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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Coventry Industries Corp.
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(NAME OF ISSUER)
Common Stock, $.001 par value
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(TITLE OF CLASS OF SECURITIES)
222864100
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(CUSIP NUMBER)
Stephen Rosedale
4700 Ashwood Drive, Suite 200
Cincinnati, Ohio 45241
(513) 489-7100
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
December 7, 1998
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(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
Page 1 of 106 Pages
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<TABLE>
<CAPTION>
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CUSIP NO. 222864100 13D PAGE 2 OF 4 PAGES
--------- -- - -
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<S> <C> <C>
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Stephen Rosedale
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
O0-Reporting Person acquired shares of Issuer in exchange for shares of corporation controlled by
Reporting Person.
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A
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7 SOLE VOTING POWER 756,800
NUMBER OF -------------------------------------------------------------------------------------------------------
SHARES 8 SHARED VOTING POWER 3,777,961
BENEFICIALLY
OWNED BY
EACH -------------------------------------------------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER 756,800
PERSON WITH
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10 SHARED DISPOSITIVE POWER 0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
756,800
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.96%
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14 TYPE OF REPORTING PERSON*
IN
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</TABLE>
Page 2 of 106 Pages
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ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this Schedule relates is the
common stock, par value $.001 per share (the "Issuer Common Stock"), of Coventry
Industries Corp., a Florida corporation (the "Issuer"). The principal executive
offices of the Issuer are located at 7777 Glades Road, Suite 211, Boca Raton,
Florida 33434.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed by Stephen Rosedale, an individual. Stephen
Rosedale is sometimes referred to herein individually as a "Reporting Person" or
as "Mr. Rosedale."
ITEM 2. (a)(b)(c)
(a) Stephen Rosedale
(b) 4700 Ashwood Drive, Suite 200, Cincinnati, Ohio 45241
(c) Stephen Rosedale serves as the President and Chief Executive
Officer of Communicare Health Services, Inc. and BSD
Healthcare Industries, Inc. ("BSD").
(d) During the last five years, Stephen Rosedale has not been
convicted in a criminal proceeding.
(e) During the last five years, Stephen Rosedale has not been a
party to a civil proceeding of a judicial or administrative
body of competent jurisdiction resulting in his being subject
to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Stephen Rosedale is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Stephen Rosedale acquired the shares which are the subject of this
statement in exchange for 1,122,042 shares of BSD (the "BSD Common Stock") on
December 7, 1998 (the "Exchange"). In the Exchange, the 1,122,042 shares of BSD
Common Stock held by Stephen Rosedale were exchanged for 756,800 shares of
Issuer Common Stock.
ITEM 4. PURPOSE OF TRANSACTION.
Stephen Rosedale acquired 756,800 shares of Issuer Common Stock
pursuant to an Exchange Agreement (the "Exchange Agreement") dated as of
September 29, 1998 among the Issuer, BSD, Stephen Rosedale, Ronald Wilheim, and
People First Staffing LLC ("PFS"). The purpose of this transaction was for
Stephen Rosedale to acquire control of the Issuer.
On December 7, 1998, Mr. Rosedale exchanged 1,122,042 shares of BSD
Common Stock for 756,800 newly-issued shares of the Issuer Common Stock. On the
same date, Ronald Wilheim, the son of Stephen Rosedale, exchanged 280,512 shares
of BSD Common Stock for 189,200 newly-issued shares of Issuer Common Stock.
Following the consummation of these exchanges, Mr. Rosedale and Mr. Wilheim held
946,000 shares of Issuer Common Stock, or 19.95% of the issued and outstanding
shares of Issuer Common Stock on a fully diluted basis, and the Issuer held
1,402,554 shares of BSD Common Stock, or 80.10% of the issued and outstanding
shares of BSD Common Stock on a fully diluted basis. The Exchange Agreement
provides that a second exchange (the "Second Exchange") will be effected in
1999, whereupon Mr. Rosedale and Mr. Wilheim will exchange 100% of the
membership interests of PFS for additional newly-issued shares of Issuer Common
Stock. Following completion of the Second Exchange, Mr. Rosedale and Mr. Wilheim
will hold, in the aggregate, 80.10% of the issued and outstanding shares of
Issuer Common Stock on a fully diluted basis.
Page 3 of 106 Pages
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The Issuer has committed to nominating Stephen Rosedale for election to
its Board of Directors, but Mr. Rosedale has not yet accepted the nomination.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Stephen Rosedale beneficially owns 756,800 shares of Issuer Common
Stock, which represents approximately 15.96% of the total issued and outstanding
shares of Issuer Common Stock.
(b) Stephen Rosedale has sole dispositive power over 756,800 shares of
Issuer Common Stock. Pursuant to the Voting Agreement described in Item 6 below,
Mr. Rosedale has shared voting power over 3,777,961 shares of Issuer Common
Stock.
(c) In the past 60 days, Stephen Rosedale has had no transactions in
Issuer Common Stock, except as described in Item 4 above.
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of, the
common stock beneficially owned by Stephen Rosedale.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Stephen Rosedale received shares of Issuer Common Stock pursuant to the
Exchange Agreement. See Item 4 above.
Mr. Rosedale, Mr. Wilheim and certain other principal shareholders of
the Issuer entered into a Voting Agreement dated as of December 3, 1998 (the
"Voting Agreement") pursuant to which each such shareholder agreed to vote his,
her or its shares of Issuer Common Stock in favor of approval of the Exchange
Agreement, the other transactions contemplated by the Exchange Agreement and any
other transactions or items recommended by the Board of Directors of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The Exchange Agreement is filed as Exhibit A hereto and incorporated
herein.
The Voting Agreement is filed as Exhibit B hereto and incorporated
herein.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 7, 1998 /s/ Stephen Rosedale
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Stephen Rosedale
Page 4 of 106 Pages
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EXHIBIT INDEX
Page
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Exchange Agreement .................................... 6
Voting Agreement ...................................... 99
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EXHIBIT A
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT, dated as of September 29, 1998, by and among COVENTRY
INDUSTRIES, INC., a Florida corporation ("COVENTRY"), BSD HEALTHCARE INDUSTRIES,
INC., a Florida corporation ("BSD"), the Shareholders of BSD as set forth on
Schedule "A" attached hereto and made a part hereof (individually a
"Shareholder" and collectively, the "Shareholders"), PEOPLE FIRST STAFFING LLC,
an Ohio limited liability company ("PF"), and the Members of PF listed on
Schedule "B" attached hereto and made a part hereof (individually a "MEMBER" and
collectively, the "MEMBERS").
WHEREAS, Coventry is a corporation organized under the laws of the State of
Florida and is responsible for filing certain reports with the Securities and
Exchange Commission pursuant to Section 13 of the Securities Exchange Act of
1934;
WHEREAS, BSD operates a respiratory therapy and respiratory therapy management
business through its wholly owned subsidiaries, Respiratory Care Services, Inc.,
an Indiana corporation ("RCS"), and RCS Subacute, Inc., also an Indiana
corporation ("RCSS"),
WHEREAS, the Shareholders own an aggregate of 1,402,555 shares (or 80.10%) of
the outstanding common stock of BSD (the "BSD SHARES");
WHEREAS, at the time of the Second Closing (as hereinafter defined), PF will be
an employee leasing company which will have significant long-term contracts for
such services covering approximately six thousand (6,000) employees;
WHEREAS, the Members own one hundred percent (100%) of the membership interests
in PF (the "PF MEMBERSHIP INTERESTS");
WHEREAS, Coventry wishes to issue a number of shares equal to 19.95% of its
outstanding shares of common stock (the "BSD CONSIDERATION") to the Shareholders
in exchange for the BSD Shares, and the closing of the BSD Consideration (the
"First Closing") will occur pursuant to the terms and conditions hereof;
WHEREAS, in exchange for the PF Membership Interests, Coventry wishes to issue a
number of shares to the Members, which, when aggregated with the shares issued
in the BSD Consideration, will equal an aggregate of 80.10% of the issued and
outstanding shares of Coventry on the date of such issuance (the "PF
CONSIDERATION") (the BSD Consideration and the PF Consideration sometimes
collectively referred to as the "COVENTRY SHARES") and the Closing of the PF
Consideration (the "Second Closing") will
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occur pursuant to the terms and conditions hereof.
WHEREAS, the parties desire both the BSD Exchange (as defined in Section 2.2
hereof) and the PF Exchange (also as defined in Section 2.2 hereof) (as defined
in Section 2.2 hereof (the BSD Exchange and the PF Exchange sometimes
collectively referred to as the "CONTEMPLATED TRANSACTIONS") to be tax-free
exchanges pursuant to Section 368 or 351 of the Internal Revenue Code;
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NOW, THEREFORE, in consideration of the mutual terms, conditions and other
agreements set forth herein, the parties hereto hereby agree as follows:
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE .
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Article I:
"ACQUIRED COMPANIES" -- BSD, RCS, RCSS and PF, collectively.
"APPLICABLE CONTRACT" -- any Contract (a) under which any Acquired Company or
Coventry has or may acquire any rights, (b) under which any Acquired Company or
Coventry has or may become subject to any obligation or liability, or (c) by
which any Acquired Company or Coventry or any of their respective assets owned
or used by it is or may become bound.
"BREACH" -- a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision.
"CLOSING DATES" -- the dates and times as of which the First Closing and the
Second Closing actually take place.
"CONSENT" -- any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DISCLOSURE LETTER"-- the disclosure letter delivered by the parties to each
other prior to the First Closing and to be attached hereto and made a part
hereof, effective at the First Closing.
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"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
encumbrance, equitable interest, lien, option, pledge, security interest, right
of first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost damages, expense,
liability, obligation, or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
()any environmental, health, or safety matters or conditions (including on-site
or off-site contamination, occupational safety and health, and regulation of
chemical substances or products);
()fines, penalties, judgments, awards, settlements, legal or administrative
proceedings, damages, losses, claims, demands and responses, investigative,
remedial, or inspection costs and expenses arising under any Environmental Law
or Occupational Safety and Health Law;
() financial responsibility under any Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by any applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
()any other compliance, corrective, investigative, or remedial measures required
under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or
relates to:
()advising appropriate authorities, employees and the public of intended or
actual releases of pollutants or hazardous substances or materials, violations
of discharge limits, or other
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prohibitions and of the commencement of activities, such as resource extraction
or construction, that could have a significant impact on the Environment;
()preventing or reducing to acceptable levels the release of pollutants or
hazardous substances or materials into the Environment;
()reducing the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
()assuring that products are designed, formulated, packaged, and used so that
they do not present unreasonable risks to human health or the Environment when
used or disposed of;
()protecting resources, species, or ecological amenities;
()reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollutants, oil, or other potentially harmful substances;
()cleaning up pollutants that have been released, preventing the threat of
release, or paying the costs of such clean up or prevention; or
()making responsible parties pay private parties, or groups of them, for damages
to their health or the Environment, or permitting self-appointed representatives
of the public interest to recover for injuries to public assets.
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"ERISA" -- the Employee Retirement Income Security Act of 1974 or any successor
law, and the regulations and rules issued pursuant to that Act or any successor
law.
"FACILITIES" -- any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Company or Coventry, as the case may
be, and any buildings, plants, structures or equipment (including motor
vehicles, tank cars, and rolling stock) currently or formerly owned or operated
by any Acquired Company or Coventry, as the case may be.
"GAAP" -- generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the balance sheet and the other
financial statements referred to in Sections 3.4, 4.4 and 5.4 were prepared.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit, waiver,
or other authorization issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY" -- any:
()nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
()federal, state, local, municipal or other government; or
()governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal).
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that poses an unreasonable risk of harm to persons
or property on or off the Facilities, or that may affect the value of the
Facilities or the Acquired Companies.
"HAZARDOUS MATERIALS" -- any waste or other hazardous substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive or toxic, or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
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"IRC" -- the Internal Revenue Code of 1986 or any successor law, and the
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor agency and,
to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a particular
fact or other matter if such individual is actually aware of such fact or other
matter. A Person (other than an individual) will be deemed to have "Knowledge"
of a particular fact or other matter if any individual who is serving or has
served, as a director, officer, partner, executor, or trustee of such Person (or
in any similar capacity) has, or at any time had, Knowledge of such fact or
other matter.
7
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"LEGAL REQUIREMENT"-- any federal, state, local, municipal, or other
administrative order, constitution, law, ordinance, principle of common law,
regulation, statute or treaty including, without limitation, land use and zoning
restrictions, environmental laws and regulations, OSHA laws and regulations,
health and safety codes, labor and employment practices, immigration,
anti-competitive practices, advertising and labeling rules, customs, tariff and
importation rules, the Fair Packaging and Labeling Act, the Magnuson-MOSS
Warranty Act, and the Consumer Product Safety Act.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order, ruling, subpoena,
or verdict entered, issued, made, or rendered by any court, administrative
agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited partnership; (d) any
charter or similar document adopted or filed in connection with the creation,
formation, or organization of a Person; (e) any organizational document of a
limited liability company; and (f) any amendment to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
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()each other member of such individual's Family;
()any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
()any Person in which such individual or members of such individual's Family
hold (individually or in the aggregate) a Material Interest; and
()any Person with respect to which such individual or one or more members of
such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
()any Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with, such
specified Person;
()any Person that holds a Material Interest in such specified Person;
()each Person that serves as a director, officer, partner, executor, or trustee
of such specified Person (or in a similar capacity);
()any Person in which such specified Person holds a Material Interest;
()any Person with respect to which such specified Person serves as a general
partner or a trustee (or in a similar capacity); and
()any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "FAMILY" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "MATERIAL INTEREST" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least five percent (5%) of
the outstanding voting power of a Person or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
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"REPRESENTATIVE" -- with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law, and the
regulations and rules issued pursuant to that Act or any successor law.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation or
other Person (x) of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of directors or
similar governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) or (y) of which fifty percent (50%) or more of any class of
securities or other equity interests, are held by the Owner or one or more of
its Subsidiaries; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of Coventry.
"TAX" -- any tax imposed by any Legal Requirement.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may result
from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken or otherwise
pursued in the future.
ARTICLE
DUE DILIGENCE PERIOD; EXCHANGE
OF SHARES AND MEMBERSHIP
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INTERESTS FOR COMMON STOCK
2. DUE DILIGENCE
Each of Coventry, the Shareholders and the Members shall have a period
commencing on the date hereof and expiring at six o'clock (6:00) p.m. on the
date that is sixty (60) days following the parties' receipt of a fully-executed
copy of this Agreement (the "DUE DILIGENCE PERIOD"), at their respective sole
cost and expense, to (a) inspect the Facilities, (b) evaluate the Contemplated
Transactions, (c) analyze and review the books, records, disclosures, documents,
agreements, assets and liabilities relating to Coventry and its Subsidiaries and
the Acquired Companies, and (d) conduct such tests, investigations, studies and
reports as they may determine to be desirable in connection therewith. If any
such review, inspections, tests, investigations or studies are unsatisfactory,
or, if there are any matters relating to Coventry or its Subsidiaries or their
businesses, assets or liabilities which are unsatisfactory, in each case in the
sole and absolute discretion of the Shareholders and Members, or if they
determine, in their sole and absolute discretion, during the Due Diligence
Period, not to proceed with the Contemplated Transactions, the Shareholders
and/or Members may terminate this Agreement by notice to Coventry not later than
six o'clock (6:00) p.m. on the last day of the Due Diligence Period. If any such
review, inspections, tests, investigations or studies are unsatisfactory, or, if
there are any matters relating to the Acquired Companies or their businesses,
assets or liabilities which are unsatisfactory, in each case in the sole and
absolute discretion of Coventry, or if it determines, in its sole and absolute
discretion, during the Due Diligence Period, not to proceed with the
Contemplated Transactions, Coventry may terminate this Agreement by notice to
the Shareholders and the Members not later than six o'clock (6:00) p.m. on the
last day of the Due Diligence Period. Upon any such termination pursuant to this
Section 2.1, neither party shall have any further liability to the other party
pursuant hereto, except for any liability that, pursuant to the provisions of
this Agreement, is expressly made to survive the termination hereof. Each party
shall cooperate with, and shall cause its Subsidiaries and Representatives to
cooperate with, the other parties in connection with the due diligence set forth
in this Section 2.1.
2. AGREEMENT TO EXCHANGE BSD SHARES AND MEMBERSHIP INTERESTS FOR
THE COVENTRY SHARES.
Upon the terms and subject to the conditions set forth herein, (i) the
Shareholders shall transfer the BSD Shares to Coventry and, simultaneously
therewith, Coventry shall transfer to the Shareholders the BSD Consideration
(the "BSD EXCHANGE"); and (ii) the Members shall transfer the PF Membership
Interests to Coventry and, simultaneously therewith, Coventry shall transfer
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the PF Consideration to the Members (the "PF EXCHANGE").
2. CLOSING.
The closing of the BSD Exchange shall take place within ten (10) days after the
later of (x) the satisfaction, waiver or expiration of the Due Diligence Period
and (y) the conditions precedent to such Closing set forth in Article XI hereof
have been satisfied (the "FIRST CLOSING"). The closing of the PF Exchange shall
take place as soon as practicable after the conditions precedent to such closing
set forth in Articles XII and XIII hereof have been satisfied but in no event
later than the Contingency Date (as defined in Article XIII hereof) (the "SECOND
CLOSING") (the First and Second Closing sometimes collectively referred to as
the "CLOSING"). Both the First Closing and the Second Closing shall take place
at the offices of Broad and Cassel, 7777 Glades Road, Boca Raton, Florida 33434,
or such other place as the parties shall agree.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF BSD
BSD represents and warrants to Coventry, except as set forth in the Disclosure
Letter, as follows (all references in this Article III to the delivery of
documents or schedules shall mean delivery on or prior to the First Closing Date
and all representations and warranties in this Article III are made as to BSD
and all Subsidiaries thereof):
3. ORGANIZATION AND GOOD STANDING
(a) BSD and its subsidiaries, RCS and RCSS, are each corporations duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. As set forth on Part 3.1 of the Disclosure Letter,
BSD and its subsidiaries, RCS and RCSS, are duly qualified to do business as
foreign corporations and are in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by them, or the nature of the activities conducted by them, require such
qualification.
(b) BSD has delivered to Coventry copies of the Organizational Documents of BSD,
as currently in effect.
3. AUTHORITY; NO CONFLICT
(a) his Agreement constitutes the legal, valid, and binding obligation of BSD,
enforceable against BSD in accordance with its
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terms. Upon the execution and delivery by BSD of this Agreement and all
agreements contemplated herein to which BSD are a party (collectively, the "BSD
CLOSING DOCUMENTS"), this Agreement and the BSD Closing Documents will
constitute the legal, valid, and binding obligations of BSD, enforceable against
BSD in accordance with their respective terms except as such enforcement is
limited by bankruptcy, insolvency, or other laws affecting creditors' rights
generally. BSD has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the BSD Closing Documents and
to perform its obligations under this Agreement and the BSD Closing Documents.
(b) Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of BSD, or (B) any resolution adopted by the board
of directors or the shareholders of BSD;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which BSD, or any of the assets owned or used by
BSD, may be subject;
(iii) contravene, conflict with, or result in a violation of, any of the terms
or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by BSD or that otherwise relates to the business of, or any of the assets
owned or used by, BSD;
(iv) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or with respect
to any of the assets owned or used by BSD.
(c) Except as set forth in Part 3.2 of the Disclosure Letter, BSD is not and
will not be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
3. CAPITALIZATION
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The authorized equity securities of BSD consist of 50,000 shares of common
stock, par value $.001 per share, of which 1,751,005 shares are issued and
outstanding and the 5,000,000 shares of preferred stock, par value $.001 per
share, of which none are outstanding. The Shareholders are and will be on the
First Closing Date the record and beneficial owners of the BSD Shares. All of
the BSD Shares are free and clear of all Encumbrances. All of the BSD Shares
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Part 3.3 of the Disclosure Letter, there
are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of BSD. None of the outstanding equity securities
or other securities of BSD was issued in violation of the Securities Act or any
other Legal Requirement. BSD does not own, or have any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business, except RCS and RCSS.
