SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 1999
INTERIORS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-24352 13-3590047
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(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization File Number) Identification No.)
320 Washington Street, Mt. Vernon New York 10553
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 665-5400
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 27, 1998, the Registrant entered into a Stock Purchase
Agreement (the "Agreement"), with Jimmy D. Webster, Jr., Bettye Jo Webster and
Henry L. Gray, each of whom are shareholders (collectively the "Shareholders")
of Stylecraft Lamps, Incorporated, a Tennessee corporation ("Stylecraft"). On
February 22, 1999 (the "Closing"), the Registrant consummated the transactions
contemplated by the Agreement. Pursuant to the Agreement, the Registrant
purchased all the issued and outstanding shares (the "Shares") of Stylecraft. As
a result of the purchase of the Shares, Stylecraft is now a wholly-owned
subsidiary of the Registrant. Stylecraft designs, manufactures and distributes
to retailers a broad line of portable lighting and lighting fixtures.
The purchase price paid to the Shareholders consisted of a cash
payment of $10,319,000. The aggregate purchase price was determined in
arms-length negotiations between the Registrant and the Shareholders.
The purchase price for the Shares was financed by Austin Financial
Services, Inc., a private placement of equity in the form of preferred stock,
and working capital of the Registrant.
The assets acquired pursuant to the Agreement included, among other
things, (i) fixed assets owned, leased or used by Stylecraft, including
equipment, (ii) accounts receivable, (iii) inventory and (iv) contracts,
agreements, and leases of real and personal property. For the foreseeable
future, the Registrant intends to utilize such assets in connection with the
operation of the business of Stylecraft.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
Financial statements with respect to the acquisition of Stylecraft Lamps,
Incorporated by the Registrant will be filed with an amendment to this Form 8-K
within 60 days after the date that this Report is required to be filed.
(b) Pro Forma Financial Information
Pro forma financial information with respect to the acquisition of Stylecraft
Lamps, Incorporated by the Registrant will be filed with an amendment to this
Form 8-K within 60 days after the date that this Report is required to be filed.
(c) Exhibits
Document Description Exhibit No.
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Stock Purchase Agreement, dated August 27, 1998 by 2
and among the Registrant, Jimmy D. Webster, Jr., Bettye
Jo Webster and Henry L. Gray
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
March 9, 1999 INTERIORS, INC.
a Delaware corporation
By: /s/ Max Munn
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Max Munn
President
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EXHIBIT INDEX
Exhibit
No. Document Description
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2 Stock Purchase Agreement, dated August 27, 1998 by and among the
Registrant, Jimmy D. Webster, Jr., Bettye Jo Webster and Henry L.
Gray
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as
of August 27, 1998 by and among Interiors, Inc., a Delaware corporation
("Buyer"), on the one hand, and Jimmy D. Webster, Jr. ("JDW"), Bettye Jo Webster
("BJW") and Henry L. Gray ("Gray") (JDW, BJW and Gray are collectively referred
to herein as the "Shareholders").
R E C I T A L S
A. The Shareholders own all of the issued and outstanding shares
(collectively, the "Shares") of common stock, no par value per share ("Common
Stock") of Stylecraft Lamps, Incorporated, a Tennessee corporation (the
"Company").
B. The Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders, the Shares in accordance with the terms of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties herein contained, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall have the meanings herein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
herein defined. All accounting terms used in this Agreement shall, except as
otherwise provided for herein, be construed in accordance with GAAP.
"Action" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.
"Affiliate" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"Agreement" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Annex" shall mean each item referred to in this Agreement as an
Annex. Each Annex shall be mutually agreed upon by the parties to this Agreement
or the parties to the agreement attached to such Annex, and shall thereupon be
appended to and made a part of this Agreement, on or before October 31, 1998.
"Balance Sheet" and "Balance Sheet Date" shall have the respective
meanings assigned to such terms in Section 3.04(a).
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"Business Day" shall mean any day excluding Saturday, Sunday or any
day which shall be a day on which banking institutions are authorized by federal
law to close.
"Buyer" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Closing" and "Closing Date" shall have the respective meanings
assigned to such terms in Section 2.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning assigned to such term in
Recital A.
"Company" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Delaware Corporation Law" shall mean the Delaware General
Corporation Law, as amended.
"Disclosure Letter" shall mean a letter delivered to Buyer by the
Shareholders on or before September 30, 1998, and to which each Schedule shall
be attached, and to which each Annex shall be appended when agreed upon. The
Disclosure Letter, when delivered, shall become a part of this Agreement and
incorporated herein.
"Environmental Laws" shall mean all Legal Requirements pertaining to
the protection of the environment, the treatment, emission and discharge of
gaseous, particulate and effluent pollutants and the use, handling, storage,
treatment, removal, transport, transloading, cleanup, decontamination, discharge
and disposal of Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financial Statements" shall have the meaning assigned to such term
in Section 3.04(a).
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Entity" shall mean any local, state, federal or
foreign (i) court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
"Hazardous Material" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future.
"Indebtedness" shall mean, when used with reference to any Person,
without duplication, (i) any liability of such Person created or assumed by such
Person, or any Subsidiary thereof, (A) for borrowed money, (B) evidenced by a
bond, note, debenture or similar instrument (including a purchase money
obligation, deed of trust or mortgage) given in connection with the acquisition
of, or exchange for, any property or assets (other than inventory or similar
property acquired and consumed in the Ordinary Course), including securities and
other Indebtedness, (C) in respect of letters of credit issued for such Person's
account and "swaps" of interest and currency exchange rates (and other
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interest and currency exchange rate hedging agreements) to which such Person is
a party or (D) for the payment of money as lessee under leases that should be,
in accordance with GAAP, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding clause
guaranteed as to payment of principal or interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire the security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon which liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person has not
assumed or become liable for the payment of such liabilities or obligations; and
(iv) any amendment, renewal, extension, revision or refunding of any such
liability or obligation; provided, however, that Indebtedness shall not include
any liability for compensation of such Person's employees or for the purchase of
inventory or similar property acquired and consumed in the Ordinary Course.
"IRS" shall mean the United States Internal Revenue Service.
"knowledge" shall mean, with respect to the Shareholders, the
knowledge of any officer, manager or director of the Company, after reasonable
investigation.
"Land" shall mean two parcels of real property, one containing
approximately 11.5 acres located in Desoto County, Mississippi, and the other
containing approximately 1.5 acres located in Tate County, Mississippi, and the
Structures located thereon, both as more particularly described in Schedule I
attached hereto, together with (a) all privileges, rights, easements and
appurtenances belonging to such real property, (b) all development rights, air
rights, water, water rights and water stock relating to such real property, and
(c) all right, title and interest of the Company in and to any streets, alleys,
passages, other easements and other rights-of-way or appurtenances included in,
adjacent to or used in connection with such real property, before or after the
vacation thereof.
"Leased Real Property" shall mean all real property, including
Structures, leased by the Company.
"Legal Requirement" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"Lien" shall mean all liens (including judgment and mechanics'
liens, regardless of whether liquidated), mortgages, assessments, security
interests, easements, claims, pledges, trusts (constructive or other), deeds of
trust, options or other charges, encumbrances or restrictions.
"Material Adverse Effect" shall mean a material adverse effect on
the business, financial condition, properties, profitability, prospects or
operations of the Company.
"Options" shall mean all outstanding options, warrants and other
rights to acquire Common Stock.
"Ordinary Course" shall mean, when used with reference to the
Company or Buyer or an Affiliate of Buyer, the ordinary course of their
respective businesses consistent with past practices.
"Permits" shall have the meaning assigned to such term in Section
3.16 hereof.
"Permitted Liens" shall mean (a) Liens for ad valorem real or
personal property taxes or assessments not at the time due and (b) Liens in
respect of pledges or deposits under workers' compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such Liens are not then
delinquent.
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"Person" shall mean all natural persons, corporations, business
trusts, associations, companies, partnerships, limited liability companies,
joint ventures, Governmental Entities and any other entities.
"Policies" shall have the meaning assigned to such term in Section
3.09(b).
"Proprietary Information" shall have the meaning assigned to such
term in Section 3.08(b).
"Registered Rights" shall have the meaning assigned to such term in
Section 3.08(a).
"Schedule" shall mean each item referred to in this Agreement as a
Schedule, each of which shall be attached to the Disclosure Letter when
delivered on or before September 30, 1998.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholders" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Shares" shall have the meaning assigned to such term in Recital A.
"Stock Plans" shall mean all stock option plans and other stock or
equity-related plans of the Company.
"Structure" shall mean any facility, building, plant, factory,
office, warehouse structure or other improvement owned or leased by the Company.
"Subsidiary" of a Person shall mean any corporation, partnership,
association or other business entity at least 50% of the outstanding voting
power of which is at the time owned or controlled directly or indirectly by such
Person or by one or more of such subsidiary entities, or both.
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine
penalty or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund or information, or statement relating to Taxes, and any exhibit,
schedule, attachment or amendment thereto.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
SECTION 2.01 Purchase and Sale of the Shares. Subject to the terms
and conditions set forth herein, the Shareholders agree to sell and deliver the
Shares to Buyer, and Buyer agrees to purchase and accept the Shares from the
Shareholders, free and clear of all Liens, for the purchase price described in
Section 2.02 hereof.
SECTION 2.02 Purchase Price. The total purchase price for the Shares
shall be the sum of Ten Million Dollars ($10,000,000), payable to the
Shareholders, in proportion to their respective percentages to be set forth
opposite their names on Schedule 2.02, by wire transfer at the Closing.
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SECTION 2.03 Closing. Unless this Agreement shall have been
terminated pursuant to Section 9.01 hereof, the closing of the purchase and sale
of the Shares (the "Closing") shall take place at the offices of Paul, Hastings,
Janofsky & Walker LLP, Twenty-Third Floor, 555 South Flower Street, Los Angeles,
California 90071, if accomplished by facsimile and/or mail courier, or at the
offices of Wyatt, Tarrant & Combs, Suite 650, Cresent Center, 6075 Poplar
Avenue, Memphis, Tennessee, if accomplished in person, at 10:00 A.M. local time
on December 31, 1998, as promptly as practicable upon satisfaction of the
conditions appearing in Article VI and Article VII hereof or at such other
place, time or date as Buyer and the Shareholders may mutually establish (such
time and date being referred to herein as the "Closing Date").
