SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 26, 1998
U.S. HOME & GARDEN,INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19899 77-0262908
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
655 Montgomery Street, Suite 500, San Francisco, CA 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415-616-8111
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Former name or former address, if changed since last report
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Item 2. Acquisition or Disposition of Assets.
On February 26, 1998 (the "Closing"), Weed Wizard Acquisition Corp.
("WWAC"), a indirect wholly-owned subsidiary of U.S. Home & Garden Inc. (the
"Registrant"), acquired substantially all of the assets used in the business
(the "Acquisition") of Weed Wizard, Inc. ("Wizard") pursuant to the Assets
Purchase Agreement, dated February 25, 1998 (the "Purchase Agreement"), by and
among Registrant, WWAC, Wizard and each of Pam Butler, Don Bryan, Mabel Bryan,
Norman Adams and James Anderson (collectively the "Wizard Stockholders").
Wizard is engaged in the business of marketing, packaging and distributing
for consumer use replacement heads for string weed trimmers under the "Weed
Wizard" brand name (the "Business"). The Registrant intends to use the acquired
assets to engage in the Business.
As consideration for the Acquisition, the Wizard Stockholders received an
aggregate sum of $14,000,000 less that amount required to discharge certain
outstanding indebtedness of Wizard, as more particularly set forth in the
Purchase Agreement, and adjusted dollar for dollar based upon the value of the
Net Current Assets (as defined in the Purchase Agreement) of Wizard at the
Closing. Approximately $2,000,000 additional consideration was paid by WWAC as a
result of the adjustments. The consideration paid for the Acquisition was
determined by negotiations among the representatives of WWAC, Registrant and
Wizard.
In conjunction with the Acquisition, Wizard, the Wizard Stockholders and
Z.V. Major, a consultant to Wizard who is the father of Pam Butler, agreed not
to compete in the United States with the Business for a period of two years from
the Closing.
The source of the consideration paid for the Acquisition was partially
provided from the working capital of Easy Gardener, Inc, the sole stockholder of
WWAC, and a wholly owned subsidiary of the Registrant ("EGI"), and partially
from the proceeds of a loan to EGI from The Provident Bank ('Provident"),
pursuant to a credit agreement, as amended, by and among EGI, as borrower, the
Registrant, as guarantor, and Provident, Lasalle National Bank and Antares
Leveraged Capital Corp, as Lenders.
The descriptions of the Purchase Agreement and other agreements described
herein are qualified in their entirety by reference to the copy of the Purchase
Agreement which is filed as an exhibit to this Report and which is incorporated
herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
A. Financial Statements of the Business Acquired.
It is impractical to provide the required financial information at this
time. The required financial information for the business acquired will be filed
under cover of Form 8-K/A within 60 days of the date this Form 8-K was required
to be filed.
B. Pro Forma Financial Information and Exhibits.
It is impracticable to provide the required pro forma financial information
at this time. The required pro forma financial information will be filed under
cover of Form 8-K/A within 60 days of the date this Form 8-K was required to be
filed.
C. Exhibit 10.1 - Purchase Agreement, dated as of February 25, 1998, by and
among Registrant, WWAC, Wizard and the Wizard Stockholders.
D. Exhibit 10.2 - List of Omitted Schedules/Exhibits to Purchase Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. HOME AND GARDEN INC.
By: /s/ Richard J. Raleigh
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Richard J. Raleigh,
Chief Operating Officer
Date: March 9, 1998
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ASSETS PURCHASE AGREEMENT
AGREEMENT, dated as of the 25th day of February, 1998, by and among Weed
Wizard, Inc., a Georgia corporation (the "Company"), Weed Wizard Acquisition
Corp., a Delaware corporation ("Buyer"), U.S. Home & Garden, Inc., a Delaware
corporation ("USH&G"), and Pam Butler, Don Bryan, Mabel Bryan, Norman Adams and
James Anderson (said individuals being hereinafter collectively called the
"Selling Stockholders" and severally called "Selling Stockholder").
W I T N E S S E T H :
WHEREAS, the Selling Stockholders are the owners of all of the issued and
outstanding Common Stock of the Company; and
WHEREAS, the Buyer is an indirect wholly-owned subsidiary of USH&G; and
WHEREAS, the Company is engaged in the business of marketing, packaging and
distributing consumer lawn and garden trimmer attachments under the "Weed
Wizard" name (the "Business"); and
WHEREAS, the Company wishes to sell to Buyer, and Buyer wishes to purchase
from the Company, as a going concern,
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the business and substantially all of the properties and assets of the Company,
all subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of and in reliance upon the covenants,
conditions, representations and warranties herein contained, the parties hereto
hereby agree as follows:
I. Purchase and Sale Agreement.
1.1. Agreement of Purchase and Sale. Subject to the terms and conditions
set forth in this Agreement and in reliance upon the representations,
warranties, covenants and conditions herein contained, on the Closing Date (as
defined in subparagraph 2.1 hereof) the Company shall sell, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase from the Company, the
Purchased Assets (as defined in subparagraph 1.2 hereof), free and clear of any
and all liens, claims, charges or encumbrances of any nature whatsoever, other
than liens reflected in the Financial Statements (as defined in subparagraph
4.6), liens for taxes not yet delinquent, mechanic's, materialmen's and similar
liens which have arisen in the ordinary course of business, purchase money
security interests liens arising under any applicable bulk sales laws (all of
which mechanic's, materialmen's and similar liens and
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purchase money security interests which are filed and of record are listed on
Schedule 1.1), or other liens which are immaterial in amount or character
("Permitted Encumbrances").
1.2. Purchased Assets. As used in this Agreement, the term "Purchased
Assets" means all of the Company's right, title and interest in the personal
property, assets owned by the Company or otherwise employed, used or available
for use in the Business, tangible and intangible, of every kind and nature,
wherever located, as the same shall exist on the Closing Date, including,
without limitation, all (i) cash and cash equivalents; machinery, equipment,
motor vehicles, tools, molds, dies, patterns, gauges, furniture and supplies;
inventories (including raw materials, work-in-process, finished goods, packaging
inventories, demonstration inventories and spare parts); notes and accounts
receivable; customer lists (including name, address and telephone number);
customer and product authorizations; goodwill; claims and rights of action
against third parties; refunds and credits due or to become due from any source;
rights and interests of the Company under warranties, guarantees, pending or
executory contracts and commitments for the purchase or lease of materials,
supplies or services in connection with the Business, pending or executory
contracts and commitments for the sale or lease of products or
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services in connection with the Business, and other leases and pending or
executory contracts and commitments of any nature relating to the Business;
deferred charges, advance payments, prepaid expenses and deposits; rights of
offset and credits of all kinds; the name "Weed Wizard" and all other names,
brands and marks used in connection with the Business, and all derivatives and
combinations thereof; all promotional materials; all research and development
relating to new products, new designs, processes or cost reductions which are
used or useful or in any way related to or of potential benefit to the Business;
telephone numbers listings and rights under governmental and administrative
licenses, permits and approvals, (ii) specifications, manuals and technical
data, trade secrets, discoveries, blueprints, drawings, inventions, designs,
patents, improvements, processes, product information and data, shop rights and
know-how, and (iii) files, books and records relating to any of the foregoing.
The Purchased Assets shall include, without limitation, all properties and
assets of the Company reflected on the Audited Closing Balance Sheet as defined
in Section 2.4.1 hereof. Anything contained in this Agreement to the contrary
notwithstanding, the Purchased Assets shall not include any insurance policies
of the Company and rights thereunder, any of the Company's rights under this
Agreement, items of equipment which are no longer used or usable in the
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conduct of the Business and the value of which is not reflected on the Audited
Closing Balance Sheet; all causes of action, claims and rights of setoff with
respect to the Retained Liabilities (as defined herein), the real property used
by the Company in the conduct of the Business located at 6195 Highway 52 East
and adjacent 25 Starbridge Road and 74 Starbridge Road, Dahlonega, Georgia,
together with all fixtures, including but not limited to pilot racking (but
excluding compressors), improvements and structures located thereon, and the
minute books, stock books and tax returns of the Company, and any other books
and records which the Company may be required by law to retain, the account
receivable in the amount of $53,641.58 due from Payless Cashways, Inc., and the
assets set forth on Exhibit I, which are otherwise reflected on Schedule 4.8
(said assets being hereinafter collectively called the "Retained Assets").