3. FINANCIAL STATEMENTS
BSD has delivered to Coventry: a balance sheet of BSD as at December 31, 1997
(including the notes thereto, the "BSD BALANCE SHEET"), and the related
statements of income, changes in shareholders' equity, and cash flow for the
fiscal years then ended, together with the report thereon of J.H. Cohn & Co.,
independent certified public accountants. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
the shareholders' equity, and cash flow of BSD as at the respective dates of and
for the periods referred to in such financial statements, all in accordance with
GAAP; the financial statements referred to in this Section 3.4 reflect the
consistent application of such accounting principles throughout the periods
involved. No financial statements of any Person other than BSD, RCS and RCSS are
required by GAAP to be included in the financial statements of BSD.
3.5 BOOKS AND RECORDS
The books of account, minute books and stock record books of BSD, all of which
have been made available to Coventry, are correct in all material respects. The
minute books of BSD contain accurate and complete records of all meetings held
of, and corporate action taken by, the shareholders, the Board of Directors, and
committees of the Board of Directors of BSD, and no meeting of any shareholders,
Board of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute book. At the Closing, all of those
books and records will be in the possession of BSD.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
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Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by BSD. BSD has
delivered to Coventry copies of the deeds and other instruments (as recorded) by
which BSD acquired such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of BSD
and relating to such property or interests. BSD owns (with good and marketable
title in the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that it purports to own located in the
facilities owned or operated by BSD or reflected as owned in the books and
records of BSD, including all of the properties and assets reflected in the BSD
Balance Sheet (except for assets held under capitalized leases disclosed in Part
3.6 of the Disclosure Letter and personal property sold since the date of the
BSD Balance Sheet, as the case may be, in the Ordinary Course of Business), and
all of the properties and assets purchased or otherwise acquired by BSD since
the date of the BSD Balance Sheet (except for personal property acquired and
sold since the date of the BSD Balance Sheet in the Ordinary Course of Business
and consistent with past practice). All properties and assets reflected in the
BSD Balance Sheet are free and clear of all Encumbrances and are not, in the
case of real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the BSD Balance Sheet as securing specified liabilities or obligations,
with respect to which no default (or event that, with notice or lapse of time or
both, would constitute a default) exists, (b) mortgages or security interests
incurred in connection with the purchase of property or assets after the date of
the BSD Balance Sheet (such mortgages and security interests being limited to
the property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of BSD, and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto.
3. 7 ACCOUNTS RECEIVABLE
All accounts receivable of BSD that are reflected on the BSD Balance Sheet or on
the accounting records of BSD as of the Closing Date (collectively, the "BSD
ACCOUNTS RECEIVABLE") represent or will represent valid obligations arising from
sales actually made or services actually performed in the Ordinary
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Course of Business. Except as set forth in Part 3.7 of the Disclosure Letter,
all BSD Accounts Receivable are current and expected to be collectible in the
Ordinary Course of Business, net of reserves for uncollectible accounts;
provided, however, that this provision is not a guaranty of collectibility.
3. 8 INVENTORY
All inventory of BSD, whether or not reflected in the BSD Balance Sheet,
consists of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, all of
which have been written off or written down to net realizable value in the BSD
Balance Sheet or on the accounting records of BSD as of the Closing Date, as the
case may be.
3.9 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.9 of the Disclosure Letter, BSD has no liabilities
or obligations of any nature (whether known or unknown, and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the BSD Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the date of the BSD Balance
Sheet.
3.10 TAXES
(a) BSD has filed or caused to be filed on a timely basis all Tax Returns that
are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. BSD has delivered to Coventry copies of, and Part
3.10 of the Disclosure Letter contains a complete and accurate list of, all such
Tax Returns filed since January 1, 1996. BSD has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by BSD, except such
Taxes, if any, as are listed in Part 3.10 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the BSD Balance Sheet.
(b) To the Knowledge of BSD, the charges, accruals, and reserves with respect to
Taxes on the books of BSD are adequate (determined in accordance with GAAP) and
are at least equal to BSD's liability for Taxes. There exists no proposed tax
assessment against BSD except as disclosed in the BSD Balance Sheet or in Part
3.10 of the Disclosure Letter. All Taxes that BSD is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
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(c) All Tax Returns filed by BSD are true and correct in all material respects.
There is no tax sharing agreement that will require any payment by BSD after the
date of this Agreement.
(d) Except as set forth in Part 3.10 of the Disclosure Letter, BSD has not been
audited by, or received any notice of audit from, any taxing authority since
January 1, 1996.
3.11 NO MATERIAL ADVERSE CHANGE
Since the date of the BSD Balance Sheet, except as set forth in Part 3.11 of the
Disclosure Letter, there has not been any material adverse change in the
business, operations, properties, assets, or condition of BSD, and to the
Knowledge of BSD, no event has occurred or circumstance exists that may result
in such a material adverse change.
3.12 EMPLOYEES, EMPLOYMENT AGREEMENTS, LABOR MATTERS, BENEFIT
PLANS, ETC.
(a) Except as set forth on Part 3.12 of the Disclosure Letter, neither BSD nor
any Subsidiary has, or is bound by, any oral or written employment, bonus,
performance, compensation, commission, management, pension, retirement, stock
purchase, savings, profit-sharing, retainer, group insurance, termination,
severance, consulting, sales representative, distributor or similar incentive or
benefit agreements, contracts, understandings or arrangements with any of its
personnel.
(b) BSD and its Subsidiaries have paid in full all wages, salaries, commissions,
bonuses, vacation pay, sick pay and other direct and indirect compensation and
benefits earned by all employees, representatives, contractors and agents
through the date of the First Closing, as well as all payroll and withholding
taxes and all payroll overheads. There are no bonuses or commissions accrued or
payable by BSD or any Subsidiaries with respect to any fiscal periods ending on
or before June 30, 1998 that remain unpaid in whole or in part, or which are in
dispute or the subject of any claim.
(c) Part 3.12 of the Disclosure Letter contains a true and complete list of all
current employees, consultants, representatives, agents, and contractors of BSD
and its Subsidiaries, together with job title and description and current
compensation rates (salary, bonus, commission and otherwise), and identification
of which Subsidiary is the employer of such persons.
(d) Except as set forth in Part 3.12 of the Disclosure Letter, there are no
collective bargaining agreements or union or labor agreements to which BSD or
any Subsidiary is a party or is bound or affecting the business thereof. Except
as set forth in Part 3.12 of the Disclosure Letter, there are no pending, and
during
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the five (5) years preceding the date of this Agreement there have been no,
disputes, strikes, work slow-downs, walkouts, disturbances, slowdowns,
grievances, arbitrations, or filings of any actions, claims, litigation,
proceedings, investigations or complaints of unfair labor practices, harassment,
discrimination, wrongful termination, wage or back pay demands or other
employment-related difficulties with respect to any employees of BSD or any
Subsidiary, and BSD knows of no basis for any of the foregoing. Each collective
bargaining agreement or other union contract set forth in Part 3.12 of the
Disclosure Letter (each a "BSD UNION CONTRACT") is in full force and effect; BSD
has made all payments and contributions due under such BSD Union Contract and is
otherwise in full compliance with the terms and conditions of such BSD Union
Contract, and there are no defaults under the BSD Union Contract or claims
thereof by the union, any employees or any governmental or labor relations
agency. There are no disputes or grievances pending or Threatened with respect
to any BSD Union Contract or any employees covered thereby, and BSD knows of no
basis for any of the foregoing.
(e) Except as set forth on Part 3.12 of the Disclosure Letter, BSD and its
Subsidiaries are not covered by and do not maintain, participate in, contribute
to, or operate any pension, retirement, profit-sharing, 401(k) or other employee
benefit plan, do not maintain or contribute to and are not required to
contribute to any employee benefit plan (within the meaning of Section 3(2) of
ERISA), which is intended to qualify under paragraph 401(a) of the IRC, and BSD
and its Subsidiaries have not been required to contribute to any employee
benefit plan which is a multi-employer plan (within the meaning of Section 3(37)
of ERISA) in the five (5) years immediately preceding the date hereof. BSD and
its Subsidiaries have no responsibility for and have not assumed any
pension-related or employee benefit plan-related liabilities (including, without
limitation, withdrawal liability) of any other predecessor business or person.
With respect to each and every employee benefit plan of BSD and its Subsidiaries
identified on Part 3.12 of the Disclosure Letter (each, a "BSD BENEFIT PLAN"),
each BSD Benefit Plan conforms to, and its administration is in compliance with,
applicable federal laws, including, but not limited to, ERISA and the IRC. There
are no pending, or Threatened or anticipated, audits, assessments, disputes or
claims by, on behalf of, or against, any BSD Benefit Plan, BSD or any Subsidiary
by any participant or beneficiary thereunder or any governmental agency.
(f) BSD and its Subsidiaries have fully paid and performed all liabilities and
obligations whatsoever relating to their participation in the multi-employer
pension plans set forth in Part 3.12 of the Disclosure Letter, including,
without limitation, payment of all contributions and assessments, whether
imposed by such plan or the trustees thereof or ERISA, as amended by the
Multi-Employers Pension Plan Amendment Act of 1980, or
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otherwise. There are no pending, or Threatened or anticipated, audits,
assessments, disputes or claims by, on behalf of, or against, BSD or any
Subsidiary by any such plan, the trustees thereof, any related union, any
participant or beneficiary thereunder or any governmental agency.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.13 of the Disclosure Letter:
(i) BSD is in compliance in all material respects with each Legal Requirement
that is or was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or without notice
or lapse of time or both) (A) may constitute or result in a material violation
by BSD of, or a material failure on the part of BSD to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of BSD to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature; and
(iii) BSD has not received at any time any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential material violation of,
or material failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential material obligation on the part of BSD to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(b) Part 3.13 of the Disclosure Letter contains a complete and accurate list of
each material Governmental Authorization that is held by BSD or that otherwise
relates to the business of, or to any of the assets owned or used by, BSD. Each
material Governmental Authorization listed or required to be listed in Part 3.13
of the Disclosure Letter is valid and in full force and effect. Except as set
forth in Part 3.13 of the Disclosure Letter:
(i) BSD is in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.13 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time or both) (A) constitute or result directly or indirectly
in a material violation of or a material failure to comply with any term or
requirement of any material Governmental Authorization listed or required to be
listed in Part 3.13 of the Disclosure Letter, or (B) result
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directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any modification to, any material Governmental
Authorization listed or required to be listed in Part 3.13 of the Disclosure
Letter;
(iii) BSD has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential material violation of or material
failure to comply with any material term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
material Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the
material Governmental Authorizations listed or required to be listed in Part
3.13 of the Disclosure Letter have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other filings required to have been
made with respect to such material Governmental Authorizations have been duly
made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.13 of the Disclosure Letter
collectively constitute all of the material Governmental Authorizations
necessary to permit BSD to lawfully conduct and operate its business in the
manner in which it currently conducts and operates such business and to permit
BSD to own and use its assets in the manner in which it currently owns and uses
such assets.
3.14 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.14 of the Disclosure Letter, there is no
pending Proceeding:
(i) that has been commenced by or against BSD or that otherwise relates to or
may affect the business of, or any of the assets owned or used by, BSD; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of BSD, (1) no such Proceeding has been Threatened, and (2) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding. BSD has delivered to Coventry
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.14 of the Disclosure Letter. The Proceedings listed
in Part 3.14 of the Disclosure Letter will not have a material adverse effect on
the business, operations, assets, condition, or prospects of BSD.
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(b) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) there is no Order to which BSD, or any of the assets owned or
used by BSD, is subject; and
(ii) no officer, director, agent, or key employee of BSD is subject to any Order
that prohibits such officer, director, agent, or key employee from engaging in
or continuing any conduct, activity, or practice relating to the business of
BSD.
(c) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) BSD is in compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject;
(ii) No event has occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time or both) a violation of or failure
to comply with any term or requirement of any Order to which BSD, or any of the
assets owned or used by BSD, is subject; and
(iii) BSD has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
material term or requirement of any Order to which BSD, or any of the assets
owned or used by BSD, is or has been subject.
3.15 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.15 of the Disclosure Letter, since the date of the
BSD Balance Sheet, BSD has conducted its business only in the Ordinary Course of
Business and there has not been any:
(a) change in BSD's authorized or issued capital stock; grant of any stock
option or right to purchase shares of capital stock of BSD; issuance of any
security convertible into such capital stock; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by BSD of any shares of
any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of BSD;
(c) payment or increase by BSD of any bonuses, salaries, or other compensation
to any stockholder, director, officer, or (except in the Ordinary Course of
Business) employee or entry into any employment, severance, or similar Contract
with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
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any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of BSD;
(e) damage to or destruction or loss of any asset or property of BSD, whether or
not adequately covered by insurance.
(f) entry into, termination of, or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
loan or similar agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to BSD of at least $25,000;
(g) sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of BSD or mortgage, pledge,
or imposition of any Encumbrance on any material asset or property of BSD;
(h) cancellation or waiver of any claims or rights with a value to BSD in excess
of $25,000;
(i) material change in the accounting methods used by BSD; (j) agreement,
whether oral or written, by BSD to do any of the foregoing; or
(k) incurrence of indebtedness for borrowed money, except pursuant to existing
credit lines set forth on Part 3.15 of the Disclosure Letter.
3.l6 CONTRACTS; NO DEFAULTS
(a) Part 3.16 of the Disclosure Letter contains a complete and accurate list,
and BSD has delivered to Coventry true and complete copies, of: (i) all
agreements and other commitments for the purchase of any materials or supplies
that involve an expenditure by BSD of more than $10,000; (ii) all notes and
agreements relating to any indebtedness of BSD for borrowed money; (iii) all
leases or other rental agreements under which BSD is either lessor or lessee;
(iv) all other agreements (including, but not limited to, employment
agreements), commitments and understandings (written or oral) to which BSD is a
party or by which it is bound that require payment by BSD of more than $10,000
and that cannot be terminated by BSD on fewer than thirty (30) days' notice
without liability; and (v) all patents, trademarks (including service marks),
trade mark registrations, and applications for registering patents or
trademarks, owned by BSD (none of which is subject to a licensing or other
agreement with any other person). True and complete copies of all written
leases, agreements, commitments and understandings (collectively, the "BSD
AGREEMENTS") referred to in Part 3.16 of the Disclosure Letter have been
delivered to Coventry. Each BSD Agreement is, and at the First Closing will
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be, in full force and effect, except for those that expire by their own terms or
which are terminated upon the request of BSD with the written consent of
Coventry. There is no existing default by BSD under any BSD Agreement, and, to
the Knowledge of BSD, there is no existing default under any BSD Agreement by
any other party to any BSD Agreement.
(b) BSD and its Subsidiaries have fully performed all of their contractual
obligations to all contracting parties with respect to all Applicable Contracts
that have been required to be performed prior to the date hereof, and there are
no pending claims, offsets or disputes with respect to any Applicable Contracts.
Except as set forth in Part 3.16 of the Disclosure Letter, BSD and its
Subsidiaries have not subcontracted or sublicensed to or from anyone the
performance of any of its contractual responsibilities with respect to any
Applicable Contract.
(c) Except as set forth in Part 3.16 of the Disclosure Letter, BSD and its
Subsidiaries are not a party to any loan, promissory note, credit agreement,
working capital line, factoring arrangement, security interest, pledge, or
mortgage with any bank, financial institution or other entity or person.
(d) Except as set forth in Part 3.16 of the Disclosure Letter, BSD and its
Subsidiaries do not have any outstanding loan to any director, officer,
shareholder, employee, consultant or contractor of BSD or any Subsidiary, or to
any other person or entity.
(e) Except as set forth in Part 3.16 of the Disclosure Letter, BSD and its
Subsidiaries (i) do not have any power of attorney outstanding and (ii) do not
have any obligations or liabilities (whether absolute, accrued, contingent or
otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of any obligation of any other person or entity (including
without limitation, any director, officer, shareholder, employee, consultant or
contractor of BSD or any Subsidiary). Part 3.16 of the Disclosure Letter sets
forth any cross-guarantees or indemnities provided by or among BSD or any
Subsidiary to or for the benefit of BSD or any other Subsidiary.
(f) BSD and its Subsidiaries are not a party to any contract or commitment for
capital expenditures involving more than $10,000 in any instance.
(g) BSD and its Subsidiaries are not a party to (i) any contract, pledge or
commitment for charitable contributions, (ii) any contract with the United
States Government or any state or local government or public authority or any
agency thereof, or (iii) any contract with any foreign government or foreign
authority or any agency thereof.
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(h) BSD and its Subsidiaries are not, by non-competition agreement, restrictive
covenant, court order, injunction, or otherwise, restricted from carrying on any
business whatsoever anywhere in the world.
(i) BSD and its Subsidiaries are not required to provide any letters of credit,
bonding or financial security arrangements in connection with any of their
businesses, customers or suppliers and none are issued or outstanding.
3.17 INSURANCE
Part 3.17 of the Disclosure Letter includes an insurance schedule prepared by
BSD's insurance broker identifying all insurance policies maintained by BSD, the
insurance carrier, type of coverage, amount of coverage, premium, policy
expiration dates, and loss experience. BSD has delivered to Coventry true and
complete copies of all policies of insurance to which BSD is a party or under
which BSD, or any director of BSD, is or has been covered at any time within the
three (3) years preceding the date of this Agreement, as set forth on Part 3.17
of the Disclosure Letter.
3.18 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.18 of the Disclosure Letter:
(a) BSD is, and at all times has been, in material compliance with, and has not
been and is not in violation of or liable under, any Environmental Law. BSD has
not received any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which BSD has or had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by BSD, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(b) There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which BSD has or had an interest.
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(c) BSD has no Knowledge of any basis to expect, and has not received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which BSD has or had an interest, or with respect
to any property or facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by BSD, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) BSD has no Environmental, Health, and Safety Liabilities with respect to the
Facilities, or with respect to any other properties and assets (whether real,
personal, or mixed) in which BSD (or any predecessor), has or had an interest,
or at any property geologically or hydrologically adjoining the Facilities or
any such other property or assets.
(e) There are no Hazardous Materials present on or in the Environment at the
Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon. BSD
has not permitted or conducted, and is not aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which BSD has or had an interest.
(f) There has been no Release or Threat of Release of any Hazardous Materials at
or from the Facilities or at any other locations where any Hazardous Materials
were generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which BSD has or had an interest,
or to the Knowledge of BSD, any geologically or hydrologically adjoining
property, whether by BSD or any other Person.
(g) BSD has delivered to Coventry true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by BSD
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by BSD with Environmental Laws.
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3.19 INTELLECTUAL PROPERTY
BSD owns or possesses adequate licenses or other rights to use all computer
software, software programs, patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information or other
rights which are material to its business, and those licenses or rights are
sufficient to conduct its business as they have been and are now being
conducted. BSD's operations do not conflict with or infringe, and no one has
asserted that those operations conflict with or infringe, any rights of any
third party. Part 3.19 of the Disclosure Letter sets forth the status of BSD's
compliance with Year 2000 computer issues.
3.20 CERTAIN PAYMENTS
Neither BSD nor any director, officer, agent, or employee of BSD, nor any other
Person associated with or acting for or on behalf of BSD, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain special
concessions or for special concessions already obtained, for or in respect of
BSD or any Subsidiary of BSD, or (ii) in violation of any Legal Requirement, or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of BSD.
3.21 DISCLOSURE
No representation or warranty of BSD in this Agreement and no statement by BSD
in the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
3.22 RELATIONSHIPS WITH RELATED PERSONS
Except as disclosed on Part 3.22 of the Disclosure Letter, no Related Person of
BSD has had any interest in any property (whether real, personal, or mixed and
whether tangible or intangible) used in or pertaining to BSD's business. Except
as set forth in Part 3.22 of the Disclosure Letter, no Related Person of BSD is
or has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with BSD; or (ii)
engaged in competition with BSD with respect to any line of the products or
services of BSD (a "Competing Business") in any market presently served by BSD.