SECTION 2.04 Actions at the Closing. At the Closing:
(a) The Shareholders shall deliver or cause to be delivered to
Buyer:
(i) a certificate or certificates representing the
Shares registered in the name of Buyer; and
(ii) all of the documents, certificates and instruments
required to be delivered to Buyer pursuant to Article VI hereof.
(b) Buyer shall deliver or cause to be delivered to the
Shareholders:
(i) cash in the amount of Ten Million Dollars
($10,000,000) by wire transfer of immediately available funds to an account
designated by the Shareholders in writing no later than three (3) Business Days
prior to the Closing; and
(ii) all of the documents, certificates and instruments
required to be delivered to the Shareholders pursuant to Article VI hereof.
(c) JDW shall deliver or cause to be delivered to the Company
the sum of One Hundred Thousand Dollars ($100,000) by check, which shall be used
solely to satisfy JDW's indebtedness to the Company under the only Promissory
Note (the "Note") between JDW and the Company in the principal amount of
$100,000, under which JDW will owe the total amount $100,000 to the Company as
of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
The Shareholders represent and warrant to the best of the
Shareholders' knowledge and belief to, and covenant and agree with, Buyer (other
than with respect to Sections 3.01, 3.02 and 3.03, which representations and
warranties are not qualified to the best of Shareholders' knowledge and belief)
that:
SECTION 3.01 Organization and Good Standing.
(a) The Company has been duly organized and is existing as a
corporation in good standing under the laws of the State of Tennessee with full
power and authority (corporate and other) to own and lease its properties and to
conduct its business as currently conducted. The Company has been duly qualified
as a foreign corporation for the transaction of business and is in good standing
under the laws of Mississippi, such state comprising the only jurisdiction in
which the failure to so qualify would have a Material Adverse Effect upon the
Company.
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(b) The Company has no Subsidiaries, nor does it own or
control or have any other equity investment or other interest in, directly or
indirectly, any corporation, joint venture, partnership, association or other
Person.
SECTION 3.02 No Conflicts. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state laws, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not (a) conflict with or result in a breach or
violation of any term or provision of, or constitute a default under (with or
without notice or passage of time, or both), or otherwise give any Person a
basis for accelerated or increased rights or termination or nonperformance
under, any indenture, mortgage, deed of trust, loan or credit agreement, lease,
license or other agreement or instrument to which the Company is a party or by
which the Company is bound or affected or to which any of the property or assets
of the Company is bound or affected, (b) result in the violation of the
provisions of the Charter or Bylaws of the Company or any Legal Requirement
applicable to or binding upon it, or (c) result in the creation or imposition of
any Lien upon any property or asset of the Company.
SECTION 3.03 Capitalization. The authorized capital stock of the
Company consists solely of 2,000 shares of Common Stock, of which 1,333 shares
are, and on the Closing Date will be, issued and outstanding, 700 of which are
owned by JDW, 500 of which are owned by BJW and 133 of which are owned by Gray.
The Shareholders are the only holders of shares of Common Stock. All of the
issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. There are
no existing Options of any character relating to shares of Common Stock, there
are no outstanding securities or other instruments convertible into or
exchangeable for shares of Common Stock and no commitments to issue such
securities or instruments, and no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any shares
of Common Stock. The offer, issuance and sale of the Shares were (i) exempt from
the registration and prospectus delivery requirements of the Securities Act,
(ii) registered or qualified (or exempt from registration or qualification)
under the registration or qualification requirements of all applicable state
securities laws and (iii) accomplished in conformity with all other Legal
Requirements.
SECTION 3.04 Financial Statements.
(a) Schedule 3.04(a) will contain true and complete copies of
(i) the audited balance sheet of the Company at December 31, 1997 and the
related audited statements of income, shareholders' equity and cash flows for
the year then ended, together with the opinion of BDO Seidman LLP, the Company's
independent accountants, and (ii) the unaudited balance sheet of the Company
(the "Balance Sheet") dated June 30, 1998 (the "Balance Sheet Date"), and the
related unaudited statements of income, shareholders' equity and cash flows for
the six-month period ended on the Balance Sheet Date (such audited and unaudited
financial statements are collectively referred to as the "Financial
Statements").
(b) The Financial Statements present fairly the financial
condition of the Company as of the dates indicated therein and the results of
operations and changes in financial position of the Company for the periods
specified therein, have been prepared in conformity with GAAP during the periods
covered thereby and prior periods (except that the Balance Sheet and the related
unaudited statements of income, Shareholders' equity and cash flows for the
six-month period ended on the Balance Sheet Date do not contain footnotes and
are subject to year end adjustments which would not, either individually or in
the aggregate, be material), have been derived from the accounting records of
the Company and represent only actual, bona fide transactions. The Financial
Statements are true and correct in all material respects.
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SECTION 3.05 Title to Property; Encumbrances.
(a) The Company does not own any real property or Structures
(other than the Land).
(b) Schedule 3.05(b) will contain a true and complete list and
legal descriptions of the Land and a general description of each Structure
situated thereon. The Shareholders shall furnish to Buyer with the Schedule true
and complete copies of all deeds, other instruments of title and policies of
title insurance indicating and describing the Company's ownership of the Land,
as well as copies of any surveys or environmental reports relating to the Land.
(c) The Company has, and immediately prior to the Closing will
have, good, valid and marketable title to the Land and all personal property
reflected on the Balance Sheet as owned by the Company, subject to changes in
the Ordinary Course, and all personal property acquired by the Company since the
Balance Sheet Date, subject to changes in the Ordinary Course, in each case free
and clear of all Liens except Permitted Liens.
(d) Schedule 3.05(d) will contain a true and complete list of
all leases and licenses pursuant to which the Company leases from others real or
personal property. All leases and licenses pursuant to which the Company leases
from others real or personal property are valid, subsisting in full force and
effect in accordance with their respective terms, and there is not, under any
lease or license any existing default or event of default (or event that, with
notice or passage of time, or both, would constitute a default, or would
constitute a basis of force majeure or other claim of excusable delay or
nonperformance) by the Company thereunder or any other party thereto. True and
complete copies of all real property leases, licenses and personal property
leases to be listed on Schedule 3.05(d) will be delivered to Buyer with the
Schedule, as well as copies of any title reports, surveys or environmental
reports or audits relating to any leases or licenses. No such lease or license
will require the consent of the lessor or licensor to or as a result of the
consummation of the transactions contemplated by this Agreement. For purposes of
this Agreement, a "lease" shall include a sublease.
(e) Schedule 3.05(e) will contain a list of all tangible
personal property having a cost or fair market value in excess of $5,000 owned
by the Company (other than personal property held by the Company as lessee under
a personal property lease). All equipment owned by the Company and all personal
property owned or leased by the Company, if any, is, in the aggregate and
considered as a whole, in good operating condition and repair, subject only to
ordinary wear and tear, has been operated, serviced and maintained properly and
is suitable and appropriate for the use thereof made and proposed to be made by
the Company in its business and operations. The Leased Real Property,
Structures, Land and personal property described in this Section 3.5 comprise
all of the Leased Real Property, Structures, real property and personal property
of the Company.
(f) Except as to be set forth in Schedule 3.05(f):
(i) The Company is not in violation of, or default
under, any Legal Requirement pertaining to any of the Land. No notice of
violation of any Legal Requirement, or of any covenant, condition, restriction
or easement affecting the Land or with respect to the use or occupancy thereof,
has been given by any Person;
(ii) All of the Structures (A) are in good operating
condition and repair, (B) are adequate and suitable for the purposes for which
they are currently and proposed to be used, and (C) are supplied with utilities
and other services necessary for the operation of such Structures, and the
business conducted by the Company therein, including gas, electricity, water,
telephone, sanitary sewer and storm sewer, all of which services are maintained
in accordance with all Legal Requirements and are provided via permanent,
irrevocable, appurtenant easements in favor of the Company;
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(iii) No condemnation proceeding is pending or threatened
which would impair the occupancy, use or value of the Land;
(iv) No Structure, nor the operations of the Company therein
or thereon, (A) is located outside of the boundary lines of the described parcel
of land on which it is located, (B) is in violation of applicable setback
requirements, zoning laws, or ordinances, (C) is subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications or
(D) encroaches on any property owned by, or easement granted in favor of, any
Person;
(v) There are no (A) leases, subleases, licenses, concessions
or other agreements, written or oral, granting to any other Person the right to
acquire, use or occupy any portion of, the Land, (B) outstanding options or
rights of first refusal to purchase all or any portion of the Land or interest
therein, and (C) Persons (other than the Company) in possession of the Land;
(vi) Each parcel of the Land (A) is fully and adequately
described in the legal description therefor contained in the deed thereof, (B)
abuts a paved public right-of-way, (C) does not serve any adjoining property for
any purpose inconsistent with the use of the Land, and (D) is not located within
any flood plain or subject to any similar type restriction for which any permits
or licenses necessary to the use thereof have not been obtained; and
(vii) With respect to each item of Leased Real Property, to
the best of the Shareholders' knowledge, (A) the owner thereof has good and
marketable title thereto, free and clear of all Liens other than (I) recorded
easements, covenants and restrictions that do not impair the current use,
occupancy or value thereof and (II) the leasehold interest of the Company, (B)
there is adequate ingress and egress (and a continuing right thereto), without
the need for an easement, between paved public rights-of-way and such Leased
Real Property and (C) the Company has not sold, transferred or subjected to a
Lien such Leased Real Property or any interest therein.
SECTION 3.06 Inventory and Accounts Receivable.
(a) All inventory set forth or reflected in the Balance Sheet,
or acquired by the Company since the Balance Sheet Date, consists of a quality
and quantity usable and saleable by the Company in the Ordinary Course. The
value at which inventories are carried on the Balance Sheet reflects the normal
inventory valuation policy of the Company, on a basis consistent with that used
in the preparation of the audited balance sheet of Company at December 31, 1997,
of stating inventory at its lower of cost or market value.