1.3. Assumed Liabilities. Subject to the terms and conditions set forth in
this Agreement and in reliance upon the representations, warranties, covenants
and conditions herein contained, on the Closing Date (as defined in subparagraph
2.1 hereof) Buyer shall assume, and shall only assume (i) the Company's
obligations under the pending and executory contracts which are included among
the Purchased Assets, but only to the extent that they represent obligations
which are by their stated
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terms to be performed, in the ordinary course, subsequent to the Closing Date,
and (ii) the following liabilities of the Company which are set forth on the
Audited Closing Balance Sheet: (A) Accounts Payable, (B) Customer Deposits (C)
Payroll Taxes payable (except for amounts due with respect to bonuses paid to
the Selling Stockholders) and (D) Accrued Expenses and (iii) subject to
subparagraph 3.15, claims of the Company's retail customers and of users of any
products sold following the Closing Date by the Company in the ordinary conduct
of the Business, including any replacement parts sold by the Company
(collectively, the "Products"), which are based solely on the Company's written
product warranties as disclosed to Buyer, and are only for the repair,
replacement or reimbursement remedies set forth in such written product
warranties (the liabilities and obligations referred to in the immediately
preceding clauses (i), (ii) and (iii) being hereinafter collectively called the
"Assumed Liabilities"); provided, however, that anything in this Agreement
contained to the contrary notwithstanding, the following shall not constitute
Assumed Liabilities: (a) liabilities and obligations of the Company, the
existence of which constitutes a material breach of any of the representations
or warranties made by the Company in this Agreement or in any document delivered
by it pursuant hereto, any (b) liabilities or claims in connection with any
litigation
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specified on Schedule 4.11 or any tax liability of the Company not reflected on
the Audited Closing Balance Sheet, (c) liabilities and obligations of the
Company for environmental and ecological matters, including those relating to
the use, transport, disposal, handling or storage of hazardous or toxic
materials, pollutants, contaminants or wastes, or to the exposure of persons
thereto and (d) the following liabilities of the Company which are set forth on
the Audited Closing Balance Sheet: (E) Notes Payable; (F) Note Payable
Stockholders (G) Sales Taxes Payable; (H) Accrued Interest Payable and (I) any
other obligations of the Company for borrowed money (collectively, the "Retained
Liabilities").
1.4. Purchase Price. Subject to adjustment as set forth in Section 2.4.2,
the purchase price for the Purchased Assets shall be $14,000,000 (the "Purchase
Price"), representing the aggregate amount of the fair market values of the
various categories of such Purchased Assets as agreed upon by Buyer and the
Company and set forth below (Buyer and the Company each hereby agreeing to
report the transaction for tax purposes on a basis consistent therewith),
increased or decreased in accordance with Section 2.4.2 hereof (it being agreed
that any such increase or decrease shall be allocated pro rata to the
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various categories of Purchased Assets by adjusting them accordingly):
Category of Asset Agreed Upon Fair Market Value
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Working Capital Net Book Value
Fixed Assets Net Book Value
All other purchased assets Balance of the Purchase Price
2. Closing.
2.1. Closing Date. The closing of the sale and purchase provided for herein
(the "Closing") shall take place at 10:00 A.M., local time, at the offices of
Powell, Goldstein, Frazer & Murphy LLP, on February 25, 1998, or at such other
place, time and date as may hereafter be mutually agreed upon by the parties
(such time and date of Closing being hereinafter called the "Closing Date").
2.2. Action by Buyer. Subject to the terms and conditions herein contained,
on the Closing Date, Buyer shall deliver to the Company (in addition to the
documents and instruments to be delivered by it pursuant to paragraphs 3 and 9
hereof), in cash, by certified or official bank check, payable to the order of
the Company or wire transfer to an account designated by the Company (i) the
Purchase Price for the Purchased Assets and (ii) an amount (the "Adjustment")
equal to (a) the adjustment to the Purchase Price as provided in Section
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2.4.2 (however, for purposes of calculating the Adjustment paid on the Closing
Date, such amounts shall be calculated based on the Trial Balance Sheet (as
hereinafter defined)), less (b) the amount of $300,000 which shall be held in
escrow (the "Escrow") with Tenzer Greenblatt LLP (the "Escrow Agent") pursuant
to the terms of the escrow agreement (the "Escrow Agreement"), in substantially
the form attached hereto as Exhibit A, (iii) a duly executed Assumption
Agreement, in substantially the form of Exhibit B attached hereto and made a
part hereof, and (iv) the Trial Balance Sheet .
2.3. Action by the Company and Selling Stockholders. Subject to the terms
and conditions herein contained, on the Closing Date the Company and/or the
Selling Stockholders, as the case may be, shall deliver to Buyer (in addition to
the documents and instruments to be delivered by it pursuant to paragraphs 3 and
8 hereof): (i) a duly executed Bill of Sale and Assignment in substantially the
form of Exhibit C attached hereto and made a part hereof, and (ii) a Sublease
Agreement (in recordable form) in substantially the form of Exhibit D attached
hereto and made a part hereof; (iii) other personal property lease assignments,
motor vehicle registrations and certificates of title; patent, trademark, trade
name and copyright assignments (in form suitable for recording in
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the United States Patent and Trademark Office and in the comparable offices of
all relevant foreign jurisdiction) in substantially the form of Exhibit E
attached hereto and made a part hereof; and other instruments of transfer, and
(iv) all third party consents and governmental and administrative approvals as
set forth in Schedules 4.5 and 4.21, necessary or appropriate in order to
convey, transfer and assign to and vest in Buyer good and marketable right,
title and interest in and to the Purchased Assets, free and clear of all liens,
security interests, claims, charges and encumbrances of any nature whatsoever,
except for the Permitted Encumbrances.
2.4. Purchase Price Adjustments.
2.4.1. Trial Balance Sheet. Prior to the Closing Date, the Selling
Stockholders and Buyer shall prepare and have agreed on a balance sheet of the
Business as of December 31, 1997 (the "Trial Balance Sheet"). Inventory
Protocol, for purposes of this Agreement shall be defined as set forth on
Exhibit J attached hereto and made a part hereof. Within thirty (30) days after
Closing Date, the Company and the Selling Stockholders shall prepare and deliver
to Buyer a balance sheet of the Business determined as of the Closing Date (the
"Trial Closing Balance Sheet"), which balance sheet shall be prepared in
accordance with the Inventory Protocol and shall
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be based on the Trial Balance Sheet. The Trial Closing Balance Sheet shall be
prepared at the Company's and the Selling Stockholders' cost and expense. Within
sixty (60) days after delivery by the Company and the Selling Stockholders of
the Trial Closing Balance Sheet to Buyer, the Buyer shall have the Trial Closing
Balance Sheet audited by BDO, at the Buyer's expense, which balance sheet shall
be prepared in accordance with generally accepted accounting principles
("GAAP"). In addition, BDO shall prepare a supplemental schedule indicating the
adjustments, including the Inventory Protocol, to reflect Tax Basis Accounting.
The Trial Closing Balance Sheet as audited by BDO Seidman ("BDO") together with
the adjustments contemplated by the supplemental schedule shall be the "Closing
Balance Sheet." Representatives of the Buyer and Selling Stockholders shall be
entitled to participate in and observe the audit of the Trial Closing Balance
Sheet, at their own expense, to whatever extent they may elect. The Selling
Stockholders shall cause West and Associates, P.C. to make available their work
papers to BDO.
The Closing Balance Sheet shall be delivered to the Selling Stockholders
promptly after receipt by the Buyer from BDO. The Selling Stockholders may, at
their expense, employ such tests and auditing procedures as the Selling
Stockholders deem to be appropriate under the circumstances. On the basis of
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their review, the Selling Stockholders may, during the fifteen (15) day period
following delivery to them of the Closing Balance Sheet, propose such
adjustments (if any) as shall in their judgment be required to cause the Closing
Balance Sheet to properly reflect the financial condition of the Company as of
the Closing Date. In the event that Buyer and the Selling Stockholders are
unable to agree upon any such proposed adjustments within ten (10) days after
they have been proposed by the Selling Stockholders as aforesaid, then, in such
event, the adjustment(s) in dispute shall be submitted to a firm of certified
public accountants of national standing which is mutually acceptable to the
Buyer and the Selling Stockholders (the "Arbitrator"), for its consideration;
the fees of said firm, the decision of which shall be final and binding upon
Buyer and the Selling Stockholders, shall be paid one-half by each of said
parties. The Closing Balance Sheet shall become final and binding upon the
parties, (A) if the Selling Stockholders do not propose any adjustments thereto
in accordance with the terms hereof, on the earlier of the date of written
acceptance thereof by the Selling Stockholders or fifteen (15) days after the
delivery thereof to the Selling Stockholders, or (B) if the Selling Stockholders
propose adjustments thereto in accordance with the terms hereof, on the earlier
of the date of written acceptance thereof (as so
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adjusted) by the Selling Stockholders and the Buyer or the date of the receipt
by the Selling Stockholders and the Buyer of the decision of the Arbitrator as
to any adjustment(s) submitted to it for resolution. The final and binding
Closing Balance Sheet (the "Audited Closing Balance Sheet") shall be delivered
by the Buyer to the Selling Stockholders within five days after it becomes
binding upon Buyer and the Selling Stockholders as aforesaid.