Except as set forth in Part 3.22 of the Disclosure Letter, no Related Person of
BSD is a party to
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any Contract with, or has any claim or right against, BSD.
.BROKERS OR FINDERS
BSD has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF PF
As of the Second Closing Date, PF represents and warrants to Coventry, except as
set forth in the Disclosure Letter, as follows (all references in this Article
IV to the delivery of documents or schedules shall mean delivery on or prior to
the Second Closing Date and all representations and warranties in this Article
IV are made as to PF and all Subsidiaries thereof):
.ORGANIZATION AND GOOD STANDING
()PF is a limited liability company duly organized, validly existing, and in
good standing under the laws of its jurisdiction of formation, with full power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. As set forth on Part 4.1 of the
Disclosure Letter, PF and its subsidiaries are duly qualified to do business and
are in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by them, or the
nature of the activities conducted by them, require such qualification.
()PF has delivered to Coventry copies of the Organizational
Documents of PF, as currently in effect.
.AUTHORITY; NO CONFLICT
()This Agreement constitutes the legal, valid, and binding obligation of PF
enforceable against PF in accordance with its terms. Upon the execution and
delivery by PF of this Agreement and all agreements contemplated herein to which
PF is a party (the "PF CLOSING DOCUMENTS"), the PF Closing Documents will
constitute the legal, valid, and binding obligations of PF enforceable against
PF in accordance with their respective terms except as such enforcement is
limited by bankruptcy, insolvency, or other laws affecting creditors' rights
generally. PF has the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and the PF Closing Documents and
to perform its obligations under this Agreement and
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<PAGE> 33
the PF Closing Documents.
()Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
()contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of PF, or (B) any resolution adopted by the Members
of PF;
()contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which PF, or any of the assets owned or used by PF,
may be subject;
()contravene, conflict with, or result in a violation of, any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by PF or that otherwise relates to the business of, or any of the assets
owned or used by, PF;
()cause PF to become subject to, or to become liable for the payment of, any
Tax;
()contravene, conflict with, or result in a violation or breach of any provision
of, or give any Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; or
()result in the imposition or creation of any Encumbrance upon or with respect
to any of the assets owned or used by PF.
()Except as set forth in Part 4.2 of the Disclosure Letter, PF is not and will
not be required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
. CAPITALIZATION
The Members will on the Second Closing Date be the record and beneficial owners
of all of the PF Membership Interests. All of the PF Membership Interests have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Part 4.3 of the Disclosure Letter, there are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of PF None of the outstanding equity securities or other securities
of PF was issued in
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violation of the Securities Act or any other Legal Requirement. PF does not own,
or have any Contract to acquire, any equity securities or other securities of
any Person or any direct or indirect equity or ownership interest in any other
business.
. FINANCIAL STATEMENTS
PF has delivered to Coventry: a balance sheet of PF as at [to be filled in on
Second Closing Date] (including the notes thereto, the "PF BALANCE SHEET"), and
the related statements of income and cash flow for the fiscal year then ended,
together with the report thereon of [to be filled in on Second Closing Date),
independent certified public accountants. Such financial statements and notes
fairly present the financial condition and the results of operations and cash
flow of PF as at the respective dates of and for the periods referred to in such
financial statements, all in accordance with GAAP; the financial statements
referred to in this Section 4.4 reflect the consistent application of such
accounting principles throughout the periods involved. No financial statements
of any Person other than PF are required by GAAP to be included in the financial
statements of PF
.BOOKS AND RECORDS
The books of account of PF, all of which have been made available to Coventry,
are correct in all material respects. Such documents contain accurate and
complete records of all meetings held of, and action taken by, the Members of
PF, and no meeting of any Members or managers of PF has been held for which
written records have not been prepared and are not contained in such books. At
the Closing, all of those books and records will be in the possession of PF.
.TITLE TO PROPERTIES; ENCUMBRANCES
Part 4.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by PF. PF has
delivered to Coventry copies of the deeds and other instruments (as recorded) by
which PF acquired such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of PF and
relating to such property or interests. PF owns (with good and marketable title
in the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that it purports to own located in the
facilities owned or operated by or reflected as owned in the books and records
of PF, including all of the properties and assets reflected in the PF Balance
Sheet (except for assets held under capitalized leases disclosed in Part 4.6 of
the Disclosure Letter and personal property sold since the date of the PF
Balance Sheet, as the case may be, in the Ordinary
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Course of Business), and all of the properties and assets purchased or otherwise
acquired by PF since the date of the PF Balance Sheet (except for personal
property acquired and sold since the date of the PF Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All properties
and assets reflected in the PF Balance Sheet are free and clear of all
Encumbrances and are not, in the case of real property, subject to any rights of
way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all such properties and
assets, (a) mortgages or security interests shown on the PF Balance Sheet as
securing specified liabilities or obligations, with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the PF Balance Sheet (such
mortgages and security interests being limited to the property or assets so
acquired), with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (c) liens for current taxes
not yet due, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of PF, and (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto.
. ACCOUNTS RECEIVABLE
All accounts receivable of PF that are reflected on the PF Balance Sheet or on
the accounting records of PF as of the Closing Date (collectively, "PF Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course of Business.
Except as set forth in Part 4.7 of the Disclosure Letter, all PF Accounts
Receivable are current and expected to be collectible in the Ordinary Course of
Business, net of reserves for uncollectible accounts; provided, however, that
this provision is not a guaranty of collectibility.
. INVENTORY
All inventory of PF, whether or not reflected in the PF Balance Sheet, consists
of a quality and quantity usable and salable in the Ordinary Course of Business,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the PF Balance Sheet
or on the accounting records of PF as of the Closing Date, as the case may be.
.NO UNDISCLOSED LIABILITIES
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Except as set forth in Part 4.9 of the Disclosure Letter, PF has no liabilities
or obligations of any nature (whether known or unknown, or whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the PF Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the date of the PF Balance
Sheet.
.TAXES
() PF has filed or caused to be filed on a timely basis all Tax Returns that are
or were required to be filed by or with respect to it, pursuant to applicable
Legal Requirements. PF has delivered to Coventry copies of, and Part 4.10 of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed since the date of PF's formation. PF has paid, or made provision for the
payment of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by PF, except such
Taxes, if any, as are listed in Part 4.10 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the PF Balance Sheet.
() To the Knowledge of PF, the charges, accruals, and reserves with respect to
Taxes on the books of PF are adequate (determined in accordance with GAAP) and
are at least equal to PF's liability for Taxes. There exists no proposed tax
assessment against PF except as disclosed in the PF Balance Sheet or in Part
4.10 of the Disclosure Letter. All Taxes that PF is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
() All Tax Returns filed by PF are true and correct in all material respects.
There is no tax sharing agreement that will require any payment by PF after the
date of this Agreement.
() Except as set forth in Part 4.10 of the Disclosure Letter, PF has not been
audited by, or received any notice of audit from, any taxing authority since the
date of PF's formation.
.NO MATERIAL ADVERSE CHANGE
Since the date of the PF Balance Sheet, except as set forth in Part 4.11 of the
Disclosure Letter, there has not been any material adverse change in the
business, operations, properties, assets, or condition of PF, and to the
Knowledge of PF, no event has occurred or circumstance exists that may result in
such a material adverse change.
.EMPLOYEES, EMPLOYMENT AGREEMENTS, LABOR MATTERS, BENEFIT PLANS,
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ETC.
() Except as set forth on Part 4.12 of the Disclosure Letter, neither PF nor any
Subsidiary has, or is bound by, any oral or written employment, bonus,
performance, compensation, commission, management, pension, retirement, stock
purchase, savings, profit-sharing, retainer, group insurance, termination,
severance, consulting, sales representative, distributor or similar incentive or
benefit agreements, contracts, understandings or arrangements with any of its
personnel.
() PF and its Subsidiaries have paid in full all wages, salaries, commissions,
bonuses, vacation pay, sick pay and other direct and indirect compensation and
benefits earned by all employees, representatives, contractors and agents
through the date of the Second Closing, as well as all payroll and withholding
taxes and all payroll overheads. There are no bonuses or commissions accrued or
payable by PF or any Subsidiaries with respect to any fiscal periods ending on
or before June 30, 1998 that remain unpaid in whole or in part, or which are in
dispute or the subject of any claim.
() Part 4.12 of the Disclosure Letter contains a true and complete list of all
current employees, consultants, representatives, agents, and contractors of PF
and its Subsidiaries, together with job title and description and current
compensation rates (salary, bonus, commission and otherwise), and identification
of which Subsidiary is the employer of such persons.
() Except as set forth in Part 4.12 of the Disclosure Letter, there are no
collective bargaining agreements or union or labor agreements to which PF or any
Subsidiary is a party or is bound or affecting the business thereof. Except as
set forth in Part 4.12 of the Disclosure Letter, there are no pending, and
during the five (5) years preceding the date of this Agreement there have been
no, disputes, strikes, work slow-downs, walkouts, disturbances, slowdowns,
grievances, arbitrations, or filings of any actions, claims, litigation,
proceedings, investigations or complaints of unfair labor practices, harassment,
discrimination, wrongful termination, wage or back pay demands or other
employment-related difficulties with respect to any employees of PF or any
Subsidiary, and PF knows of no basis for any of the foregoing. Each collective
bargaining agreement or other union contract set forth in Part 4.12 of the
Disclosure Letter (each a "PF UNION CONTRACT") is in full force and effect; PF
has made all payments and contributions due under such PF Union Contract and is
otherwise in full compliance with the terms and conditions of such PF Union
Contract, and there are no defaults under the PF Union Contract or claims
thereof by the union, any employees or any governmental or labor relations
agency. There are no disputes or grievances pending or Threatened with respect
to any PF Union Contract or any employees covered thereby, and PF knows of no
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<PAGE> 38
basis for any of the foregoing.
() Except as set forth on Part 4.12 of the Disclosure Letter, PF and its
Subsidiaries are not covered by and do not maintain, participate in, contribute
to, or operate any pension, retirement, profit-sharing, 401(k) or other employee
benefit plan, do not maintain or contribute to and are not required to
contribute to any employee benefit plan (within the meaning of Section 3(2) of
ERISA), which is intended to qualify under paragraph 401(a) of the IRC, and PF
and its Subsidiaries have not been required to contribute to any employee
benefit plan which is a multi-employer plan (within the meaning of Section 3(37)
of ERISA) in the five (5) years immediately preceding the date hereof. PF and
its Subsidiaries have no responsibility for and have not assumed any
pension-related or employee benefit plan- related liabilities (including,
without limitation, withdrawal liability) of any other predecessor business or
person. With respect to each and every employee benefit plan of PF and its
Subsidiaries identified on Part 4.12 of the Disclosure Letter (each, a "PF
BENEFIT PLAN"), each PF Benefit Plan conforms to, and its administration is in
compliance with, applicable federal laws, including, but not limited to, ERISA
and the IRC. There are no pending, or Threatened or anticipated, audits,
assessments, disputes or claims by, on behalf of, or against, any PF Benefit
Plan, PF or any Subsidiary by any participant or beneficiary thereunder or any
governmental agency.
() PF and its Subsidiaries have fully paid and performed all liabilities and
obligations whatsoever relating to their participation in the multi-employer
pension plans set forth in Part 4.12 of the Disclosure Letter, including,
without limitation, payment of all contributions and assessments, whether
imposed by such plan or the trustees thereof or ERISA, as amended by the
Multi-Employers Pension Plan Amendment Act of 1980, or otherwise. There are no
pending, or Threatened or anticipated, audits, assessments, disputes or claims
by, on behalf of, or against, PF or any Subsidiary by any such plan, the
trustees thereof, any related union, any participant or beneficiary thereunder
or any governmental agency.
.COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
()Except as set forth in Part 4.13 of the Disclosure Letter:
() PF is in compliance in all material respects with each Legal Requirement that
is or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
() No event has occurred or circumstance exists that (with or without notice or
lapse of time or both) (A) may constitute or result in a material violation by
PF of, or a material failure on the part of PF to comply with, any Legal
Requirement, or (B) may
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give rise to any obligation on the part of PF to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature; and
() PF has not received at any time any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential material violation of, or material
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential material obligation on the part of PF to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.
() Part 4.13 of the Disclosure Letter contains a complete and accurate list of
each material Governmental Authorization that is held by PF or that otherwise
relates to the business of, or to any of the assets owned or used by, PF. Each
material Governmental Authorization listed or required to be listed in Part 4.13
of the Disclosure Letter is valid and in full force and effect. Except as set
forth in Part 4.13 of the Disclosure Letter:
() PF is in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 4.13 of the Disclosure Letter;
() No event has occurred or circumstance exists that may (with or without notice
or lapse of time or both) (A) constitute or result directly or indirectly in a
material violation of or a material failure to comply with any term or
requirement of any material Governmental Authorization listed or required to be
listed in Part 4.13 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any material Governmental Authorization
listed or required to be listed in Part 4.13 of the Disclosure Letter;
() PF has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential material violation of or material
failure to comply with any material term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
material Governmental Authorization; and
() all applications required to have been filed for the renewal of the material
Governmental Authorizations listed or required to be listed in Part 4.13 of the
Disclosure Letter have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made with
respect to such material Governmental Authorizations have been duly made on a
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timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 4.13 of the Disclosure Letter
collectively constitute all of the material Governmental Authorizations
necessary to permit PF to lawfully conduct and operate its business in the
manner in which it currently conducts and operates such business and to permit
PF to own and use its assets in the manner in which it currently owns and uses
such assets.
.LEGAL PROCEEDINGS; ORDERS
() Except as set forth in Part 4.14 of the Disclosure Letter,
there is no pending Proceeding:
() that has been commenced by or against PF or that otherwise relates to or may
affect the business of, or any of the assets owned or used by, PF; or
() that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of PF, (1) no such Proceeding has been Threatened, and (2) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding. PF has delivered to Coventry
copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 4.14 of the Disclosure Letter. The Proceedings listed
in Part 4.14 of the Disclosure Letter will not have a material adverse effect on
the business, operations, assets, condition, or prospects of PF.
() Except as set forth in Part 4.14 of the Disclosure Letter:
() there is no Order to which PF, or any of the assets owned or
used by PF, is subject; and
() no officer, director, agent or key employee of PF is subject to any Order
that prohibits such officer, director, agent or key employee from engaging in or
continuing any conduct, activity or practice relating to the business of PF
() Except as set forth in Part 4.14 of the Disclosure Letter:
() PF is in material compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
() No event has occurred or circumstance exists that may constitute or result in
(with or without notice or lapse of time or both) a violation of or failure to
comply with any term or requirement of any Order to which PF, or any of the
assets owned
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or used by PF, is subject; and
() PF has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
material term or requirement of any Order to which PF, or any of the assets
owned or used by PF, is or has been subject.
.ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 4.15 of the Disclosure Letter, since the date of the
PF Balance Sheet, PF has conducted its business only in the Ordinary Course of
Business and there has not been any:
() change in PF's authorized or issued Membership Interests; grant of any right
to purchase such Membership Interests; or purchase of such Membership Interests;
() amendment to the Organizational Documents of PF;
() payment or increase by PF of any bonuses, salaries, or other compensation to
any Member, manager, officer, or (except in the Ordinary Course of Business)
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee;
() adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of PF;
() damage to or destruction or loss of any asset or property of
PF, whether or not adequately covered by insurance;
() entry into, termination of, or receipt of notice of termination of (i) any
license, distributorship, dealer, sales representative, joint venture, credit,
loan or similar agreement, or (ii) any Contract or transaction involving a total
remaining commitment by or to PF of at least $25,000;
() sale (other than sales of inventory in the Ordinary Course of Business),
lease, or other disposition of any asset or property of PF or mortgage, pledge,
or imposition of any Encumbrance on any material asset or property of PF;
() cancellation or waiver of any claims or rights with a value to
PF in excess of $25,000;
() material change in the accounting methods used by PF;
() agreement, whether oral or written, by PF to do any of the
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foregoing; or
(incurrence of indebtedness for borrowed money, except pursuant to existing
credit lines set forth in Part 4.15 of the Disclosure Letter.
.CONTRACTS; NO DEFAULTS
(Part 4.16 of the Disclosure Letter contains a complete and accurate list, and
PF has delivered to Coventry true and complete copies, of: (i) all agreements
and other commitments for the purchase of any materials or supplies that involve
an expenditure by PF of more than $10,000; (ii) all notes and agreements
relating to any indebtedness of PF for borrowed money; (iii) all leases or other
rental agreements under which PF is either lessor or lessee; (iv) all other
agreements (including, but not limited to, employment agreements), commitments
and understandings (written or oral) to which PF is a party or by which it is
bound that require payment by PF of more than $10,000 and that cannot be
terminated by PF on fewer than thirty (30) days' notice without liability; and
(v) all patents, trademarks (including service marks), trade mark registrations,
and applications for registering patents or trademarks, owned by PF (none of
which is subject to a licensing or other agreement with any other person). True
and complete copies of all written leases, agreements, commitments and
understandings (collectively, the "PF AGREEMENTS") referred to in Part 4.16 of
the Disclosure Letter have been delivered to Coventry. Each PF Agreement, at the
Second Closing, will be in full force and effect, except for those that expire
by their own terms or which are terminated upon the request of PF with the
written consent of Coventry. There is no existing default by PF under any PF
Agreement, and, to the Knowledge of PF, there is no existing default under any
PF Agreement by any other party to any PF Agreement.
(PF and its Subsidiaries have fully performed all of their contractual
obligations to all contracting parties with respect to all Applicable Contracts
that have been required to be performed prior to the date hereof, and there are
no pending claims, offsets or disputes with respect to any Applicable Contracts.
Except as set forth in Part 4.16 of the Disclosure Letter, PF and its
Subsidiaries have not subcontracted or sublicensed to or from anyone the
performance of any of its contractual responsibilities with respect to any
Applicable Contract.
(Except as set forth in Part 4.16 of the Disclosure Letter, PF and its
Subsidiaries are not a party to any loan, promissory note, credit agreement,
working capital line, factoring arrangement, security interest, pledge, or
mortgage with any bank, financial institution or other entity or person.
(Except as set forth in Part 4.16 of the Disclosure Letter, PF
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and its Subsidiaries do not have any outstanding loan to any director, officer,
shareholder, employee, consultant or contractor of PF or any Subsidiary, or to
any other person or entity.
(Except as set forth in Part 4.16 of the Disclosure Letter, PF and its
Subsidiaries (i) do not have any power of attorney outstanding and (ii) do not
have any obligations or liabilities (whether absolute, accrued, contingent or
otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of any obligation of any other person or entity (including
without limitation, any director, officer, shareholder, employee, consultant or
contractor of PF or any Subsidiary). Part 4.16 of the Disclosure Letter sets
forth any cross-guarantees or indemnities provided by or among PF or any
Subsidiary to or for the benefit of PF or any other Subsidiary.
(PF and its Subsidiaries are not a party to any contract or commitment for
capital expenditures involving more than $10,000 in any instance.
(PF and its Subsidiaries are not a party to (i) any contract, pledge or
commitment for charitable contributions, (ii) any contract with the United
States Government or any state or local government or public authority or any
agency thereof, or (iii) any contract with any foreign government or foreign
authority or any agency thereof.
(PF and its Subsidiaries are not, by non-competition agreement, restrictive
covenant, court order, injunction, or Otherwise, restricted from carrying on any
business whatsoever anywhere in the world.
(PF and its Subsidiaries are not required to provide any letters of credit,
bonding or financial security arrangements in connection with any of their
businesses, customers or suppliers and none are issued or outstanding.
.INSURANCE
Part 4.17 of the Disclosure Letter includes an insurance schedule prepared by
PF's insurance broker identifying all insurance policies maintained by PF, the
insurance carrier, type of coverage, amount of coverage, premium, policy
expiration dates and loss experience. PF has delivered to Coventry true and
complete copies of all policies of insurance to which PF is a party or under
which PF, or any member or manager of PF, is or has been covered at any time
within the three (3) years preceding the date of this Agreement, as set forth in
Part 4.17 of the Disclosure Letter.