(b) All accounts receivable of the Company reflected in the
Balance Sheet and all accounts receivable of the Company that have arisen since
the Balance Sheet Date (except such accounts receivable as have been collected
since such dates and except to the extent of the allowance for doubtful accounts
reflected on the Balance Sheet) are valid and enforceable claims against the
account debtor, and the goods and services sold and delivered that gave rise to
such accounts were sold and delivered in conformity with all applicable express
and implied warranties, purchase orders, agreements and specifications. Such
accounts receivable of the Company are subject to no valid defense, offset or
counterclaim and are fully collectible in the Ordinary Course, except to the
extent of the allowance for doubtful accounts reflected on the Balance Sheet.
SECTION 3.07 Compliance with Law. Except where it has not had a
Material Adverse Effect, the Company (i) has not violated, has not conducted its
business or operations in violation of, and has not used or occupied its
properties or assets in violation of, any Legal Requirement, (ii) has not been
alleged to be in violation of any Legal Requirement, and (iii) has not received
any notice of any alleged violation of, nor any citation for noncompliance with,
any Legal Requirement.
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SECTION 3.08 Trademarks, Patents, Etc.
(a) Schedule 3.08(a) will contain a true and complete list of
all patents, patent applications, trade names, logos, trademarks, service marks,
trademark and service mark registrations and applications, copyrights, copyright
registrations and applications, Internet domain names, 1-800 and 1-888 telephone
numbers, grants of a license or right to the Company with respect to any of the
foregoing, both domestic and foreign, owned or claimed by the Company or used or
proposed to be used by the Company in the conduct of its business, whether
registered or not (collectively herein, "Registered Rights"). No other patent,
trademark, service mark, trade name or copyright, or license with respect to any
of the foregoing, is necessary to permit the Company's business to be conducted
as now conducted or as heretofore or proposed to be conducted. True and complete
copies of all documentation related to the Registered Rights will be made
available to Buyer pursuant to Section 8.04 hereof.
(b) The Company owns and has the unrestricted right to use the
Registered Rights and every trade secret, know-how, process, discovery,
development, design, technique, customer and supplier list, promotional idea,
marketing and purchasing strategy, computer program (including source code),
technical data, invention, process, confidential data and other information
(collectively herein, "Proprietary Information"), if any, required for or
incident to the design, development, manufacture, operation, sale and use of all
products and services sold or rendered or proposed to be sold or rendered by the
Company, free and clear of any right, equity or claim of others and without
infringing upon or otherwise acting adversely to the right or claimed right of
any third party under or with respect to any of the Proprietary Information. The
Company has taken reasonable security measures to protect the secrecy,
confidentiality and value of all Proprietary Information.
(c) The Company has not sold, transferred, assigned, licensed,
restricted, encumbered or subjected to any Lien, any Registered Right or any
Proprietary Information or any interest therein and (ii) the Company is not
obligated or under any liability whatever to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant to,
any Registered Right or Proprietary Information.
(d) There are no claims or demands of any Person pertaining
to, or any Actions that are pending or threatened, which challenge the rights of
the Company in respect of any Registered Right or any Proprietary Information.
SECTION 3.09 Banking and Insurance.
(a) Schedule 3.09(a) will contain a true and complete list of
the names and locations of all financial institutions at which the Company
maintains a checking account, deposit account, securities account, safety
deposit box or other deposit or safekeeping arrangement, the numbers or other
identification of all such accounts and arrangements and the names of all
persons authorized to draw against any funds therein.
(b) Schedule 3.09(b) will contain a true and complete list of
all insurance policies and bonds and self insurance arrangements currently in
force that cover or purport to cover risks or losses to, or associated with, the
Company's business, operations, premises, properties, assets, employees, agents
and directors (collectively, the "Policies"). No facts or circumstances exist
that would cause the Company to be unable to renew its existing insurance
coverage as and when the same shall expire upon terms at least as favorable as
those currently in effect, other than possible increases in premiums that do not
result from any act or omission of the Company or the Shareholders.
SECTION 3.10 Indebtedness.
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(a) Except as shown on the Balance Sheet, the Company has no
liability or obligation for Indebtedness. No event has occurred and no condition
has become known to the Shareholders (including the transactions contemplated
hereby) that constitutes or, with notice or passage of time, or both, would
constitute a default or basis of force majeure or other claim of accelerated or
increased rights, termination, excusable delay or nonperformance by the Company
or any other Person under the Credit Facility or the Leases that would entitle
any Person to require the Company to pay any portion of the principal amount of
such Indebtedness prior to the scheduled maturity thereof.
(b) All agreements or instruments pursuant to which any of the
Company's directors, employees or the Shareholders have guaranteed any
Indebtedness of the Company (the "Guaranties") will be made available to Buyer
pursuant to Section 8.04 hereof.
SECTION 3.11 Judgments; Litigation. Except as set forth in Schedule
3.11, when delivered:
(a) There is no (i) outstanding judgment, order, decree,
award, stipulation, injunction of any Governmental Entity or arbitrator against
or affecting the Company or its properties, assets or business or (ii) Action
pending against or affecting the Company or its properties, assets or business.
(b) There is no (i) outstanding judgment, order, decree,
award, stipulation, injunction of any Governmental Entity or arbitrator against
or affecting any officer, director or employee of the Company relating to the
Company or its business, (ii) Action threatened against the Company or its
properties, assets or business, (iii) Action pending or threatened against the
Company's officers, directors or employees relating to the Company or its
business or (iv) basis for the institution of any Action against the Company or
any of its officers, directors, employees, properties or assets which, if
decided adversely, would have a Material Adverse Effect.
SECTION 3.12 Income and Other Taxes. Except as to be disclosed on
Schedule 3.12:
(a) All Tax Returns required to be filed through and including
the date hereof in connection with the operations of the Company are true,
complete and correct in all material respects and have been properly and timely
filed. The Company has not requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed. True, correct and
complete copies of each Tax Return of the Company with respect to the past three
taxable years, and of all reports of, and communications from, any Governmental
Entities relating to such period will be made available to Buyer pursuant to
Section 8.04 hereof. The Company has disclosed on its Federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of income Taxes for federal income tax purposes within the meaning of Code
Section 6662.
(b) All Taxes required to be paid or withheld and deposited
through and including the date hereof in connection with the operations of the
Company have been duly and timely paid or deposited by the Company. The Company
has properly withheld or collected all amounts required by law for income Taxes
and employment Taxes relating to its employees, creditors, independent
contractors and other third parties, and for Taxes on sales, and has properly
and timely remitted such withheld or collected amounts to the appropriate
Governmental Entity. The Company has no liabilities for any Taxes for any
taxable period ending prior to or coincident with the Closing Date other than
those which have been recorded on the books and records of the Company.
(c) The Company has made adequate provision on its books of
account for all Taxes with respect to its business, properties and operations
through the Balance Sheet Date, and
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the accruals for Taxes in the Balance Sheet are adequate to cover all
liabilities for Taxes of the Company for all periods ending on or before the
Closing Date.
(d) Except as to be set forth in Schedule 3.12(d), the Company
has not heretofore (i) had a tax deficiency proposed, asserted or assessed
against it, (ii) executed any waiver of any statute of limitations on the
assessment or collection of any Taxes, or (iii) been delinquent in the payment
of any Taxes.
(e) Except as to be set forth in Schedule 3.12(e), no Tax
Return of the Company has been audited or the subject of other Action by any
Governmental Entity. Except as to be set forth in Schedule 3.12(e), the Company
has not received any notice from any Governmental Entity of any pending
examination or any proposed deficiency, addition, assessment, demand for payment
or adjustment relating to or affecting the Company or its assets or properties
and the Shareholders have no reason to believe that any Governmental Entity may
assess (or threaten to assess) any Taxes for any periods ending on or prior to
the Closing Date.
(f) The Company (i) has not filed any consent or agreement
pursuant to Code Section 341(f), and no such consent or agreement will be filed
at any time on or before the Closing Date; (ii) has not made any payments, is
not obligated to make any payments and is not a party to any agreement that
under certain circumstances could obligate the Company to make any payments that
will not be deductible under Code Section 280G; (iii) is not a United States
real property holding corporation within the meaning of Code Section 897(c)(2);
(iv) is not a party to a tax allocation or sharing agreement; (v) has never been
(or does not have any liability for unpaid Taxes because it was) a member of an
affiliated group within the meaning of Code Section 1504(a); (vi) has never
applied for a tax ruling from a Governmental Entity; and (vii) has never filed
or been the subject of an election under Code Section 338(g) or Code Section
338(h)(10) or caused or been the subject of a deemed election under Code Section
338(e).
(g) The Company has no unused net operating loss, net capital
loss, unused investment or other credit, unused foreign tax or excess charitable
contribution.
SECTION 3.13 Corporate Records. True and complete copies or
originals of the Charter, Bylaws, minute books and stock records of the Company
will be made available to Buyer pursuant to Section 8.04 hereof.
SECTION 3.14 Employee Benefit Matters. Except as to be set forth in
Schedule 3.14, the Company maintains no pension, retirement, profit-sharing,
employee stock ownership plan, deferred compensation, stock bonus or other
similar plan; medical, vision, dental or other health plan; life insurance plan;
vacation, severance, golden parachute or other similar plan or arrangement;
stock option, stock appreciation or other similar plan or arrangement; and any
other employee benefit plan, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA, which, in any case, relates
to the Company.
SECTION 3.15 No Undisclosed Liabilities. Except (i) to the extent
set forth or provided for in the Financial Statements or the notes thereto, or
(ii) for non-material current liabilities incurred since the Balance Sheet Date
in the Ordinary Course, as of the date hereof, the Company has no liabilities,
whether accrued, absolute, contingent or otherwise, whether due or to become due
and whether the amounts thereof are readily ascertainable or not, or any
unrealized or anticipated losses from any commitments of a contractual nature,
including Taxes with respect to or based upon the transactions or events
occurring at or prior to the Closing.