2.4.2. The Adjustment. The Purchase Price shall be (i) increased dollar for
dollar in the event that the aggregate amount of the current assets (cash,
accounts receivable less than 30 days after the due date of the invoice, good
and usable inventory consistent with the Inventory Protocol, deposits and
prepaid expenses) minus the current liabilities (accounts payable, customer
deposits and short term liabilities excluding interest bearing debt) reflected
on the Audited Closing Balance Sheet (the "Net Current Assets") is greater than
$3,000,000 (the "Base Amount"), or (ii) decreased dollar for dollar in the event
that the aggregate amount of Net Current Assets reflected on the Audited Closing
Balance Sheet is less than the Base Amount.
If the Audited Closing Balance Sheet shows Net Current Assets greater than
the Base Amount, then Buyer shall be
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obligated to pay to the Company, within five (5) days after delivery of the
Audited Closing Balance Sheet, the difference between (a) the amount that the
Net Current Assets exceeds the Base Amount, minus (b) the Adjustment amount paid
by Buyer to Seller on the Closing Date, which amount shall first be satisfied by
the amounts deposited by Buyer in the Escrow, pursuant to instructions from
Buyer to the Escrow Agent authorizing the Escrow Agent to release that amount
due the Company. If any amounts are still due from Buyer, they shall be paid in
the same manner as set forth in Section 2.2.
If the Audited Closing Balance Sheet shows Net Current Assets less than the
Base Amount, then the Company shall be obligated to pay Buyer, within five (5)
days after delivery of the Audited Closing Balance Sheet, the sum of (a) the
amount that the Base Amount exceeds the Net Current Assets plus (b) the
Adjustment amount paid by Buyer to the Company on the Closing Date. Furthermore,
all amounts held in Escrow shall be returned to the Buyer by the Escrow Agent.
3. Additional Covenants.
3.1. Further Assurances. Each of the Company, the Buyer and each of the
Selling Stockholders hereby agrees that it or he shall from time to time after
the Closing Date, at the requesting party's sole cost and expense (unless the
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requesting party is entitled to indemnification therefor hereunder), take any
and all actions, and execute, acknowledge, deliver, file and/or record any and
all documents and instruments, as any other party may reasonably request in
order to more fully perfect the rights which are intended to be granted to such
party hereunder. The Company and the Stockholders acknowledge and agree that
from and after the Closing, the Buyer will have the right but not the obligation
to possession of all documents, books, records (including copies of tax
records), agreements, and financial data of any sort relating to the Company
included in the definition of Purchased Assets in this Agreement; provided,
however, that the Company and the Stockholders shall have the right to obtain
access to such documents, books, records (including copies of tax records),
agreements, and financial data upon reasonable prior notice and at reasonable
times, to make photocopies thereof for a proper purpose, such as in connection
with the preparation of their tax returns.
3.2. Non-Assignable Contracts. Anything in this Agreement contained to the
contrary notwithstanding, nothing in this Agreement shall be construed as an
attempt to assign (i) any contract or agreement that is at law non-assignable
without the consent of the other party thereto and as to which such
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consent shall not have been given, or (ii) any contract or agreement as to which
all the remedies for the enforcement thereof and the rights thereunder enjoyed
by the Company would not, as a matter of law, pass to Buyer as an incident of
the assignments provided for by this Agreement. In order, however, that the full
value of every contract and agreement of the character described in clauses (i)
and (ii) of the immediately preceding sentence and all claims and demands
relating to such contracts and agreements may be realized, the Company hereby
agrees with Buyer that it will, at its sole cost and expense, at the request and
under the direction of Buyer, in the name of the Company or otherwise, as Buyer
shall specify and as shall be permitted by law, take all such action and do or
cause to be done all such things as shall be, in the opinion of Buyer,
reasonably necessary or desirable (a) in order that the rights and benefits of
the Company under such contracts and agreements shall be preserved and (b) for,
and to facilitate, the collection of the monies due and payable, and to become
due and payable, to the Company in and under every such contract and agreement,
and the Company will hold the same for the benefit of and will pay the same,
when received, to Buyer.
3.3. Investigation. Prior to the date hereof Buyer has made, directly and
through its representatives, such
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investigation of the Company, the Business and the Purchased Assets as Buyer
deems necessary or advisable, but such investigation shall not affect any of the
representations and warranties of the Company or any of the Selling Stockholders
contained herein or in any instrument or document delivered pursuant hereto.
3.4. Cooperation. Each of the parties hereto hereby agrees to fully
cooperate with the other parties hereto in preparing and filing any notices,
applications, reports and other instruments and documents which are required by,
or which are desirable in the opinion of any of the parties hereto in respect
of, any statute, rule, regulation or order of any governmental or administrative
body in connection with the transactions contemplated hereby. Any costs, charges
or fees incurred pursuant to this Section 3.4 shall be shared equally by the
Buyer and the Company.
3.5. Use of Names. Within five (5) days after the Closing Date, the Company
shall have, at its cost and expense, (i) changed its corporate name to a name
bearing no resemblance to "Weed Wizard", and (ii) taken such other action as is
necessary or is in the reasonable opinion of Buyer desirable so that Buyer will
have full and exclusive right, title and interest in and to, and exclusive use
of, all of the
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names, brands and marks used in connection with the Business, including, without
limitation, the name "Weed Wizard". In furtherance of the foregoing, the Company
hereby agrees from and after the Closing Date it shall not use or permit any of
its subsidiaries or affiliates to use, directly or indirectly, any of such
words, names, brands, marks or expressions, or anything so closely resembling
any of the foregoing as to be likely confused therewith, or as to be likely to
detract from the value of any of the Purchased Assets or the Business.
3.6. Waiver of Compliance with Bulk Transfer Laws. With respect to the
transactions contemplated by this Agreement, Buyer, the Selling Stockholders and
the Company, respectively, hereby waive compliance with any applicable
provisions of the so-called "bulk transfer laws" (Article 6 of the Uniform
Commercial Code) of any relevant jurisdiction.
3.7. Payment of Taxes Upon Transfer of Purchased Assets. The Company and
Buyer, respectively, shall be responsible for, and shall each pay, one-half
(1/2) of all sales, use, purchase, transfer and similar taxes, and any and all
filing, recording, registration and similar fees, arising out of the
transactions contemplated by this Agreement.
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3.8. Survival of Representations and Warranties. Each of the parties hereto
hereby agrees that all representations and warranties made by or on behalf of
him or it in this Agreement or in any document or instrument delivered pursuant
hereto shall survive for a period of eighteen (18) months following the Closing
Date and the consummation of the transactions contemplated hereby. No action,
claim or proceeding may be brought by any party hereto against any other party
resulting from, arising thereof, or caused by a breach of a representation or
warranty contained herein, or the failure to perform any covenant or other
obligations hereunder after the time such representation, warranty or covenant
ceases to survive pursuant to this Section 3.8, unless notice of such claim
setting forth with specificity the basis for such claim is delivered to the
party prior to such time.
3.9. Books and Records. The Company and Don Bryan shall, for a period of at
least seven (7) years following the Closing Date, maintain and make available to
Buyer and its representatives for inspection and reproduction, during regular
business hours, all books and records relating to the Company, the Purchased
Assets, the Business or the Assumed Liabilities which are not included among the
Purchased Assets. Buyer shall, for a period of at least seven (7) years
following the Closing
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Date, maintain and make available to the Company and its representatives for
inspection and reproduction, during regular business hours, all books and
records relating to the Company, the Purchased Assets, the Business or the
Assumed Liabilities which are included among the Purchased Assets, but only
insofar as said books and records relate to periods ending on or prior to the
Closing Date.
3.10. Discharge of Liens. The Company shall have caused all liens, claims,
charges and encumbrances upon any of the Purchased Assets, other than the
Permitted Encumbrances, to be terminated or otherwise discharged at or prior to
the Closing.