.ENVIRONMENTAL MATTERS
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Except as set forth in Part 4.18 of the Disclosure Letter:
(PF is, and at all times has been, in material compliance with, and has not been
and is not in violation of or liable under, any Environmental Law. PF has not
received any actual or Threatened order, notice, or other communication from (i)
any Governmental Body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which PF has or had an interest, or with respect to any property or Facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by PF, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(There are no pending or Threatened claims, Encumbrances, or other restrictions
of any nature, resulting from any Environmental, Health, and Safety Liabilities
or arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets (whether
real, personal, or mixed) in which PF has or had an interest.
(PF has no Knowledge of any basis to expect, and has not received, any citation,
directive, inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which PF has or had an interest, or with respect to any property or facility
at or to which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by PF, or from which Hazardous
Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received. (PF has no Environmental, Health, and Safety
Liabilities with respect to the Facilities, or with respect to any other
properties and assets (whether real, personal, or mixed) in which PF (or any
predecessor), has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or assets.
(There are no Hazardous Materials present on or in the Environment at the
Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous
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Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. PF has not permitted or conducted, and is
not aware of, any Hazardous Activity conducted with respect to the Facilities or
any other properties or assets (whether real, personal, or mixed) in which PF
has or had an interest.
(There has been no Release or Threat of Release, of any Hazardous Materials at
or from the Facilities or at any other locations where any Hazardous Materials
were generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which PF has or had an interest, or
to the Knowledge of PF, any geologically or hydrologically adjoining property,
whether by PF or any other Person.
(PF has delivered to Coventry true and complete copies and results of any
reports, studies, analyses, tests, or monitoring possessed or initiated by PF
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by PF with Environmental Laws.
.INTELLECTUAL PROPERTY
PF owns or possesses adequate licenses or other rights to use all computer
software, software programs, patents, patent applications, trademarks, trademark
applications, trade secrets, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information or other
rights which are material to its business, and those licenses or rights are
sufficient to conduct its business as they have been and are now being
conducted. PF's operations do not conflict with or infringe, and no one has
asserted that those operations conflict with or infringe, any rights of any
third party. Part 4.19 of the Disclosure Letter sets forth the status of PF's
compliance with Year 2000 computer issues.
.CERTAIN PAYMENTS
Neither PF nor any manager, officer, agent, or employee of PF, nor any other
Person associated with or acting for or on behalf of PF, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain special
concessions or for special concessions already obtained, for or in respect of PF
or any Subsidiary of PF, or (ii) in
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<PAGE> 46
violation of any Legal Requirement, (b) established or maintained any fund or
asset that has not been recorded in the books and records of PF
.DISCLOSURE
No representation or warranty of PF in this Agreement and no statement by PF in
the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
.RELATIONSHIPS WITH RELATED PERSONS
Except as disclosed on Part 4.22 of the Disclosure Letter, no Related Person of
PF has had any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to PF's business. Except
as set forth in Part 4.22 of the Disclosure Schedule, no Related Person of PF is
or has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with PF; or (ii)
engaged in competition with PF with respect to any line of the products or
services of PF (a "COMPETING BUSINESS") in any market presently served by PF.
Except as set forth in Part 4.22 of the Disclosure Letter, no Related Person of
PF is a party to any Contract with, or has any claim or right against, PF.
.BROKERS OR FINDERS
PF has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF COVENTRY
Coventry represents and warrants to the Shareholders and Members, except as set
forth in the Disclosure Letter, as follows (all references in this Article V to
the delivery of documents or schedules shall mean delivery on or prior to the
First Closing Date and all representations and warranties in this Article V are
made as to Coventry and all Subsidiaries thereof):
.ORGANIZATION AND GOOD STANDING
(Coventry and its Subsidiaries are each corporations duly organized, validly
existing, and in good standing under the laws of their jurisdiction of
incorporation, with full corporate power and authority to conduct their business
as it is now being
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conducted, to own or use the properties and assets that they purport to own or
use, and to perform all of their obligations under Applicable Contracts. As set
forth on Part 5.1 of the Disclosure Letter, Coventry and its Subsidiaries are
duly qualified to do business as foreign corporations and are in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by them, or the nature of the activities
conducted by them, require such qualification.
(Coventry has delivered to the Shareholders and Members copies of the
Organizational Documents of Coventry and all of its Subsidiaries, as currently
in effect.
.AUTHORITY; NO CONFLICT
(This Agreement constitutes the legal, valid, and binding obligation of
Coventry, enforceable against Coventry in accordance with its terms. Upon the
execution and delivery by Coventry of this Agreement and all agreements
contemplated herein to which Coventry is a party (the "COVENTRY CLOSING
DOCUMENTS"), the Coventry Closing Documents will constitute the legal, valid,
and binding obligations of Coventry, enforceable against Coventry in accordance
with their respective terms except as such enforcement is limited by bankruptcy,
insolvency, or other laws affecting creditors' rights generally. Coventry has
the absolute and unrestricted right, power, authority, and capacity to execute
and deliver this Agreement and the Coventry Closing Documents and to perform its
obligations under this Agreement and the Coventry Closing Documents.
(Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of Coventry or its Subsidiaries, or (B) any resolution
adopted by the board of directors or the shareholders of Coventry or its
Subsidiaries;
(contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which Coventry or its Subsidiaries, or any of the
assets owned or used by Coventry or its Subsidiaries, may be subject;
(contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is
held by Coventry or its
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Subsidiaries or that otherwise relates to the business of Coventry or its
Subsidiaries, or any of the assets owned or used by, Coventry or its
Subsidiaries;
(cause Coventry or its Subsidiaries to become subject to, or to become liable
for the payment of, any Tax;
(contravene, conflict with, or result in a violation or breach of any provision
of, or give any Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; or
(result in the imposition or creation of any Encumbrance upon or with respect to
any of the assets owned or used by Coventry.
(Except as set forth in Part 5.2 of the Disclosure Letter, Coventry is not and
will not be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
.CAPITALIZATION
The authorized equity securities of Coventry consist of 25,000,000 shares of
Common Stock, par value $.00l per share, of which 3,385,485 shares are issued
and outstanding, plus 2,000,000 shares of Preferred Stock, par value $.001 per
share issued in series as set forth in Part 5.3 of the Disclosure Letter. Part
5.3 of the Disclosure Letter sets forth the number of issued and outstanding
shares of Coventry Common and Preferred Stock and each series thereof. The
authorized equity securities of all Subsidiaries of Coventry, together with the
number of shares, par value, and number of issued and outstanding shares, are
set forth on Part 5.3 of the Disclosure Letter. All of the outstanding equity
securities of Coventry and its Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth on Part
5.3 of the Disclosure Letter, there are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of Coventry and
its Subsidiaries. None of the outstanding equity securities or other securities
of Coventry and its Subsidiaries were issued in violation of the Securities Act
or any other Legal Requirement. Except for transactions contemplated by this
Agreement, neither Coventry nor its Subsidiaries own, or have any Contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
.FINANCIAL STATEMENTS
Coventry has delivered to the Shareholders and Members: an
audited balance sheet of Coventry as at June 30, 1998 (including
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the notes thereto, the "COVENTRY BALANCE SHEET"), and the related statements of
income, changes in shareholders' equity, and cash flow for the fiscal years then
ended, together with the report thereon of Sweeney Gates & Co., independent
certified public accountants. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in shareholders'
equity, and cash flow of Coventry as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP;
the financial statements referred to in this Section 5.4 reflect the consistent
application of such accounting principles throughout the periods involved. No
financial statements of any Person other than Coventry and the Subsidiaries
identified in Part 5.3 of the Disclosure Letter are required by GAAP to be
included in the financial statements of Coventry.
.BOOKS AND RECORDS
The books of account, minute books and stock record books of Coventry, all of
which have been made available to the Shareholders and Members, are correct in
all material respects. The minute books of Coventry contain accurate and
complete records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and committees of the Board of Directors
of Coventry, and no meeting of any shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute book. At the Closing, all of those books and records
will be in the possession of Coventry.
.TITLE TO PROPERTIES; ENCUMBRANCES
Part 5.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by Coventry.
Coventry has delivered to the Shareholders and Members copies of the deeds and
other instruments (as recorded) by which Coventry acquired such real property
and interests, and copies of all title insurance policies, opinions, abstracts,
and surveys in the possession of Coventry and relating to such property or
interests. Coventry owns (with good and marketable title in the case of real
property, subject only to the matters permitted by the following sentence) all
the properties and assets (whether real, personal, or mixed and whether tangible
or intangible) that it purports to own located in the facilities owned or
operated by Coventry or reflected as owned in the books and records of Coventry,
including all of the properties and assets reflected in the Coventry Balance
Sheet (except for assets held under capitalized leases disclosed in Part 5.6 of
the Disclosure Letter and personal property sold since the date of the Coventry
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the properties and assets purchased or otherwise acquired by Coventry since
the date of the Coventry Balance Sheet
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(except for personal property acquired and sold since the date of the Coventry
Balance Sheet in the Ordinary Course of Business and consistent with past
practice). All properties and assets reflected in the Coventry Balance Sheet are
free and clear of all Encumbrances and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except, with respect to all such
properties and assets, (a) mortgages or security interests shown on the Coventry
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the
Coventry Balance Sheet (such mortgages and security interests being limited to
the property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(c) liens for current taxes not yet due, and (d) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of Coventry, and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto.
.ACCOUNTS RECEIVABLE
All accounts receivable of Coventry that are reflected on the Coventry Balance
Sheet or on the accounting records of Coventry as of the Closing Dates
(collectively, the "COVENTRY ACCOUNTS RECEIVABLE") represent or will represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. Except as set forth in Part 5.7 of
the Disclosure Letter, all Coventry Accounts Receivable are current and expected
to be collectible in the Ordinary Court of Business, net of reserves for
uncollectible accounts; provided, however, that this provision is not a guaranty
of collectibility.
.INVENTORY
All inventory of Coventry, whether or not reflected in the Coventry Balance
Sheet, consists of a quality and quantity usable and salable in the Ordinary
Course of Business, except for obsolete items and items of below-standard
quality, all of which have been written off or written down to net realizable
value in the Coventry Balance Sheet or on the accounting records of Coventry as
of the Closing Date, as the case may be.
.NO UNDISCLOSED LIABILITIES
Except as set forth in Part 5.9 of the Disclosure Letter,
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Coventry has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Coventry Balance
Sheet and current liabilities incurred in the Ordinary Course of Business since
the date of the Coventry Balance Sheet.
.TAXES
(Coventry has filed or caused to be filed on a timely basis all Tax Returns that
are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. Coventry has delivered to the Shareholders and
Members copies of, and Part 5.10 of the Disclosure Letter contains a complete
and accurate list of, all such Tax Returns filed since January 1, 1996. Coventry
has paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Coventry, except such Taxes, if any, as are listed in
Part 5.10 of the Disclosure Letter and are being contested in good faith and as
to which adequate reserves (determined in accordance with GAAP) have been
provided in the Coventry Balance Sheet.
(To Coventry's Knowledge, the charges, accruals, and reserves with respect to
Taxes on the books of Coventry are adequate (determined in accordance with GAAP)
and are at least equal to Coventry's liability for Taxes. There exists no
proposed tax assessment against Coventry except as disclosed in the Coventry
Balance Sheet or in Part 5.10 of the Disclosure Letter. All Taxes that Coventry
is or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(All Tax Returns filed by Coventry are true and correct in all material
respects. There is no tax sharing agreement that will require any payment by
Coventry after the date of this Agreement.
(Except as set forth in Part 5.10 of the Disclosure Letter, Coventry has not
been audited by, or received any notice of audit from, any taxing authority
since January 1, 1996.
.NO MATERIAL ADVERSE CHANGE
Since the date of the Coventry Balance Sheet, except as set forth in Part 5.11
of the Disclosure Letter, there has not been any material adverse change in the
business, operations, properties, assets, or condition of Coventry, and to the
Knowledge of Coventry, no event has occurred or circumstance exists that may
result in such a material adverse change.
.EMPLOYEES, EMPLOYMENT AGREEMENTS, LABOR MATTERS, BENEFIT PLANS, ETC.
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(Except as set forth on Part 5.12 of the Disclosure Letter, neither Coventry nor
any Subsidiary has, or is bound by, any oral or written employment, bonus,
performance, compensation, commission, management, pension, retirement, stock
purchase, savings, profit-sharing, retainer, group insurance, termination,
severance, consulting, sales representative, distributor or similar incentive or
benefit agreements, contracts, understandings or arrangements with any of its
personnel.
(Coventry and its Subsidiaries have paid in full all wages, salaries,
commissions, bonuses, vacation pay, sick pay and other direct and indirect
compensation and benefits earned by all employees, representatives, contractors
and agents through the dates of the First Closing and the Second Closing,
respectively, as well as all payroll and withholding taxes and all payroll
overheads. There are no bonuses or commissions accrued or payable by Coventry or
any Subsidiaries with respect to any fiscal periods ending on or before June 30,
1998 that remain unpaid in whole or in part, or which are in dispute or the
subject of any claim.
(Part 5.12 of the Disclosure Letter contains a true and complete list of all
current employees, consultants, representatives, agents, and contractors of
Coventry and its Subsidiaries, together with job title and description and
current compensation rates (salary, bonus, commission and otherwise), and
identification of which Subsidiary is the employer of such persons.
(Except as set forth in Part 5.12 of the Disclosure Letter, there are no
collective bargaining agreements or union agreements to which Coventry or any
Subsidiary is a party or is bound or affecting the business thereof. Except as
set forth in Part 5.12 of the Disclosure Letter, there are no pending, and
during the five (5) years preceding the date of this Agreement there have been
no, disputes, strikes, work slowdowns, walkouts, disturbances, slowdowns,
grievances, arbitrations, or filings of any actions, claims, litigation,
proceedings, investigations or complaints of unfair labor practices, harassment,
discrimination, wrongful termination, wage or back pay demands or other
employment-related difficulties with respect to any employees of Coventry or any
Subsidiary, and Coventry knows of no basis for any of the foregoing. Each
collective bargaining agreement or other union contract set forth in Part 5.12
of the Disclosure Letter (each a "COVENTRY UNION CONTRACT") is in full force and
effect; Coventry has made all payments and contributions due under such Coventry
Union Contract and is otherwise in full compliance with the terms and conditions
of such Coventry Union Contract, and there are no defaults under the Coventry
Union Contract or claims thereof by the union, any employees or any governmental
or labor relations agency. There are no disputes or
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grievances pending or Threatened with respect to any Coventry Union Contract or
any employees covered thereby, and Coventry knows of no basis for any of the
foregoing.
(Except as set forth on Part 5.12 of the Disclosure Letter, Coventry and its
Subsidiaries are not covered by and do not maintain, participate in, contribute
to, or operate any pension, retirement, profit-sharing, 401(k) or other employee
benefit plan, do not maintain or contribute to and are not required to
contribute to any employee benefit plan (within the meaning of Section 3(2) of
ERISA), which is intended to qualify under paragraph 401(a) of the IRC, and
Coventry and its Subsidiaries have not been required to contribute to any
employee benefit plan which is a multi-employer plan (within the meaning of
Section 3(37) of ERISA) in the five (5) years immediately preceding the date
hereof. Coventry and its Subsidiaries have no responsibility for and have not
assumed any pension-related or employee benefit plan-related liabilities
(including, without limitation, withdrawal liability) of any other predecessor
business or person. With respect to each and every employee benefit plan of
Coventry and its Subsidiaries identified on Part 5.12 of the Disclosure Letter
(each, a "COVENTRY BENEFIT PLAN"), each Coventry Benefit Plan conforms to, and
its administration is in compliance with, applicable federal laws, including,
but not limited to, ERISA and the IRC. There are no pending, or Threatened or
anticipated, audits, assessments, disputes or claims by, on behalf of, or
against, any Coventry Benefit Plan, Coventry or any Subsidiary by any
participant or beneficiary thereunder or any governmental agency.
(Coventry and its Subsidiaries have fully paid and performed all liabilities and
obligations whatsoever relating to their participation in the multi-employer
pension plans set forth in Part 5.12 of the Disclosure Letter, including,
without limitation, payment of all contributions and assessments, whether
imposed by such plan or the trustees thereof or ERISA, as amended by the
Multi-Employers Pension Plan Amendment Act of 1980, or otherwise. There are no
pending, or Threatened or anticipated, audits, assessments, disputes or claims
by, on behalf of, or against, Coventry or any Subsidiary by any such plan, the
trustees thereof, any related union, any participant or beneficiary thereunder
or any governmental agency.
.COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(Except as set forth in Part 5.13 of the Disclosure Letter:
(Coventry is in compliance in all material respects with each Legal Requirement
that is or was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets;
(no event has occurred or circumstance exists that (with or
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without notice or lapse of time or both) (A) may constitute or result in a
material violation by Coventry of, or a material failure on the part of Coventry
to comply with, any Legal Requirement, or (B) may give rise to any obligation on
the part of Coventry to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature; and
( Coventry has not received at any time any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential material violation of,
or material failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential material obligation on the part of Coventry to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature.
(Part 5.13 of the Disclosure Letter contains a complete and accurate list of
each material Governmental Authorization that is held by Coventry or that
otherwise relates to the business of, or to any of the assets owned or used by,
Coventry. Each material Governmental Authorization listed or required to be
listed in Part 5.13 of the Disclosure Letter is valid and in full force and
effect. Except as set forth in Part 5.13 of the Disclosure Letter:
(Coventry is in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 5.13 of the Disclosure Letter;
(no event has occurred or circumstance exists that may (with or without notice
or lapse of time or both) (A) constitute or result directly or indirectly in a
material violation of or a material failure to comply with any term or
requirement of any material Governmental Authorization listed or required to be
listed in Part 5.13 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any modification to, any material Governmental Authorization
listed or required to be listed in Part 5.13 of the Disclosure Letter;
(Coventry has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential material violation of or material
failure to comply with any material term or requirement of any Governmental
Authorization, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
material Governmental Authorization; and
(all applications required to have been filed for the renewal of the material
Governmental Authorizations listed or required to be listed in Part 5.13 of the
Disclosure Letter have been duly filed
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on a timely basis with the appropriate Governmental Bodies, and all other
filings required to have been made with respect to such material Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 5.13 of the Disclosure Letter
collectively constitute all of the material Governmental Authorizations
necessary to permit Coventry to lawfully conduct and operate its business in the
manner in which it currently conducts and operates such business and to permit
Coventry to own and use its assets in the manner in which it currently owns and
uses such assets.
.LEGAL PROCEEDINGS; ORDERS
(Except as set forth in Part 5.14 of the Disclosure Letter, there is no pending
Proceeding:
(that has been commenced by or against Coventry or that otherwise relates to or
may affect the business of, or any of the assets owned or used by Coventry; or
(that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To the Knowledge of Coventry, (1) no such Proceeding has been Threatened, and
(2) no event has occurred or circumstance exists that may give rise to or serve
as a basis for the commencement of any such Proceeding. Coventry has delivered
to the Shareholders and Members copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 5.14 of the
Disclosure Letter. The Proceedings listed in Part 5.14 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of Coventry.
(Except as set forth in Part 5.14 of the Disclosure Letter:
(there is no Order to which Coventry, or any of the assets owned or used by
Coventry, is subject; and
(Coventry is not subject to any Order that relates to the business of, or any of
the assets owned or used by, Coventry.
(no officer, director, agent, or employee of Coventry is subject to any Order
that prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of
Coventry.
(Except as set forth in Part 5.14 of the Disclosure Letter:
(Coventry is in compliance with all of the terms and requirements
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of each Order to which it, or any of the assets owned or used by it, is or has
been subject;
(no event has occurred or circumstance exists that may constitute or result in
(with or without notice or lapse of time or both) a violation of or failure to
comply with any term or requirement of any Order to which Coventry, or any of
the assets owned or used by Coventry, is subject; and
(Coventry has not received any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
material term or requirement of any Order to which Coventry, or any of the
assets owned or used by Coventry, is or has been subject.
.ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 5.15 of the Disclosure Letter, since the date of the
Coventry Balance Sheet, Coventry and its Subsidiaries have conducted their
business only in the Ordinary Course of Business and there has not been any:
(change in Coventry's or its Subsidiaries' authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of
Coventry or its Subsidiaries; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by Coventry or its Subsidiaries of any shares
of any such capital stock; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
(amendment to the Organizational Documents of Coventry or its
Subsidiaries;
(payment or increase by Coventry or its Subsidiaries of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(adoption of, or increase in the payments to or benefits under, any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any employees of Coventry or its
Subsidiaries;
(damage to or destruction or loss of any asset or property of Coventry or its
Subsidiaries, whether or not adequately covered by insurance;
(entry into, termination of, or receipt of notice of termination
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of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, loan or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to Coventry of at least $25,000;
(sale (other than sales of inventory in the Ordinary Course of Business), lease,
or other disposition of any asset or property of Coventry or mortgage, pledge,
or imposition of any Encumbrance on any material asset or property of Coventry;
(cancellation or waiver of any claims or rights with a value to
Coventry in excess of $25,000;
(material change in the accounting methods used by Coventry;
(agreement, whether oral or written, by Coventry to do any of the
foregoing; or
(incurrence of indebtedness for borrowed money, except pursuant to existing
credit lines set forth on Part 5.15 of the Disclosure Letter.
.CONTRACTS; NO DEFAULTS
(Part 5.l6 of the Disclosure Letter contains a complete and accurate list, and
Coventry has delivered to the Shareholders and Members true and complete copies,
of: (i) all agreements and other commitments for the purchase of any materials
or supplies that involve an expenditure by Coventry or its Subsidiaries of more
than $10,000; (ii) all notes and agreements relating to any indebtedness of
Coventry or its Subsidiaries for borrowed money; (iii) all leases or other
rental agreements under which Coventry or its Subsidiaries is either lessor or
lessee; (iv) all other agreements (including, but not limited to, employment
agreements), commitments and understandings (written or oral) to which Coventry
or its Subsidiaries is a party or by which it is bound that require payment by
Coventry or its Subsidiaries of more than $10,000 and that cannot be terminated
by Coventry or its Subsidiaries on fewer than thirty (30) days' notice without
liability; and (v) all patents, trademarks (including service marks), trade mark
registrations, and applications for registering patents or trademarks, owned by
Coventry or its Subsidiaries (none of which is subject to a licensing or other
agreement with any other person). True and complete copies of all written
leases, agreements, commitments and understandings (collectively, the "COVENTRY
AGREEMENTS") referred to in Part 5.16 of the Disclosure Letter have been
delivered to the Shareholders and Members. Each Coventry Agreement is, and at
the First Closing and the Second Closing will be, in full force and effect,
except for those that expire by their own terms or which are terminated upon the
request of Coventry with the written consent of the Shareholders and Members.
There is no existing default by Coventry or its Subsidiaries under any Coventry
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Agreement, and, to the Knowledge of Coventry, there is no existing default under
any Coventry Agreement by any other party to any Coventry Agreement.
(Coventry and its Subsidiaries have fully performed all of their contractual
obligations to all contracting parties with respect to all Applicable Contracts
that have been required to be performed prior to the date hereof, and there are
no pending claims, offsets or disputes with respect to any Applicable Contracts.
Except as set forth in Part 5.16 of the Disclosure Letter, Coventry and its
Subsidiaries have not subcontracted or sublicensed to or from anyone the
performance of any of its contractual responsibilities with respect to any
Applicable Contract.
(Except as set forth in Part 5.16 of the Disclosure Letter, Coventry and its
Subsidiaries are not a party to any loan, promissory note, credit agreement,
working capital line, factoring arrangement, security interest, pledge, or
mortgage with any bank, financial institution or other entity or person.
( Except as set forth in Part 5.16 of the Disclosure Letter, Coventry and its
Subsidiaries do not have any outstanding loan to any director, officer,
shareholder, employee, consultant or contractor of Coventry or any Subsidiary,
or to any other person or entity.
() Except as set forth in Part 5.16 of the Disclosure Letter, Coventry and its
Subsidiaries (i) do not have any power of attorney outstanding and (ii) do not
have any obligations or liabilities (whether absolute, accrued, contingent or
otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of any obligation of any other person or entity (including
without limitation, any director, officer, shareholder, employee, consultant or
contractor of Coventry or any Subsidiary). Part 5.16 of the Disclosure Letter
sets forth any cross-guarantees or indemnities provided by or among Coventry or
any Subsidiary to or for the benefit of Coventry or any other Subsidiary.
()Coventry and its Subsidiaries are not a party to any contract or commitment
for capital expenditures involving more than $10,000 in any instance.
()Coventry and its Subsidiaries are not a party to (i) any contract, pledge or
commitment for charitable contributions, (ii) any contract with the United
States Government or any state or local government or public authority or any
agency thereof, or (iii) any contract with any foreign government or foreign
authority or any agency thereof.
()Coventry and its Subsidiaries are not, by non-competition agreement,
restrictive covenant, court order, injunction, or
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otherwise, restricted from carrying on any business whatsoever anywhere in the
world.
()Coventry and its Subsidiaries are not required to provide any letters of
credit, bonding or financial security arrangements in connection with any of
their businesses, customers or suppliers, and none are issued or outstanding.
.INSURANCE
Part 5.17 of the Disclosure Letter includes an insurance schedule prepared by
Coventry's insurance broker identifying all insurance policies maintained by
Coventry and its Subsidiaries, the insurance carrier, type of coverage, amount
of coverage, premium, policy expiration dates and loss experience. Coventry has
delivered to the Shareholders and Members true and complete copies of all
policies of insurance to which Coventry is a party or under which Coventry, or
any director of Coventry, is or has been covered at any time within the three
(3) years preceding the date of this Agreement, as set forth on Part 5.17 of the
Disclosure Letter.
.ENVIRONMENTAL MATTERS
Except as set forth in Part 5.18 of the Disclosure Letter:
() Coventry is, and at all times has been, in material compliance with, and has
not been and is not in violation of or liable under, any Environmental Law.
Coventry has no basis to expect, nor has it or any other Person for whose
conduct it is or may be held to be responsible received, any actual or
Threatened order, notice, or other communication from (i) any Governmental Body
or private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or Threatened
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which Coventry has or had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by Coventry, or any other Person for whose conduct it is or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
() There are no pending or Threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether
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real, personal, or mixed) in which Coventry has or had an interest.
() Coventry has no Knowledge of any basis to expect, nor has it or any other
Person for whose conduct it is or may be held responsible, received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Activity, Hazardous Materials, or any
alleged, actual, or potential violation or failure to comply with any
Environmental Law, or of any alleged, actual, or potential obligation to
undertake or bear the cost of any Environmental, Health, and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal, or mixed) in which Coventry has or had an interest, or with
respect to any property or facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
Coventry or any other Person for whose conduct it is or may be held responsible,
or from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled, or received.
() Neither Coventry nor or any other Person for whose conduct it is or may be
held responsible, has any Environmental, Health, and Safety Liabilities with
respect to the Facilities, or with respect to any other properties and assets
(whether real, personal, or mixed) in which Coventry (or any predecessor), has
or had an interest, or at any property geologically or hydrologically adjoining
the Facilities or any such other property or assets.
() There are no Hazardous Materials present on or in the Environment at the
Facilities or at any geologically or hydrologically adjoining property,
including any Hazardous Materials contained in barrels, above or underground
storage tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and deposited or
located in land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or thereon.
Neither Coventry, nor any other Person for whose conduct it is or may be held
responsible, or any other Person, has permitted or conducted, or is aware of,
any Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Coventry has or
had an interest.
() There has been no Release or Threat of Release of any Hazardous Materials at
or from the Facilities or at any other locations where any Hazardous Materials
were generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Coventry has or had an
interest, or to the Knowledge of Coventry, any geologically or hydrologically
adjoining property, whether by
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Coventry or any other Person.
() Coventry has delivered to the Shareholders and Members true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Coventry pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Coventry, or any other Person for whose conduct it is or may be held
responsible, with Environmental Laws.
.INTELLECTUAL PROPERTY
() Coventry owns or possesses adequate licenses or other rights to use all
computer software, software programs, patents, patent applications, trademarks,
trademark applications, trade secrets, service marks, trade names, copyrights,
inventions, drawings, designs, customer lists, proprietary know-how or
information or other rights which are material to its business, and those
licenses or rights are sufficient to conduct its business as they have been and
are now being conducted. Coventry's operations do not conflict with or infringe,
and no one has asserted that those operations conflict with or infringe, any
rights of any third party.
() All licenses, agreements, registrations, applications and other documentation
of such intellectual property are listed and set forth on Part 5.19 of the
Disclosure Letter, and Coventry has delivered to the Shareholders and Members
true and accurate copies thereof. Part 5.19 of the Disclosure Letter identifies
all such intellectual property which is (i) owned by Coventry or its
Subsidiaries, (ii) licensed from third parties (together with identification of
the license or other agreements relating to intellectual property licensed from
third parties), and (iii) licensed or sublicensed by Coventry or its
Subsidiaries to third parties. Except for the intellectual property licenses set
forth on Part 5.19 of the Disclosure Letter, neither Coventry nor any Subsidiary
is a party or subject to any trademark, copyright, patent, license, royalty or
proprietary rights agreements, and neither Coventry nor any Subsidiary pay any
license or royalty fees to any party in connection therewith.
() No product made or sold by Coventry or its Subsidiaries infringes any
trademark, trade name, copyright, patent, know-how, trade secret or proprietary
right of any other party. No notifications, claims, actions, suits,
arbitrations, inquiries, proceedings or investigations of any kind have been
made or asserted or are pending or Threatened either (i) contesting Coventry's
or its Subsidiaries' right to sell, market and distribute the products utilizing
any intellectual property, (ii) based upon or challenging or seeking to deny or
restrict the use by Coventry or its Subsidiaries of any intellectual property,
or (iii) alleging that any products are being manufactured, sold,
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provided, licensed or used by Coventry or its Subsidiaries in violation of any
proprietary rights of any third party.
() Part 5.19 of the Disclosure Letter sets forth the status of Coventry's and
its Subsidiaries' compliance with Year 2000 computer issues.
.CERTAIN PAYMENTS
Neither Coventry nor any director, officer, agent, or employee of Coventry, nor
any other Person associated with or acting for or on behalf of Coventry, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
special concessions or for special concessions already obtained, for or in
respect of Coventry or any Subsidiary of Coventry, or (ii) in violation of any
Legal Requirement, or (b) established or maintained any fund or asset that has
not been recorded in the books and records of Coventry.
.DISCLOSURE
No representation or warranty of Coventry in this Agreement and no statement by
Coventry in the Disclosure Letter omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.
.RELATIONSHIPS WITH RELATED PERSONS
Except as disclosed on Part 5.22 of the Disclosure Letter, no Related Person of
Coventry has had any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to Coventry's
business. Except as disclosed in Part 5.22 of the Disclosure Schedule, no
Related Person of Coventry is or has owned (of record or as a beneficial owner)
an equity interest or any other financial or profit interest in, a Person that
has (i) had business dealings or a material financial interest in any
transaction with Coventry; or (ii) engaged in competition with Coventry with
respect to any line of the products or services of Coventry (a "COMPETING
BUSINESS") in any market presently served by Coventry. Except as set forth in
Part 5.22 of the Disclosure Letter, no Related Person of Coventry is a party to
any Contract with, or has any claim or right against, Coventry.
.BROKERS OR FINDERS
Coventry has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
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.SEC DOCUMENTS
Coventry has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities and Exchange Act of 1934 (all of the foregoing, including all
exhibits filed therewith and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter collectively referred to herein as the "COVENTRY SEC DOCUMENTS").
Coventry has delivered to the Shareholders and Members true and complete copies
of the Coventry SEC Documents. As of their respective dates, the Coventry SEC
Documents complied in all material respects with the requirements of the
Securities and Exchange Act of 1934 and the rules and regulations of the SEC
promulgated thereunder applicable to such Coventry SEC Documents, and none of
the Coventry SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
.ACQUISITIONS AND DIVESTITURES
()Part 5.25 of the Disclosure Letter lists and identifies all acquisitions or
investments in the business, assets, capital stock, partnership interests or
membership interests in any other entity or division thereof conducted at any
time by Coventry, whether by purchase, merger, consolidation, or any other form
of transaction, as well as all divestitures or sales of any business,
Subsidiary, or division of Coventry or the assets, capital stock, partnership
interests or membership interests therein conducted at any time by Coventry
(such transactions referred to as "ACQUISITIONS AND DIVESTITURES"); and for each
Acquisition or Divestiture, sets forth the date of the transaction, the
interests acquired or sold, the parties to the transaction and the consideration
therefor, and identifies all parties which have retained interests in any
business acquired by Coventry.
()Part 5.25 of the Disclosure Letter sets forth a listing of all asset purchase,
stock purchase, merger, consolidation, or other primary agreement relating to
each Acquisition and Divestiture as well as all promissory notes, guarantees,
security agreements, pledge agreements, preferred stock designations, and other
operative agreements relating to each Acquisition and Divestiture; copies of all
such documents have been delivered to the Shareholders and Members.
()Part 5.25 of the Disclosure Letter sets forth a listing of all agreements,
reports, audits, and documentation relating to
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purchase price adjustments, post-closing audits, post-closing amendments,
revaluations or reappraisals relating to all Acquisitions and Divestitures;
copies of all such documents have been delivered to the Shareholders and
Members.
() Part 5.25 of the Disclosure Letter sets forth a listing of all earnout
agreements or other agreements relating to the payment of additional purchase
price or compensation, whether stock, cash or otherwise, based on post-closing
performance of businesses which are the subject of Acquisitions or Divestitures,
together with calculations, reports and statements of any amounts paid
thereunder; copies of all such documentation have been delivered to the
Shareholders and the Members.
() Except as specifically described in Part 5.25 of the Disclosure Letter, there
are no claims for indemnification, adjustment, recission, disputes, arbitration,
accounting or breach or default, by Coventry or any other party, under any
agreement relating to any Acquisition or Divestiture. All agreements relating to
Acquisitions or Divestitures are in full force and effect; there is no existing
default by Coventry under any such agreement, and to the actual Knowledge of
Coventry, there is no existing default under any such agreement by any other
party thereto. Coventry has made all payments required to be made to date
(whether in cash, stock or property) under all Acquisitions, and Coventry has
received all payments required to be made to date (whether in cash, stock or
property) under all Divestitures.
() Part 5.25 of the Disclosure Letters identifies any Acquisition or Divestiture
involving a company or affiliate thereof which was the subject of any
bankruptcy, insolvency or reorganization proceedings; copies of the final court
orders approving the transaction (and the plan of reorganization if the
transaction was pursuant to such plan) have been delivered to the Shareholders
and Members.
.CORPORATE STRUCTURE AND SUBSIDIARIES
() Part 5.26 of the Disclosure Letter sets forth an identification of all
subsidiaries, corporations, partnerships, limited liability companies or other
entities and affiliates in which Coventry has an interest, including states of
incorporation or organization and foreign qualification, sets forth the exact
authorized and outstanding shares and share ownership of all subsidiaries and
minority shareholdings, contains a chart of corporate organization showing
direct and indirect subsidiaries and chain of ownership, and sets forth for each
subsidiary or other entity, a brief description of the business thereof and the
directors and officers thereof.
() Except as set forth in Part 5.26 of the Disclosure Letter, neither Coventry
nor any Subsidiary has any legal or beneficial interest in any subsidiary,
corporation, partnership, joint
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venture or limited liability company or other business entity. Coventry's
business and assets are owned and operated by the corporate entities of Coventry
and the subsidiaries set forth in Part 5.26 of the Disclosure Letter directly
and exclusively, and not through any other affiliate or entity of any kind.
() Except as set forth in Part 5.26 of the Disclosure Letter, each Subsidiary
and other entity set forth in Part 5.26 is fully consolidated in the federal tax
returns filed by Coventry and fully consolidated in the Balance Sheet of
Coventry referred to in Section 5.4 hereof.
.COVENTRY STOCK ISSUED TO BSD AND PF
() The Coventry Shares to be delivered to BSD at the First Closing and PF at the
Second Closing will be duly authorized and issued, fully paid and
non-assessable. The shares of Coventry common stock to be delivered to BSD at
the First Closing, I.E. the BSD Consideration, shall aggregate 19.95% of the
Fully Diluted Capitalization (as defined below) of Coventry on the date of the
First Closing. The shares of Coventry common stock to be delivered to PF at the
Second Closing, I.E. the PF Consideration, shall be equal to the amount that,
when aggregated with the shares of Coventry common stock to be delivered to BSD
at the First Closing, shall total 80.1% of the Fully Diluted Capitalization of
Coventry on the date of the Second Closing. "Fully Diluted Capitalization" shall
mean the total number of outstanding shares of common stock of Coventry,
assuming that all options, warrants, convertible preferred stock, convertible
debt and other convertible securities or rights to acquire common stock of
Coventry have been fully exercised, converted and exchanged for, shares of
common stock of Coventry immediately prior to the applicable Closing. Part 5.27
of the Disclosure Letter sets forth a detailed calculation of the Fully Diluted
Capitalization of Coventry as of the dates of the First Closing and Second
Closing, respectively, giving effect to the issuance of shares to BSD and PF.
() All shares of Coventry common stock to be issued to BSD and PF in accordance
with this Agreement will be offered, issued, sold and delivered by Coventry in
compliance with all applicable state and federal laws and regulations concerning
the issuance of securities and none of such shares was or will be issued in
violation of the pre-emptive rights of any stockholder of Coventry..
.OPTIONS, WARRANTS, CONVERTIBLE SECURITIES, OTHER MATTERS RELATING TO SECURITIES
OF COVENTRY
() Part 5.28 of the Disclosure Letter sets forth a table of all outstanding
options, warrants, convertible preferred stock, convertible securities,
convertible debt and other rights or arrangements for acquisition, exercise,
conversion or exchange
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into shares of common stock or other securities of Coventry (or requiring
Coventry to issue any shares of common stock or other securities of Coventry),
identifying the holders thereof, date of grant, vesting requirements, exercise
price, and number of underlying shares of common stock or other securities of
Coventry. Such table also identifies any vesting or acceleration of such rights
on any sale, transfer, merger or change of control of Coventry or any Subsidiary
thereof. Copies of all agreements relating to such rights to acquire securities
of Coventry have been delivered to the Shareholders and Members.
() Part 5.28 of the Disclosure Letter sets forth a table of all stock
compensation agreements of Coventry (including marketing, advisory, consulting
or other agreements providing for payment or compensation in stock of Coventry
or rights thereto), identifying the holders thereof, date of grant, the number
of shares covered, and whether they remain outstanding, have been exercised or
have expired. Copies of all agreements relating to stock compensation have been
delivered to the Shareholders and Members.
() Except as set forth in Part 5.28 of the Disclosure Letter, no present or
former director, officer, employee or contractor of Coventry, or the sellers or
principals of any business which was the subject of any Acquisition by Coventry,
has the right to or has been promised a participation in any sale, transfer,
merger, change in control, Acquisition or Divestiture of Coventry or any
Subsidiary or business which was the subject of any Acquisition by Coventry.
() Except as set forth in Part 5.28 of the Disclosure Letter, there are no
voting agreements, voting trusts, proxies, powers of attorney, shareholder
agreements, buy-sell agreements, put/call agreements, standstill agreements,
rights of first refusal, stock purchase, repurchase and redemption agreements,
stock restriction agreements, or other agreements relating to the voting,
transfer, or disposition of any class of securities of Coventry or any
Subsidiary.