SECTION 3.16 Permits, Licenses, Etc. The Company possesses, and is
operating in material compliance with, all franchises, licenses, permits,
certificates, authorizations, rights and other approvals of Governmental
Entities necessary to (i) occupy, maintain, operate and use the Land or the
Leased Real Property as it is currently used and proposed to be used (including,
if applicable,
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with respect to storm water runoff and treatment of any of the Land or Leased
Real Property as a hazardous waste facility), (ii) conduct its business as
currently conducted, and (iii) maintain and operate its employee benefit plans
(collectively, the "Permits"). Schedule 3.16 will contain a true and complete
list of all Permits, and each expiration date and scheduled renewal date related
to each Permit. Each Permit has been lawfully and validly issued, and no
proceeding is pending or threatened looking toward the revocation, suspension or
limitation of any Permit. The consummation of the transactions contemplated
hereby will not result in the revocation, suspension or limitation of any Permit
and no Permit will require the consent of its issuing authority as a result of
the consummation of the transactions contemplated hereby.
SECTION 3.17 Regulatory Filings. The Company has made all required
registrations and filings with and submissions to all applicable Governmental
Entities relating to the operations of the Company as currently conducted and as
proposed to be conducted, including, without limitation, all such applicable
Governmental Entities having jurisdiction over any matters pertaining to
conservation or protection of the environment, and the treatment, discharge,
use, handling, storage or production, or disposal of Hazardous Materials. All
such registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or submissions
and no facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any such
registration, filing or submission.
SECTION 3.18 Consents. All consents, authorizations and approvals of
any Person that are necessary in connection with the operations and business of
the Company as currently conducted, or for which the failure to obtain the same
might have, individually or in the aggregate, a Material Adverse Effect, have
been lawfully and validly obtained by the Company or will be obtained by the
Company prior to the Closing Date.
SECTION 3.19 Material Contracts; No Defaults.
(a) Schedule 3.19(a) will contain a true and complete list and
description of all outstanding sales orders and sales contracts of the Company
having an indicated gross value in excess of $5,000 or having a term or duration
in excess of six (6) months. All such sales orders and sales contracts have been
entered into in the Ordinary Course. The Company has not received any advance,
progress payment or deposit in respect of any sales order or sales contract, and
the Company has no sales order or sales contract that will result, upon
completion of the performance thereof, in gross margins materially lower than
those normally experienced by the Company for services or products covered by
such sales order or sales contract.
(b) Schedule 3.19(b) will contain a true and complete list and
description of all outstanding purchase orders and purchase commitments of the
Company having an indicated gross value in excess of $5,000 or having a term or
duration in excess of six (6) months. All outstanding purchase orders and
purchase commitments of the Company have been incurred in the Ordinary Course,
and no purchase order or purchase commitment of the Company is in excess of the
normal, ordinary and usual requirements of the business of the Company.
(c) Schedule 3.19(c) will contain a true and complete list of
all sales agency, sales representative and similar contracts or agreements of
the Company and a description of the territory or market and the expiration or
renewal date of each such contract or agreement. True and complete copies of
each such contract and agreement will be made available to Buyer pursuant to
Section 8.04 hereof.
(d) There are no noncompetition agreements or covenants under
which the Company or the Shareholders or any of the Company's officers,
directors or key employees is obligated. The Company is not restricted by any
agreement from carrying on its business or engaging
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in any other activity anywhere in the world, and no officer, director or key
employee is a party to or otherwise bound or affected by any agreement, covenant
or other arrangement or understanding that would restrict or impair his ability
to perform diligently his other duties to the Company. There are no
noncompetition agreements or covenants in favor of the Company.
(e) Schedule 3.19(e) will contain a true and complete list of
all written contracts, agreements, understandings, arrangements and commitments
of the Company with any officer, director, consultant, employee or Affiliate of
the Company or with any associate, Affiliate or employee of any Affiliate of the
Company. Except as to be set forth in Schedule 3.19(e), there are no oral
contracts, agreements, understandings, arrangements and commitments of the
Company with any officer, director, consultant, employee or Affiliate of the
Company or with any associate, Affiliate or employee of any Affiliate of the
Company. Except as to be set forth in Schedule 3.19(e), there are no oral
contracts, agreements, understandings or commitments with any third party by
which the Company's properties, rights or assets are bound.
(f) Schedule 3.19(f) will contain a true and complete list of
all other material contracts, agreements, understandings, arrangements and
commitments, written or oral, of the Company by which it or its properties,
rights or assets are bound that are not otherwise disclosed in this Agreement.
True and complete copies of such contracts, agreements, understandings,
arrangements and commitments will be made available to Buyer pursuant to Section
8.04 hereof. For the purposes of this subsection (f), "material" means any
contract, agreement, understanding, arrangement or commitment that (i) involves
performance by any party more than ninety (90) days from the date hereof, (ii)
involves payments or receipts by the Company in excess of $10,000 or (iii)
involves capital expenditures in excess of $10,000.
(g) No event or condition has occurred or is alleged to have
occurred that constitutes or, with notice or the passage of time, or both, would
constitute a default or a basis of force majeure or other claim of excusable
delay, termination, nonperformance or accelerated or increased rights by the
Company or any other Person under any written or oral contract, agreement,
arrangement, commitment or other understanding; no Person with whom the Company
has such a contract, agreement, arrangement, commitment or other understanding
is in default thereunder or has failed to perform fully thereunder by reason of
force majeure or other claim of excusable delay, termination or nonperformance
thereunder, the delay, termination or nonperformance of which, or a default
under which, has had or may have a Material Adverse Effect; and each agreement,
contract, arrangement or commitment is, and after the Closing will be, on
identical terms, legal, valid, binding, enforceable and in full force and
effect.
SECTION 3.20 Absence of Certain Changes. Since the Balance Sheet
Date, the Company has not: (i) incurred any debts, obligations or liabilities
(absolute, accrued, contingent or otherwise), other than current liabilities
incurred in the Ordinary Course which, individually or in the aggregate, are not
material; (ii) subjected to or permitted a Lien (other than a Permitted Lien)
upon or otherwise encumbered any of its assets, tangible or intangible; (iii)
sold, transferred, licensed or leased any of its material assets or properties
except in the Ordinary Course; (iv) discharged or satisfied any Lien other than
a Lien securing, or paid any obligation or liability other than, current
liabilities shown on the Balance Sheet and current liabilities incurred since
the Balance Sheet Date, in each case in the Ordinary Course; (v) canceled or
compromised any debt owed to or by or claim of or against it, or waived or
released any right of material value other than in the Ordinary Course; (vi)
suffered any physical damage, destruction or loss (whether or not covered by
insurance) causing a Material Adverse Effect; (vii) entered into any material
transaction or otherwise committed or obligated itself to any capital
expenditure other than in the Ordinary Course (except with respect to the
acquisition of new computer software and hardware); (viii) made or suffered any
change in, or condition affecting, its condition (financial or otherwise),
properties, profitability, prospects or operations other than changes, events or
conditions in the Ordinary Course, none of which (individually or in the
aggregate) has had or may have a Material Adverse Effect; (ix) made any change
in the accounting principles, methods, records or practices followed by it or
depreciation or amortization policies or rates
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theretofore adopted; (x) other than in the Ordinary Course, made or suffered any
amendment or termination of any material contract, agreement, lease or license
to which it is a party; (xi) paid, or made any accrual or arrangement for
payment of, any severance or termination pay to, or entered into any employment
or loan or loan guarantee agreement with, any current or former officer,
director or employee or consultant; (xii) paid, or made any accrual or
arrangement for payment of, any increase in compensation, bonuses or special
compensation of any kind to any employee other than in the Ordinary Course, or
paid, or made any accrual or arrangement for payment of, any increase in
compensation, bonuses or special compensation of any kind to any officer or
director of the Company or any consultant to the Company; (xiii) made or agreed
to make any charitable contributions or incurred any nonbusiness expenses; (xiv)
changed or suffered change in any Plan or labor agreement affecting any employee
of the Company otherwise than to conform to Legal Requirements; or (xv) entered
into any material agreement or otherwise obligated itself to do any of the
foregoing.
SECTION 3.21 Employees and Labor Matters.
(a) Schedule 3.21(a) will contain a true and complete list of
all contracts, agreements, plans, arrangements, commitments and understandings
(formal and informal, including the Company's employee manual, if any)
pertaining to terms of employment, compensation, bonuses, profit sharing, stock
purchases, stock repurchases, stock options, commissions, incentives, loans or
loan guarantees, severance pay or benefits, use of the Company's property and
related matters of the Company with any current or former officer, director,
employee or consultant. A true and complete copy of the Company's employee
manual will be made available to Buyer pursuant to Section 8.04 hereof.
(b) Schedule 3.21(a) will contain a true and complete list of
all labor, collective bargaining, union and similar agreements under or by which
the Company is obligated.
(c) Except for the employment and labor agreements which will
be made available to Buyer pursuant to Section 8.04 hereof, neither Buyer nor
the Company will have any responsibility for continuing any person in the employ
(or retaining any person as a consultant) of the Company from and after the
Closing or have any liability for any severance payments to or similar
arrangements with any such Person who shall cease to be an employee of the
Company at or prior to the Closing. There is no agreement, arrangement,
commitment or understanding between the Company and any of its employees which
could prohibit the Company from modifying the work schedule of its employees.
(d) There is not occurring or threatened, any strike, slow
down, picket, work stoppage or other concerted action by any union or other
group of employees or other persons against the Company or its premises or
products. Except for activities by the unions that are parties to any of the
agreements which will be made available to Buyer pursuant to Section 8.04
hereof, no union or other labor organization has attempted to organize any of
the employees of the Company.
(e) The Company has complied with all Legal Requirements
relating to employment and labor, except where the failure to so comply would
not have a Material Adverse Effect, and no facts or circumstances exist that
could provide a reasonable basis for a claim of wrongful termination by any
current or former employee of the Company against the Company.