3.11. Retained and Assumed Liabilities. At or prior to the Closing Date,
the Company shall have paid and discharged in full all Notes Payables, Sales
Taxes Payable and Accrued Interests Payable as such liabilities appear on the
Trial Balance Sheet, and subsequent to the Closing Date, the Company shall pay,
discharge and perform the other Retained Liabilities in due course, and
subsequent to the Closing Date, Buyer shall pay, discharge and perform the
Assumed Liabilities in due course.
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3.12. Products Liability Insurance. On or prior to the Closing Date, the
Company shall, at its expense, cause Buyer to be named as an additional insured
under its products liability tail insurance policies as in effect on the Closing
Date. The Company has provided Buyer with a description of such policy. Prior to
the Closing Date, the Company shall provide Buyer with a copy of said policies,
together with the written agreements of the insurers that said policies will not
be modified or cancelled without at least 30 day's prior written notice to
Buyer. The Buyer shall be authorized, but under no duty to obtain or maintain
such insurance at the Company's expense if the Company fails to do so.
3.13. Remittances. The Company shall (i) within ten (10) days after the end
of each month following the Closing Date, remit to Buyer any and all amounts
which are received by it during such month in respect of the accounts receivable
or any other assets which are included among the Purchased Assets, and (ii)
provide Buyer with such information relating to said remittances as Buyer may
reasonably require in order to properly maintain its records relating to the
Purchased Assets. Pending such remittances, all such amounts shall be held by
the Company in trust for Buyer.
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3.14. Sublease Agreement. At Closing, Buyer and the Company shall enter
into a Sublease Agreement for the premises located at 6195 Highway 52 East and
adjacent 25 Starbridge Road and 74 Starbridge Road, Dahlonega, Georgia, in
substantially the form annexed hereto as Exhibit D.
3.15. Reimbursement for Certain Returns. The Selling Stockholders agree
that for the period of six (6) months after the Closing Date they shall promptly
pay Buyer (i) $1.25 for each old non reworked return received by Buyer, (ii) an
additional $3.70 for each such item for which the customer requested and
obtained a credit or refund and with respect to which such customer has not
placed new orders within 90 days thereafter, and (iii) all expenses of Buyer
from third party vendors in connection with shipping and handling costs
associated with all "old non-reworked returns" which represent "hangover"
returns from the Company's program associated with the one-size fits all product
exchange. This payment obligation shall not be subject to the basket set forth
in Section 6.1 hereof.
4. Representations and Warranties as to the Company and the Selling
Stockholders. The Company and each of the Selling Stockholders jointly and
severally represent and warrant to Buyer as follows:
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4.1. Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia, with full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it. There are
no states or jurisdictions in which the character and location of any of the
properties owned or leased by the Company, or the conduct of its business, makes
it necessary for it to qualify to do business as a foreign corporation except
where the failure to qualify would have a material adverse effect on the
Company. Copies of the Certificate of Incorporation of the Company and all
amendments thereof, and of the By-laws of the Company, as amended to date, have
been furnished to Buyer and are complete and correct. The Company's minute books
heretofore exhibited to Buyer contain complete and accurate records of all
meetings and other corporate actions of the Company's stockholders and Board of
Directors provided, however, that if the Company is unable to produce complete
minute books, the Company shall have provided Buyer with a certificate of an
officer of the Company as to the due authorization of the Company's corporate
acts which are not evidenced by such minutes (including committees of its Board
of Directors).
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4.2. Capitalization. The authorized capital stock of the Company consists
of 1,000,000 shares of Common Stock, par value $.01 per share, of which 2,000
shares are issued and outstanding and all of which are owned by the Selling
Stockholders as set forth on Schedule 4.2. There are no outstanding options,
warrants, rights, puts, calls, commitments, conversion rights, plans or other
agreements of any character with respect to the stock of the Company to which
the Company is a party or otherwise bound which provide for the acquisition,
disposition or issuance of any issued but not outstanding, outstanding, or
authorized and unissued shares of Common Stock of the Company. There is no
personal liability, and there are no preemptive or similar rights, attached to
the Company's Common Stock. Set forth on Schedule 4.2, is a complete and correct
list of the names, addresses and record and beneficial stock ownership of all of
the stockholders of the Company, all of which shares are owned by the persons
listed thereon free and clear of all claims, liens and encumbrances of any
nature whatsoever.
4.3. Interests in Other Entities. The Company does not (A) own, directly or
indirectly, of record or beneficially, any shares of voting stock or other
equity securities of any other corporation, (B) have any ownership
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interest, direct or indirect, of record or beneficially, in any unincorporated
entity, or (C) have any obligation, direct or indirect, present or contingent,
(1) to purchase or subscribe for any interest in, advance or loan monies to, or
in any way make investments in, any person or entity, or (2) to share any
profits or capital investments or both.
4.4. Authority. The execution and delivery by the Company of this Agreement
and of all of the agreements to be executed and delivered by it pursuant hereto,
the performance by it of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action on the part of the
Company (including, but not limited to, the unanimous consent of its
stockholders and Board of Directors), and the Company has all necessary power
with respect thereto. This Agreement is, and when executed and delivered by the
Company and the Selling Stockholders (to the extent that they are parties
thereto) each of the other agreements to be delivered by any or all of them
pursuant hereto will be, the valid and binding obligation of the Company and the
Selling Stockholders (to the extent that they are parties thereto) in accordance
with its terms.
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4.5. Noncontravention. Except as set forth on Schedule 4.5 neither the
execution and delivery by the Company or any of the Selling Stockholders of this
Agreement or of any agreement to be executed and delivered by any or all of them
pursuant hereto, nor the consummation of any of the transactions contemplated
hereby or thereby, nor the performance by any of them of any of their respective
obligations hereunder or thereunder, will (nor with the giving of notice or the
lapse of time or both would) (A) conflict with or result in a breach of any
provision of the Certificate of Incorporation or By-laws of the Company, or (B)
give rise to a default, or any right of termination, cancellation or
acceleration, or otherwise be in conflict with or result in a loss of
contractual benefits to any of them, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which any of them is a party or by which any of them
or any of the Purchased Assets may be bound, or require any consent, approval or
notice under the terms of any such document or instrument, or (C) except as set
forth on Schedule 4.5(C) violate any order, writ, injunction, decree, law,
statute, rule or regulation of any court or governmental or administrative
authority which is applicable to any of them or any of the Purchased Assets, or
(D) except as set forth on Schedule 4.5(D) result in the creation or imposition
of any
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lien, claim, security interest restriction, charge or encumbrance upon any of
the Purchased Assets, or (E) except as set forth on Schedule 4.5(E) interfere
with or otherwise adversely affect the ability of Buyer to carry on the Business
after the Closing Date on substantially the same basis as is now conducted by
the Company.
4.6. Financial Statements. The Company has heretofore delivered to Buyer
copies of its balance sheets as of December 31, 1997, 1996 and 1995, together
with the related statements of income, changes in financial position and changes
in stockholders' equity for the years ended on such dates, compiled by West &
Associates, P.C., independent certified public accountants (the "Financial
Statements"). Said Financial Statements were prepared on a Tax Basis (as
hereinafter defined), and, consistent with the principles of Tax Basis
accounting, fairly present the financial position of the Company as at the dates
thereof and its results of operations for the periods indicated. The books and
records of the Company are in all material respects complete and correct, have
been maintained in accordance with good business practices, and accurately
reflect the basis for the financial condition of the Company as set forth in the
aforementioned financial statements. "Tax Basis" shall mean accounting methods
and principles consistent
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with applicable provisions of the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
4.7. Absence of Undisclosed Liabilities. To the knowledge of the Company,
the Selling Stockholders and Z.V. Major, the Company has no liabilities or
obligations of any nature whatsoever, whether accrued, absolute, contingent or
otherwise, which have not been (i) in the case of liabilities and obligations of
a type customarily reflected on a corporate balance sheet prepared on a Tax
Basis, or (ii) in the case of other types of liabilities and obligations,
described in any of the Schedules delivered pursuant hereto or omitted from said
Schedules in accordance with the terms of this Agreement, or (iii) incurred,
consistent with past practice, in the ordinary course of business since June 30,
1997 (in the case of liabilities and obligations of the type referred to in
clause (i) above).
4.8. Properties. The Purchased Assets comprise substantially all of the
personal and intangible properties used in the conduct of the Business which are
necessary in order for the Company and the Selling Stockholders to carry on the
Business as is now conducted by the Company. The Company has good and valid
title to all of the Purchased Assets, free and clear of all mortgages, liens,
pledges, charges or encumbrances
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of any nature whatsoever, except for Permitted Encumbrances. The Company owns no
real property. All machinery and equipment which are material to the business,
operation or condition (financial or otherwise) of the Company are in
substantially good operating condition and repair, subject to normal wear and
tear; and none of such machinery or equipment are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
substantial in nature or cost. Schedule 4.8 contains an accurate list setting
forth all (A) real property leased (whether as lessor or lessee) or subject to
contract or commitment of purchase or sale or lease (whether as lessor or
lessee) by the Company and (B) machinery and equipment, motor vehicles and other
personal property owned by the Company or leased by or to the Company, or which
is otherwise used or available for use in connection with the Business.