() Part 5.28 of the Disclosure Letter sets forth an identification of all stock
option plans, stock incentive plans, stock appreciation rights plans, "phantom
stock" or similar incentive plans, together with evidence of Board and
shareholder approval thereof, where applicable. Copies of all such plans have
been provided to the Shareholders and Members.
() Except as set forth in Part 5.28 of the Disclosure Letter, no holder of any
securities of Coventry or any Subsidiary, or rights to obtain any securities of
Coventry or any Subsidiary, has any agreement or other rights requiring Coventry
or any Subsidiary thereof to register securities of any class of Coventry or any
Subsidiary at any time.
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() The shares of common stock of Coventry are duly authorized for trading on the
NASDAQ Small Cap Market. On the date hereof and on the First Closing and the
Second Closing, Coventry will continue to meet all NASD qualification
requirements for continued trading on the NASDAQ Small Cap Market. Coventry has
not received any notices, warnings or actions from NASD or NASDAQ relating to
any delisting, suspension, removal, or failure to meet qualification
requirements of the NASDAQ Small Cap Market.
() Except as disclosed in Part 5.28 of the Disclosure Letter, Coventry has not
received any correspondence, notices, warnings, comment letters, or actions from
the United States Securities & Exchange Commission (the "SEC") or any state
securities regulator regarding any failure or potential failure to comply with
federal or state securities laws or regulations, or requiring amendment or
restatement of filings with the SEC or financial statements included therein, or
requiring any other corrective action on the part of Coventry, or regarding any
investigation, proceeding or audit of Coventry or its Subsidiaries.
() All shares of capital stock of Coventry, and rights to acquire such shares,
since the formation of Coventry, have been offered, issued, sold and delivered
by Coventry in compliance with all applicable state and federal laws and
regulations concerning the issuance of securities. There has never been any
suit, claim or investigation by any shareholder of Coventry or any Subsidiary,
or by any purchaser, offeree or holder of any securities of Coventry or rights
to acquire such shares, or by the SEC or any state securities regulator, that
any securities of Coventry were offered, issued, sold or delivered in violation
of state or federal laws and regulations concerning the issuance of securities,
or requesting recission thereof, or damages in connection therewith.
() Except as set forth in Part 5.28 of the Disclosure Letter, neither Coventry
nor any Subsidiary is a party to any contract or understanding, oral or written,
with any underwriter, broker-dealer, placement agent, broker, finder, agent,
investment banker, investment advisor, bank, insurance company or other Person
or entity whereby any such party (i) has any rights or obligations to conduct
the offering, sale, underwriting, or placement of securities of Coventry or any
Subsidiary or to act as investment banker or investment advisor to Coventry or
any Subsidiary, or (ii) is entitled to any compensation or payments, whether in
the form of cash, stock, warrants, options or otherwise, with respect to any
offering, issuance, underwriting, sale or placement of securities of Coventry or
any Subsidiary.
.FACILITIES; LEASES; OWNED REAL PROPERTY
() Coventry and its Subsidiaries conduct business only at or from the Facilities
identified on Part 5.29 of the Disclosure Letter,
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which sets forth the address of each location, the county in which it is
located, whether such Facility is owned or leased, the name of the Subsidiary
which is the tenant or owner of such Facility, and a general description of the
use of the premises. Except as set forth on Part 5.29 of the Disclosure Letter,
all Facilities which are owned by Coventry or its Subsidiaries ("OWNED REAL
PROPERTY") are utilized entirely by Coventry or its Subsidiaries and are not
leased or subleased to third parties. All Facilities which are leased by
Coventry or its Subsidiaries (collectively referred to as the "REAL PROPERTY
LEASES") are leased from third parties unaffiliated with Coventry, its
Subsidiaries, or the officers, directors, employees or shareholders thereof.
Except as set forth on Part 5.29 of the Disclosure Letter, no consent or
approval from any landlord under any of the Real Property Leases is necessary in
connection with the transactions contemplated by this Agreement. At or prior to
the First Closing and the Second Closing, as applicable, and as a condition
thereto, Coventry and its Subsidiaries shall have received from the landlords of
the Real Property Leases identified on Part 5.29 of the Disclosure Letter as
requiring such consent, a written consent to the transactions contemplated by
this Agreement and an estoppel certificate in form and substance reasonably
satisfactory to the Shareholders and Members. Coventry shall bear all expenses
of obtaining such landlord consents. Coventry and its Subsidiaries have made all
rental payments due under the Real Property Leases to date (and through the
dates of the First Closing and the Second Closing) and are otherwise in full
compliance with the terms and conditions of such Real Property Leases.
() Coventry and its Subsidiaries do not share any space under the Real Property
Leases with any other person or entity; the Real Property Leases have never been
sublet or assigned by Coventry or its Subsidiaries; on the dates of the First
Closing and the Second Closing, the Real Property Leases shall be in full force
and effect; there are and will be no defaults under any Real Property Leases or
claims by the landlords thereof; and all rents under the Real Property Leases
have been paid and shall be paid in full through the dates of the First Closing
and the Second Closing. On the dates of the First Closing and the Second
Closing, the premises covered by the Real Property Leases shall not have been
damaged or otherwise adversely affected by any fire or casualty or the exercise
of the powers of eminent domain.
() All improvements, fixtures, machinery, equipment, structures, heating,
ventilation, air conditioning, lighting, security and other building systems,
plumbing and waste distribution systems relating to the Owned Real Property are
in good operating condition, working order and repair and are adequate for the
uses to which they are being put. The Owned Real Property and all improvements
thereon conform in all material respects with all applicable building, zoning,
environmental and other land use
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laws, ordinances, rules and regulations and do not encroach in any respect on
property of others. All necessary occupancy, facility and other certificates and
permits for the occupancy and lawful use of the Owned Real Property for its
current uses have been issued and are presently in full force and effect. Except
as set forth on Part 5.29 of the Disclosure Letter, Coventry and its
Subsidiaries have not received any notices of violations of any Legal
Requirements issued by any state, county, municipal or local department having
jurisdiction against or affecting any of such Owned Real Property. Except to the
extent set forth on Part 5.29 of the Disclosure Letter, no use of the Owned Real
Property is dependent upon the continuance of a non-conforming use or special
permit or license. All service and maintenance contracts relating to the Owned
Real Property are set forth on Part 5.29 of the Disclosure Letter. There is no
tax assessment, revaluation or similar proceeding pending with respect to the
Owned Real Property. On the dates of the First Closing and the Second Closing,
the premises covered by the Owned Real Property shall not have been damaged or
otherwise adversely affected by any fire or casualty or the exercise of the
powers of eminent domain.
() The transactions contemplated by this Agreement shall not, with respect to
the Facilities, require the consent or approval of or notification to any
federal, state or local agency under any environmental, industrial, labor, plant
closing, factory registration, or other laws or regulations.
() Coventry and its Subsidiaries have delivered to the Shareholders and Members
copies of all OSHA inspection reports, audits and surveys with respect to the
Facilities comprising the Owned Real Property and the Real Property Leases
within the past five (5) years. None of such Facilities have been rated a high
risk or high hazard facility or operation, nor are they subject to or
participate in any OSHA Cooperative Compliance Program or any other remedial,
corrective or compliance program imposed by OSHA.
.FIXED ASSETS
() Certain of Coventry's and its Subsidiaries' Fixed Assets (as defined below)
are leased in accordance with the equipment leases described on Part 5.30 of the
Disclosure Letter (the "EQUIPMENT LEASES"). Coventry and its Subsidiaries have
made all rental payments due under such leases to date (and through the dates of
the First Closing and the Second Closing) and are otherwise in full compliance
with the terms and conditions of such leases.
() Coventry's and its Subsidiaries' Fixed Assets are in good operating
condition, working order and repair and are adequate for the uses to which they
are being put. Part 5.30 of the Disclosure Letter sets forth a schedule of
Coventry's and its Subsidiaries' Fixed Assets and identifies any Fixed Assets
which
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are not actually owned by them but are leased. "FIXED ASSETS" shall be defined
as fixtures, leasehold improvements, structures, machinery, equipment, tools,
furniture, pallets, telephones and systems, computer systems (including
software), and all other items of material personal property used or useful in
the business of Coventry and its Subsidiaries.
.PRODUCT LINES
() Part 5.31 of the Disclosure Letter contains a complete and correct list of
all product types and product lines comprising the businesses of Coventry and
its Subsidiaries, identified by the specific Subsidiary or division thereof.
Coventry and its Subsidiaries have never been the subject of any product
liability, safety, or false, deceptive or misleading advertising claims and have
never been the subject of any investigation, proceeding, warning, citation or
other claim by any federal, state, foreign or local governmental agency.
Coventry and its Subsidiaries have not initiated any recall of any items
products or taken any similar action, and Coventry does not know of any basis
for any such action which should have been taken or may have to be taken in the
future. Coventry and its Subsidiaries have not engaged in any advertising
practices which are deceptive, misleading, or otherwise in violation of any
Legal Requirements.
() Each item of merchandise included in the inventory of Coventry and its
Subsidiaries or which has been sold or shipped by Coventry and its Subsidiaries
is safe for its intended uses and conforms with all Legal Requirements and
product safety and testing codes and standards, and contains all required
labels, disclosures and warnings, including without limitation, compliance with
the requirements of the Magnuson-MOSS Warranty Act and the Consumer Product
Safety Act. With regard to items of merchandise included in the inventory of
Coventry and its Subsidiaries or which has been sold or shipped by Coventry or
its Subsidiaries as to which safety or flammability standards have been issued,
Coventry and its Subsidiaries have performed the necessary tests to demonstrate
compliance of its products with such standards and maintains proper
documentation thereof.
.BANK ACCOUNTS
Part 5.32 of the Disclosure Letter sets forth the name, account number,
signatories, financial institution (with branch, address and contact person) of
all banking or financial institution accounts, deposit or concentration
accounts, safety deposit boxes, money market accounts, brokerage accounts and
investment accounts maintained by Coventry and its Subsidiaries.
.PURCHASE FOR INVESTMENT
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All of the BSD Shares and the PF Membership Interests delivered pursuant to this
Agreement shall be acquired by Coventry for investment and not with a view
toward, or for sale in connection with, any distribution thereof; provided,
however, that the foregoing shall not constitute a restriction on Coventry from
transferring such BSD Shares and PF Membership Interests in compliance with
applicable Legal Requirements.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder individually represents and warrants to Coventry, as to
himself, except as set forth in the Disclosure Letter, as follows:
.AUTHORITY; NO CONFLICT
() This Agreement constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against the Shareholder in accordance with its terms,
to the extent applicable thereto. Upon the execution and delivery by the
Shareholder of this Agreement and all Agreements contemplated herein to which
the Shareholder is a party (collectively, the "Shareholder Closing Documents"),
this Agreement and the Shareholder Closing Documents will constitute the legal,
valid and binding obligations of the Shareholder enforceable against such
Shareholder in accordance with their respective terms except as such enforcement
is limited by bankruptcy, insolvency or other laws affecting creditor's rights
generally. The Shareholder has the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Agreement and the Shareholder
Closing Documents and to perform his obligations under this Agreement and the
Shareholder Closing Documents.
() Neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or directly
(with or without notice or lapse of time or both);
() contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any legal
requirement or any order to which such Shareholder may be subject;
() to the knowledge of the Shareholder, contravene, conflict with, or result in
a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any contract to which such
Shareholder is a party;
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() Except as set forth in Part 6.1 of the Disclosure Letter, the Shareholder is
not and will not be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement by
such Shareholder or the consummation and performance of any of the Contemplated
Transactions by such Shareholder.
.BSD SHARE OWNERSHIP
The Shareholder is and will be on the First Closing Date the record and
beneficial owner and holder of all of the BSD Shares identified on Part 6.2 of
the Disclosure Letter, free and clear of all Encumbrances.
.PURCHASE FOR INVESTMENT
All shares of Coventry common stock delivered pursuant to this Agreement shall
be acquired by the Shareholders for investment and not with a view toward, or
for sale in connection with, any distribution thereof; provided, however, that
the foregoing shall not constitute a restriction on the Shareholders from
transferring such shares of Coventry in compliance with applicable Legal
Requirements.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF MEMBERS
As of the Second Closing Date, each Member individually represents and warrants
to Coventry, as to himself, except as set forth in the Disclosure Letter, as
follows:
.AUTHORITY; NO CONFLICT
() This Agreement constitutes the legal, valid and binding obligation of such
Member, enforceable against the Member in accordance with its terms, to the
extent applicable thereto. Upon the execution and delivery by the Member of this
Agreement and all Agreements contemplated herein to which the Member is a party
(collectively, the "Member Closing Documents"), this Agreement and the Member
Closing Documents will constitute the legal, valid and binding obligations of
the Member enforceable against such Member in accordance with their respective
terms except as such enforcement is limited by bankruptcy, insolvency or other
laws affecting creditor's rights generally. The Member has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and the Member Closing Documents and to perform his obligations under
this Agreement and the Member Closing Documents.
() Neither the execution and delivery of this Agreement nor the
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consummation or performance of any of the Contemplated Transactions will,
directly or directly (with or without notice or lapse of time or both);
() contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any legal
requirement or any order to which such Member may be subject;
() to the knowledge of the Member, contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify, any contract to which such
Member is a party;
() Except as set forth in Part 7.1 of the Disclosure Letter, the Member is not
and will not be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement by such
Member or the consummation and performance of any of the Contemplated
Transactions by such Member.
.PF MEMBERSHIP INTEREST OWNERSHIP
The Member will be on the Second Closing Date the record and beneficial owner
and holder of all of the PF Membership Interests identified on Part 7.2 of the
Disclosure Letter, free and clear of all Encumbrances.
.PURCHASE FOR INVESTMENT
All shares of Coventry common stock delivered pursuant to this Agreement shall
be acquired by the Members for investment and not with a view toward, or for
sale in connection with, any distribution thereof; provided, however, that the
foregoing shall not constitute a restriction on the Members from transferring
such shares of Coventry in compliance with applicable Legal Requirements.
ARTICLE
COVENANTS OF BSD PRIOR TO DATE OF FIRST CLOSING
.ACCESS AND INVESTIGATION
Between the date of this Agreement and the First Closing Date, BSD will, and
will cause its Representatives to, (a) afford Coventry and its Representatives
and prospective lenders and their Representatives (collectively, "COVENTRY'S
ADVISORS") full and free access to BSD personnel, properties (including
subsurface testing), contracts, books and records, and other
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documents and data, (b) furnish Coventry and Coventry's Advisors with copies of
all such contracts, books and records, and other existing documents and data as
Coventry may reasonably request, and (c) furnish Coventry and Coventry's
Advisors with such additional financial, operating, and other data and
information as Coventry may reasonably request.
.OPERATION OF BSD BUSINESSES
Between the date of this Agreement and the First Closing Date, BSD will:
() conduct the business of BSD only in the Ordinary Course of Business;
() use its best efforts to: preserve intact the current business organization of
BSD, keep available the services of the current officers, employees, and agents
of BSD, and maintain the relations and goodwill with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with BSD;
() confer with Coventry concerning operational matters of a material nature; and
() otherwise report periodically to Coventry concerning the status of the
business, operations, and finances of BSD.
.NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the First Closing Date, BSD will not, without the prior
consent of Coventry, take any affirmative action, or fail to take any reasonable
action within their or its control, as a result of which any of the changes or
events listed in Section 3.15 is likely to occur.
.REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, BSD will make all
filings required by Legal Requirements to be made by it in order to consummate
the Contemplated Transactions. Between the date of this Agreement and the First
Closing Date, BSD will (a) cooperate with Coventry with respect to all filings
that Coventry elects to make or is required by Legal Requirements to make in
connection with the Contemplated Transactions, and (b) cooperate with Coventry
in obtaining all consents identified in Part 5.2 of Coventry's Disclosure
Letter.
.NOTIFICATION
Between the date of this Agreement and the First Closing Date,
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BSD will promptly notify Coventry in writing if BSD becomes aware of any fact or
condition that causes or constitutes a Breach of any of BSD's representations
and warranties as of the date of this Agreement, or if BSD becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, BSD will promptly deliver to
Coventry a supplement to the Disclosure Letter specifying such change. During
the same period, BSD will promptly notify Coventry of the occurrence of any
Breach of any covenant of BSD in this Agreement or of the occurrence of any
event that may make the satisfaction of the conditions in Article XI impossible
or unlikely.
.NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Article XV,
the Shareholders will not, and will cause BSD and each of their Representatives
not to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than Coventry) relating to any transaction involving the sale of
the business or assets (other than in the Ordinary Course of Business) of BSD,
or any of the stock or equity security interests of BSD, or any merger,
consolidation, business combination, or similar transaction involving BSD
.BEST EFFORTS
Between the date of this Agreement and the First Closing Date, BSD will use its
best efforts to cause the conditions in Article XI to be satisfied.
.SUBSIDIARIES
All references to "BSD" in this Article VIII shall include BSD and all its
Subsidiaries.
ARTICLE
COVENANTS OF PF PRIOR TO DATE OF SECOND CLOSING
.ACCESS AND INVESTIGATION
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Between the date of this Agreement and the Second Closing Date, PF will, and
will cause its Representatives to, (a) afford Coventry and Coventry's Advisors
full and free access to PF personnel, properties (including subsurface testing),
contracts, books and records, and other documents and data, (b) furnish Coventry
and Coventry's Advisors with copies of all such contracts, books and records,
and other existing documents and data as Coventry may reasonably request, and
(c) furnish Coventry and Coventry's Advisors with such additional financial,
operating, and other data and information as Coventry may reasonably request.
.OPERATION OF PF BUSINESSES
From and after the inception of its business and until the Second Closing Date,
PF will:
() conduct the business of PF only in the Ordinary Course of Business;
() use its best efforts to: preserve intact the business organization to be
developed by PF, keep available the services of the officers, employees, and
agents to be appointed by PF, and maintain the relations and goodwill with
suppliers, customers, landlords, creditors, employees, agents, and others which
will have business relationships with PF;
() confer with Coventry concerning the acquisition and development of its
business and operational matters of a material nature; and
() otherwise report periodically to Coventry concerning the status of the
business, operations, and finances of PF;
provided, however, that Coventry recognizes and acknowledges that PF will be
acquiring and developing its business during the period prior to the Second
Closing Date.
.INTENTIONALLY DELETED
.REQUIRED APPROVALS
Prior to the Second Closing Date, PF will make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Second Closing Date, PF
will (a) cooperate with Coventry with respect to all filings that Coventry
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Coventry in obtaining all
consents identified in Part 5.2 of Coventry's Disclosure Letter
.NOTIFICATION
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Between the date of this Agreement and the Second Closing Date, PF will promptly
notify Coventry in writing if PF becomes aware of any fact or condition that
causes or constitutes a Breach of any of PF's representations and warranties as
of the date of this Agreement, or if PF becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, PF will promptly deliver to Coventry a supplement to the
Disclosure Letter specifying such change. During the same period, PF will
promptly notify Coventry of the occurrence of any Breach of any covenant of PF
in this Agreement or of the occurrence of any event that may make the
satisfaction of the conditions in Article XII impossible or unlikely.
.NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Article XV,
the Members will not, and will cause PF and each of their Representatives not
to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than Coventry) relating to any transaction involving the sale of
the business or assets (other than in the Ordinary Course of Business) of PF, or
any of the membership interests of PF, or any merger, consolidation, business
combination, or similar transaction involving PF, provided, however, that
Coventry recognizes and acknowledges that PF will be acquiring and developing
its business during the period prior to the Second Closing Date.
.BEST EFFORTS
Between the date of this Agreement and the Second Closing Date, PF will use its
best efforts to cause the conditions in Article XII to be satisfied.
.SUBSIDIARIES
All references to "PF" in this Article IX shall include PF and all its
Subsidiaries.