SECTION 3.22 Affiliations. No Shareholder, officer, director or key
employee of the Company or any associate or Affiliate of the Company or any of
such Persons has, directly or indirectly, (i) an interest in any Person that (A)
furnishes or sells, or proposes to furnish or sell, services or products that
are furnished or sold by the Company or (B) purchases from or sells or furnishes
to, or proposes to purchase from or sell or furnish to, the Company any goods or
services or (ii) a beneficial interest in any contract or agreement to which the
Company is a party or by which the Company or any of the assets of the Company
are bound or affected.
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SECTION 3.23 Principal Customers and Suppliers.
(a) Schedule 3.23(a) will contain a true and complete list of
the name and address of each customer that purchased in excess of five percent
(5%) of the Company's sales of goods or services during the twelve (12) months
ended on the Balance Sheet Date, and since that date no such customer has
terminated its relationship with or adversely curtailed its purchases from the
Company or indicated (for any reason) its intention so to terminate its
relationship or curtail its purchases.
(b) Schedule 3.23(a) will contain a true and complete list of
all suppliers from whom the Company purchased in excess of five percent (5%) of
the Company's purchases of goods or services or which do not permit open terms
of payment or purchases on credit, during the twelve (12) months ended on the
Balance Sheet Date, and since that date no such supplier has terminated its
relationship with or adversely curtailed its accommodations, sales or services
to the Company or indicated (for any reason) its intention to terminate such
relationship or curtail its accommodations, sales or services.
SECTION 3.24 Warranty Liability. Schedule 3.24 will contain a true
and complete list of all written warranties granted or made with respect to
services rendered or products sold by the Company, and the Company's aggregate
expense related to such warranties for each of the last three (3) years.
SECTION 3.25 Hazardous Materials. Except as disclosed on Schedule
3.25, when delivered:
(a) No Hazardous Material (i) has been released, placed,
stored, generated, used, manufactured, treated, deposited, spilled, discharged,
released or disposed of on or under the Land or any real property currently or
previously owned or leased by the Company or is presently located on or under
the Land or any Leased Real Property (or any property adjoining the Land or any
Leased Real Property), (ii) is presently maintained, used, generated, or
permitted to remain in place by the Company in violation of any Environmental
Law, (iii) is required by any Environmental Law to be eliminated, removed,
treated or mitigated by the Company, given the nature of its present condition,
location, nature, material or maintenance, or (iv) is of a type, location,
material, nature or condition which requires special notification to third
parties by the Company under Environmental Law or common law.
(b) No notice, citation, summons or order has been received by
the Company or any Shareholder, no notice has been given by the Company and no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened by any Governmental Entity, with respect to (i)
any alleged violation by the Company of any Environmental Law or (ii) any
alleged failure by the Company to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with its
business or properties, or (iii) any use, possession, generation, treatment,
storage, recycling, transportation, release or disposal by or on behalf of the
Company of any Hazardous Material.
(c) The Company has not received any request for information,
notice of claim, demand or notification that it is or that indicates that it may
be a "potentially responsible party" with respect to any investigation or
remediation of any threatened or actual release of any Hazardous Material.
Schedule 3.25(f) will contain a true and complete list of all Material Safety
Data Sheets applicable to the Company's operations at the Leased Real Property.
(d) No above-ground or underground storage tanks, whether or
not in use, are or have ever been located on the Land or at any property
currently owned or leased by the Company.
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(e) No notice has been received by the Company with respect to
the listing or proposed listing of the Land or any property currently or
previously owned, operated or leased by the Company on the National Priorities
List promulgated pursuant to CERCLA, CERCLIS or any similar state list of sites
requiring investigation or cleanup.
(f) There have been no environmental inspections,
investigations, studies, tests, reviews or other analyses conducted in relation
to the Land or any Leased Real Property except those that indicated no violation
of any Legal Requirement, or if a violation was indicated, such violation has
been remedied.
(g) The Company has not released, transported, or arranged for
the transportation of any Hazardous Material from the Land or any property
currently or previously owned, operated or leased by the Company.
SECTION 3.26 Brokers' Fees. No broker, finder or similar agent has
been employed by or on behalf of the Company or the Shareholders in connection
with this Agreement or the transactions contemplated hereby, and neither the
Company nor the Shareholders have entered into any agreement or understanding of
any kind with any person or entity for the payment of any brokerage commission,
finder's fee or any similar compensation in connection with this Agreement or
the transactions contemplated hereby.
SECTION 3.27 Disclosure. No representation or warranty of the
Shareholders in this Agreement and no information contained in any Schedule or
other writing delivered by the Shareholders pursuant to this Agreement or at the
Closing contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements
herein or therein not misleading. There is no fact that the Shareholders have
not disclosed to Buyer in writing that has had or, insofar as the Shareholders
can now foresee, may have a Material Adverse Effect on the ability of the
Shareholders to perform fully this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
REGARDING BUYER
Buyer represents and warrants to the best of Buyer's knowledge and
belief to, and covenants and agrees with, Shareholders that:
SECTION 4.01 Organization, Power and Authority of Buyer. Buyer has
been duly organized and is existing as a corporation in good standing under the
laws of the State of Delaware with full power and authority (corporate and
other) to own and lease its properties and to conduct its business as currently
conducted.
SECTION 4.02 Authorization. Buyer has the corporate power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations under this Agreement. The
execution and delivery by Buyer of this Agreement, and the consummation by Buyer
of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action by Buyer. This Agreement, upon its execution and
delivery by Buyer (assuming the due authorization, execution and delivery hereof
by the other parties hereto), will constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar laws relating to creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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SECTION 4.03. No Conflict or Violation. Subject to compliance with
the applicable requirements of the Securities Act and any applicable state
securities laws, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not (a) conflict
with or result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which Buyer is a party or by which Buyer is bound or affected or to which any of
the property or assets of Buyer is bound or affected, (b) result in the
violation of the provisions of the Certificate of Incorporation or Bylaws of
Buyer or any Legal Requirement applicable to or binding upon it, (c) result in
the creation or imposition of any Lien upon any property or asset of Buyer or
(d) otherwise adversely affect the contractual or other legal rights or
privileges of Buyer. Schedule 4.03 will set forth a list of all agreements to
which Buyer is a party requiring the consent of any party thereto to any of the
transactions contemplated hereby.
SECTION 4.04 Consents and Approvals. No consent, approval,
authorization, license, permit or other action by, or filing with, any
governmental or regulatory authority is required in connection with the
execution and delivery of this Agreement by Buyer or the consummation by Buyer
of the transactions contemplated hereby, except for such consents, approvals,
authorizations, licenses, permits, actions or filings as will have been
obtained, taken or filed at or prior to the Closing.
SECTION 4.05 Brokers' Fees. No broker, finder or similar agent has
been employed by or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and Buyer has not entered into any agreement
or understanding of any kind with any person or entity for the payment of any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
SECTION 4.06 Disclosure. No representation or warranty of the Buyer
in this Agreement and no information contained in any other writing delivered by
Buyer to the Company or the Shareholders pursuant to this Agreement or at the
Closing contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to make the statements
herein or therein not misleading. To the knowledge of Buyer, there is no fact
that the Buyer has not disclosed to the Company or the Shareholders in writing
that has had or, insofar as the Buyer can now foresee, may have a Material
Adverse Effect on the ability of Buyer to fully perform this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
REGARDING THE SHAREHOLDERS
Each of the Shareholder hereby represents and warrants to, and
covenants and agrees with, Buyer that:
SECTION 5.01 Ownership of Shares. The Shareholder owns of record and
beneficially the Shares, and has, and immediately prior to the Closing the
Shareholder will have, good and marketable title to the Shares free and clear of
all Liens, other than the agreements and commitments contained herein or
contemplated hereby.
SECTION 5.02 Delivery of Good Title. All consents, approvals,
authorizations and orders necessary for the sale and delivery of the Shares to
be sold by the Shareholder hereunder have been obtained, and the Shareholder
has, and immediately prior to the Closing the Shareholder will have, full right,
power, authority and capacity to sell, assign, transfer and deliver the Shares
pursuant to this Agreement. Upon delivery of the Shares and payment of the
consideration therefor
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pursuant to this Agreement, valid and marketable title to the Shares, free and
clear of all Liens will pass to Buyer.
SECTION 5.03 Authorization. The Shareholder has the power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform his/her obligations under this Agreement. The
execution and delivery by the Shareholder of this Agreement, and the
consummation by the Shareholder of the transactions contemplated hereby, has
been duly authorized by all necessary action by the Shareholders. This
Agreement, upon its execution and delivery by the Shareholders (assuming the due
authorization, execution and delivery hereof by Buyer), will constitute the
legal, valid and binding obligation of the Shareholder, enforceable against the
Shareholder in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws relating to
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.04 No Conflict or Violation. Subject to compliance with
the applicable requirements of the Securities Act and any applicable state
securities laws, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not (a) conflict
with or result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which the Shareholder is a party, or by which the Shareholder is bound or
affected or to which any of the property or assets of the Shareholder is bound
or affected, (b) result in the violation of the provisions of the Charter or
Bylaws of the Company or any Legal Requirement applicable to or binding upon
them, (c) result in the creation or imposition of any Lien upon any property or
asset of the Shareholder, other than pursuant to the terms of this Agreement, or
(d) otherwise adversely affect the contractual or other legal rights or
privileges of the Shareholder.
ARTICLE VI
CONDITIONS TO THE CONSUMMATION OF THE AGREEMENT
SECTION 6.01 Conditions to Obligations of Buyer. Notwithstanding any
other provision of this Agreement, the obligations of Buyer to consummate the
Agreement and the other transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened
any Action, before any Governmental Entity or otherwise, (i) challenging this
Agreement or otherwise seeking to restrain or prohibit the consummation of the
transactions contemplated hereby, or (ii) seeking to prohibit the direct or
indirect ownership or operation by Buyer of all or a material portion of the
business or assets of the Company, or to compel Buyer or the Company to dispose
of or hold separate all or a material portion of the business or assets of the
Company or Buyer.
(b) The representations and warranties of the Shareholders in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date and each of
the Company and the Shareholders shall have complied with all covenants and
agreements and satisfied all conditions on the Company's or their part, as
applicable, to be performed or satisfied on or prior to the Closing Date.