4.9. Accounts Receivable; Inventories. Schedule 4.9 sets forth the accounts
receivable of the Company as of February 25, 1998. The accounts and notes
receivable which are reflected on the Audited Closing Balance Sheet are good and
collectible in the ordinary course of business at the aggregate recorded amounts
thereof, less the amount of the allowance for doubtful accounts reflected
thereon, and are not subject to
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offsets. The inventories reflected on the Audited Closing Balance Sheet are
consistent with the Inventory Protocol, and consist of items of a quality and
quantity usable or saleable in the ordinary course of business, except for
obsolete materials, slow-moving items, materials of below standard quality and
not readily marketable items, all of which have been written down to net
realizable value or adequately reserved against on the books and records of the
Company, except for inventory of Kleen Jeans, Lawnkeeper and Grass Wizard items
which will be written down in the Closing Balance Sheet. All inventories are
stated at the lower of cost or market in accordance with Tax Basis accounting.
4.10. Absence of Changes. Since June 30, 1997, there has not been (i) any
material adverse change in the condition (financial or otherwise), assets,
liabilities, business, prospects, or results of operations of the Company
(including, without limitation, any such adverse change resulting from damage,
destruction or other casualty loss, whether or not covered by insurance), (ii)
any waiver by the Company of any right, or cancellation of any debt or claim, of
substantial value, (iii) any change in any of the arrangements which are
referred to in subparagraph 4.17 hereof or any transactions of the type which is
referred to in clause (E) of
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subparagraph 4.19 hereof, or (iv) any change in the accounting principles or
methods which are utilized by the Company.
4.11. Litigation. Other than as set forth in Schedule 4.11 there are no
claims, suits, actions, arbitration, investigations, inquiry or other proceeding
before any governmental agency, court or tribunal, domestic or foreign, or
before any private arbitration tribunal, pending or, to the best of the
knowledge of the Company, threatened, against or relating to the Company, the
Business or any of the Purchased Assets. Other than as set forth on Schedule
4.11, there are no judgments, orders, stipulations, injunctions, decrees or
awards in effect which name the Company, the effect of which is (A) to
materially limit, restrict, regulate, enjoin or prohibit any business practice
in any area, or the acquisition of any properties, assets or businesses, or (B)
otherwise materially adverse to the Business or any of the Purchased Assets.
Other than as set forth on Schedule 4.11 the Company has not settled or
compromised any litigation since December 31, 1994, or settled, paid or
compromised any claims not required to be paid which are individually in an
amount in excess of $25,000 and in the aggregate in an amount in excess of
$100,000. Schedule 4.11 sets forth all claims known by the Company made by third
parties
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against the Company received by the Company after December 31, 1994, relating to
Products.
4.12. No Violation of Law. To the knowledge of the Company, the Selling
Stockholders and Z.V. Major, the Company is not engaging in any activity or
omitting to take any action as a result of which (A) it is in violation of any
law, rule, regulation, zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or governmental or administrative
body or agency, applicable to the Company, the Business or any of the Purchased
Assets, including, but not limited to, those relating to: occupational safety
and health; environmental and ecological protection (e.g., the use, storage,
handling, transport or disposal of pollutants, contaminants or hazardous or
toxic materials or wastes, and the exposure of persons thereto); business
practices and operations; labor practices; employee benefits; and zoning and
other land use, which violation would have a material adverse effect on the
Business, and (B) the Company, the Business and/or any of the Purchased Assets
have been or may be materially and adversely affected.
4.13. Intellectual Property. Schedule 4.13 is a complete and correct list
of all (A) United States and foreign patents, trademark and trade name
registrations, trademarks and
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trade names, brandmarks and brand name registrations, servicemarks and
servicemark registrations, assumed names and copyrights and copyright
registrations, owned in whole or in part or used by the Company, and all
applications therefor, and (B) licenses and other agreements to which the
Company is a party or otherwise bound which relate to any of the foregoing.
Except as expressly set forth in said Schedule 4.13, (i) the Company owns or has
the right to use all of the foregoing; (ii) no proceedings have been instituted,
are pending or, to the best of the knowledge of the Company are threatened,
which challenge the rights of the Company in respect thereto or the validity
thereof and, to the best knowledge of the Company, there is no valid basis for
any such proceedings; (iii) to the knowledge of the Company, none of the
aforesaid violates any laws, statutes, ordinances or regulations, or infringes
upon or violated any rights of others, or is being infringed by others, which in
either case would have a material adverse effect on the Business; and (iv) none
of the aforesaid is subject to any outstanding order, decree, judgment,
stipulation or charge. Company has funded Buyer's expenses with respect to
Buyer's efforts to obtain a federal registration of the Weed Wizard trademark.
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4.14. Tax Matters. The Company has filed with the appropriate governmental
agencies all tax returns and reports required to be filed by it, and has paid in
full or made adequate provision for the payment of, all material taxes,
interest, penalties, assessments and deficiencies shown to be due or claimed to
be due on such tax returns and reports. The provision for taxes which is set
forth on the books of account of the Company is adequate for all taxes of the
Company which accrued after December 31, 1997. The Company has not executed or
filed with any taxing authority any agreement extending the period for the
assessment or collection of any income or other taxes, and is not a party to any
pending or, to the best of the knowledge of the Company, threatened, action or
proceeding by any governmental authority for the assessment or collection of
income or other taxes.
4.15. Insurance. Attached hereto as Schedule 4.15 is a complete and correct
list and summary description of all policies of insurance purchased by the
Company from January 1, 1993 until the Closing Date relating to any of the
Purchased Assets or the Business in which the Company is an insured party,
beneficiary or loss payable payee. Such policies are in full force and effect,
all premiums due and payable with respect thereto have been paid, and no notice
of cancellation or
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termination has been received by the Company with respect to any such policy.
Since January 1, 1995, the Company has not sustained any material loss or
interference with its business from fire, storm, explosion, flood or other
casualty, whether or not covered by insurance, or from any labor dispute or
court of governmental action, order or decree.
4.16. Products Liability. Schedule 4.16 lists all product liability claims
made or to the knowledge of the Company threatened in the Company's last three
fiscal years.
4.17. Employee Arrangements. Schedule 4.17 is a complete and correct list
and summary description of all (i) written union, collective bargaining,
employment, management, termination and consulting agreements to which the
Company is a party or otherwise bound, and (ii) written compensation plans and
arrangements; bonus and incentive plans and arrangements; deferred compensation
plans and arrangements; pension and retirement plans and arrangements;
profit-sharing and thrift plans and arrangements; stock purchase and stock
option plans and arrangements; hospitalization and other life, health or
disability insurance or reimbursement programs; holiday, sick leave, severance,
vacation, tuition reimbursement, personal loan and product purchase discount
policies and arrangements; and other plans or arrangements providing for
benefits for employees
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of the Company. Said Schedule also lists the names and compensation of all
employees of the Company whose earnings during the last fiscal year was $50,000
or more (including bonuses and other incentive compensation), and all employees
who are expected to receive at least said amount in respect of the present year.
Since June 30, 1997, except as set forth on Schedule 4.17, the Company has not
(i) increased the compensation or fringe benefits of any of its directors,
officers or employees, (ii) paid any bonus, salary or compensation to the
Stockholders, nor (iii) established, adopted, entered into or amended or
terminated any written agreement or other plan, agreement, trust, fund policy or
arrangement for the benefit of any of its directors, officers or employees.
4.18. ERISA. There is no "employee pension benefit plan", as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and no "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA, which is maintained by the Company or to which
it contributes or is obligated or required to contribute.
4.19. Certain Business Matters. Except as is set forth in Schedule 4.19,
(A) the Company is not a party to or
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bound by any distributorship, dealership, sales agency, franchise or similar
agreement which relates to the sale or distribution of any of the products and
services of the Business, (B) there are no pending, or to the best of the
knowledge of the Company threatened, labor negotiations, work stoppages or work
slowdowns involving or affecting the Business, and, to the best of the knowledge
of the Company, no union representation questions exist, and there are no
organizing activities, in respect of any of the employees of the Company, (C)
the Company and the Stockholders are not a party to or bound by any agreement
which limits its freedom to compete in any line of business or with any person,
or which is otherwise materially burdensome to it, and (E) the Company is not a
party to or bound by any agreement in which any officer, director or stockholder
of the Company (or any affiliate of any such person) has, or had when made, a
direct or indirect material interest.
