UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 31,
2000
WINSLOEW FURNITURE, INC.
(Exact name of registrant as specified in its charter)
Florida 0-25246 63-1127982
(State or other ( Commission File Number) ( I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
160 Village Street, Birmingham, Alabama 35242
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (205)
408-7600
(Not Applicable)
(Former name or former address, if changed since last
report)
Item 2. Acquisition or Disposition of Assets.
On March 31, 2000, the Registrant, acquired all of the
outstanding stock of Wabash Valley Manufacturing, Inc.,
("Wabash") an Indiana corporation. The following summary is
qualified in its entirety by the more detailed information
contained in the copy of the stock purchase agreement,
attached as Exhibit 2.1 to this current report on Form 8-K.
The assets acquired consist of the stock of Wabash,
which is engaged in the design, manufacture and distribution
of plastisol coated outdoor furniture and site amenity
products.
As consideration for the stock, the Registrant 1) paid
the Sellers, in the aggregate, $34,000,000 at closing and 2)
paid $1,500,000 into an escrow account, which amount will be
released to the Sellers subject to certain contingencies.
Wabash was acquired debt free. The amount of consideration
paid the Registrant for the stock was determined through an
arm's length negotiation between representatives of the
Registrant and the Sellers.
The transaction was financed through a combination of
borrowings under the Registrant's senior credit facility and
additional equity.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit No.
Description
2.1 Stock Purchase Agreement by and among and Doug Curtis,
et al., the Stockholders of Wabash Valley Manufacturing,
Inc. and Wabash Manufacturing, Inc. dated as of March 31,
2000
2.2 Employment Agreement between Jerry Shilling and
Wabash Valley Manufacturing, Inc.
2.3 Employment Agreement between Michael Shilling and
Wabash Valley Manufacturing, Inc.
2.4 Subscription and Shareholder Agreement between Michael
Shilling and WinsLoew Furniture, Inc.
2.5 Subscription and Shareholder Agreement Between Jerry
Shilling and WinsLoew Furniture, Inc.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
WinsLoew Furniture, Inc.
April 10, 2000
by: /s/ Vincent A. Tortorici, Jr.
Vincent A. Tortorici, Jr.
Vice President
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
by and among
WINSLOEW FURNITURE, INC.
and
DOUGLAS H. CURTIS; ANNE D. PHILLIPP; EDWARD T. PHILLIPP;
REBECCA J. BACLAWSKI, NOT INDIVIDUALLY BUT AS GUARDIAN FOR
DIANA J. BACLAWSKI; REBECCA J. BACLAWSKI, NOT INDIVIDUALLY
BUT AS GUARDIAN FOR JAMES C. BACLAWSKI; REBECCA J.
BACLAWSKI, NOT INDIVIDUALLY BUT AS GUARDIAN FOR JOHN D.
BACLAWSKI; LINDA A. PHILLIPP AND EDWARD T. PHILLIPP, NOT
INDIVIDUALLY BUT AS GUARDIANS FOR CHRISTOPHER R. PHILLIPP;
LINDA A. PHILLIPP AND EDWARD T. PHILLIPP, NOT INDIVIDUALLY
BUT AS GUARDIANS FOR MICHAEL C. PHILLIPP; ROBERT P. CURTIS
AND ELLEN M. CURTIS, NOT INDIVIDUALLY BUT AS GUARDIANS FOR
MICHAEL M. CURTIS; ROBERT P. CURTIS AND ELLEN M. CURTIS, NOT
INDIVIDUALLY BUT AS GUARDIANS FOR ANDREW B. CURTIS; ROBERT
P. CURTIS AND ELLEN M. CURTIS, NOT INDIVIDUALLY BUT AS
GUARDIANS FOR CATHERINE A. CURTIS; COLLEEN KALSBEEK AND PAUL
KALSBEEK, NOT INDIVIDUALLY BUT AS CONSERVATORS FOR DOUGLAS
W. KALSBEEK; COLLEEN KALSBEEK AND PAUL KALSBEEK, NOT
INDIVIDUALLY BUT AS CONSERVATORS FOR CLAIRE C. KALSBEEK;
COLLEEN KALSBEEK AND PAUL KALSBEEK, NOT INDIVIDUALLY BUT AS
CONSERVATORS FOR MARK J. KALSBEEK; MICHAEL R. SHILLING, NOT
INDIVIDUALLY BUT AS GUARDIAN FOR DREW M. SHILLING; GWENDOLYN
CURTIS HOLTON; PATRICIA CURTIS PIRNIE; JERRY L. SHILLING;
BRENDA K. SHILLING; JODI L. SHILLING; JUSTIN T. SHILLING;
MICHAEL R. SHILLING; KATHY K. SHILLING; DEREK M. SHILLING,
the stockholders of Wabash Valley Manufacturing, Inc.
and
WABASH VALLEY MANUFACTURING, INC.
dated as of March 31, 2000
TABLE OF CONTENTS
Page
1. Definitions and Interpretation 1
(a) Definitions 1
(b) Additional Defined Terms 9
(c) Interpretation 10
2. Purchase and Sale of Shares; Satisfaction of Funded
Indebtedness; Closing 10
(a) Basic Transaction 10
(b) Purchase Price 10
(c) Payment at Closing 10
(d) Funded Indebtedness 11
(e) The Closing 11
(f) Deliveries at the Closing 12
(g) Transfer Taxes 13
(h) Net Working Capital Adjustment 13
(i) Distribution to Sellers Prior to Closing. 15
3A. Representations and Warranties of the Sellers as to
Seller Matters 16
(a) Capacity 16
(b) Binding Obligation 16
(c) Noncontravention 16
(d) Litigation 16
(e) Ownership of Company Common Stock 17
(f) Brokers Fees 17
3B. Representations and Warranties of the Sellers and
Company With Respect to the Company 17
(a) Organization/Power and Authority to Conduct Business 17
(b) Noncontravention 17
(c) Brokers Fees 18
(d) Capitalization 18
(e) Financial Statements 18
(f) Absence of Certain Developments 18
(g) Undisclosed Liabilities 20
(h) Legal Compliance 21
(i) Company Permits 21
(j) Tax Matters 21
(k) Certain Business Relationships with the Company 22
(l) Title to Tangible Assets Other than Real Property
Interests 23
(m) Real Property 23
(n) Intellectual Property 24
(o) Material Contracts 24
(p) Powers of Attorney 25
(q) Insurance 25
(r) Litigation 25
(s) Labor Relations 25
(t) Employee Benefits 25
(u) Environmental, Health and Safety Matters 27
(v) Customers and Suppliers 28
(w) Inventory 28
(x) Accounts Receivable 28
(y) List of Accounts 28
(z) Product Warranty 28
(aa) Product Liability 29
(bb) Year 2000 Compliance 29
(cc) Repayment of Seller Loans 29
(dd) Trustee of 401(k) Plan 29
(ee) Employee List. 29
(ff) Medical, Dental, and Workers' Compensation Claims 29
(gg) Pre-paid Advertising. 29
(hh) EPCRA Filings 30
4. Representations and Warranties of the Purchaser 30
(a) Organization 30
(b) Authorization of Transaction; Binding Obligation 30
(c) Noncontravention 30
(d) Brokers Fees 30
(e) Acquisition of Shares for Investment 30
5. Pre-Closing Covenants 31
(a) General 31
(b) Notices and Consents 31
(c) Operation of Business 31
(d) Preservation of Business 31
(e) Full Access 31
(f) Notice of Developments 31
6. Post-Closing Covenants 32
(a) General 32
(b) Transition 32
(c) Litigation Support 32
(d) Noncompetition 32
(e) Non-Solicitation 33
(f) Confidentiality 33
(g) Section 338(h)(10) Election; Certain Tax Matters 34
(h) Certain Employee Matters 35
7. Remedies for Breaches of This Agreement 36
(a) Survival of Representations and Warranties 36
(b) Indemnification 36
(c) Effect of Knowledge of Breach; Determination of
Losses; Treatment of Indemnification Payments 38
(d) Enforcement of Escrow Agreement 39
(e) No Contribution from Company 39
(f) Assignment by Purchaser 39
(g) Exclusive Remedy 39
8. No Shop 39
9. Conditions to Obligation to Close 39
(a) Conditions to Obligation of the Purchaser 39
(b) Conditions to Obligation of the Sellers 41
10. Additional Agreements 41
(a) Sellers? Guarantee of Accounts Receivable 41
(b) Litigation 43
Computer Software Licenses 43
Environmental Matters 43
Product Returns 43
Product Liability Insurance 43
Medical and Dental Reserves 44
NLRB Proceeding 44
Zinc 44
Union Organization 44
11. Termination 45
(a) Termination of Agreement 45
(b) Effect of Termination 45
12. Miscellaneous 46
(a) No Third-Party Beneficiaries 46
(b) Entire Agreement 46
(c) Succession and Assignment 46
(d) Counterparts 46
(e) Headings 46
(f) Notices 46
(g) Governing Law; Jurisdiction 47
(h) Amendments and Waivers 48
(i) Arbitration 48
(j) Equitable Remedies 48
(k) Waiver of Jury Trial 49
(l) Prevailing Parties 49
(m) Severability 49
(n) Expenses 49
(o) Construction 49
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made
this 31 day of March, 2000, by and among WINSLOEW
FURNITURE, INC., a Florida corporation (the "Purchaser"),
WABASH VALLEY MANUFACTURING, INC., an Indiana Corporation
(the "Company"), and the following selling shareholders,
DOUGLAS H. CURTIS; ANNE D. PHILLIPP; EDWARD T. PHILLIPP;
REBECCA J. BACLAWSKI, NOT INDIVIDUALLY BUT AS GUARDIAN FOR
DIANA J. BACLAWSKI; REBECCA J. BACLAWSKI, NOT INDIVIDUALLY
BUT AS GUARDIAN FOR JAMES C. BACLAWSKI; REBECCA J.