(c) Buyer shall have received from Shareholders a certificate
dated the Closing Date in substantially the form to be attached as Annex A.
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(d) Buyer shall have received a certificate from the President
of the Company in substantially the form to be attached as Annex B.
(e) Buyer shall have received a certificate of the Secretary
or Assistant Secretary of the Company dated the Closing Date in substantially
the form to be attached as Annex C.
(f) Each of Gray, Geneva Gray and JDW shall have entered into
a Non-Competition Agreement with Buyer substantially in the form to be attached
as Annex D.
(g) Geneva Gray shall have entered into an Employment
Agreement with the Company substantially in the form to be attached as Annex E,
for a period of one (1) year for a salary of approximately $26,000 plus a bonus.
(h) JDW shall have entered into an Employment Agreement with
the Company substantially in the form to be attached as Annex F.
(i) Mike Kennedy shall have entered into an Employment
Agreement with the Company substantially in the form to be attached as Annex G,
for a period of two (2) years for a salary of approximately $115,000 plus a
bonus.
(j) Buyer shall have received reasonable assurances from those
employees, if any, of the Company that may be identified by Buyer in its
discretion that they will remain in the employ of the Company for a reasonable
period of time after the consummation of the transactions contemplated hereby.
(k) Buyer shall have concluded (through its representatives,
agents, accountants, legal counsel and other experts) satisfactorily an
investigation, including without limitation legal and financial review, of the
Company and shall be satisfied in its sole discretion with the results thereof
on or before December 31, 1998.
(l) All authorizations, consents, waivers and approvals by or
from third parties required for the consummation of the transactions
contemplated hereby shall have been obtained and all Liens on the assets and
properties of the Company, if any, will be released or terminated upon Closing.
(m) No act, event or condition shall have occurred after the
date hereof which Buyer determines has had or could reasonably be expected to
have a Material Adverse Effect.
(n) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
reasonably satisfactory to Buyer and its counsel.
(o) The Shareholders shall have approved the adoption of the
Agreement and any other matters required to be approved by them under applicable
Legal Requirements.
SECTION 6.02 Conditions to Obligations of the Shareholders.
Notwithstanding any other provision of this Agreement, the obligations of the
Shareholders to consummate the Agreement and the other transactions contemplated
hereby shall be subject to the satisfaction, at or prior to the Closing Date, of
the following conditions:
(a) The representations and warranties of Buyer in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date, and Buyer
shall have complied with all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied on or prior to the Closing
Date.
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(b) The Shareholders shall have received a certificate from
the Secretary of Buyer dated the Closing Date in substantially the form to be
attached as Annex H.
(c) The Shareholders shall have received a certificate from
the President of Buyer in substantially the form to be attached as Annex I.
(d) Each of Geneva Gray and JDW shall have entered into an
Employment Agreement with the Company substantially in the form to be attached
as Annex E and Annex F, respectively.
(e) Buyer shall have entered into a Lease Agreement with JDW
substantially in the form to be attached as Annex J, which will permit JDW to
store his personal effects currently located at the Company's garage, for an
annual rental of $1.00.
(f) No act, event or condition shall have occurred after the
date hereof which the Shareholders determine has had or could reasonably be
expected to have a material adverse effect on the business, financial condition,
properties, profitability, prospects or operations of Buyer.
(g) All corporate and other proceedings and actions taken in
connection with the transactions contemplated hereby and all certificates,
opinions, agreements, instruments, releases and documents referenced herein or
incident to the transactions contemplated hereby shall be in form and substance
reasonably satisfactory to the Shareholders and their counsel.
(h) There shall not be instituted and pending or threatened
any Action (i) challenging the Agreement or otherwise seeking to restrain or
prohibit the consummation of the transactions contemplated hereby, or (ii)
seeking to prohibit the direct or indirect ownership or operation by Buyer of
all or a material portion of the business or assets of the Company, or to compel
Buyer or the Company to dispose of or hold separate all or a material portion of
the business or assets of the Company or Buyer.
(i) Buyer shall execute and deliver to Sellers an investment
letter, to be attached as Annex K, to the effect that:
(i) Buyer understands that the warranties and
representations of the Company and Shareholders are provided for the purpose of
Buyer's due diligence only and will not survive the Closing. Buyer has been
provided an opportunity to ask questions of, and Buyer has received answers
thereto satisfactory to it from the Company and the Shareholders and their
representatives regarding the terms and conditions of this Agreement and the
matters pertaining hereto, and Buyer has obtained all additional information
requested of the Company and the Shareholders and their representatives. Buyer
has investigated and is familiar with the affairs, financial conditions and
prospects of the Company and has acquired sufficient information, including the
schedules to this Agreement and all other information and documents as requested
by Buyer about the Company, to reach an informed and knowledgeable decision to
acquire the Shares.
(ii) Buyer has such knowledge and experience in
financial affairs that it is capable of evaluating the merits and risks of the
transactions contemplated by this Agreement. Buyer has not relied in connection
with the transactions contemplated herein upon any representations, warranties
or agreements other than those set forth in this Agreement and the schedules
hereto. Buyer's financial situation is such that it can afford to bear the
economic risk of holding the Shares for an indefinite period of time.
(iii) Buyer is acquiring the Shares pursuant to this
Agreement for its own account and not with a view to or for sale in connection
with any distribution of all or any part of the Shares. Buyer acknowledges the
Shareholder's understanding that the sale of the Shares hereunder is intended to
be exempt from registration under the Securities Act.
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(iv) Buyer represents and warrants that, by reason of
its business and financial experience, it has the capacity to protect its own
interests in connection with its receipt of the Shares pursuant to this
Agreement.
(v) No shareholder or any officer, employee, agent or
affiliate of the Company has made any representations or warranties to Buyer,
other than as set forth herein.
ARTICLE VII
CONDUCT OF BUSINESS PENDING CLOSING
During the period commencing on the date hereof and continuing
through the Closing Date, the Shareholders covenant and agree (except as
expressly contemplated by this Agreement or to the extent that Buyer shall
otherwise expressly consent in writing) that:
SECTION 7.01 Qualification. The Shareholders shall cause the Company
to maintain all qualifications to transact business and remain in good standing
in Tennessee and the foreign jurisdictions set forth in Section 3.01(a).
SECTION 7.02 Ordinary Course. The Shareholders shall cause the
Company to conduct its business in, and only in, the Ordinary Course and
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and going business value shall be unimpaired at the Closing Date.
The Shareholders shall cause the Company to maintain its properties and assets
in good condition and repair.
SECTION 7.03 Organic Changes. The Shareholders shall not permit the
Company to (a) amend its Charter or Bylaws (or equivalent documents), (b)
acquire by merging or consolidating with, or agreeing to merge or consolidate
with, or purchase substantially all of the stock or assets of, or otherwise
acquire any business or any corporation, partnership, association or other
business organization or division thereof, (c) enter into any partnership or
joint venture, (d) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock, or purchase or redeem, directly or
indirectly, any shares of its capital stock, (e) issue or sell or agree to issue
or sell any shares of its capital stock of any class or any options, warrants,
conversion or other rights to purchase any such shares or any securities
convertible into or exchangeable for such shares, or (f) liquidate or dissolve
or obligate itself to do so.
SECTION 7.04 Indebtedness. The Shareholders shall not permit the
Company to incur any Indebtedness, sell any debt securities or lend money to or
guarantee the Indebtedness of any Person except in the Ordinary Course. The
Shareholders shall not permit the Company to restructure or refinance its
existing Indebtedness.
SECTION 7.05 Accounting. The Shareholders shall not permit the
Company to make any change in the accounting principles, methods, records or
practices followed by it or depreciation or amortization policies or rates
theretofore adopted by it. The Shareholders shall cause the Company to maintain
its books, records and accounts in accordance with GAAP.
SECTION 7.06 Compliance with Legal Requirements. The Shareholders
shall cause the Company to comply promptly with all requirements that applicable
law may impose upon it and its operations and with respect to the transactions
contemplated by this Agreement, and cooperate promptly with, and furnish
information to, Buyer in connection with any such requirements imposed upon
Company, or upon any of its Affiliates, in connection therewith or herewith.
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SECTION 7.07 Disposition of Assets. The Shareholders shall not
permit the Company to sell, transfer, license, lease or otherwise dispose of, or
suffer or cause the encumbrance by any Lien not disclosed herein to Buyer upon
any of, its material properties or assets, tangible or intangible, or any
interest therein.
SECTION 7.08 Compensation. Except as set forth in Sections 7.16 and
7.17 below, the Shareholders shall not permit the Company to (a) adopt or amend
in any material respect any collective bargaining, bonus, profit-sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other plan, agreement, trust, fund or arrangement for the benefit
of employees (whether or not legally binding) other than to comply with any
Legal Requirement or (b) pay, or make any accrual or arrangement for payment of,
any increase in compensation, bonuses or special compensation of any kind, or
any severance or termination pay to, or enter into any employment or loan or
loan guarantee agreement with, any current or former officer, director, employee
or consultant of the Company.
SECTION 7.09 Modification or Breach of Agreements; New Agreements.
The Shareholders shall not permit the Company to terminate or modify, or commit
or cause or suffer to be committed any act that will result in breach or
violation of any term of, or (with or without notice or passage of time, or
both) constitute a default under or otherwise give any person a basis for
nonperformance under, any indenture, mortgage, deed of trust, loan or credit
agreement, lease, license or other agreement, instrument, arrangement or
understanding, written or oral, disclosed in this Agreement or the Schedules
hereto. The Shareholders will not permit the Company to become a party to any
contract or commitment other than in the Ordinary Course. The Shareholders will
cause the Company to meet all of its contractual obligations in accordance with
their respective terms.
SECTION 7.10 Capital Expenditures. Except for capital expenditures
or commitments necessary to maintain its properties and assets in good condition
and repair (the amount of which for repairs only shall not exceed $75,000 in the
aggregate), the Shareholders shall not permit the Company to purchase or enter
into any contract to purchase any capital assets.
SECTION 7.11 Maintain Insurance. The Shareholders shall cause the
Company to maintain its Policies in full force and effect and shall not do,
permit or willingly allow to be done any act by which any of the Policies may be
suspended, impaired or canceled.