4.20. Certain Contracts. Schedule 4.20 is a complete and correct list of
all contracts, commitments, indentures, mortgages, guarantees, debts, other
obligations, agreements and understandings which are not set forth in any other
Schedule delivered hereunder and to which the Company is a party or otherwise
bound, except for each of those which (A) was made in the ordinary course of
business, and (B) either (1) is
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terminable by the Company (and will be terminable by Buyer) without liability,
expense or other obligation on 30 days' notice or less, or (2) may be
anticipated to involve aggregate payments to or by the Company of $50,000 (or
the equivalent) or less calculated over the full term thereof, and (C) is not
otherwise material to the Business or any of the Purchased Assets. Complete and
correct copies of all contracts, commitments, indentures, mortgages, guarantees,
debts, other obligations, agreements and undertakings set forth on any of the
Schedules delivered pursuant to this Agreement have been furnished by the
Company to Buyer, and except as expressly stated on the Schedule on which they
are set forth, (A) each of them is in full force and effect, and to the
knowledge of the Company with respect to the other party, no person or entity
which is a party thereto or otherwise bound thereby is in material default
thereunder, and, to the best of the knowledge of the Company, no event,
occurrence, condition or act exists which does (or which with the giving of
notice or the lapse of time or both would) give rise to a default or right of
cancellation, acceleration or loss of contractual benefits thereunder; (B) there
has been no threatened cancellations thereof, and there are no outstanding
material disputes thereunder. None of the material provisions of such contracts,
instruments or agreements materially violates any existing
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applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court having jurisdiction over the Company, the Business or the
Purchased Assets.
4.21. Approvals. Schedule 4.21 is a complete and correct list of all
governmental and administrative consents, permits, appointments, approvals,
licenses, certificates, franchises and other authorizations which, to the best
of the Company's knowledge, are necessary for the operation of the Business or
to own or operate the Purchased Assets, all of which have been obtained by the
Company and are in full force and effect. There are no proceedings pending or,
to the knowledge of the Company, threatened, seeking to cancel, terminate or
limit such consents, permits, appointments, approvals, licenses, certificates,
franchises or other authorizations.
4.22. Customers and Suppliers. Set forth on Schedule 4.22 is a complete and
correct list setting forth, with respect to the years ended December 31, 1997
and 1996,: (A) the ten (10) largest customers of the Business and the amount for
which each such customer was invoiced, and (B) the ten (10) largest suppliers of
the Business and the amount of goods and services purchased from each such
supplier. To the knowledge of the Company there has been no material adverse
change in the
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business relationship between the Business and any such customer or supplier,
and (ii) to the best of the knowledge of the Company said suppliers and
customers will continue their respective relationships with the Business after
the Closing Date on substantially the same basis as now exists.
4.23. Business Practices and Commitments. Schedule 4.23 is a summary
description of (i) all of the Company's current rebate and volume discount and
promotional practices and obligations, (ii) the Company's current allowance and
customer return practices and obligations, (iii) the Company's warranty
practices and obligations and (iv) the Company's cooperative advertising and
product introduction commitments. Except as set forth on Schedule 4.23, the
Company does not have any written product warranties which are provided to its
customers with regard to the purchase of the Company's products.
4.24. Backlog and Retail Inventories. Set forth on Schedule 4.24 is the
firm backlog of the Company as at December 31, 1997, and the Closing Date,
respectively. Set forth on Schedule 4.24A is the inventory of the Company's
products of each of the Company's customers who have supplied such information
(as supplied by such customers) as of the dates set forth on said Schedule.
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4.25. Brokers. No agent, broker, person, or firm acting on behalf of the
Company or the Selling Stockholders, or under its or their authority, is or will
be entitled to a financial advisory fee, brokerage commission or other like
payment in connection with any of the transactions contemplated hereby, other
than Ernst & Young LLP, the fees of which shall be the responsibility of the
Company.
4.26. Information as to the Company. None of the representations or
warranties made by the Company or any of the Selling Stockholders in this
Agreement or in any agreement executed and delivered by or on behalf of any of
them pursuant hereto are false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
therein contained not misleading.
4.27. Political Contributions. The Company has not, directly or indirectly,
at any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law.
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4.28. Creditors. Schedule 4.28 lists all of the Company's creditors as of
the date of this Agreement.
5. Representations and Warranties as to Buyer. USH&G and the Buyer hereby
jointly and severally represents and warrants to the Company as follows:
5.1. Organization, Standing and Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it. Buyer is
qualified to do business in the State of Georgia.
5.2. Authority. The execution and delivery by Buyer of this Agreement and
of each agreement to be executed and delivered by it pursuant hereto, the
compliance by Buyer with the provisions hereof and thereof, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer, and Buyer has
all necessary corporate power with respect thereto. This Agreement is, and when
executed and delivered by Buyer each other agreement to be executed and
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delivered by it pursuant hereto will be, the valid and binding obligation of
Buyer in accordance with its terms. Neither the execution and delivery by Buyer
of this Agreement or of any of the aforementioned other agreements, nor the
consummation of the transactions contemplated hereby or thereby, nor the
compliance by Buyer with the provisions hereof and thereof, will (nor with the
giving of notice or the lapse of time or both, would) conflict with or result in
a violation of any provision of the Certificate of Incorporation or By-laws of
Buyer, or in the breach of any material agreement to which Buyer is a party or
otherwise bound.
6. Indemnification.
6.1. Indemnification by the Company and the Selling Stockholder. The
Company and each Selling Stockholder, jointly and severally shall indemnify and
hold Buyer and USH&G harmless from and against any and all losses, obligations,
deficiencies, liabilities, claims, damages, costs and expenses (including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecution or defense of any matter indemnified pursuant hereto)
which USH&G and/or Buyer may sustain, suffer or incur and which arise out of,
are caused by, relate to, or result or
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occur from or in connection with (i) the Retained Liabilities, (ii) the
noncompliance with any applicable bulk transfer laws of any jurisdiction with
respect to the Purchased Assets, (iii) the breach by the Company or any of the
Selling Stockholders of any representation, warranty or covenant made by him or
it in this Agreement or in any agreement or instrument executed and delivered
pursuant hereto, or (iv) third party claims related to Products of the Company
sold at retail prior to the Closing Date (i)-(iv) collectively, "Losses"),
provided, however, (i) that the aggregate amount of the Company's and/or the
Selling Stockholders' liability under this Section 6 shall not exceed the
Purchase Price, (ii) that the aggregate amount of any one Selling Stockholders'
liability under this Section 6 shall not exceed such portion of the Purchase
Price actually received by such Selling Stockholder, and (iii) the Company and
the Selling Stockholder shall have no such indemnification obligation under this
Section 6 until Buyer or USH&G has suffered Losses in excess of seventy five
thousand ($75,000) dollars, and then only to the extent of such excess. This
indemnification obligation shall also apply to claims directly by USH&G and/or
the Buyer against the Company and/or the Selling Stockholder as well as to third
party claims.
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6.2. Indemnification by Buyer. Buyer indemnifies and holds the Company and
the Selling Stockholders harmless from and against any and all losses,
obligations, deficiencies, liabilities, claims, damages, costs and expenses (net
of any insurance proceeds received by Buyer and related thereto and including,
without limitation, the amount of any settlement entered into pursuant hereto,
and all reasonable legal and other expenses incurred in connection with the
investigation, prosecutor defense of any matter indemnified pursuant hereto),
which any of them may sustain, suffer or incur and which arise out of, are
caused by, relate to, or result or occur from or in connection with (i) the
Assumed Liabilities or (ii) the breach by Buyer or USH&G of any representation,
warranty or covenant made by it in this Agreement or in any agreement or
instrument executed and delivered pursuant hereto, (iii) noncompliance with
applicable bulk transfer laws solely with respect to the Assumed Liabilities, or
(iv) third party claims related to Products of the Company sold at retail on or
after the Closing Date. The Buyer shall have no such indemnification obligation
under this Section 6 until the Company and/or the Selling Stockholders have
suffered Losses in excess of seventy five thousand dollars ($75,000), and then
only to the extent of such excess. This indemnification obligation shall also
apply to claims directly by the Company and/or the
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Selling Stockholders against the Buyer as well as to third party claims.