BACLAWSKI, NOT INDIVIDUALLY BUT AS GUARDIAN FOR JOHN D.
BACLAWSKI; LINDA A. PHILLIPP AND EDWARD T. PHILLIPP, NOT
INDIVIDUALLY BUT AS GUARDIANS FOR CHRISTOPHER R. PHILLIPP;
LINDA A. PHILLIPP AND EDWARD T. PHILLIPP, NOT INDIVIDUALLY
BUT AS GUARDIANS FOR MICHAEL C. PHILLIPP; ROBERT P. CURTIS
AND ELLEN M. CURTIS, NOT INDIVIDUALLY BUT AS GUARDIANS FOR
MICHAEL M. CURTIS; ROBERT P. CURTIS AND ELLEN M. CURTIS, NOT
INDIVIDUALLY BUT AS GUARDIANS FOR ANDREW B. CURTIS; ROBERT
P. CURTIS AND ELLEN M. CURTIS, NOT INDIVIDUALLY BUT AS
GUARDIANS FOR CATHERINE A. CURTIS; COLLEEN KALSBEEK AND PAUL
KALSBEEK, NOT INDIVIDUALLY BUT AS CONSERVATORS FOR DOUGLAS
W. KALSBEEK; COLLEEN KALSBEEK AND PAUL KALSBEEK, NOT
INDIVIDUALLY BUT AS CONSERVATORS FOR CLAIRE C. KALSBEEK;
COLLEEN KALSBEEK AND PAUL KALSBEEK, NOT INDIVIDUALLY BUT AS
CONSERVATORS FOR MARK J. KALSBEEK; MICHAEL R. SHILLING, NOT
INDIVIDUALLY BUT AS GUARDIAN FOR DREW M. SHILLING; GWENDOLYN
CURTIS HOLTON; PATRICIA CURTIS PIRNIE; JERRY L. SHILLING;
BRENDA K. SHILLING; JODI L. SHILLING; JUSTIN T. SHILLING;
MICHAEL R. SHILLING; KATHY K. SHILLING; DEREK M. SHILLING
(each individually, a "Seller" and collectively, the
"Sellers"). The Purchaser, the Company, and the Sellers are
each referred to in this Agreement as a "Party" and
collectively as the "Parties."
The Sellers directly own all of the outstanding capital
stock of the Company.
This Agreement contemplates a transaction in which the
Purchaser will purchase from the Sellers, and the Sellers
will sell to the Purchaser, all of the outstanding capital
stock of the Company.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the
representations, warranties and covenants herein contained,
the Parties agree as follows.
1. Definitions and Interpretation.
(a) Definitions. As used in this Agreement, the following
terms have the meaning specified or referred to below:
"Accounts Receivable" means all of the Company's accounts,
instruments, drafts, acceptances and other forms of
receivables and all rights earned under the Company's
contracts to sell goods or render services.
"Accrued Commissions" means accrued commissions payable by
the Company calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial
Statements.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of section1504 of the Code.
"Authority" means any federal, state, local or foreign
governmental regulatory agency, commission, bureau,
authority, court or arbitration tribunal.
"Available Cash" means all Cash held by the Company as of
midnight on the day before the Closing Date less (i) an
amount of Cash necessary to cover outstanding checks (which
are not otherwise stale) which have been mailed or otherwise
delivered by the Company but which have not cleared.
"Business Day" means a day which is not a Saturday, Sunday,
or a legal holiday on which banking institutions in the
State of Indiana are authorized to be closed.
"Business of the Company" means the manufacturing and
distribution of site amenities including, but not limited
to, furniture and fixtures, and any other business in which
the Company is currently involved.
"Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in
accordance with GAAP applied on a basis consistent with the
preparation of the Financial Statements.
"Changes in Accounting Principles" includes all changes in
accounting principles, policies, practices, procedures or
methodologies with respect to financial statements, their
classification or their display, as well as all changes in
practices, methods, conventions or assumptions (unless
required by objective changes in underlying events) utilized
in making accounting estimates.
"Charter and bylaws" respectively, mean with respect to any
corporation, those instruments that, among other things, (i)
define its existence, as filed or recorded with the
applicable Authority, including such corporation's Articles
or Certificate of Incorporation, and (ii) otherwise govern
its internal affairs, in each case as amended, supplemented,
or restated.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Common Stock" means the Common Stock, no par value,
of the Company.
"Confidential Information" means data and information
relating to the business of the Company (which does not rise
to the level of a Trade Secret) and which has value to the
Company and is not generally known to its competitors.
Confidential Information does not include any data or
information that (i) has been voluntarily disclosed to the
public by the Company, (ii) has been independently developed
and disclosed by others, (iii) otherwise enters the public
domain through lawful means.
"Contribution and Agency Agreement" means the Contribution
and Agency Agreement by and among the Sellers dated as of
March 31, 2000, attached as Exhibit A.
"Disclosure Schedule" means the Disclosure Schedule
accompanying this Agreement. Any matters disclosed in such
Disclosure Schedule shall be deemed to qualify each and
every representation and warranty of the Sellers in this
Agreement to which such matters are relevant.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA section3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA section3(1).
"Employment Agreements" means the Employment Agreements to
be entered into between the Company and, Jerry L. Shilling
and Michael R. Shilling, respectively, at Closing
substantially in the form of Exhibit B hereto.
"Environmental, Health and Safety Requirements" means all
federal, state, local, regional and foreign statutes,
regulations and ordinances concerning workplace health and
safety and pollution or protection of the environment,
including all those relating to the presence, use,
production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control
or cleanup of any hazardous materials, substances or wastes.
"Environmental Claim" means any written notice or claim by
any person or any Authority alleging potential liability
(including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (i)
the presence, release or threatened release into the
environment, of any Material of Environmental Concern at any
location, whether or not owned, leased or operated by the
Company, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person that would be aggregated
with the Company under section414(b), (c), (m) or (o) of the
Code.
"Escrow Agreement" means the Escrow Agreement, in the form
of Exhibit C hereto, to be entered into on the Closing Date
by the Purchaser, the Sellers and the Escrow Agent.
"Escrow Agent" has the meaning set forth in Paragraph
2(c)(ii) below.
"Escrow Funds" has the meaning set forth in Paragraph
2(c)(ii) below.
"Funded Indebtedness" means, with respect to any Person
(without duplication), the aggregate amount (including the
current portions thereof) of (i) all indebtedness of such
Person for money borrowed from others, (ii) all obligations
of such Person evidenced by notes, bonds, debentures or
other similar instruments, (iii) all obligations, contingent
or otherwise, of such Person for the deferred purchase price
of assets, property or services other than trade payables
incurred in the ordinary course of business, (iv) all
indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of
default are limited to the repossession or sale of such
property), (v) all obligations of such Person as lessee
under leases that have been, in accordance with GAAP,
recorded as capital leases, (vi) all obligations, contingent
or otherwise, of such Person to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of
such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid
dividends, (vii) all indebtedness or obligations of others
of the type described in clauses (i) through (vi) above
guaranteed, directly or indirectly, in any manner by such
Person, or in effect guaranteed, directly or indirectly, in
any manner by such Person, through an agreement, contingent
or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to
purchase and pay for property if not delivered or to pay for
services if not performed, primarily for the purpose of
enabling the debtor to make payment of the indebtedness or
to assure the owners of the indebtedness against loss, but
excluding endorsements of checks and other instruments in
the ordinary course, (viii) all indebtedness or obligations
of the type described in clauses (i) through (vi) above
secured by (or for which the holder or obligee thereof has
an existing right, contingent or otherwise, to be secured
by) any Lien upon property owned by such Person, even though
such Person has not in any manner become liable for the
payment of such indebtedness or obligations and (ix)
interest expense accrued but unpaid, and all fees and
prepayment premiums, on or relating to any of the foregoing,
however, Funded Indebtedness shall in any event exclude
trade accounts payable and accrued expenses of the type
reflected in the Financial Statements.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"IRS" means the Internal Revenue Service.
"Information Technology" means computer software, computer
firmware, computer hardware (in each case whether general or
specific purpose) and other similar or related items of
automated, computerized or software systems that are used or
relied upon by any Person in the conduct of such Person's
trade or business.
"Intellectual Property" means (i) all national and
multinational patents and patent applications and statutory
invention registrations, (ii) all trademarks, service marks,
trade dress, logos, trade names, Internet domain names and
corporate names, and all related national and multinational
registrations, applications and renewals, together with all
goodwill associated therewith (including all translations,
adaptations, derivations and combinations of the foregoing),
(iii) all copyrights and copyrightable works and all related
national and multinational registrations, applications and
renewals, (iv) all Trade Secrets and Confidential
Information, including inventions (whether reduced to
practice or not and whether patentable or not), ideas,
compositions, know-how, manufacturing and production
processes and techniques, research and development
information, drawings, specifications, designs, plans,
proposals, technical data, business and marketing plans, and
customer and supplier lists and related information) and (v)
all computer software and related source codes,
specifications and data (including data, data bases and
documentation).
"Inventory" means all of the inventories of the Company,
including raw materials, work in progress, finished goods,
packaging goods and other like items.
"Knowledge" means with respect to the Sellers, the actual
knowledge of any one or more members of the Sellers' Agent
Committee that such representation or warranty is not true
and correct to the same extent as provided in the applicable
representation and warranty, after reasonable investigations
and inquiries of the officers and responsible employees of
the Company, and (ii) with respect to the Purchaser, the
actual knowledge of Bobby Tesney, Vincent A. Tortorici, Jr.,
Rick J. Stephens, or Stephen C. Hess that such
representation or warranty is not true and correct to the
same extent as provided in the applicable representation and
warranty.
"Lien" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, whether or not related to the
extension of credit or the borrowing of money.