SECTION 7.12 Discharge. The Shareholders shall not permit the
Company to cancel, compromise, release or discharge any claim of the Company
upon or against any person or waive any right of the Company of material value,
and not discharge any Lien (other than Permitted Liens) upon any asset of the
Company or compromise any debt or other obligation of the Company to any person
other than Liens, debts or obligations with respect to current liabilities of
the Company.
SECTION 7.13 Actions. The Shareholders shall not permit the Company
to institute, settle or agree to settle any Action before any Governmental
Entity.
SECTION 7.14 Permits. The Shareholders shall cause the Company to
maintain in full force and effect, and comply with, all Permits.
SECTION 7.15 Tax Assessments and Audits. The Shareholders shall
cause the Company to furnish promptly to Buyer a copy of all notices of proposed
assessment or similar notices or reports that are received from any taxing
authority and which relate to the Company's operations for periods ending on or
prior to the Closing Date. The Shareholders shall cause the Company to promptly
inform Buyer, and permit the participation in and control by Buyer, of any
investigation, audit or other proceeding by a Governmental Entity in connection
with any Taxes, assessment, governmental charge or duty and shall not consent to
any settlement or final determination in any proceeding without the prior
written consent of Buyer.
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SECTION 7.16 Certain Distributions. Notwithstanding anything
contained in this Agreement to the contrary, at or prior to the Closing, Company
may:
(a) distribute to its shareholders, sums which, in the
aggregate, equal the maximum amount of Federal and State of Mississippi income
tax payable (estimated at the Closing and adjusted later) by Shareholders by
reason of the income of the Company reportable by Shareholders on their
individual tax returns for the period from January 1, 1998 up to the Closing.
Shareholders and Buyer agree that if the sums so paid are more or less than the
sums computed based upon the Federal income tax return for the period, when
filed, they will adjust the amounts payable under this subsection (a)
immediately after such event (which in no case shall be later than June 1,
1999);
(b) pay to JDW an extraordinary bonus in the amount of
$115,000, which JDW agrees to utilize in part to pay sums owed to the Company
under the Note; and
(c) pay off all notes to Gray in the total outstanding amount
of $40,000, which is equal to the total amount of debt owed by the Company to
Gray as of the Closing Date.
SECTION 7.17 Certain Personal Property. Nothing in the foregoing to
the contrary withstanding, Company may transfer and convey unto JDW, for the
total consideration of One Dollar ($1.00), the assets to be listed on Schedule
7.17.
ARTICLE VIII
ADDITIONAL COVENANTS
SECTION 8.01 Covenants of the Shareholders. During the period
commencing on the date hereof and continuing through the Closing Date, the
Shareholders agree to:
(a) comply promptly with all requirements that applicable
Legal Requirements may impose upon them with respect to the transactions
contemplated by this Agreement, and shall cooperate promptly with, and furnish
information to, Buyer in connection with any such requirements imposed upon
Buyer or upon any of its affiliates in connection therewith or herewith;
(b) use their reasonable commercial efforts to obtain (and to
cooperate with Buyer in obtaining) any consent, authorization or approval of, or
exemption by, any Person required to be obtained or made by the Company or the
Shareholders, as applicable, in connection with the transactions contemplated by
this Agreement;
(c) use their reasonable commercial efforts to bring about the
satisfaction of the conditions precedent to the Closing set forth in Section
6.01 of this Agreement;
(d) promptly advise Buyer orally and, within three (3)
Business Days thereafter, in writing of any change in the Company's business or
condition that has had or may have a Material Adverse Effect;
(e) deliver to Buyer prior to the Closing a written statement
disclosing any untrue statement in this Agreement or any Schedule hereto (or
supplement thereto) or document furnished pursuant hereto, or any omission to
state any material fact required to make the statements herein or therein
contained complete and not misleading, promptly upon the discovery of such
untrue statement or omission, accompanied by a written supplement to any
Schedule to this Agreement that may be affected thereby; provided, however, that
the disclosure of such untrue statement or omission shall not prevent Buyer from
terminating this Agreement pursuant to Section 9.01(c) hereof at any time at or
prior to the Closing in respect of any original untrue or misleading statement;
and
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(f) deliver to Buyer as soon as possible, which in no case
shall be later than September 30, 1998, the Disclosure Letter and the Schedules
contemplated by or referenced in this Agreement, which the Shareholders and the
Company acknowledge are not attached hereto as of the date hereof. Such
Schedules must be acceptable to Buyer in its sole discretion.
SECTION 8.02 Covenants of Buyer.
(a) Pre-Closing Covenants of Buyer. During the period
commencing on the date hereof and continuing through the Closing Date, Buyer
agrees to:
(i) comply promptly with all requirements that
applicable Legal Requirements may impose upon it with respect to the
transactions contemplated by this Agreement, and shall cooperate promptly with,
and furnish information to, the Company and the Shareholders in connection with
any such requirements imposed upon the Shareholders or the Company or upon any
of the Affiliates of the Company in connection therewith or herewith;
(ii) use its reasonable commercial efforts to obtain
(and to cooperate with Shareholders and the Company in obtaining) any consent,
authorization or approval of, or exemption by, any Person required to be
obtained or made by Buyer in connection with the transactions contemplated by
this Agreement;
(iii) use its reasonable commercial efforts to bring
about the satisfaction of the conditions precedent to Closing set forth in
Section 6.02 of this Agreement.
(iv) to use its best efforts to hold confidential, and
not to disclose the negotiations relating to the transactions contemplated by
this Agreement or the existence of this Agreement to any employees of Company,
other than Geneva Gray, or to any other Person, other than the agents, officers
and employees of Buyer on a need to know basis, without the written consent of
the Shareholders, except as required by any Legal Requirement.
(v) not to make any public announcement regarding the
transactions contemplated herein without the written consent of Shareholders,
except as required by any Legal Requirement.
(vi) provide the Shareholders with drafts of the Annexes
provided for herein on or before October 31, 1998.
(b) Post-Closing Covenants of Buyer. Buyer agrees that, after
the Closing, it will cause the Company to timely undertake the following:
(i) pay 1998 bonuses to certain key employees (other
than JDW) designated by JDW, up to an aggregate sum of One Hundred and Fifty
Thousand Dollars ($150,000), as JDW shall determine prior to the end of the
Company's fiscal year.
(ii) the Company is an "S Corporation" as defined in
section 1361 of the Code. It is understood that the "S" status will terminate on
the Closing and that short period tax returns will be filed for the Stub Period
(defined in Section 5.2(c)) with income for periods prior to the Closing being
attributed to the Shareholders, by closing the Company books on the Closing Date
utilizing the Company's historic accounting methods and procedures and prepared
in conformity with GAAP. In order to effect the preceding allocations, the
parties agree to adopt the elections in Section 1362(e)(3) of the Code, if
necessary, to effect the cut off. In the process of making final postings and
closing the Company's books as of December 31, 1998, which may occur subsequent
to Closing, and for the Stub Period, which will occur after the Closing, the
responsible party shall cause the Company to record all entries or adjustments
and maintain the books, accounts, and records of the Company in a
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manner consistent with past practice during the preceding twelve (12) month
accounting periods and this Section 8.03(d), and prepared in conformity with
GAAP.
(iii) comply with the adjustment provisions of Section
7.16(a).
(iv) retain all books and records of the Company for a
period of not less than five years after the Closings and Company shall allow
each Shareholder and his/her authorized tax preparer to have reasonable access
to the Company's books, records, officers, and employees at all times after the
Closing during Buyer's normal business hours in order to make copies thereof and
to prepare any applicable tax returns and tax information reports. The
Shareholders are responsible for payment of federal income taxes on the Company
earnings for the period prior to the Closing.
SECTION 8.03 Confidentiality. Each of the parties hereto
acknowledges that all confidential, financial and proprietary information,
documents and materials which directly relate to the business of the other party
(collectively, "Confidential Information") shall be the exclusive, confidential
property of such other party, except to the extent expressly authorized in
writing for dissemination. From the date of this Agreement through and including
the thirty-sixth (36th) month following the Closing Date, each party shall not
disclose any of such Confidential Information of the other party to any third
party without the prior written consent of the other party and shall take all
reasonable steps and actions necessary to maintain the confidentiality of such
Confidential Information. The foregoing restrictions shall not apply to any
information which (i) becomes generally available to the public other than as a
result of disclosures by the non-disclosing party, (ii) was available to the
non-disclosing party on a non-confidential basis prior to disclosure to it by
the other party, (iii) becomes available to the non-disclosing party on a
non-confidential basis from any source other than the disclosing party, provided
such source is not bound by a confidentiality agreement with one of the parties
hereto, or (iv) is required to be disclosed by any Governmental Entity. In
addition, the obligations set forth in this Section 8.03 shall not apply to
Buyer with respect to Confidential Information which is acquired by Buyer as a
result of the consummation of the transactions contemplated herein.
SECTION 8.04 Access and Information. Between the date hereof and the
Closing Date, the Shareholders will cause the Company's officers, directors, key
employees and advisors to permit, Buyer and its representatives and agents
reasonable access to the Company's books and records, facilities, key personnel,
customers, suppliers, independent accountants and attorneys, as requested by
Buyer.
SECTION 8.05 Expenses. Except as otherwise specifically provided
herein, each party to this Agreement shall bear its own direct and indirect
expenses incurred in connection with the negotiation and preparation of this
Agreement and the consummation and performance of the transactions contemplated
hereby, including, without limitation, all legal fees and fees of any brokers,
finders or similar agents; provided, however, that, if the Closing occurs, Buyer
shall cause the Company to pay for legal fees and accounting fees actually
incurred by the Company in connection with this Agreement (including those
incurred on behalf of the Shareholders), up to a maximum of $25,000. The Company
shall not incur legal fees or accounting fees in connection with this Agreement
or the transactions contemplated hereby in excess of $32,500. Any such excess
shall be paid directly by the Shareholders.