6.3. Third Party Claims. If a claim by a third party is made against any
party or parties hereto and the party or parties against whom said claim is made
intends to seek indemnification with respect thereto under this paragraph 6, the
party or parties seeking such indemnification shall within ten (10) days
thereafter notify the indemnifying party or parties, in writing, of such claim;
provided, however, that the failure to give such notice shall not affect the
rights of the indemnified party or parties hereunder unless such failure
materially and adversely affects the indemnifying party or parties. The
indemnifying party or parties shall have thirty (30) days (or such time as may
be required to file an answer or response in court) after said notice is given
to elect, by written notice given to the indemnified party or parties, to
undertake, conduct and control, through counsel of their own choosing (subject
to the consent of the indemnified party or parties, such consent not to be
unreasonably withheld) and at their sole risk and expense, the good faith
settlement or defense of such claim, and the indemnified party or parties shall
cooperate with the indemnifying parties in connection therewith; provided: (i)
in the case of the Company and/or any
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of the Selling Stockholders as the indemnifying party or parties, it or they
shall not thereby permit to exist any lien, encumbrance or other adverse change
upon any of the Purchased Assets, Buyer or the Business, and (ii) the
indemnified party or parties shall be entitled to participate in such settlement
or defense through counsel chosen by the indemnified party or parties, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party or parties. So long as the indemnifying party or parties are contesting
any such claim in good faith, the indemnified party or parties shall not pay or
settle any such claim; provided, however, that notwithstanding the foregoing,
the indemnified party or parties shall have the right to pay or settle any such
claim at any time if the indemnifying party is unconditionally released thereby,
provided that in such event they shall waive any right of indemnification
therefor by the indemnifying party or parties. If the indemnifying parties do
not make a timely election to undertake the good faith defense or settlement of
the claim as aforesaid, or if the indemnifying parties fail to proceed with the
good faith defense or settlement of the matter after making such election, then,
in either such event, the indemnified party or parties shall have the right to
contest, settle or compromise the claim at their exclusive discretion, at the
risk and expense
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of the indemnifying parties to the full extent set forth in subparagraph 6.1 or
6.2 hereof, as the case may be.
7. Nondisclosure; Noncompete.
7.1. "Confidential Information" Defined. As used in this paragraph 7, the
term "Confidential Information" shall mean any and all information (oral and
written) relating to the Business or the Purchased Assets, other than such
information which can be shown by the Company to be in the public domain (such
information not being deemed to be in the public domain merely because it is
embraced by more general information which is in the public domain) other than
as the result of a breach of the provisions of subparagraph 7.2 below,
including, but not limited to, information relating to: identity and description
of goods and services used; purchasing; costs; pricing; machinery and equipment;
manufacturing processes; technology; research; test procedures and results;
customers and prospects; marketing; and selling and servicing.
7.2. Nondisclosure of Confidential Information. The Company, each of the
Selling Stockholders and Z.V. Major hereby agrees not to, at any time, directly
or indirectly, use, communicate, disclose or disseminate any Confidential
Information in any manner whatsoever. This restriction shall
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expire as to Confidential Information not rising to the level of a trade secret
under the Georgia Trade Secrets Act within two (2) years following the Closing
Date.
7.3. Noncompete Covenant. The Company, each of the Selling Stockholders and
Z.V. Major shall not, during the two (2) year period commencing on the Closing
Date, directly or indirectly (A) engage or become interested in any entity
(whether as owner, manager, operator, licensor, licensee, lender, partner,
stockholder, joint venturer, employee, consultant or otherwise) in the
continental United States whose products or activities compete in whole or in
part with the Business of the Company. Notwithstanding the foregoing, the
Company, each Selling Stockholder and Z.V. Major shall be permitted to own not
more than five percent (5%) of any class of securities which is registered under
the Securities Exchange Act of 1934, as amended; provided, however, that said 5%
limitation shall apply to the aggregate holdings of any Selling Stockholder,
Z.V. Major or the Company, as the case may be, and those of all other persons
and entities with whom he or it has agreed to act for the purpose of acquiring,
holding, voting or disposing of such securities.
7.4. Certain Activities. The Company, each of the Selling Stockholders and
Z.V. Major hereby acknowledges and
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agrees for an eighteen (18) month period commencing on the Closing Date, neither
the Company, the Selling Stockholders nor Z.V. Major shall, without the written
consent of Buyer or USH&G, directly or indirectly, hire, offer to hire, entice
away or in any other manner persuade or attempt to persuade any officer,
employee, agent, licensor, licensee, customer, prospective customer or supplier
of the Business to discontinue or alter his or its relationship with the
Business, provided, however, that the foregoing shall not apply to employees
employed at the Dahlonega, Georgia facility who are not offered employment by
Buyer or USH&G immediately following the Closing.
7.5. Injunctive Relief, etc. The parties hereto hereby acknowledge and
agree that (i) Buyer and USH&G would be irreparably injured in the event of a
breach by the Company or any of the Selling Stockholders or Z.V. Major of any of
his or its obligations under this paragraph 7 with respect to unauthorized
disclosure of Confidential Information or engaging in activities in violation of
Sections 7.3 or 7.4, (ii) monetary damages would not be an adequate remedy for
any such breach, and (iii) Buyer shall be entitled to seek injunctive relief, in
addition to any other remedy which it may have, in the event of any such breach.
It is hereby also agreed that the existence of any claims which the Company, any
of the Selling Stockholders or
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Z.V. Major may have against Buyer, whether under this Agreement or otherwise,
shall not be a defense to the enforcement by Buyer of any of its rights under
this paragraph 7.
7.6. Scope of Restriction. It is the intent of the parties hereto that the
covenants contained in this paragraph 7 shall be enforced to the fullest extent
permissible under the laws of and public policies of each jurisdiction in which
enforcement is sought (the Company, the Selling Stockholders and Z.V. Major
hereby acknowledging that said restrictions are reasonably necessary for the
protection of Buyer). Accordingly, it is hereby agreed that if any one or more
of the provisions of this paragraph 7 shall be adjudicated to be invalid or
unenforceable for any reason whatsoever, said provision shall be (only with
respect to the operation thereof in the particular jurisdiction in which such
adjudication is made) construed by limiting and reducing it so as to be
enforceable to the extent permissible.
7.7. Additional Undertakings. The provisions of this paragraph 7 shall be
in addition to, and not in lieu of, any other obligations with respect to the
subject matter hereof, whether arising as a matter of contract, by law or
otherwise, including, but not limited to, any obligations which may be
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contained in any employment or consulting agreements between Buyer and any of
the Selling Stockholders.
8. Documents to be Delivered by Company and Selling Stockholders at
Closing:
The Company and the Selling Stockholders shall deliver the following
documents at Closing:
8.1. Escrow Agreement. The Escrow Agreement in substantially the form of
Exhibit A, by and among the Company, the Selling Stockholders, the Buyer and the
Escrow Agent.
8.2. Bill of Sale. The Bill of Sale and Assignment in substantially the
form of Exhibit C of the Company.
8.3. The Sublease Agreement. The Sublease Agreement in substantially the
form of Exhibit D between the Company and the Buyer.
8.4. Patent and Trademark Assignments. The Patent and Trademark Assignments
in substantially the form of Exhibit E between the Company and the Buyer.
8.5. Certificate of Company and Selling Stockholders. A Certificate of the
Secretary of the Company and
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the Selling Stockholders certifying that (i) the representations and warranties
of the Company and the Selling Stockholders contained in this Agreement or in
any document, agreement or instrument delivered by any or all of them pursuant
hereto are true, (ii) the Company and the Selling Stockholders have performed
all material obligations and agreements, and complied with all covenants and
conditions, contained in this Agreement or in any document, agreement or
instrument delivered by any or all of them pursuant hereto and required to be
performed or complied with by any or all of them at or prior to the Closing
Date, (iii) each of the Company's Board of Directors and Stockholders has duly
authorized the execution of this Agreement and the consummation of the
transactions contemplated hereby and (iv) no order of any court or
administrative agency is in effect which restrains or prohibits the transactions
contemplated hereby, and no suit, action, inquiry, investigation or proceeding
in which it will be, or it is, sought to restrain, prohibit or change the terms
of or obtain damages or other relief in connection with this Agreement or any of
the transactions contemplated hereby, and which in the judgment of Buyer makes
it inadvisable to proceed with the consummation of such transactions, has been
instituted or to the knowledge of the Company or the Selling Stockholders has
been threatened by any person or entity.
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8.6. Opinion of Counsel for the Company. An opinion of Messrs. Powell,
Goldstein, Frazer & Murphy LLP, counsel for the Company and the Selling
Stockholders, dated the Closing Date, in substantially the form of Exhibit F
attached hereto and made a part hereof.