"Loss" or "Losses" means all damages, dues, penalties,
fines, reasonable amounts paid in settlement, Taxes, costs,
obligations, losses, expenses, and fees (including court
costs and reasonable attorneys' fees and expenses),
including, as the context may require, any of the foregoing
which arise out of or in connection with any actions, suits,
proceedings, hearings, third party investigations, charges,
complaints, claims, demands, injunctions, judgments, orders,
decrees or rulings.
"Material Adverse Change" or "Material Adverse Effect" means
any change or effect that is materially adverse to the
business, assets, financial condition or results of
operations of the Company.
"Material Contract" means any contract or agreement whether
written or oral to which the Company is a party, or by which
the Company or any of its assets is bound, and which (a)
relates to Funded Indebtedness or is a letter of credit,
pledge, bond or similar arrangement running to the account
of or for the benefit of the Company, (b) relates to the
purchase, maintenance or acquisition of, or sale or
furnishing of, materials, supplies, merchandise, machinery,
equipment, parts or any other property or services
(excluding any such contract made in the Ordinary Course of
Business and which is expected to be fully performed within
90 days of the date hereof or which involves revenues or
expenditures of less than $50,000), (c) is a collective
bargaining agreement, (d) obligates the Company not to
compete with any business, or which otherwise restrains or
prevents the Company from carrying on any lawful business or
which restricts the right of the Company to use or disclose
any information in its possession (excluding in each case
customary restrictive covenants contained in agreements
entered into in the Ordinary Course of Business), (e)
relates to (i) employment, compensation, severance, or
consulting between the Company and any of its officers or
directors, or (ii) between the Company and any other
employees or consultants of the Company who are entitled to
compensation thereunder in excess of $35,000 per annum, (f)
is a lease or sublease of real property, or a lease,
sublease or other title retention agreement or conditional
sales agreement involving annual payments in excess of
$25,000 individually or $100,000 in the aggregate for any
machinery, equipment, vehicle or other tangible personal
property (whether the Company is a lessor or lessee), (g) is
a contract for capital expenditures or the acquisition or
construction of fixed assets for or in respect of any real
property involving payments to be made after the date hereof
in excess of $50,000, (h) is a contract granting any Person
a Lien on any of the assets of the Company, in whole or in
part (other than Permitted Liens), (i) is a contract by
which the Company retains any manufacturer's
representatives, broker or other sales agent, distributor or
representative or through which the Company is appointed or
authorized as a sales agent, distributor or representative,
(j) is a joint venture or partnership contract or a limited
liability company operating agreement with any Seller, or
with any Affiliate of any Seller, (k) is (i) an agreement
for the storage, transportation, treatment and disposal of
any materials subject to regulation under any Environmental
Health and Safety Requirements, or (ii) a contract for
storage, transportation or similar services with carriers or
warehousemen (excluding any such contract entered into in
the Ordinary Course of Business and involving aggregate
annual expenditures not exceeding $50,000), (l) is an
agreement or arrangement with any Affiliate of any Seller,
or (m) any other agreement (or group of related agreements)
the performance of the executory portion of which involves
consideration in excess of $50,000 or which cannot be
terminated by the Company upon 90 days notice.
"Materials of Environmental Concern" means chemicals,
pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum and petroleum products in
each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health
and Safety Requirements.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Multiemployer Plan" has the meaning set forth in ERISA
section3(37).
"Net Working Capital at Closing" means the total current
assets of the Company, including Cash (other than Available
Cash), Accounts Receivable (including any 90 and Over
Accounts Receivable described in section10[b]), Inventory
(valued as described in section 3B(w) of this Agreement and
section 3B(w) Disclosure Schedule), prepaid expenses, and
deposits minus the total current liabilities of the Company
(which current liabilities shall include (i) accounts
payable-trade and accrued expenses [including Accrued
Commissions], (ii) a reserve for unpaid medical and dental
claims submitted to the Company but unpaid as of Closing,
and (iii) any accrual for vacation and holidays carried
over from calendar year 1999, but shall exclude (a) the
current portion of any Funded Indebtedness, and (b) any
reserves or accruals for medical or dental claims or accrued
vacation and holidays other than those described above), in
each case determined as of the open of business on the
Closing Date and by reference to the amounts set forth on
the face (but not the notes) of the Closing Balance Sheet,
subject to the provisions of this definition and after
giving effect to the transactions contemplated in
sections 2(c) and 2(d) below. With respect to any calculation
of Net Working Capital at Closing, except as expressly
provided in this Agreement, no Change in Accounting
Principles will be made from those utilized in preparing the
Financial Statements including with respect to the nature of
accounts, in determining the level of reserves or in
determining the level of accruals.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including
with respect to quantity and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under
ERISA.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (i) Liens set forth in
the Disclosure Schedule or noted in the Financial
Statements, (ii) Liens for Taxes not yet due and payable and
for which adequate reserves are maintained on the financial
statements of the Company as of the Closing Date in
accordance with GAAP, (iii) pledges or deposits to secure
obligations under workers or unemployment compensation Laws
or similar legislation or to secure public or statutory
obligations, (iv) mechanic's, materialman's, supplier's,
vendor's or similar Liens arising in the Ordinary Course of
Business securing amounts which are not overdue and for
which adequate reserves are maintained on the financial
statements of the Company as of the Closing Date in
accordance with GAAP and (v) deposits to secure the
performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a
like nature incurred in the Ordinary Course of Business.
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department,
agency or political subdivision thereof).
"Phase I Site Assessments" means the Phase I Site
Assessments, Projects 80Z2202 and 80Z2203 prepared by
Envirocorp, Inc., dated February, 2000.
"Restricted Area" means (i) the State of Indiana, and (ii)
each of the other states, territories and possessions of the
United States and each of the other countries and
territories of the World in which the Company conducts or
has conducted the Business of the Company during the five
years preceding the Closing Date .
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Sellers' Agent Committee" shall mean those Sellers
authorized to act as the agent of the Sellers individually
and collectively under and pursuant to the terms of the
Contribution and Agency Agreement.
"Subscription and Shareholders' Agreement" means the
Subscription and Shareholders' Agreement to be entered into
among Purchaser, Jerry L. Shilling and Michael R. Shilling
in the form of Exhibit D hereto.
"Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of
which (i) more than 50% of the securities or other ownership
interests or (ii) securities or other interests having by
their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar
functions with respect to such corporation or other
organization, is directly owned or controlled by such Person
or by any one or more of its Subsidiaries.
"Taxes" means all federal, state, local and foreign taxes
(including income or profits taxes, premium taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, ad valorem taxes, severance taxes, capital
levy taxes, transfer taxes, value added taxes, employment
and payroll-related taxes, property taxes, business license
taxes, occupation taxes, import duties and other
governmental charges and assessments), of any kind
whatsoever, including interest, additions to tax and
penalties with respect thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim
for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Trade Secrets" means information relating to the Company,
without regard to form, including technical or nontechnical
data, formulas, patterns, compilations, programs, devices,
methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or
potential customers or suppliers which is not commonly known
by or available to the public and which (a) derives economic
value, actual or potential, from not being known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or
use, and (b) is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
"Transaction Documents" means this Agreement and the
Employment Agreement(s), Escrow Agreement, Contribution and
Agency Agreement, Subscription and Shareholders' Agreement,
and Purchase Price Calculation Certificate.
"Year 2000 Compliant" means, with respect to the Company's
Information Technology, that (i) the information technology
is designed to be used prior to, during and after the
calendar year 2000 A.D., (ii) the Information Technology
used during each such time period will accurately receive,
provide and process date/time data (including calculating,
comparing and sequencing) from, into and between the 20th
and 21st centuries, including the years 1999 and 2000 and
leap-year calculations and (iii) the Information Technology
will not malfunction, cease to function or provide invalid
or incorrect results as a result of date/time data, in each
case to the extent that Information Technology of third
parties, used in combination with the Company's Information
Technology, properly exchanges date/time data with the
Company's Information Technology.
(b) Additional Defined Terms. As used in this Agreement,
the following terms have the meanings specified in the
Sections referred to below:
Term Section
AAA 12(i)
Accountant 2(h)(ii)
Agreement Preamble
Closing 2(e)
Closing Balance Sheet 2(h)(i)
Closing Date 2(e)
Company Recitals
Company Permits 3B(i)
Defense Counsel 7(b)(iv)
Defense Notice 7(b)(iv)
Employee Benefit Plan 3B(t)
Financial Statements 3B(e)
WinsLoew Recitals
Indemnified Parties 7(b)(iv)
Indemnifying Parties 7(b)(iv)
Real Property 3B(m)
Most Recent Financial Statements 3B(e)
Most Recent Fiscal Month End 3B(e)
Most Recent Fiscal Year End 3B(e)
Net Working Capital at Closing 2(h)(i)
Objection Notice 2(h)(ii)
Party(ies) Preamble
Pre-Closing Tax Periods 6(g)(i)
Property 3B(m)
Purchase Price 2(b)
Purchase Price Calculation Certificate 2(c)(i)
Purchaser Preamble
Rules 12(i)
Section 338(h)(10) Election 6(g)(i)
S Corporation Tax Period 3B(j)(iv)
Shares 2(a)
Sellers Preamble
Seller Transaction Expenses 2(c)(i)
Third Party Claim 7(b)(iv)
(c) Interpretation. As used in this Agreement, the word
"including" means without limitation, the word "or" is not
exclusive and the words" herein", "hereof", "hereby"," hereto" and
"hereunder" refer to this Agreement as a whole. Unless the
context otherwise requires, references herein: (i) to
Articles, Sections, Exhibits and Schedules (including the
Disclosure Schedule) mean the Articles and Sections of and
the Exhibits and Schedules attached to this Agreement; (ii)
to an agreement, instrument or document means such
agreement, instrument or document as amended, supplemented
and modified from time to time to the extent permitted by
the provisions thereof and by this Agreement; and (iii) to a
statute means such statute as amended from time to time and
includes any successor legislation thereto. The Schedules
(including the Disclosure Schedule) and Exhibits referred to
herein shall be construed with and as an integral part of
this Agreement to the same extent as if they were set forth
verbatim herein. Titles to Articles and headings of
Sections are inserted for convenience of reference only and
shall not be deemed a part of or to affect the meaning or
interpretation of this Agreement.