ARTICLE
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COVENANTS OF COVENTRY
.ACCESS AND INVESTIGATION
Between the date of this Agreement and the Second Closing Date, Coventry will,
and will cause its Representatives to, (a) afford the Shareholders, the Members
and their Representatives and prospective lenders and their Representatives
(collectively, "ADVISORS") full and free access to Coventry's personnel,
properties (including subsurface testing), contracts, books and records, and
other documents and data, (b) furnish the Shareholders, the Members and their
Advisors with copies of all such contracts, books and records, and other
existing documents and data as they may reasonably request, and (c) furnish the
Shareholders, the Members and their Advisors with such additional financial,
operating, and other data and information as they may reasonably request.
.OPERATION OF COVENTRY'S BUSINESSES
Between the date of this Agreement and the Second Closing Date,
Coventry will:
() conduct the business of Coventry only in the Ordinary Course of Business;
() use its best efforts to: preserve intact the current business organization of
Coventry, keep available the services of the current officers, employees, and
agents of Coventry, and maintain the relations and goodwill with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with Coventry;
() confer with the Shareholders and Members concerning operational matters of a
material nature; and
() otherwise report periodically to the Shareholders and Members concerning the
status of the business, operations, and finances of Coventry.
.NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Second Closing Date, Coventry will not, without the prior
consent of the Shareholders and Members, take any affirmative action, or fail to
take any reasonable action within their or its control, as a result of which any
of the changes or events listed in Section 5.15 is likely to occur.
.REQUIRED APPROVALS
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As promptly as practicable after the date of this Agreement, Coventry will make
all filings required by Legal Requirements to be made by it in order to
consummate the Contemplated Transactions. Between the date of this Agreement and
the Second Closing Date, Coventry will (a) cooperate with BSD, PF, the
Shareholders and the Members with respect to all filings that they elect to make
or are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (b) cooperate with BSD, PF, the Shareholders and
Members in obtaining all consents identified in Part 3.2 of BSD's Disclosure
Letter or Part 4.2 of PF's Disclosure Letter.
.NOTIFICATION
Between the date of this Agreement and the Second Closing Date, Coventry will
promptly notify the Shareholders and Members in writing if Coventry becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Coventry's representations and warranties as of the date of this Agreement, or
if Coventry becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition require
any change in the Disclosure Letter if the Disclosure Letter were dated the date
of the occurrence or discovery of any such fact or condition, Coventry will
promptly deliver to the Shareholders and Members a supplement to the Disclosure
Letter specifying such change. During the same period, Coventry will promptly
notify the Shareholders and Members of the occurrence of any Breach of any
covenant of Coventry in this Agreement, or of the occurrence of any event that
may make the satisfaction of the conditions in Articles XI and XII impossible or
unlikely.
.NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Article XV,
Coventry will not, and will cause each of its Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than the Shareholders and Members) relating to any transaction involving the
sale of the business or assets (other than in the Ordinary Course of Business)
of Coventry, or any acquisition of the business or assets of any Person by
Coventry or any of the stock or equity security interests of Coventry, or any
merger, consolidation, business combination, or similar transaction involving
Coventry.
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.BEST EFFORTS
Between the date of this Agreement and the Second Closing Date, Coventry will
use its best efforts to cause the conditions in Articles XI and XII to be
satisfied.
.SUBSIDIARIES
All references in this Article X to "Coventry" shall include Coventry and all
its Subsidiaries.
.SEC FILINGS AND SHAREHOLDER COMMUNICATIONS
From and after the date of this Agreement and until the completion of the Second
Closing, all of Coventry's SEC filings, communications with its shareholders,
proxy statements, prospectuses, and similar communications shall be subject to
the prior review and reasonable approval of the Shareholders and Members.
.SPECIAL RIGHTS OF SHAREHOLDERS/MEMBERS
From and after the First Closing, the Board of Directors of Coventry shall
consist of eight (8) members, of which four (4) shall be designated by the
Shareholders. On the First Closing and as a condition thereof, the Board of
Directors of Coventry shall appoint such four (4) designees of the Shareholders
to the Board of Directors of Coventry, and a sufficient number of existing
Directors of Coventry shall resign so as to accommodate such appointments. From
and after the First Closing, Stephen Rosedale shall be elected and shall serve
as the Chairman of the Board of Coventry, and Robert Hausman shall be elected
and shall serve as Chief Executive Officer of Coventry. From and after the
Second Closing and until the next annual meeting of shareholders of Coventry,
the Board of Directors of Coventry shall consist of nine (9) members, of which
five (5) shall be designated by the Shareholders and the Members. On the Second
Closing and as a condition thereof, the Board of Directors of Coventry shall
appoint such five (5) designees of the Shareholders and Members to the Board of
Directors of Coventry, and a sufficient number of existing Directors of Coventry
shall resign so as to accommodate such appointments.
ARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF BSD, SHAREHOLDERS AND
COVENTRY
AT FIRST CLOSING
BSD's, the Shareholders' and Coventry's (BSD, the Shareholders and
Coventry collectively referred to as the "PARTIES" in this
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Article XI) obligations to consummate the transactions contemplated at the First
Closing and to take the other actions required to be taken by the Parties at the
First Closing are subject to the satisfaction, at or prior to the First Closing,
of each of the following conditions to be performed by Coventry in favor of the
Shareholders and BSD (any of which may be waived by the Shareholders, in whole
or in part) and to be performed by BSD or the Shareholders in favor of Coventry
(any of which may be waived by Coventry in whole or in part):
.ACCURACY OF REPRESENTATIONS
All of the Parties' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the First
Closing Date as if made on the First Closing Date, without giving effect to any
supplement (delivered after the First Closing Date) to the Disclosure Letter.
.PARTIES' PERFORMANCE
() All of the covenants and obligations that the Parties are required to perform
or to comply with pursuant to this Agreement at or prior to the First Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
() Each document required to be delivered by the Parties pursuant to this
Agreement must have been delivered, and each of the other covenants and
obligations to be performed by the Parties under this Agreement must have been
performed and complied with in all respects.
.CONSENTS
Each of the Consents identified in the Disclosure Letter or otherwise required
by this Agreement to be obtained by a Party, must have been obtained and must be
in full force and effect.
.ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to the opposite Party:
() an opinion of such Parties' counsel, identified in Section 16.4, dated the
First Closing Date; ()such other documents as the other Party may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 11.4(a), (ii) evidencing the
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accuracy of any of the Party's representations and warranties, (iii) evidencing
the performance by the Party of any covenant or obligation required to be
performed or complied with by the Party, (iv) evidencing the satisfaction of any
condition referred to in this Article XI, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
.NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against the Party, or against any Person affiliated with the Party,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Transactions, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
.NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock or membership
interest, or any other voting, equity, or ownership interest in Coventry or BSD,
or (b) is entitled to all or any portion of the BSD Consideration.
.NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time or both), materially contravene, or conflict with, or result in a material
violation of, or cause each respective Party or any Person affiliated therewith
to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
.DUE DILIGENCE
All of the inspections, investigations, evaluations, due diligence and other
matters set forth in Section 2.1 hereof shall have been satisfactory to, or
waived by, Coventry, the Shareholders and the Members in accordance with Section
2.1 hereof.
.PRO FUTURES AGREEMENT
Coventry, the Shareholders, the Members and Pro Futures Fund shall have entered
into an agreement, satisfactory to the Shareholders and the Members, whereby Pro
Futures Fund agrees
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that prior to the Second Closing, it will convert all shares of preferred stock
of Coventry held or owned by Pro Futures Fund to shares of common stock of
Coventry.
.AGREEMENTS WITH CERTAIN COVENTRY SECURITY/OPTION HOLDERS
Each of certain Persons who are security holders of Coventry, or who have stock
compensation or stock option agreements, or other similar arrangements, with
Coventry, as specified by the Shareholders, shall have entered into agreements
in favor of Coventry, the Shareholders and the Members, in each case
satisfactory to the Shareholders and the Members, whereby such Persons will
confirm their specific arrangements as to Coventry securities and will release
Coventry, the Shareholders and the Members from any other rights to securities
of Coventry or liabilities in connection therewith.
.NASDAQ COMPLIANCE.
Coventry shall be in full compliance with the requirements of Section 5.28(g) of
this Agreement relating to NASDAQ qualification and compliance, and accordingly,
on the date of the First Closing, Coventry shall continue to be fully qualified
for NASDAQ Small Cap Market listing and trading, and all necessary filings and
registrations to maintain such qualification shall have been made.
ARTICLE
CONDITIONS PRECEDENT TO OBLIGATIONS OF PF, MEMBERS AND
COVENTRY AT SECOND CLOSING
PF's, the Members' and Coventry's (PF, the Members and Coventry collectively
referred to as the Parties in this Article XII) obligations to consummate the
transactions contemplated at the Second Closing and to take the other actions
required to be taken by the Parties at the Second Closing are subject to the
satisfaction, at or prior to the Second Closing, of each of the following
conditions to be performed by Coventry in favor of the Members and PF (any of
which may be waived by the Members, in whole or in part) and to be performed by
PF or the Members in favor of Coventry (any of which may be waived by Coventry,
in whole or in part):
.ACCURACY OF REPRESENTATIONS
All of the Parties' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as
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of the Second Closing Date as if made on the Second Closing Date, without giving
effect to any supplement to the Disclosure Letter.
.PARTIES' PERFORMANCE
() All of the covenants and obligations that the Parties are required to perform
or to comply with pursuant to this Agreement at or prior to the Second Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with in
all material respects.
() Each document required to be delivered by the Parties pursuant to this
Agreement must have been delivered, and each of the other covenants and
obligations to be performed by the Parties pursuant to this Agreement must have
been performed and complied with in all respects.
.CONSENTS
Each of the Consents identified in the Disclosure Letter or otherwise required
by this Agreement, must have been obtained and must be in full force and effect.
.ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to the opposite Party:
() an opinion of such Parties' counsel, identified in Section 16.4, dated the
Second Closing Date;
() such other documents as the other Party may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 12.4(a), (ii) evidencing the accuracy of any of the Party's
representations and warranties, (iii) evidencing the performance by the Party of
any covenant or obligation required to be performed or complied with by the
Party, (iv) evidencing the satisfaction of any condition referred to in this
Article XII, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
.NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against the Party, or against any Person affiliated with the Party,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Transactions, or (b) that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
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.NO CLAIM REGARDING STOCK OWNERSHIP OR MEMBERSHIP INTEREST OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock or membership
interest, or any other voting, equity, or ownership interest in Coventry or PF,
or (b) is entitled to all or any portion of the PF Consideration.
.NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time or both), materially contravene, or conflict with, or result in a material
violation of, or cause each respective Party or any Person affiliated therewith
to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
.PRO FUTURES CONVERSION
The conversion of all shares of preferred stock of Coventry held or owned by Pro
Futures Fund to shares of common stock of Coventry shall have been completed
prior to the Second Closing Date, such that the representations and warranties
of Coventry set forth in Section 5.27 hereof shall be true and accurate on the
Second Closing Date.
.NASDAQ COMPLIANCE
As provided in Section 5.28(g) of this Agreement, Coventry shall continue to be
fully qualified for NASDAQ Small Cap listing and trading on the Second Closing
Date, and all necessary filings and registrations to maintain such qualification
shall have been made.
ARTICLE
ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF MEMBERS AND COVENTRY AT THE
SECOND CLOSING; RECISSION.
In addition to the conditions set forth in Article XII hereof, the obligations
of each Member and Coventry to consummate the transactions contemplated at the
Second Closing shall be subject to: (i) the consummation of the transactions
contemplated at the First Closing; (ii) Coventry obtaining the requisite
approval of its shareholders to issue the PF Consideration; and (iii) the
transaction contemplated by the Second Closing qualifying as a tax free
transaction under the IRC. In the event that the Second
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Closing is not consummated within one hundred eighty (180) days after
consummation of the First Closing (the "CONTINGENCY DATE"), which "CONTINGENCY
DATE" may be extended by either party for an additional ninety (90) days in
order to obtain any necessary approvals from the SEC, and extended thereafter
only by mutual consent of the parties hereto, or if Coventry has not satisfied
any condition precedent set forth in Article XII hereof or in this Article XIII
on or before the Contingency Date, as so extended, then, in addition to the
rights and remedies set forth in Articles XIV and XV hereof, the parties agree
that, upon the written request of a majority of the Shareholders and the
Members, they shall take all actions necessary to rescind this Agreement and to
unwind the transactions consummated at the First Closing in such a manner as
will place the parties hereto in as close to the same position as possible as
such party was in on the date hereof without unreasonable effort, expense or
delay.
ARTICLE
INDEMNIFICATION
.INDEMNIFICATION BY COVENTRY
Coventry covenants and agrees as follows:
()Coventry and its Subsidiaries shall, jointly and severally, indemnify the
Shareholders and the Members and their affiliates and the members, officers and
directors thereof and defend and hold each of them and their respective
successors, assigns, heirs and personal representatives (collectively, the
"INDEMNITEES") harmless of and from: (i) any breach of any representations or
warranties of Coventry contained herein; (ii) any breach of any other covenants
or obligations of Coventry contained herein; (iii) any and all claims, suits and
causes of action arising out of or by reason of any matter or cause whatsoever,
relating to or in connection with or arising out of the business conducted by
Coventry and its Subsidiaries prior to the First Closing Date; (iv) any and all
claims, suits and causes of action arising out of or by reason of any matter or
cause whatsoever, relating to or in connection with or arising out of the
business conducted by BSD from and after the First Closing Date, except for
claims, suits and causes of action arising out of or by reason of any acts or
omissions of the Shareholders after the First Closing Date (provided, however,
that this exception shall not limit the Shareholders' rights to be indemnified
by Coventry under other agreements and by applicable law); (v) any and all
claims, suits and causes of action arising out of or by reason of any matter or
cause whatsoever, relating to or in connection with or arising out of the
business conducted by PF from and after the Second Closing Date, except for
claims,
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suits and causes of action arising out of or by reason of any acts or omissions
of the Members after the Second Closing Date (provided, however, that this
exception shall not limit the Members' rights to be indemnified by Coventry
under other agreements and by applicable law); (vi) any and all liabilities,
claims, suits, or causes of action by or through any shareholders (or holders of
rights to acquire securities) of Coventry or its Subsidiaries, or by any
Governmental Body, or by any other Person, contesting, challenging, objecting
to, delaying, or otherwise interfering with, the Contemplated Transactions or
alleging that any such transactions are in violation of law or contract or
seeking damages, dissenter's rights, appraisal rights, recission or other
remedies in connection therewith; and (vii) any and all liabilities, claims,
suits, causes of action relating to, or in connection with, the existing claims
against Coventry and its Subsidiaries identified in Part 5.14 of the Disclosure
Letter. Such indemnity shall only cover all damages, losses, costs and expenses
of the Indemnitees, including, without limitation, amounts paid in settlement or
satisfaction of claims; judgments; fines; penalties; and reasonable attorneys'
fees and disbursements.
() In the event that Coventry shall have breached any of its obligations,
representations, warranties or covenants contained in this Agreement, or
Coventry and its Subsidiaries are obligated to make any indemnification as
provided herein, the Indemnitees shall notify Coventry in writing of any such
claim.
() With respect to third party claims which are the subject of indemnification
under this Section 14.1, Coventry and its Subsidiaries shall have the obligation
to defend any such claim at their own expense and with counsel reasonably
acceptable to the Indemnitees; PROVIDED, HOWEVER, that if Coventry and its
Subsidiaries fail to undertake such defense or procure a settlement releasing
the Indemnitees by written notification to the Indemnitees within twenty (20)
days after the date of the Indemnitees' notification of indemnification claim,
or if thereafter, Coventry and its Subsidiaries fail to maintain such defense to
the reasonable satisfaction of the Indemnitees, then the Indemnitees shall have
the option, but not the obligation, to defend such claim with any counsel of
their choosing, all at the joint and several expense of Coventry and its
Subsidiaries, provided that Coventry shall not be liable for the fees and
expenses of more than one firm. Notwithstanding the foregoing, the Indemnitees
may elect to defend any such third party claim which is the subject of
indemnification with their own counsel, all at the joint and several expense of
Coventry and its Subsidiaries. Neither Coventry or its Subsidiaries, on one
hand, nor the Indemnitees, on the other hand, shall enter into a settlement of
any such third party claim without the other party's written consent, which will
not be unreasonably withheld or delayed; PROVIDED, HOWEVER, that the Indemnitees
shall have no
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obligation to consent to any settlement unless it provides for a complete
release of the Indemnitees with respect to such third party claim.
() If any Indemnitee is entitled to be indemnified by Coventry and its
Subsidiaries pursuant to this Agreement, then, promptly following the final
determination of the amount thereof, at the election of the Indemnitee in its
sole discretion, (i) Coventry or its Subsidiaries shall pay to the Indemnitee
the Adjusted Indemnification Amount (as defined below) in cash, or (ii) Coventry
shall pay to the Indemnitee the Adjusted Indemnification Amount by issuing to
Indemnitee that number of shares of common stock of Coventry (which shall be
duly issued, fully paid and non-assessable) computed by dividing the Adjusted
Indemnification Amount by the fair market value of Coventry common stock on the
date of the final determination. For example, if the Adjusted Indemnification
Amount were $100,000, and Coventry common stock's fair market value on the final
determination date was $2.00 per share, then Coventry would issue an additional
50,000 shares of its common stock to the Indemnitee. The "Adjusted
Indemnification Amount" is one hundred thirty-five percent (135%) of the final
determination of the amount of indemnification to be provided to Indemnitee
pursuant to this Agreement.
() The representations, warranties and covenants made by Coventry herein shall
be deemed and construed to be continuing representations, warranties and
covenants and shall survive the execution and delivery of this Agreement and the
First Closing and the Second Closing for a period of two (2) years thereafter.
() Notwithstanding anything to the contrary in this Section 14.1, the first
Twenty Five Thousand and 00/100 ($25,000.00) Dollars, in the aggregate, of
claims for indemnification hereunder shall be exempted from payment unless and
until such threshold is exceeded; provided, however, that if such threshold is
exceeded, the first Twenty Five Thousand and 00/100 ($25,000.00) Dollars of such
indemnification claims shall no longer be exempted and shall be included in the
aggregate amount of such indemnification claims due and payable hereunder.
.INDEMNIFICATION BY BSD
BSD covenants and agrees as follows:
() BSD and its Subsidiaries shall, jointly and severally, indemnify Coventry and
its affiliates and the officers and directors thereof and defend and hold each
of them and their respective successors, assigns, heirs and personal
representatives (collectively, the "COVENTRY INDEMNITEES") harmless of and from:
(i) any breach of any representations or warranties of BSD contained herein;
(ii) any breach of any other covenants or obligations of BSD contained herein;
(iii) any and
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all claims, suits and causes of action arising out of or by reason of any matter
or cause whatsoever, relating to or in connection with or arising out of the
business conducted by BSD and its Subsidiaries prior to the First Closing Date;
(iv) any and all liabilities, claims, suits, or causes of action by or through
any shareholders (or holders of rights to acquire securities) of BSD or its
Subsidiaries, or by any Governmental Body, or by any other Person, contesting,
challenging, objecting to, delaying, or otherwise interfering with, the
Contemplated Transactions or alleging that any such transactions are in
violation of law or contract or seeking damages, dissenter's rights, appraisal
rights, recission or other remedies in connection therewith; and (v) any and all
liabilities, claims, suits, causes of action relating to, or in connection with,
the existing claims against BSD and its Subsidiaries identified in Part 3.14 of
the Disclosure Letter. Such indemnity shall only cover all damages, losses,
costs and expenses of the Coventry Indemnitees, including, without limitation,
amounts paid in settlement or satisfaction of claims; judgments; fines;
penalties; and reasonable attorneys' fees and disbursements.
() In the event that BSD shall have breached any of its obligations,
representations, warranties or covenants contained in this Agreement, or BSD and
its Subsidiaries are obligated to make any indemnification as provided herein,
the Coventry Indemnitees shall notify BSD in writing of any such claim.