SECTION 8.06 Publicity; Employee Communications. At all times prior
to the Closing Date, each party shall obtain the consent of all other parties
hereto, which shall not be unreasonably withheld, prior to issuing, or
permitting any of its directors, officers, employees or agents to issue, any
press release or other information to the press, employees of the Company or any
third party with respect to this Agreement or the transactions contemplated
hereby; provided, however, that no party shall be prohibited from supplying any
information to any of is representatives, agents, attorneys, advisors, financing
sources and others to the extent necessary to complete the
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transactions contemplated hereby so long as such representatives, agents,
attorneys, advisors, financing sources and others are made aware of and agree to
be bound by the terms of this Section 8.06. Nothing contained in this Agreement
shall prevent any party to this Agreement at any time from furnishing any
required information to any Governmental Entity or authority pursuant to a Legal
Requirement or from complying with its legal or contractual obligations.
SECTION 8.07 Further Assurances.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements, to
consummate and make effective the transactions contemplated by this Agreement.
(b) If at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Shareholders or the proper officers or directors of the Company or Buyer, as the
case may be, shall take or cause to be taken all such necessary or convenient
action and execute, and deliver and file, or cause to be executed, delivered and
filed, all necessary or convenient documentation.
SECTION 8.08 Inconsistent Action. Buyer and the Shareholders shall
not take or suffer to be taken, and the Shareholders shall not permit the
Company to take or cause or suffer to be taken, any action that would cause any
of the representations or warranties of the Buyer or the Shareholders,
respectively, in this Agreement to be untrue, incorrect, incomplete or
misleading.
SECTION 8.9 Post-Termination Employment. The Shareholders
acknowledge and agree that, subject to any written contracts of employment, if
any, after the Closing (a) Buyer shall not be required to employ or retain any
employee of the Company or any other Person, and (b) Buyer, in its sole and
absolute discretion, may cause the Company to retain all, some, or none of such
employees.
SECTION 8.10 Competing Offers; Merger or Liquidation. The
Shareholders agree that they will not, and the Shareholders will cause the
Company not to, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage discussions with, or the submissions
of bids, offers or proposals by, any Person with respect to an acquisition of
the Shares, and the Shareholders will not, and the Shareholders will not permit
the Company to, engage any broker, financial adviser or consultant with an
incentive to initiate or encourage proposals or offers from other parties.
Furthermore, the Shareholders shall not, and the Shareholders shall not permit
the Company to, directly or indirectly, through any officer, director, agent or
otherwise, engage in negotiations concerning any such transaction with, or
provide information to, any Person other than Buyer and its representatives,
with a view to engaging, or preparing to engage, that Person with respect to any
matters referenced in this Section. The Shareholders shall ensure that the
Company shall not commence any proceeding to merge, consolidate or liquidate or
dissolve or obligate itself to do so.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual consent of all of the parties hereto;
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(b) by the Shareholders, on the one hand, or by Buyer, on the
other hand, by written notice to the other party or parties hereto if the
Closing shall not have taken place on or before December 31, 1998 (or such later
date as Buyer and the Shareholders may agree), provided that in the case of a
termination under this clause (b), the party or parties terminating this
Agreement shall not then be in material breach of any of its or their
obligations under this Agreement;
(c) by Buyer if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by the Shareholders
under this Agreement or (ii) any of the conditions precedent to Closing set
forth in Section 6.01 have not been met on the Closing Date, and, in each case,
Buyer is not then in material default of its obligations hereunder; or
(d) by the Shareholders if (i) there has been a material
misrepresentation, breach of warranty or breach of covenant by Buyer under this
Agreement or (ii) any of the conditions precedent to Closing set forth in
Section 6.02 have not been met on the Closing Date, and, in each case, the
Shareholders are not then in material default of any of their obligations
hereunder.
(e) by either party if the Annexes are not agreed upon on or
before October 31, 1998; provided, however, that the parties shall negotiate
diligently and in good faith to agree upon the Annexes.
(f) by the Shareholders if Buyer has not waived in writing the
provisions of Section 6.01(j) on or before December 15, 1998.
SECTION 9.02 Effect of Termination. Upon termination in accordance
with the provisions of Section 9.01, this Agreement shall become void and there
shall be no liability or obligation (except for Extraordinary Remedies) on the
part of any party hereto or their respective directors, officers, employees,
agents or other representatives to any other party hereto; provided, however,
that the provisions of Sections 8.03, 8.05 and 7.16(a) shall survive termination
and remain in full force and effect.
SECTION 9.03 Amendment. Other than by the delivery of supplements to
the Schedules on or before the Closing, this Agreement may be amended only by a
written instrument executed by each of the parties hereto. Any amendment
effected pursuant to this Section 9.03 shall be binding upon all parties hereto.
SECTION 9.04 Waiver; Survival. Any term or provision of this
Agreement may be waived in writing at any time by the party or parties entitled
to the benefits thereof. The representations and warranties of the Shareholders
made herein are made for the sole purpose of providing Buyer with information
during the course of Buyer's due diligence. A termination of this Agreement in
accordance with Section 9.01 shall conclusively be deemed a waiver and release
of any and all claims (except for Extraordinary Remedies) by Buyer against
Seller arising out of this Agreement. Except as provided in Section 10.02 below,
the closing of the transactions described
herein in accordance with the terms of this Agreement shall conclusively be
deemed to be a waiver by Buyer of any breach or untruth of any representation or
warranty made by the Shareholders and an acceptance of the Company in an "as is"
condition.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDIES
SECTION 10.01 Survival of Representations, Warranties and Covenants.
Except as provided in Section 10.02 below, the representations, warranties and
covenants of the parties hereto contained in this Agreement shall not survive
the Closing and shall be deemed to merge therein (except for the provisions of
Sections 8.02(b), 8.03, 8.05 and 7.16(a), which shall survive and remain in full
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force and effect), no party having any obligation or liability to the others by
reason thereof after the Closing.
SECTION 10.02 Remedies. Except for Extraordinary Remedies, Buyer's
exclusive remedy for a breach of any covenant, representation or warranty shall
be, at Buyer's sole election: (a) the termination of this Agreement or (b) the
closing of the transactions contemplated hereby in accordance with the terms
hereof. Closing of the transactions contemplated herein shall be conclusively
deemed a waiver by each party hereto of all remedies and claims against the
other parties by reason of this Agreement and the transactions contemplated
herein (except for remedies and claims for a breach or violation of Sections
8.02(b), 8.03, 8.05 or 7.16(a) which shall survive the Closing), except for
Extraordinary Remedies, which Extraordinary Remedies shall survive the Closing
and be actionable thereafter. "Extraordinary Remedies" means remedies for claims
arising out of conduct constituting fraud, deceit, intentional misrepresentation
and/or willful misconduct by any other party hereto during or in connection with
(a) the negotiation and execution of this Agreement, (b) the preparation and
delivery of the Disclosure Letter and/or the Schedules, and/or (c) the period of
time between the execution of this Agreement and the Closing. Damages under this
Section 10.02 are limited to the direct costs, expenses and damages which arise
from the conduct constituting fraud, deceit, intentional misrepresentation
and/or willful misconduct.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Notices. All notices and other communications under or
in connection with this Agreement shall be in writing and shall be deemed given
(a) if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three days after being mailed, or (c) if given by facsimile, upon
confirmation of transmission by facsimile, in each case to the parties at the
following addresses:
(a) If to Buyer addressed to:
Interiors, Inc.
320 Washington Street
Mt. Vernon, New York 10553-1017
Facsimile: (914) 665-5469
Attention: Mr. Max Munn
With copies to:
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Facsimile: (213) 627-0705
Attention: DeAnne H. Ozaki, Esq.
and
Mr. Dennis D. D'Amore
1755 Glendale Boulevard
Los Angeles, California 90026
Facsimile: (213) 664-5679
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and
Irvin Rothfarb, Esq.
15 West 53rd Street
New York, New York 10019
Facsimile: (212) 262-6228
(b) If to the Shareholders, addressed to:
Jimmy D. Webster, Jr.
241 Green T Boulevard, East
Hernando, Mississippi 38632
With a copy to:
Wyatt, Tarrant & Combs
Crescent Center
6075 Poplar Avenue, Suite 650
Memphis, Tennessee 38119
Facsimile: (901) 537-1010
Attention: Lawson F. Apperson, Esq.
SECTION 11.02 Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
such term or provision in any other jurisdiction, the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or enforceable.
SECTION 11.03 Entire Agreement. Except as specifically set forth
herein, this Agreement, including the annexes and schedules attached hereto and
other documents referred to herein, contain the entire understanding of the
parties hereto in respect of their subject matter and supersede all prior and
contemporaneous agreements and understandings, oral and written, among the
parties with respect to such subject matter.
SECTION 11.04 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors, heirs and assigns; provided, however, that no party may
assign either this Agreement or any of its rights, interests or obligations
hereunder in whole or in part without the prior written consent of the other
parties hereto, and any such transfer or assignment without said consent shall
be void, ab initio. Subject to the immediately preceding sentence, this
Agreement is not intended to benefit, and shall not run to the benefit of or be
enforceable by, any other person or entity other than the parties hereto and
their permitted successors and assigns.
SECTION 11.05 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
SECTION 11.06 Schedules and Annexes. The Schedules and Annexes to
this Agreement are incorporated herein and, by this reference, made a part
hereof as if fully set forth at length herein.
SECTION 11.07 Construction.
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(a) The article, section and subsection headings used herein
are inserted for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or
neuter gender, and the singular or plural, shall be deemed to include the others
whenever and wherever the context so requires.
(c) For the purposes of this Agreement, unless the context
clearly requires, "or" is not exclusive.
SECTION 11.08 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Delaware.
SECTION 11.09 Consent to Jurisdiction. Each party hereto irrevocably
submits to the exclusive jurisdiction of the state and federal courts located in
Atlanta, Georgia (or if such courts refuse to accept jurisdiction, in Memphis,
Tennessee), or a for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby and to the laying of venue in any such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in any such court and irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
INTERIORS, INC.
By:
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An Authorized Officer
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Jimmy D. Webster, Jr.
-------------------------------------
Henry Gray
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Bettye Jo Webster
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