2. Purchase and Sale of Shares; Satisfaction of Funded
Indebtedness; Closing.
(a) Basic Transaction. Pursuant to discussions and
negotiations between the Purchaser and various groups of
Sellers holding, respectively, majority and minority
interests in the Company, said groups collectively owning
all of the outstanding stock of the Company, and on and
subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase from the Sellers, and the
Sellers agree to sell to the Purchaser, free and clear of
all restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), liens, claims
and demands, all of the shares of Common Stock owned by the
Sellers (the "Shares") as set forth in section3B(d) of the
Disclosure Schedule hereto for the consideration specified
below in this section 2.
(b) Purchase Price. Purchaser has agreed to pay Sellers,
comprising groups holding majority and minority interests
respectively in the Company, aggregate purchase price for
all of the Shares (the "Purchase Price") in the amount of
(i) $35,500,000.00 plus Available Cash, if any, minus (ii)
the amount of the Company's Funded Indebtedness as of the
open of business on the Closing Date. The Purchase Price
payable to the Sellers at Closing is subject to adjustment
as set forth in section 2(h). The Purchase Price shall be
allocated among the Sellers comprising groups holding
majority and minority interests respectively, in the Company
in accordance with the applicable percentages reflected in
section 3B(d) of the Disclosure Schedule.
(c) Payment at Closing. On the Closing Date, the Purchaser
shall make payment of the Purchase Price as follows:
(i) The Purchase Price, minus (A) $1,500,000.00 to be
deposited as the Escrow Funds pursuant to section2(c)(ii)
below, and minus (B) $500,000.00 to be paid to the Sellers'
Agent Committee as the Fees and Expenses Fund pursuant to
section 2(c)(iii) below, shall be paid to the Sellers, by
wire transfer of immediately available funds, to an account
or accounts designated in writing by the Sellers' Agent
Committee prior to the Closing, against delivery by the
Sellers to the Purchaser of a stock certificate or
certificates representing all of the Shares, duly endorsed
in blank or accompanied by duly executed assignment
documents, sufficient in form and substance to convey to the
Purchaser good title to such Shares, free and clear of all
restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), liens, claims and
demands. It shall be the responsibility of the Sellers'
Agent Committee to distribute the proceeds from said account
or accounts in accordance with instructions from the
Sellers. The Sellers' Agent Committee may direct the
Purchaser to deliver a portion of the Purchase Price to
certain third parties, including without limitation McDonald
Investments Inc., and Bose McKinney & Evans LLP for fees,
expenses, costs or other obligations of the Sellers arising
out of or in connection with the transactions contemplated
in this Agreement (the "Seller Transaction Expenses"). The
amount so delivered shall be withheld from the Purchase
Price payable at Closing in accordance with such written
directions of the Sellers' Agent Committee. At the Closing,
the Sellers' Agent Committee shall deliver to the Purchaser
a certificate (the "Purchase Price Calculation
Certificate"), in the form of Exhibit E hereto, setting
forth (i) the amount of all Funded Indebtedness of the
Company outstanding immediately prior to the Closing and
(ii) the amount of Seller Transaction Expenses (if any).
(ii) The sum of $1,500,000.00 (the "Escrow Funds") to
SunTrust Bank, Atlanta, as escrow agent (the "Escrow Agent")
pursuant to the terms of the Escrow Agreement. As provided
in the Escrow Agreement, the Escrow Funds shall be held in
an account (the "Escrow Account") to provide indemnification
to the Purchaser and the Company as provided in section 7
hereof.
(iii) The sum of $500,000.00 (the "Fees and Expenses Fund")
to an account designated by the Sellers' Agent Committee by
wire transfer pursuant to the Contribution and Agency
Agreement.
Funded Indebtedness. On the Closing Date, concurrently with
the Closing, the Purchaser and/or the Company (as determined
by the Purchaser) shall deliver to the holders of Funded
Indebtedness an amount sufficient to repay all Funded
Indebtedness outstanding immediately prior to the Closing,
with the result that immediately following the Closing there
will be no further obligations of the Company, monetary or
otherwise, with respect to any Funded Indebtedness
outstanding immediately prior to the Closing. Prior to the
Closing Date, the Sellers will provide the Purchaser with
customary pay-off letters from all holders of Funded
Indebtedness outstanding immediately prior to the Closing,
and make arrangements reasonably satisfactory to the
Purchaser for such holders to provide to the Purchaser
recordable form mortgage and lien releases, canceled notes,
trademark and patent assignments (if applicable) and other
documents reasonably requested by the Purchaser
simultaneously with the Closing. If the Purchaser directs
the Company to pay any of the Company's funded indebtedness,
it shall provide the Company with sufficient funds to do so.
The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the
offices of Bose, McKinney & Evans LLP, 135 N. Pennsylvania
Street, 2700 First Indiana Plaza, Indianapolis, Indiana
46204 (or at such other location as the Parties may agree or
by the execution and delivery of the closing documents by a
courier agreed to by the Parties), on the 31st day of March,
2000, or such other date as the Sellers and the Purchaser
may mutually determine (the "Closing Date"), but no later
than April 7, 2000, and shall be effective for all purposes
of this Agreement as of 12:01 a.m., Central Standard Time,
on the Closing Date. Except as otherwise provided herein,
all proceedings to be taken and all documents to be executed
at the Closing shall be deemed to have been taken, delivered
and executed simultaneously, and no proceeding shall be
deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
(f) Deliveries at the Closing. At the Closing:
(i) Jerry L. Shilling and Michael R. Shilling and the
Company shall execute and deliver their respective
Employment Agreement;
(ii) The Purchaser, Jerry L. Shilling and Michael R.
Shilling shall execute and deliver the Subscription and
Shareholders' Agreement;
(iii) The Sellers shall execute and deliver the Contribution
and Agency Agreement;
(iv) The Sellers' Agent Committee shall deliver to the
Purchaser (A) a certificate issued by the Secretary of State
of the State of Indiana and each state (if any) in which the
Company is qualified as a foreign entity, as of a date
reasonably acceptable to the Purchaser, as to the existence
(or, as applicable) of the Company in such states, and (B) a
tax clearance certificate from the State of Indiana, if and
to the extent available, as of a date reasonably acceptable
to the Purchaser;
(v) The Sellers shall deliver to the Purchaser (A) a copy
of the Company's Charter, as amended to date, certified as
of the recent date by the Secretary of State of the State of
Indiana, and (B) all minute books, stock transfer books,
blank stock certificates and corporate seals of the Company;
(vi) The Sellers shall deliver to the Purchaser a
certificate of the Secretary of the Company, dated the
Closing Date, in form and substance reasonably satisfactory
to the Purchaser, as to (A) the Charter of the Company and
no amendments thereto since a specified date, (B) the bylaws
of the Company, (C) the resolutions of the directors of the
Company authorizing the execution and performance by the
Company of this Agreement and the transactions contemplated
thereby and (D) incumbency and signatures of the officers of
the Company executing this Agreement and any other
agreement, instrument or document executed by the Company in
connection with this Agreement;
(vii) The Purchaser shall deliver to the Sellers a
certificate issued by the Secretary of State of the State of
Florida, as of a date reasonably acceptable to the Sellers,
as to the good standing (or non-dissolution, as applicable)
of the Purchaser in such state;
(viii) The Purchaser shall deliver to the Sellers a
copy of the Purchaser's Charter, as amended to date,
certified as of the recent date by the Secretary of State of
the State of Florida;
(ix) The Purchaser shall deliver to the Sellers a
certificate of the Secretary of the Purchaser, dated the
Closing Date, in form and substance reasonably satisfactory
to the Sellers, as to (A) the Charter of the Purchaser and
no amendments thereto since a specified date; (B) the bylaws
of the Purchaser; (C) the resolutions of the directors of
the Purchaser authorizing the execution and performance of
this Agreement and the transactions contemplated hereby; and
(C) incumbency and signatures of the officers of the
Purchaser executing this Agreement and any other agreement,
instrument or document executed by the Purchaser in
connection herewith;
(x) The Sellers shall deliver to the Purchaser the
resignations of all of the directors of the Company, which
resignations shall be effective as of the Closing;
(xi) The Sellers shall deliver to the Purchaser the various
certificates and documents referred to in section 9(a) below, and
(xii) The Purchaser shall deliver to the Sellers the various
certificates and documents referred to insection 9(b) below.
(xiii) The Purchaser shall deliver the Purchase Price
to the Sellers and the Escrow Agent in accordance with section 2(c)
above;
(xiv) The Sellers shall deliver to the Purchaser an opinion
letter from Sellers' attorney in the form of Exhibit F
hereto; and
(xv) The Purchaser shall deliver to the Sellers an opinion
letter from Purchaser's attorney in the form of Exhibit G
hereto.
(g) Transfer Taxes. The Sellers, jointly and severally,
shall be responsible for the payment of all transfer,
documentary, sales, use, stamp, registration and other such
Taxes and fees (including any penalties and interest), if
any, which may be payable with respect to the transactions
contemplated by this Agreement. The Sellers will, at their
own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other such
Taxes and fees and, if required by applicable law, the
Purchaser will, and will cause the Company to, join in the
execution of any such Tax Returns and other documentation.
(h) Net Working Capital Adjustment.
(i) As promptly as practicable, but in no event later than
30 days after the Closing Date, the Purchaser shall prepare
and deliver to the Sellers' Agent Committee a balance sheet
of the Company as of the open of business on the Closing
Date prepared in accordance with GAAP with no Change in
Accounting Principles from those utilized in preparing the
Financial Statements including with respect to the nature of
accounting in determining the level of reserves or in
determining the level of accruals (the "Closing Balance
Sheet"), together with a schedule setting forth in
reasonable detail the Purchaser's good faith calculation of
the Net Working Capital at Closing.