() With respect to third party claims which are the subject of indemnification
under this Section 14.2, BSD and its Subsidiaries shall have the obligation to
defend any such claim at their own expense and with counsel reasonably
acceptable to the Coventry Indemnitees; PROVIDED, HOWEVER, that if BSD and its
Subsidiaries fail to undertake such defense or procure a settlement releasing
the Coventry Indemnitees by written notification to the Coventry Indemnitees
within twenty (20) days after the date of the Coventry Indemnitees' notification
of indemnification claim, or if thereafter, BSD and its Subsidiaries fail to
maintain such defense to the reasonable satisfaction of the Coventry
Indemnitees, then the Coventry Indemnitees shall have the option, but not the
obligation, to defend such claim with any counsel of their choosing, all at the
joint and several expense of BSD and its Subsidiaries, provided that BSD shall
not be liable for the fees and expenses of more than one firm. Notwithstanding
the foregoing, the Coventry Indemnitees may elect to defend any such third party
claim which is the subject of indemnification with their own counsel, all at the
joint and several expense of BSD and its Subsidiaries. Neither BSD or its
Subsidiaries, on one hand, nor the Coventry Indemnitees, on the other hand,
shall enter into a settlement of any such third party claim without the other
party's written consent, which will not be unreasonably withheld or delayed;
PROVIDED, HOWEVER, that the Coventry Indemnitees shall have no obligation to
consent to any settlement
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unless it provides for a complete release of the Coventry Indemnitees with
respect to such third party claim.
() The representations, warranties and covenants made by BSD herein shall be
deemed and construed to be continuing representations, warranties and covenants
and shall survive the execution and delivery of this Agreement and the First
Closing and the Second Closing for a period of two (2) years thereafter.
() Notwithstanding anything to the contrary in this Section 14.2, the first
Twenty Five Thousand and 00/100 ($25,000.00) Dollars, in the aggregate, of
claims for indemnification hereunder shall be exempted from payment unless and
until such threshold is exceeded; provided, however, that if such threshold is
exceeded, the first Twenty Five Thousand and 00/100 ($25,000.00) Dollars of such
indemnification claims shall no longer be exempted and shall be included in the
aggregate amount of such indemnification claims due and payable hereunder.
.INDEMNIFICATION BY PF
PF covenants and agrees as follows:
() PF shall indemnify Coventry and its affiliates and the officers and directors
thereof and defend and hold each of them and their respective successors,
assigns, heirs and personal representatives (collectively, the "COVENTRY
INDEMNITEES") harmless of and from: (i) any breach of any representations or
warranties of PF contained herein; (ii) any breach of any other covenants or
obligations of PF contained herein; (iii) any and all claims, suits and causes
of action arising out of or by reason of any matter or cause whatsoever,
relating to or in connection with or arising out of the business conducted by PF
and its Subsidiaries prior to the Second Closing Date; (iv) any and all
liabilities, claims, suits, or causes of action by or through any members (or
holders of rights to acquire securities) of PF, or by any Governmental Body, or
by any other Person, contesting, challenging, objecting to, delaying, or
otherwise interfering with, the Contemplated Transactions or alleging that any
such transactions are in violation of law or contract or seeking damages,
dissenter's rights, appraisal rights, recission or other remedies in connection
therewith; and (v) any and all liabilities, claims, suits, causes of action
relating to, or in connection with, the existing claims against PF identified in
Part 4.14 of the Disclosure Letter. Such indemnity shall only cover all damages,
losses, costs and expenses of the Coventry Indemnitees, including, without
limitation, amounts paid in settlement or satisfaction of claims; judgments;
fines; penalties; and reasonable attorneys' fees and disbursements.
() In the event that PF shall have breached any of its obligations,
representations, warranties or covenants contained
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in this Agreement, or PF is obligated to make any indemnification as provided
herein, the Coventry Indemnitees shall notify PF in writing of any such claim.
() With respect to third party claims which are the subject of indemnification
under this Section 14.3, PF shall have the obligation to defend any such claim
at its own expense and with counsel reasonably acceptable to the Coventry
Indemnitees; PROVIDED, HOWEVER, that if PF fails to undertake such defense or
procure a settlement releasing the Coventry Indemnitees by written notification
to the Coventry Indemnitees within twenty (20) days after the date of the
Coventry Indemnitees' notification of indemnification claim, or if thereafter,
PF fails to maintain such defense to the reasonable satisfaction of the Coventry
Indemnitees, then the Coventry Indemnitees shall have the option, but not the
obligation, to defend such claim with any counsel of their choosing, all at the
expense of PF, provided that PF shall not be liable for the fees and expenses of
more than one firm. Notwithstanding the foregoing, the Coventry Indemnitees may
elect to defend any such third party claim which is the subject of
indemnification with their own counsel, all at the expense of PF. Neither PF, on
one hand, nor the Coventry Indemnitees, on the other hand, shall enter into a
settlement of any such third party claim without the other party's written
consent, which will not be unreasonably withheld or delayed; PROVIDED, HOWEVER,
that the Coventry Indemnitees shall have no obligation to consent to any
settlement unless it provides for a complete release of the Coventry Indemnitees
with respect to such third party claim.
() The representations, warranties and covenants made by PF herein shall be
deemed and construed to be continuing representations, warranties and covenants
and shall survive the execution and delivery of this Agreement and the First
Closing and the Second Closing for a period of two (2) years thereafter.
()Notwithstanding anything to the contrary in this Section 14.3, the first
Twenty Five Thousand and 00/100 ($25,000.00) Dollars, in the aggregate, of
claims for indemnification hereunder shall be exempted from payment unless and
until such threshold is exceeded; provided, however, that if such threshold is
exceeded, the first Twenty Five Thousand and 00/100 ($25,000.00) Dollars of such
indemnification claims shall no longer be exempted and shall be included in the
aggregate amount of such indemnification claims due and payable hereunder.
ARTICLE
TERMINATION
.TERMINATION EVENTS
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This Agreement may, by notice given prior to or at either the First or Second
Closing, be terminated:
() by any party if a Material Breach of any provision of this Agreement has been
committed by the other party and such Material Breach has not been waived after
notice of such Material Breach has been provided and such breaching party has
been given an opportunity to be heard. As used herein, a "Material Breach" shall
mean a Breach which substantially interferes with the ability of any party to
comply with the closing conditions to this Agreement or to consummate the
Contemplated Transactions;
()() by Coventry, if any of the conditions in Articles XI or XII to be performed
by BSD, PF, the Shareholders or the Members, as the case may be, has not been
satisfied as of the Closing Dates applicable thereto or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Coventry
to comply with its obligations under this Agreement) and Coventry has not waived
such condition on or before the Closing Dates applicable thereto;
() by the Shareholders or Members, if any of the conditions in Articles XI or
XII to be performed by Coventry has not been satisfied as of the Closing Dates
applicable thereto or if satisfaction of such a condition is or becomes
impossible (other than through the failure of the Shareholders or Members to
comply with their obligations under this Agreement) and the Shareholders or
Members have not waived such condition on or before the Closing Dates applicable
thereto;
() by mutual consent of the parties hereto;
() by either Coventry, the Shareholders or the Members if the First Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before the date set forth in the first sentence of Section 2.3 hereof, or such
later date as the parties may agree upon;
() by either Coventry, the Shareholders or the Members if the Second Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement) on or
before the Contingency Date, as defined in, and as may be extended pursuant to,
Article XIII hereof, or such later date as the parties agree upon; or
() by Coventry, the Shareholders and/or the Members at any time on or before the
expiration of the Due Diligence Period, pursuant to Section 2.1.
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.EFFECT OF TERMINATION
Each party's right of termination under Section 15.1 is in addition to any other
rights that it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 15.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Articles
XIII, XIV and XVI will survive; provided, however, that if this Agreement is
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
ARTICLE
GENERAL PROVISIONS
.EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a Breach of this Agreement by another party.
.PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Coventry, the Shareholders and the Members shall determine.
Unless consented to by all parties hereto in advance or required by Legal
Requirements, prior to the Closing, all parties hereto shall keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person, except as required by law. The parties hereto will consult with each
other concerning the means by which the employees, customers, and suppliers and
others having dealings with them will be informed of the Contemplated
Transactions.
.CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, BSD, PF,
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Coventry, the Shareholders and the Members will maintain in confidence, and will
cause the directors, officers, employees, agents and advisors of Coventry and
the Acquired Companies to maintain in confidence, and not use to the detriment
of another party or an Acquired Company, any written, oral, or other information
obtained in confidence from another party or an Acquired Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions, or (c) the furnishing or use of
such information is required by, or necessary or appropriate in connection with,
legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request.
.NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
SHAREHOLDERS:
Ronald Wilheim
Steven Rosedale
Facsimile No.: (513) 530-1698
with a copy to: Lawrence M. Levinson, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
MEMBERS:
Ronald Wilheim
Steven Rosedale
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Facsimile No.: (513) 530-1698
with a copy to: Lawrence M. Levinson, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
BSD:
c/o CommuniCare Health Services, Inc.
4700 Ashwood Drive, Suite 200
Cincinnati, Ohio 45241
Attention: Ronald Wilheim, Secretary
Facsimile No.: (513) 530-1698
with a copy to: Lawrence M. Levinson, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
PF:
People First Staffing
c/o CommuniCare Health Services, Inc.
4700 Ashwood Drive, Suite 200
Cincinnati, Ohio 45241
Attention: Ronald Wilheim, Secretary
Facsimile No.: (513) 530-1698
with a copy to: Lawrence M. Levinson, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
COVENTRY:
Coventry Industries, Inc.
7777 Glades Road
Boca Raton, Florida 33434
Attention: Robert Hausman, CEO
Facsimile No.: 561-488-3419
with a copy to: Michael Karsch, Esq.
Broad and Cassel
Suite 3000
201 South Biscayne Boulevard
Miami, Florida 33131
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.JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Florida, Palm Beach County, or, if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of Florida, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
.FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
.WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
.ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter and constitutes (along with the documents referred to in
this Agreement) a complete and exclusive statement of the terms of the agreement
between the
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<PAGE> 97
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
.DISCLOSURE LETTER
() The disclosures in the Disclosure Letter, and those in any supplement
thereto, relate only to the representations and warranties in the Section of the
Agreement to which they expressly refer and not to any other representation or
warranty in this Agreement.
() In the event of any inconsistency between the statements in the body of this
Agreement and those in the Disclosure Letter (other than an exception expressly
set forth as such in the Disclosure Letter with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
.ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
.SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
.SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
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.TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
.GOVERNING LAW
This Agreement will be governed by the laws of the [State of Florida] without
regard to conflicts of laws principles.
.COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
COVENTRY INDUSTRIES, INC.: SHAREHOLDERS:
By:
Robert Hausman, CEO Ronald Wilheim
Steven Rosedale
MEMBERS:
Ronald Wilheim
Steven Rosedale
BSD HEALTHCARE INDUSTRIES,
INC.
By:
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<PAGE> 99
Exhibit B
VOTING AGREEMENT
VOTING AGREEMENT, dated as of December 3, 1998 (this "Agreement"),
among Robert Hausman, Lester Gann, Ronald Wilhelm, Stephen Rosedale, Yucatan
Holdings, Connie Steinmetz, Strategic Capital Holdings, Inc. and Arizona
Development Corporation (collectively, the "Shareholders") and Coventry
Industries Corp., a Florida corporation ("Coventry").
WHEREAS, Coventry, BSD Healthcare Industries, Inc. ("BSD"), People
First Staffing, LLC ("PF") and the shareholders and members of BSD and PF have
entered into an Exchange Agreement dated as of September 29, 1998 (the "Exchange
Agreement") pursuant to which 80.1% of the outstanding equity of BSD and all of
the outstanding equity of PF will be exchanged for 80.1% of the outstanding
common stock of Coventry (the "Exchange"); and
WHEREAS, as of the date hereof; the Shareholders are the beneficial
owners of 3,777,961 shares of Coventry's common stock, par value $.00l per share
("Coventry Common Stock") and each Shareholder owns of record and beneficially
the number of shares of Coventry Common Stock set forth on Schedule A hereto;
WHEREAS, approval of the Exchange Agreement and the issuance of in
excess of 19.9% of Coventry Common Stock by Coventry's Shareholders at a
Shareholders meeting (the "Shareholder Meeting") is a condition to the
consummation of the Exchange;
WHEREAS, certain Shareholders of Coventry have requested that the
Shareholders enter into this Agreement and such Shareholders have agreed to
enter into this Agreement to vote in favor of the Exchange and certain other
events;
WHEREAS, in order to effectuate the Exchange, the Shareholders have
agreed, among other things, to enter into this Agreement with respect to all of
the shares of Coventry Common Stock now owned and which may hereafter be
acquired by the Shareholders (the "Shares").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
VOTING OF SHARES
----------------
SECTION 1.01. VOTING AGREEMENT. (a) During the term of this Agreement, the
Shareholders agree to attend the Shareholder Meeting or any other shareholder
meeting in person
<PAGE> 100
or by proxy, and to vote (or cause to be voted) all Shares, and any other voting
securities of Coventry, whether issued heretofore or hereafter, that the
Shareholder beneficially owns or has the right to vote for approval and adoption
of the Exchange Agreement (as amended from time to time), the Exchange, the
other transactions contemplated by the Exchange Agreement and any other
transactions or items recommended by Coventry's Board of Directors, with such
agreement to vote to apply also to any adjournments or postponements of the
Shareholder Meeting.
(b) Except as provided in this Agreement and during the term of this
Agreement, the Shareholders shall not, directly or indirectly, grant any proxy
or power of attorney with respect to the Shares, deposit any of such Shares into
a voting trust or enter into any voting agreement or arrangement inconsistent
with this Agreement.
(c) During the term of this Agreement, each Shareholder agrees that,
without the prior written consent of Coventry, such Shareholder shall not,
directly or indirectly, sell, offer to sell, grant any option for the sale of;
pledge, assign, hypothecate, tender or otherwise transfer or dispose of, or
enter into any agreement to do any of the foregoing with respect to, any Shares
or any other voting securities of Coventry that the Shareholder beneficially
owns except to a purchaser who agrees in writing prior to such acquisition to be
bound by the terms of this Agreement with respect to the Shares being acquired
by such purchaser.
(d) During the term of this Agreement, each Shareholder agrees to vote
(or cause to be voted) all Shares, and any other voting securities of the
Company, whether issued heretofore or hereafter, that he beneficially owns or
has the right to vote (i) against any action or agreement that could result in a
material breach of any covenant, representation or warranty or any other
obligation or agreement of Coventry, BSD or PF under the Exchange Agreement or
that could result in any of the conditions to the obligations of Coventry, BSD
or PF under the Exchange Agreement not being fulfilled, and (ii) in favor of any
action recommended by the Board of Directors of Coventry with respect to the
business and affairs of Coventry.
SECTION 1.02. IRREVOCABLE PROXY. Each Shareholder hereby irrevocably
appoints Stephen Rosedale, until termination of this Agreement, as the
Shareholder's attorney and proxy pursuant to the provisions of Section 607.0731
of the Florida Business Corporation Act, with full power of substitution, to
vote, and otherwise act (by written consent or otherwise) with respect to the
Shares which the Shareholder is entitled to vote at any shareholder meeting
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise, only on the specific
matters and in the manner specified in Section 1.01 hereof. THIS PROXY AND POWER
OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Shareholder hereby
revokes all other proxies and powers of attorney with respect to the Shares
which the Shareholder may have heretofore appointed or granted, and no
subsequent proxy or power of attorney shall be given or written consent executed
(and if given or executed, shall not be effective) by the Shareholder with
respect thereto.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
----------------------------------------------
Each Shareholder hereby represents and warrants to Coventry and the
other Shareholders as follows:
SECTION 2.01. AUTHORITY RELATIVE TO THIS AGREEMENT. This Agreement has
been duly and validly executed and delivered by the Shareholder and, assuming
the due authorization, execution and delivery by Coventry, constitutes a legal,
valid and binding obligation of the Shareholder, enforceable against the
Shareholder in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles.
SECTION 2.02. NO CONFLICT. (a) The execution and delivery of this
Agreement by the Shareholder does not, and the performance of this Agreement by
the Shareholder shall not, (i) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Shareholder or by which
the Shareholder is bound, or (ii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of; or result in the creation of a lien or
encumbrance on any of the Shares pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Shareholder is party or by which the
Shareholder is bound or affected, except, in the case of the foregoing, for any
such conflicts, violations, breaches, defaults or other occurrences which would
not prevent or materially delay the performance by Shareholder of its
obligations under this Agreement.
(b) The execution and delivery of this Agreement by the Shareholder
does not, and the performance of this Agreement by the Shareholder shall not,
require any consent, approval, authorization or permit of; or filing with or
notification to, any domestic governmental or regulatory authority, except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended.
SECTION 2.03. TITLE TO THE SHARES. The Shareholder hereby represents
that (a) as of the date hereof; the Shareholder is either the record owner or
the beneficial owner of the number of shares of Coventry Common Stock set forth
on Exhibit A hereto, and (b) except as provided by this Agreement as of the date
hereof and at any Shareholder Meeting held during the term of this Agreement,
the Shareholder has, and shall have, the ability to vote all of the Shares in
accordance with Section 1.01 of this Agreement. Except as provided in this
Agreement, the Shareholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares.
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ARTICLE III
MISCELLANEOUS
-------------
SECTION 3.01. TERMINATION. This Agreement shall terminate upon the
earlier of (a) the termination of the Exchange Agreement or (b) the consummation
of the Exchange, in each case in accordance with the terms and conditions of the
Exchange Agreement.
SECTION 3.02. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction to prevent any breach of this Agreement and to enforce
specifically the terms and provisions hereof in any Florida court, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 3.03. SUCCESSORS AND AFFILIATES. This Agreement shall inure to
the benefit and shall be binding upon the parties hereto and their respective
successors, assigns, heirs, executors, administrators and representatives. If
any person shall acquire additional Shares from a Shareholder in any manner,
whether by operation of law or otherwise, such Shares shall be held subject to
all of the terms of this Agreement, and by taking and holding such Shares, such
person shall be conclusively deemed to have agreed to be bound by and to comply
with all of the terms and provisions of this Agreement. Without limiting the
foregoing, each Shareholder specifically agrees that its obligations hereunder
shall not be terminated by operation of law.
SECTION 3.04. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between Coventry and the Shareholders with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between Coventry and the Shareholders with respect to the
subject matter hereof.
SECTION 3.05. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 3.06. WAIVERS. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
SECTION 3.07. SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
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SECTION 3.08. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 3.09. COUNTERPARTS. This Agreement may be executed in
counterparts by manual or facsimile signature of each undersigned party, and all
such counterparts shall be deemed to constitute one and the same instrument.
SECTION 3.10. NOTICES. All notices, requests, claims, demands or other
communications under this Agreement shall be in writing and shall be deemed to
have been effectively given when delivered personally, when dispatched by
electronic facsimile transmission (with receipt thereof electronically
confirmed) or one day after having been sent by overnight courier to the parties
at the addresses set forth on the signature pages hereto (or such other address
for a party as shall be specified by like notice).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date hereof.
COVENTRY INDUSTRIES CORP.
By:_____________________________________
Robert Hausman, Chairman of the Board
and Chief Executive Officer
ROBERT HAUSMAN STEPHEN ROSEDALE
___________________ _______________________
Address: Address:
LESTER GANN YUCATAN HOLDINGS
___________________
Address: By:____________________
Name:
Address:
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<PAGE> 104
RONALD WILHELM CONNIE STEINMETZ
Address: Address:
STRATEGIC CAPITAL. ARIZONA DEVELOPMENT CORP.
HOLDINGS, INC
By:________________________ By:________________________
Name: Name:
Address: Address:
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SCHEDULE A
----------
NAME NUMBER OF SHARES
- ---- ----------------
Robert Hausman 718,380
Lester Gann 728,581
Ronald Wilhelm 189,200
Stephen Rosedale 756,800
Yucatan Holdings 250,000
Connie Steinmetz 145,000
Strategic Capital Holdings, Inc. 250,000
Arizona Development Corp. 120,000
7