8.7. Consents and Approvals. All consents, waivers, approvals, licenses and
authorizations by third parties and governmental and administrative authorities
(and all amendments or modifications to existing agreements with third parties)
set forth on Schedule 4.5 required as a precondition to the performance by the
Company and the Selling Stockholders of their respective obligations hereunder
and under any agreement delivered pursuant hereto.
8.8. Minimum Net Current Assets Certificate. A certificate of the President
of the Company stating the Net Current Assets are at least $1,500,000 as of the
Closing Date.
8.9. Financial Statements of the Company. The Trial Date Balance Sheet
certified by the President of the Company.
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8.10. Employment Agreement. Employment Agreements with Jeff Mounce and
Bruce Diamond and Buyer, in substantially the form annexed hereto as Exhibit G.
8.11. Letter of Agreement. Letter Agreement with Z.V. Major with respect to
consulting services to be performed by Z.V. Major to the Company in the amount
of $4,800 per month for 6 months from the Closing Date in substantially the form
annexed hereto as Exhibit H.
8.12. Payoff Letters; UCC Termination Statements. Payoff letters from each
of Union County Bank and Nations Bank N.A., together with UCC-3 termination
statements with respect to security interests by each Bank on the Purchased
Assets.
9. Documents to be Delivered by Buyer and USH&G at Closing.
The Buyer and USH&G shall deliver the following documents at Closing:
9.1. Escrow Agreement. The Escrow Agreement in substantially the form of
Exhibit A by and among the Company, the Selling Stockholders, the Buyer and the
Escrow Agent.
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9.2. Assumption Agreement. The Assumption Agreement in substantially the
form of Exhibit C executed by the Buyer.
9.3. The Sublease Agreement. The Sublease Agreement in substantially the
form of Exhibit D between the Company and the Buyer.
9.4. Patent and Trademark Assignments. The Patent and Trademark Assignments
in substantially the form of Exhibit E between the Company and the Buyer.
9.5. Certificate of the Secretary of Buyer and USH&G. Certificate of the
Secretary of Buyer and USH&G certifying that (i) the representations and
warranties of Buyer and USH&G contained in this Agreement or in any document,
agreement or instrument delivered by it pursuant hereto are true, (ii) Buyer and
USH&G have performed all obligations and agreements, and complied with all
covenants and conditions, contained in this Agreement or in any document,
agreement or instrument delivered by it pursuant hereto and required to be
performed or complied with by it at or prior to the Closing Date, (iii) each of
the Buyer's and USH&G's Board of Directors has duly authorized the execution of
this Agreement and the consummation of the transactions contemplated hereby and
(iv) no
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order of any court or administrative agency is in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action, inquiry,
investigation or proceeding in which it will be, or it is, sought to restrain,
prohibit or change the terms of or obtain damages or other relief in connection
with this Agreement or any of the transactions contemplated hereby has been
instituted to the knowledge of Buyer and/or USH&G or has been threatened by any
person or entity.
9.6. Opinion of Counsel for the Buyer. An opinion of Messrs. Tenzer
Greenblatt LLP, counsel for the Buyer and USH&G, dated the Closing Date, in
substantially the form of Exhibit H attached hereto and made a part hereof.
9.7. Consents and Approvals. All consents, waivers, approvals, licenses and
authorizations by third parties and governmental and administrative authorities
(and all amendments and modifications to existing agreements with third parties)
required as a precondition to the performance by Buyer of its obligations
hereunder.
10. Miscellaneous Provisions.
10.1. Expenses. Except as otherwise provided in this Agreement, each of the
parties hereto shall pay his or its own costs and expenses in connection with
this Agreement and the
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transactions contemplated hereby. For purposes of this Agreement, the expenses
of the Company shall be deemed to be the expenses of the Selling Stockholders.
10.2. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
10.3. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, by overnight courier or
mailed by express mail or the date mailed if mailed by registered or certified
mail, postage prepaid, return receipt requested, as follows:
If to Buyer or USH&G to: c/o U.S. Home and Garden, Inc.
655 Montgomery Street
Suite 830
San Francisco, CA 94111
Attn: Robert Kassel
Copy to: Tenzer, Greenblatt LLP
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405 Lexington Avenue
New York, New York 10174
Attn: Barry Rutcofsky, Esq.
If to the Company, to: Weed Wizard, Inc.
P.O. Box 275
Dahlonega, Georgia 30533
Attn: President
Copy to: Powell, Goldstein, Frazer &
Murphy LLP
191 Peachtree N.E.
16th Floor
Atlanta, Georgia 30303
Attn: Thomas R. McNeill, Esq.
If to any or all of the
Selling Stockholders, to: The names and addresses
set forth on Schedule 4.2 hereof
Copy to: Powell, Goldstein, Frazer &
Murphy LLP
191 Peachtree N.E.
16th Floor
Atlanta, Georgia 30303
Attn: Thomas R. McNeill, Esq.
or to such other address as any party shall have designated by like notice to
the other parties hereto (except that a notice of change of address shall only
be effective upon receipt).
10.4. Amendment. This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
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10.5. Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
10.6. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.7. Assignment. Prior to the Closing Date, neither this Agreement nor any
rights, interests or obligations hereunder may be assigned (by operation of law
or otherwise) by any party hereto without the prior written consent of all of
the parties hereto, except that this Agreement may be assigned to a wholly-owned
subsidiary of Buyer without the need for such prior consent provided that such
assignment shall not relieve Buyer of any liabilities hereunder.
10.8. Binding Effect; Benefits. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective heirs,
legal
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representatives, successors and permitted assigns. Nothing herein contained,
express or implied, is intended to confer upon any person other than the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns, any rights or remedies under or by reason of this Agreement.
10.9. Waiver, etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach of any of the provisions of this Agreement shall be effective unless
set forth in a written instrument executed by the party or parties against whom
or which enforcement of such waiver is sought; and no waiver of any such breach
shall be construed or deemed to be a waiver of any other or subsequent breach.
10.10. Severability. Any provision of this Agreement which is held by a
court of competent jurisdiction to be prohibited or unenforceable in any
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the
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remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.11. Announcements. No party hereto shall issue any press release or
otherwise divulge the existence of this Agreement or the transactions
contemplated hereby without the prior approval of the other parties hereto,
except as may be required by applicable law or the applicable rules or
regulations of any stock exchange.
10.12. Schedules. The Schedules delivered pursuant to this Agreement are an
integral part hereof. Each such Schedule shall be in writing, shall indicate the
subparagraph pursuant to which it is being delivered, and shall be initialed by
the delivering party.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
WEED WIZARD ACQUISITION CORP.
By: /s/ Richard J. Raleigh
---------------------------
VP
U.S. HOME & GARDEN INC.
By: /s/ Richard J. Raleigh
---------------------------
COO
WEED WIZARD, INC.
By: /s/ Don Bryan
---------------------------
/s/ Pam Butler
-------------------------------
Pam Butler
/s/ Don Bryan
-------------------------------
Don Bryan
/s/ Mabel Bryan
-------------------------------
Mabel Bryan
/s/ Norman Adams
-------------------------------
Norman Adams
/s/ James Anderson
-------------------------------
James Anderson
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WITH RESPECT TO SECTIONS 4.7, 4.12
AND ARTICLE VII HEREOF:
/s/ Z.V. Major
----------------------------------
Z.V. MAJOR
64
Exhibit 10.2
LIST OF OMITTED SCHEDULES/EXHIBITS
Schedule 4.2 Capitalization
Schedule 4.5 Noncontravention
Schedule 4.8 Real Property
Schedule 4.9 Accounts Receivable
Schedule 4.11 Litigation
Schedule 4.13 Intellectual Property
Schedule 4.15 Insurance
Schedule 4.16 Product Liability
Schedule 4.17 Employee Arrangements
Schedule 4.19 Certain Business Matters
Schedule 4.23 Business Practices and Commitments
Schedule 4.24 Backlog and Retail Inventories
Schedule 4.24(a) Inventory
Schedule 4.28 Accounts Payable
Exhibit A Escrow Agreement
Exhibit B Assumption Agreement
Exhibit C Bill of Sale and Assignment
Exhibit D Patent and Trademark Assignments
Exhibit E Opinion of Powell, Goldstein, Frazer & Murphy LLP
Exhibit F Employment Agreements of Jeff Mounce and Bruce
Diamond
Exhibit G Opinion of Tenzer Greenblatt LLP
Exhibit H Retained Asset List
Exhibit I Inventory Protocol
Copies of any of the Schedules and/or Exhibits listed above will be furnished to
the Securities and Exchange Commission upon request.