(ii) The Purchaser and its accountants shall permit the
Sellers' Agent Committee and its representatives to have
full access to the books, records and other documents
(including work papers) pertaining to or used in connection
with preparation of the Closing Balance Sheet and the
Purchaser's calculation of the Net Working Capital at
Closing and provide the Sellers' Agent Committee and their
representatives with copies thereof (as reasonably requested
by the Sellers' Agent Committee). If the Sellers' Agent
Committee disagrees with the Purchaser's calculation of the
Net Working Capital at Closing as set forth on the schedule
attached to the Closing Balance Sheet or with any other
aspect of the Closing Balance Sheet for any purpose under
this Agreement, the Sellers' Agent Committee shall notify
the Purchaser in writing of such disagreement (the
"Objection Notice") (such Objection Notice setting forth the
basis for such disagreement in reasonable detail) within 15
Business Days after the Purchaser's delivery of the Closing
Balance Sheet to the Sellers' Agent Committee. The
Purchaser and the Sellers' Agent Committee thereafter shall
negotiate in good faith to resolve any such disagreements
with respect to the computation of the Net Working Capital
at Closing or any other aspect of the Closing Balance Sheet.
If the Purchaser and the Sellers' Agent Committee are unable
to resolve any such disagreements within 15 Business Days
after the delivery of the Objection Notice to the Purchaser
by the Sellers' Agent Committee, the Purchaser and the
Sellers' Agent Committee shall submit the dispute to a so-
called "big five" public accounting firm (or a successor
thereto) jointly selected by the Purchaser and the Sellers'
Agent Committee (the "Accountant") for resolution; and at
the time of such submission, the Purchaser and the Sellers'
Agent Committee shall each disclose to the other any
professional relationships by and between the Sellers and
the Purchasers and its shareholders, directors, and
officers, and any such "big five" accounting firms during
the three (3) year period immediately prior to Closing. If
the Purchaser and the Sellers are unable to agree upon the
Accountant, the Accountant shall be a so-called "big five"
accounting firm (or a successor thereto) selected by lot
(after the Purchaser and the Sellers each exclude one such
accounting firm). The Purchaser and the Sellers agree to
release the Accountant from any and all claims or
liabilities for any services performed by the Accountant in
resolving any dispute concerning the computation of Net
Working Capital at Closing.
(iii) The Purchaser and the Sellers' Agent Committee shall
use their respective best efforts to cause the Accountant
to resolve all disagreements with respect to the Net Working
Capital at Closing or otherwise with respect to the Closing
Balance Sheet as soon as practicable, but in any event shall
direct the Accountant to render a determination within 30
days of its retention. The Accountant shall consider only
those items and amounts in the Closing Balance Sheet which
are identified in the Objection Notice as being items which
the Purchaser and the Sellers' Agent Committee are unable to
resolve. In resolving any disputed item, the Accountant may
not assign a value to any item greater than the greatest
value for such item claimed by either party or less than the
smallest value for such item claimed by either party. The
Accountant's determination shall be based solely on
presentations by the Purchaser and the Sellers' Agent
Committee (i.e., not on independent review), and on the
definition of Net Working Capital included herein. The
determination of the Accountant shall be conclusive and
binding upon the Sellers and the Purchaser and constitute
the Net Working Capital at Closing for purposes of this
Agreement.
(iv) The Accountant shall determine the allocation of its
costs and expenses in resolving any disputes relating to the
determination of Net Working Capital at Closing or any other
aspect of the Closing Balance Sheet based upon the
percentage which the portion of the contested amount not
awarded to the Purchaser, on the one hand, or the Sellers,
on the other hand, bears to the amount actually contested by
such Parties. For example, if the Sellers claim the Net
Working Capital at Closing is $1,000 less than the amount
determined by the Purchaser, and the Purchaser contests only
$500 of the amount claimed by the Sellers, and if the
Accountant ultimately resolves the dispute by awarding the
Sellers $300 of the $500 contested, then the costs and
expenses of arbitration will be allocated 60% (i.e., 300 /
500) to the Purchaser and 40% (i.e., 200 / 500) to the
Sellers.
(v) Upon the final determination of the Net Working
Capital at Closing:
(A) if Net Working Capital at Closing is greater than
$6,600,000.00, the Purchaser shall pay the amount of any
such excess to the Sellers no later than three Business Days
after the final determination of Net Working Capital at
Closing, by wire transfer of immediately available funds to
an account or accounts designated by the Sellers' Agent
Committee in writing;
(B) if Net Working Capital at Closing is less
than 6,500,000.00, the Sellers, jointly and severally, shall
pay the amount of any such deficiency to the Purchaser no
later than three Business Days after the final determination
of Net Working Capital at Closing, by wire transfer of
immediately available funds to an account designated by the
Purchaser in writing; and
(C) if Net Working Capital at Closing is less than or
equal to $6,600,000.00 and greater than or equal to
$6,500,000.00, no adjustment shall be made to the Purchase
Price.
All payments made pursuant to this 2(h)(v) shall be treated
by all Parties as adjustments to the Purchase Price.
(i) Distribution to Sellers Prior to Closing. On or before
Closing, the Company may distribute to the Sellers, without
affecting the Purchase Price payable under this Agreement,
dividends equal to the sum of (a) the estimated state and
federal income tax required to be paid by the Sellers on the
Company's net income for fiscal year 1999, and (b) the
estimated state and federal income tax required to be paid
by the Sellers on the Company's net income for the portion
of fiscal year 2000 prior to Closing, calculated in each
case using the highest state and federal tax rates for such
year for ordinary income of individuals. Any such dividends
payable to Jerry L. Shilling, Michael R. Shilling, and
Douglas Curtis, respectively, shall include transfer by the
Company to each such individual, as applicable, of any
vehicle owned by the Company and used by such Seller; and
life insurance policies on the life of such Seller
maintained by the Company. In the event that the value of
any distributions of such vehicles and life insurance
policies to any of Jerry L. Shilling, Michael R. Shilling,
or Douglas Curtis shall exceed the allocable portion of the
tax dividend payable to such person, then the aggregate
dividends payable to the Shareholders of the Company shall
be increased to the extent that the dividend payable to such
individuals shall at a minimum equal the value of the life
insurance policies and vehicles distributed to such person.
3A. Representations and Warranties of the Sellers as to
Seller Matters. Each Seller, severally and not jointly,
represents and warrants to the Purchaser, as of the date of
this Agreement and as of the Closing Date, as follows:
(a) Capacity. Such Seller has full capacity to execute
and deliver this Agreement and the other Transaction
Documents to which he or she is a party and to perform his
or her obligations hereunder and thereunder.
(b) Binding Obligation. This Agreement constitutes, and
the other Transaction Documents to which such Seller is a
party, when executed and delivered, will constitute the
valid and legally binding obligations of such Seller
enforceable in accordance with the terms hereof and thereof,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization and other similar laws affecting
creditors' rights generally and by general principles of
equity, regardless of whether asserted in a proceeding in
equity or at law.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement by such Seller nor the execution
and delivery of the other Transaction Documents to which
such Seller is a party, nor the consummation of the
transactions contemplated hereby or thereby, will (i)
violate any statute, regulation or rule of any Authority to
which such Seller is subject (except for violations which
would not have a Material Adverse Effect or prevent or
materially delay the consummation of the transactions
contemplated hereby), (ii) violate any injunction, judgment,
order, decree or ruling of any Authority to which such
Seller is subject or (iii) conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement,
contract, lease, license or instrument to which such Seller
is a party or by which such Seller is bound or to which any
of such Seller's assets is subject. Except as set forth
under 3A(c) of the Disclosure Schedule, such Seller is not
required to give any notice to, make any filing with, or
obtain any authorization, consent or approval of any
Authority in order for such Seller to consummate the
transactions contemplated by this Agreement or this
Agreement or the other Transaction Documents to which such
Seller is a party. With respect to any such disclosures
listed in 3A(c) of the Disclosure Schedule, the Seller
shall, prior to the Closing Date, perform all acts necessary
to consummate the transactions contemplated by this
Agreement or the other Transaction Documents to which such
Seller is a party.
(d) Litigation. There are no actions, suits, claims or
proceedings pending or threatened against or involving such
Seller or any of his or her assets or properties by or
before any Authority that question the validity of this
Agreement or seek to prohibit, enjoin or otherwise challenge
the consummation of the transactions contemplated hereby.
There are no outstanding orders, judgments, injunctions,
stipulations, awards or decrees of any Authority against
such Seller or any of his or her assets or properties which
prohibit or enjoin the consummation of the transactions
contemplated hereby.
(e) Ownership of Company Common Stock. Each Seller holds
of record and owns beneficially the number and percentage of
the Shares set forth in the Disclosure Schedule and has good
title to said number and percentage of the Shares, free and
clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities
laws), liens, claims, and demands. Such Seller is not a
party to any option, warrant, purchase right, or other
contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of
the Company (other than pursuant to this Agreement). Such
Seller is not a party to any voting trusts, proxies, or
other agreements or understandings with respect to the
voting of any capital stock of the Company.
(f) Brokers Fees. Neither such Seller nor any Person
acting on his or her behalf has engaged any broker, finder
or intermediary other than McDonald Investments Inc. for or
on account of the transactions contemplated by this
Agreement as a result of which any of the Purchaser or the
Company will have any legal responsibility. The Sellers
collectively will pay any fees and expenses due and owing
McDonald Investments Inc. in connection with the
transactions described in this Agreement out of the portion
of the Purchase Price payable at Closing under 2(c)(i).
3B. Representations and Warranties of the Sellers and
Company With Respect to the Company. The Sellers jointly
and severally and the Company represent and warrant to the
Purchaser, as of the date of this Agreement and as of the
Closing Date, as follows:
(a) Organization/Power and Authority to Conduct Business.
The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Indiana.
The Company is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect.
Section 3B(a) of the Disclosure Schedule sets forth a list
of each jurisdiction in which the Company is licensed or
qualified to do business as a foreign corporation. The
Company has full corporate power and authority to carry on
the businesses in which it is engaged and to own and use the
properties owned and used by it. The Company does not have
any Subsidiary, and does not own, directly or indirectly,
any capital stock or other equity interests in any
corporation, partnership or other entity.
(b) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any
statute, regulation or rule of any Authority to which the
Company is subject (except for violations which would not
have a Material Adverse Effect or prevent or materially
delay the consummation of the transactions contemplated
hereby), (ii) violate any injunction, judgment, order,
decree or ruling of any Authority to which the Company is
subject or any provision of the Charter or bylaws of the
Company or (iii) except as set forth under section 3B(b) of
the Disclosure Schedule, conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement,
contract, lease, license or instrument to which the Company
is a party or by which it is bound or to which any of its
assets is subject. Except as set forth under section 3B(b)
of the Disclosure Schedule, the Company is not required to
give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Authority in order
for the Company to consummate the transactions contemplated
by this Agreement or the other Transaction Documents to
which it is a party. With respect to any such disclosures
listed in section 3B(b) of the Disclosure Schedule, the
Company shall, prior to the Closing Date, perform all acts
necessary to consummate the transactions contemplated by
this Agreement or the other Transaction Documents to which
such Company is a party.
(c) Brokers Fees. Neither the Company nor any Person
acting on the Company's behalf has paid or become obligated
to pay any fee or commission to any broker, finder or
intermediary other than McDonald Investments Inc. for or on
account of the transactions contemplated by this Agreement.
The Sellers collectively will pay any and all fees and
expenses due and owing to McDonald Investments Inc. in
connection with the transactions described in this Agreement
out of the portion of the Purchase Price payable at Closing
under section 2(c)(i).
(d) Capitalization. The Common Stock constitutes the
Company's only authorized class of capital stock. Section
3B(d) of the Disclosure Schedule sets forth for the Company
(i) the number of shares of authorized Common Stock and (ii)
the number of issued and outstanding shares of Common
Stock, the names of the holders of record thereof, and the
number of shares held by each such holder. All of the
issued and outstanding shares of capital stock of the
Company have been duly authorized, are validly issued, fully
paid and nonassessable and were not issued in violation of
the preemptive rights of any Person or any agreement or law
by which the Company at the time of issuance was bound.
There are no outstanding or authorized subscriptions,
warrants, options or, except for this Agreement, other
agreements or rights of any kind to purchase or otherwise
receive or be issued, or securities or obligations of any
kind convertible into, any shares of capital stock or any
other security of the Company; there are no dividends which
have accrued or been declared but are unpaid on the capital
stock of the Company; and are no outstanding or authorized
stock appreciation, phantom stock or similar rights with
respect to the Company.
(e) Financial Statements. Set forth in section 3B(e) of
the Disclosure Schedule are the following financial
statements (collectively the "Financial Statements"): (i)
audited balance sheets and statements of income and
statements of shareholders equity and cash flows as of and
for the fiscal year ended December 31, 1999 (the "Most
Recent Fiscal Year End") for the Company; and (ii) unaudited
balance sheet and statement of income and statement of cash
flows (the "Most Recent Financial Statements") as of and for
each of the two periods ended February 5, 2000 and March 4,
2000 (the "Most Recent Fiscal Month End") for the Company.
The Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and
present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for
such periods; provided, however, that the Most Recent
Financial Statements are subject to normal year-end
adjustments (which will not be material, individually or in
the aggregate) and lack footnotes and other presentation
items; further provided that the Financial Statements do not
include accruals for vacation and holiday expense, unpaid
medical or dental expenses, or product returns; and provided
further that certain Inventory is valued as described in
section 3B(w) of the Disclosure Schedule.
(f) Absence of Certain Developments. Except as otherwise
contemplated by this Agreement or as set forth in section
3B(f) of the Disclosure Schedule, since the Most Recent
Fiscal Month End, the Company has conducted its business
only in the Ordinary Course of Business and there has not
been any Material Adverse Change with respect to the
Company. Without limiting the generality of the foregoing,
since that date, except as set forth in the Disclosure
Schedule, the Company has not:
(i) borrowed any amount or incurred any liabilities,
except liabilities incurred in the Ordinary Course of
Business (none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of
contract, breach of warranty, tort, infringement or
violation of law by the Company or any Seller);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any
conditional sale or other title retention agreement with
respect to any property or asset;
(iii) sold, assigned or transferred any of its tangible
assets, except for sales of Inventory in the Ordinary Course
of Business;
(iv) sold, assigned or otherwise transferred, or abandoned,
any Intellectual Property right or any claim for
infringement thereon;
(v) suffered any extraordinary losses involving more than
$25,000 in the aggregate or canceled, compromised, waived or
released any right or claim (or series of related rights and
claims) outside the Ordinary Course of Business or involving
more than $50,000 in the aggregate;
(vi) made any capital expenditures or commitments therefor
in excess of
$10,000 individually or $50,000 in the aggregate;
(vii) entered into any material agreement, contract, lease
or license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or
casualty loss in excess of
$50,000 in the aggregate, individually or in the aggregate,
to its property, whether or not covered by insurance;
(ix) entered into any agreement with any labor union or
association representing any employee, or made any wage or
salary increase or bonus, or increase in any other direct or
indirect compensation, for or to any of its officers or
directors (or, other than in the Ordinary Course of
Business, other employees), or otherwise made any material
change in employment terms for any of its directors,
officers and employees;
(x) made any Change in Accounting Principles;
(xi) made any increase in or established any bonus,
insurance, deferred compensation, pension, retirement,
profit-sharing, stock option (including the granting of
stock options, stock appreciation rights, performance awards
or restricted stock awards or the amendment of any existing
stock options, stock appreciation rights, performance awards
or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement or
modified or obligated itself to modify or announced its
intention to modify, the Company's personnel policies and
practices in any material respect;
(xii) made any payment (including any dividends or other
distributions with respect to the Common Stock) to the
Sellers or any Affiliate of the Sellers (other than
compensation otherwise payable in the Ordinary Course of
Business) or forgiven any indebtedness due or owing from the
Sellers or any Affiliate of the Sellers to the Company;
(xiii) reclassified, combined, split, subdivided or
redeemed or otherwise repurchased any capital stock of the
Company, or created, authorized, issued, sold, delivered,
pledged or encumbered any additional capital stock (whether
authorized but unissued or held in treasury) or other
securities equivalent to or exchangeable for capital stock,
or granted or otherwise issued any options, warrants or
other rights with respect thereto;
(xiv) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the
capital stock, partnership interests or assets of, or by any
other manner, any business or any corporation, partnership,
limited liability company, association or other business
organization or division thereof;
(xv) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution
to, or extended any credit to, any Person, except (i) short-
term investments pursuant to customary cash management
policies, and (ii) advances to employees made in the
Ordinary Course of Business;
(xvi) made any write-down of the value of Inventory or
written off as uncollectible any Account Receivable except
for write-downs and write-offs in the Ordinary Course of
Business consistent with past practices, none of which would
reasonably be expected to result in a Material Adverse
Change;
(xvii) (A) except in the Ordinary Course of Business
liquidated Inventory or accepted product returns, (B)
accelerated receivables, or (C) delayed payables;
(xvii) made or pledged to make any charitable
contribution; or
(xviii) committed to do any of the foregoing.
(g) Undisclosed Liabilities. The Company does not have any
material liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to
become due, including any liability for Taxes) and there is
no basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand
against the Company giving rise to any such liability,
except for (i) liabilities set forth on the Financial
Statements or in any notes thereto (but only to the extent
such notes quantify any such liabilities), (ii) executory
liabilities under agreements, contracts, leases, licenses
and other arrangements entered into in the Ordinary Course
of Business to which the Company or any of its assets may be
bound (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach thereof
or violation of law), (iii) liabilities and other matters
reflected in the Disclosure Schedule, and (iv) liabilities
which have arisen in the Ordinary Course of Business since
the Most Recent Fiscal Month End (none of which results
from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement or violation of law by the Company or the
Sellers). Section 3B(g) of the Disclosure Schedule sets
forth as of the Most Recent Fiscal Month End a true and
correct listing of the indebtedness of the Company described
in clauses (i), (ii) and (iii) of the definition of Funded
Indebtedness.
(h) Legal Compliance. Except as set forth in section
3B(h) of the Disclosure Schedule, the Company is in
compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of all Authorities, except
where the failure to comply would not have a Material
Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated hereby.
Except as set forth in section 3B(h) of the Disclosure
Schedule, since December 31, 1994, the Company has not
received any written communication from any Authority that
alleges that the Company is not in compliance with any
foreign, federal, state or local laws, rules or regulations.
(i) Company Permits. The Company holds all permits,
licenses, variances, exemptions, orders and approvals of all
Authorities necessary for the lawful conduct of its business
(the "Company Permits"). The Company is in compliance with
the terms of the Company Permits, except where the failure
to comply would not have a Material Adverse Effect. Section
3B(i) of the Disclosure Schedule sets forth a list of the
Company Permits.
(j) Tax Matters.
(i) The Company has filed or will before Closing shall
have filed all Tax Returns required to have been filed, has
paid all Taxes that are due to be paid pursuant to such
returns (whether or not shown as due thereon) or pursuant to
any assessment that has become payable, and has set up a
reserve for the payment of all Taxes not yet due and payable
that adequately covers all periods through the date hereof.
All such Tax Returns are and will be complete and accurate
in all material respects and disclose all Taxes required to
be paid by the Company for the periods covered thereby.
Except as set forth in section 3B(j) of the Disclosure
Schedule:
(A) there is no action, suit, investigation, audit, claim
or assessment pending, or to Sellers' Knowledge proposed or
threatened against the Company with respect to Taxes;
(B) the federal income tax returns of the Company have not
been examined by and settled with the IRS;
(C) the Company has not waived or been requested to waive
any statute of limitations in respect of Taxes and there is
no agreement or other document extending, or having the
effect of extending, the period of assessment or collection
of any Taxes;
(D) there are no Liens for Taxes upon any of the assets of
the Company except liens relating to Taxes not delinquent.
All monies the Company is required by applicable law to
collect or withhold from the employees of the Company for
income Taxes, social security and other payroll Taxes, or
from independent contractors, shareholders or other third
parties, have been collected or withheld, and either paid to
the respective governmental agencies, set aside in accounts
for such purpose, or accrued, reserved against and entered
upon the applicable books and financial statements of the
Company;
(E) the Company has not, during the five-year period
ending on the Closing Date, been a personal holding company
within the meaning of section 541 of the Code; and
(F) the Company has never filed or been included in any
combined or consolidated Tax return with any other person or
been a member of an Affiliated Group filing a consolidated
federal income Tax Return; the Company does not otherwise
have liability for the Tax of any other Person under
Treasury Regulations section 1.1502-6 (or any comparable
provisions of state, local or foreign Tax law) and the
Company is not a party to or bound by any tax sharing
agreement, tax indemnity obligation or similar agreement
with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to
Taxes with any taxing Authority) and is not otherwise
responsible by contract or law (including theories of
successor or transferee liability) or otherwise, for the
Taxes of any other Person.
(ii) As a result of the transactions contemplated by this
Agreement, the Company will not be obligated to make a
payment to an individual that would be a "parachute payment"
to a "disqualified individual" as those terms are defined
in section 280G of the Code, without regard to whether such
payment is reasonable compensation for personal services
performed or to be performed in the future.
(iii) The Company has not filed a consent undersection341(f)
of the Code or any comparable provision of a state statute.
(iv) For all tax periods up to and including the effective
time of the Closing (collectively, the "S Corporation Tax
Period"), the Company has elected (with the consent of all
of its shareholders), in compliance with all applicable
legal requirements, to be taxed under Subchapter S of the
Code and corresponding provisions under any applicable state
and local laws, and such elections are in effect for the
Company. No action has been taken by the Company or any
shareholder of the Company that may result in the revocation
of any such elections (other than by reason of the
transactions described herein) and, with respect to the S
Corporation Tax Period, the Company has no liability,
absolute or contingent, for the payment of any income Taxes
under the Code or under the laws of such states or
localities which afford tax treatment similar to that under
Subchapter S of the Code. Except as set forth
insection3B(j) of the Disclosure Schedule, (A) the Company
has no "Subchapter C earnings and profits" as defined
insection1362(d) of the Code and (B) the Company has no "net
unrealized built-in gain" as such term is defined in section
1374(d)(1) and 1374(d)(8) of the Code.
(k) Certain Business Relationships with the Company.
Except as set forth insection3B(k) of the Disclosure
Schedule and except for normal advances to employees
consistent with past practice, payment of compensation for
employment to employees consistent with past practice, and
participation in Employee Benefit Plans by employees, since
December 31, 1996 the Company has not purchased, acquired or
leased any property or services from, or sold, transferred
or leased any property or services to, or loaned or advanced
any money to, or borrowed any money from, or entered into or
been subject to any management, consulting or similar
agreement with (i) any officer, director or shareholder of
the Company, or (ii) any of their respective Affiliates.
Except as set forth insection3B(k) of the Disclosure
Schedule, no Affiliate of the Company is indebted to the
Company for money borrowed or other loans or advances, and
the Company is not indebted to any such Affiliate for money
borrowed or other loans or advances.
(l) Title to Tangible Assets Other than Real Property
Interests. Except as set forth in section 3B(l) of the
Disclosure Schedule, the Company has good and valid title
to, or a valid leasehold interest in, all the tangible
assets (other than real property or interests in real
property) used or useful in the conduct of the Company's
business, except Inventory sold since the date hereof in the
Ordinary Course of Business, free and clear of any Liens
other than Permitted Liens. The machinery and equipment
used regularly in the conduct of the Business of the Company
are in the aggregate in good operating condition and repair
(subject to normal wear and tear, to periodic downtime and
repair, and to periodic replacement, in each case in light
of the age of such machinery and equipment), and subject to
the foregoing are suitable for the purposes for which they
are presently used. Except for interests and rights in
property pursuant to any lease, license or other agreement
described in section 3B(l) of the Disclosure Schedule or
pursuant to any lease, license or other agreement not
required to be described in section 3B(l) of the Disclosure
Schedule and except for property supplied by any customer or
supplier in connection with the purchase or sale of products
or services from or to such customer or supplier in the
Ordinary Course of Business, there is no tangible personal
property owned by any third party which is used by the
Company in the operation of its business. Section 3B(l) of the
Disclosure Schedule lists all machinery, equipment,
vehicles, furniture and other tangible personal property of
any kind and description having a present value in excess of
$10,000.00 (other than Inventory) owned or leased by the
Company. Notwithstanding any provision of this Agreement to
the contrary, the Purchaser acknowledges that certain art
work, wall displays, plaques and other objects of
sentimental value (none of which, individually or in the
aggregate, is material to the operation of the Company's
business and none which will be listed as an asset of the
Company on the Closing Balance Sheet) located at the
Company's premises (a list of which is set forth
under section 3B(l) of the Disclosure Schedule) is, and shall
remain, the personal property of the Sellers.
(m) Real Property. All real property and improvements
thereto and interests in real property and improvements
thereto that are owned or leased by the Company are
referred to herein collectively as the "Real Property" or
"Properties", and individually as a "Property". Section 3B(m)
of the Disclosure Schedule identifies all Real Property.
Except as set forth on section 3B(m) of the Disclosure
Schedule, the Company has good and valid title to, or a
valid leasehold interest in, all Real Property in each case
free and clear of any Liens, easements, covenants, rights-
of-way and other similar restrictions, except (i) Permitted
Liens and (ii) easements, covenants, rights-of-way and other
similar restrictions of record. There are no pending
condemnation, expropriation, eminent domain or similar
proceedings affecting all or any portion of such Properties
and no such proceedings are contemplated. There are no
leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of any
Property. The Company enjoys peaceful and undisturbed
possession of the Real Property. Except as set forth
on section 3B(m) of the Disclosure Schedule or otherwise in
the Disclosure Schedule, the Real Property is in compliance
with all applicable local, state and federal laws including,
but not limited to, environmental laws, zoning and land use
laws, building codes, safety codes, fire codes, OSHA laws,
and the Americans with Disabilities Act.
(n) Intellectual Property.
(i) Section 3B(n)(i) of the Disclosure Schedule identifies each
pending patent application and each registered item of
Intellectual Property owned or used by the Company, and each
written license agreement (excluding off-the-shelf or
"shrink-wrap" software license agreements) pursuant to which
the Company has granted to any third party, or received from
any third party a grant of, any rights in any of the
Intellectual Property owned or used by the Company. Except
as set forth in this Agreement or the Disclosure Schedule,
the Company owns, or possesses adequate and enforceable
licenses or rights (free of Liens other than Permitted
Liens) to use all Intellectual Property currently used by
the Company, or necessary to permit the Company to conduct
its business as now conducted.
(ii) Except as set forth insection 3B(n)(ii) of the
Disclosure Schedule, with respect to each item identified
insection3B(n)(i) of the Disclosure Schedule:
(A) the Company possesses all right, title and interest
thereto, free and clear of any Lien (other than Permitted
Liens), license or other restriction;
(B) such item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing, investigation,
written claim or written demand is pending or is threatened
which challenges the legality, validity, enforceability, use
or ownership of the item;
(D) neither the Company nor any other party to any license
agreement is in breach or default and no event has occurred
which with notice or lapse of time would constitute a breach
or default or permit termination, modification or
acceleration thereunder;
(E) no party to any license agreement has repudiated any
material provision thereof;
(F) no claims are pending or threatened that the Company
is infringing on or otherwise violating the rights of any
person with regard to any such item; and
(G) no person is infringing on or otherwise violating any
right of the Company with respect to such item.
(o) Material Contracts. Section 3B(o) of the Disclosure
Schedule lists the Material Contracts to which the Company
is a party. The Company has made available to the Purchaser
a correct and complete copy of each Material Contract listed
in section3B(o) of the Disclosure Schedule. With respect to
each such Material Contract, except as disclosed in
section 3B(o) of the Disclosure Schedule, (A) the Material
Contract is legal, valid, binding, enforceable and in full
force and effect; (B) except as disclosed in section 3B(o) of
the Disclosure Schedule neither the Company nor any other
party is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or
acceleration, under the Material Contract; (C) no party has
repudiated any provision of the Material Contract, (D) there
are no disputes or forbearance programs in effect with
respect to the Material Contract.
(p) Powers of Attorney. There are no outstanding powers
of attorney executed on behalf of the Company.
(q) Insurance. Section 3B(q) of the Disclosure Schedule
describes each insurance policy maintained by the Company.
All of such insurance policies are in full force and effect
and the Company is not in default with respect to its
obligations under any of such insurance policies. Such
policies are sufficient for compliance with all requirements
of law and Material Contracts to which the Company is a
party. Since the respective dates of such policies, no
notice of cancellation or non-renewal with respect to any
such policy has been received by the Company. section 3B(q)
of the Disclosure Schedule sets forth a list of all pending
claims with respect to all such policies.
(r) Litigation. Section 3B(r) of the Disclosure Schedule
sets forth each instance in which the Company (i) is subject
to any outstanding injunction, judgment, order, decree or
ruling or (ii) is a party or is to the Sellers' Knowledge
threatened to be made a party, to any action, suit,
proceeding, hearing or investigation of, in or before any
Authority.
(s) Labor Relations. The Company is not and has never been
a party to a collective bargaining agreement. Except as set
forth in section 3B(s) of the Disclosure Schedule, (i) since
December 31, 1995, the Company has not been involved in or
threatened with any strike, slowdown or work stoppage, (ii)
since December 31, 1995, the Company has not been involved
in or threatened with any unfair labor practice charge,
arbitration, suit or administrative proceeding relating to
labor matters involving its employees, (iii) there are no
actions, proceedings or claims pending or threatened against
the Company under any laws relating to employment, including
any provisions thereof relating to wages, hours, collective
bargaining, withholding or the payment of social security or
other Taxes, and (iv) the Company has complied with the
provisions of the Immigration Reform and Control Act of 1986
with respect to all of its employees hired after November 6,
1986 by verifying their employment eligibility and having
them complete Form I-9.
(t) Employee Benefits. Section3B(t) of the Disclosure
Schedule sets forth (a) all of the current Employee Pension
Benefit Plans, Employee Welfare Benefit Plans and all other
employee benefit, fringe benefit plans and programs
maintained or contributed to by the Company or any ERISA
Affiliate with respect to current or former employees of the
Company (the "Employee Benefit Plans").
(i) With respect to each Employee Benefit Plan and except
as disclosed in section 3B(i) of the Disclosure Schedule:
(A) each such Employee Benefit Plan (and each related
trust, insurance contract or fund) complies in form and in
operation in all material respects with the applicable
requirements of ERISA, the Code and other applicable laws
(including all reporting and disclosure requirements), and
has been operated in all material respects in accordance
with its terms;
(B) all contributions (including all employer
contributions and employee salary reduction contributions,
if any) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan, and
there are no accumulated funding deficiencies with respect
to any such Employee Pension Benefit Plan;
(C) each such Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to so qualify under
section 401(a) of the Code so qualifies and has received a
favorable determination letter from the IRS as to its
qualification under section401(a) of the Code;
(D) no "prohibited transaction" (as such term is defined
in section 406 of ERISA or section 4975 of the Code) has
occurred with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan (or its related
trust) which could subject the Company or any officer,
director or employee of the Company, to any Tax or penalty
imposed under section 4975 of the Code or liability under
section 406 of ERISA;
(E) the Company has delivered to the Purchaser correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received
from the IRS, the most recent Form 5500 Annual Report and
all accompanying schedules, the most recent actuarial
valuation (if any), and all related trust agreements,
insurance contracts and other funding arrangements which
implement each such Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an Employee
Pension Benefit Plan has been completely or partially
terminated or has been the subject of a "reportable event"
(as defined in section 4043 of ERISA) as to which notices
would be required to be filed with the PBGC. No proceeding
by the PBGC to terminate any such Employee Pension Benefit
Plan (other than a Multiemployer Plan) has been instituted;
(G) the Company has not incurred, and will not incur as a
result of any existing condition or the transactions
contemplated by this Agreement, any liability to the PBGC
(except for required premium payments, if any), or otherwise
under Title IV of ERISA (including any withdrawal liability)
or under the Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan and, as of
the Closing Date, the assets of each such Employee Pension
Benefit Plan are at least equal in value to the present
value of accrued benefits of the plan, based on actuarial
methods, tables and assumptions satisfactory to the
Purchaser; and
(H) no action, suit, proceeding, hearing or investigation
with respect to the administration or the investment of
assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or to the Sellers' Knowledge
threatened.
(ii) The Company does not contribute to any Multiemployer
Plan or have any liability (including withdrawal liability)
under any Multiemployer Plan.
(iii) The Company does not have any obligation to provide
health or other welfare benefits to former, retired or
terminated employees, except as specifically required under
section 4980B of the Code. With respect to all of its past
and present employees, the Company has complied in all
material respects with the notice and continuation
requirements of Part 6 of Subtitle B of Title I of ERISA and
of section 4980B of the Code.
(iv) The Company has no liability for or relating to any
Employee Benefit Plan or arrangement sponsored, maintained
or contributed to by an ERISA Affiliate.
(v) The consummation of the transactions contemplated by
this Agreement will not entitle any individual to any
severance pay, and will not accelerate the time of payment
or vesting, or increase the amount of any compensation due
to any individual, and will not be the direct or indirect
cause of any amount payable under any Employee Benefit Plan
being classified as an "excess parachute payment" under
section 280G of the Code.
(u) Environmental, Health and Safety Matters. Except as
disclosed in section 3B(u) of the Disclosure Schedule or in
the Phase I Site Assessments:
(i) The Company has not disposed of or released any
substance, arranged for the disposal of any substance,
knowingly exposed any employee or other individual to any
substance or condition, or owned or operated its businesses
or any property or facility so as to give rise to any
liability or corrective or remedial obligation of the
Company under any Environmental, Health and Safety
Requirement.
(ii) The Company is in compliance with all Environmental
Health and Safety Requirements, except where the failure to
comply would not have a Material Adverse Effect, and the
Company has not, since December 31, 1995, received any
written communication from any Authority that alleges that
the Company is not in such compliance.
(iii) There is no Environmental Claim pending or threatened
or recently filed against the Company, nor is there any
Environmental Claim against any Person whose liability for
any Environmental Claim the Company has retained or assumed
contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment
or fluids are present on any Property, nor have any said
items been removed from any Property.
(v) No real property presently or heretofore owned or
operated by the Company is currently listed on the National
Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both
promulgated under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or on
any analogous state list.
(vii) No off-site location at which the Company has disposed
or arranged for the disposal of any waste is listed on the
National Priorities List or on any analogous state list.
(v) Customers and Suppliers. Section 3B(v) of the
Disclosure Schedule contains a complete and accurate list of
the names of the 20 largest (by volume) customers and the 20
largest (by volume) suppliers of the Company for the fiscal
year ended December 31, 1999. The Company maintains good
relations with each of such customers and suppliers and,
except as set forth in section 3B(v) of the Disclosure
Schedule, since the Most Recent Fiscal Year End no event has
to the Sellers' Knowledge occurred that would materially
adversely affect the Company's relations with any such
customers or supplier. Except as set forth in section3B(v)
of the Disclosure Schedule, since the Most Recent Fiscal
Year End, no customer which accounted for more than five
percent (5%) of the Company's aggregate sales revenues
during the last twelve months has canceled, terminated (or
made any threat to the Company to cancel or terminate), or
materially decreased its usage of the Company's services or
products.
(w) Inventory. Except as disclosed in section 3B(w) of
the Disclosure Schedule, the Inventory of the Company is
merchantable and fit for the purpose for which it was
procured or manufactured and none of such Inventory is slow-
moving, obsolete, damaged or defective. Except as disclosed
in section 3B(w) of the Disclosure Schedule, the Inventory
of the Company is valued at the lower of cost (on a first-
in-first-out basis) or market in accordance with GAAP on a
basis consistent with prior periods.
(x) Accounts Receivable. Except as disclosed in
section 3B(x) of the Disclosure Schedule, all of the Accounts
Receivable of the Company are properly reflected on its
books and records and arose from bona fide transactions in
the Ordinary Course of Business, and are valid receivables
subject to no setoffs or counterclaims. The reserve for bad
debts set forth on the face of the Financial Statements
(rather than in any notes thereto) has been determined in
accordance with GAAP on a basis consistent with the past
custom and practice of the Company.
(y) List of Accounts. Section 3B(y) of the Disclosure
Schedule sets forth a list of all bank and securities
accounts, and all safe deposit boxes, maintained by the
Company and a listing of the persons authorized to draw
thereon or make withdrawals therefrom or, in the case of
safe deposit boxes, with access thereto.
(z) Product Warranty. Except as disclosed in section
3B(z) of the Disclosure Schedule, the products manufactured,
sold, and delivered by the Company have in the aggregate
conformed in all material respects with all applicable
contractual commitments and all express and implied
warranties, and the Company has no material liability
(whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether
due or to become due) for replacement thereof or other
damages in connection therewith. Substantially all of the
products manufactured, sold, and delivered by the Company
are subject to standard terms and conditions of sale,
subject to variations applicable to specific customer
requirements. Any obligations of the Sellers to indemnify
the Purchaser under this Section in connection with product
returns shall be in accordance with section 10(e).
(aa) Product Liability. The Company has no material
liabilities (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and
whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold or
delivered by the Company prior to the Closing (the "Pre-
Closing Product Liabilities"). section3B(aa) of the
Disclosure Schedule sets forth a true and correct list and
brief description of all product liability claims that have
been filed against the Company since December 31, 1993.
(bb) Year 2000 Compliance. The Company has undertaken an
assessment of its Information Technology and such
Information Technology is Year 2000 Compliant.
(cc) Repayment of Seller Loans. The Sellers have satisfied
in full all loans due and owing from them to the Company, if
any, together with all interest accrued thereon.
(dd) Trustee of 401(k) Plan. Unless the Purchaser requests
in writing prior to closing the resignation of Jerry L.
Shilling as trustee under the Company's 401(k) Plan, Jerry
L. Shilling shall remain as trustee under the Company's
401(k) Plan after closing until the Purchaser or the Company
directs otherwise.
(ee) Employee List. The Company has no employees other
than those listed in section3B(ee) of the Disclosure
Schedule. section 3B(ee) of the Disclosure Schedule sets
forth a true and correct list of all employees of the
Company, their dates of hire, accrued vacation and sick
leave, and salaries or hourly wage rates, and identifies any
and all inactive employees who are off work due to workers?
compensation leave, family medical leave, leave of absence,
or who are not actively employed for any other reason.
(ff) Medical, Dental, and Workers? Compensation Claims.
The Company has no medical claims, dental claims or worker's
compensation claims resulting from treatment, injuries,
conditions or illnesses arising prior to the Closing (Pre-
Closing Claims), other than those listed in section3B(ff) of
the Disclosure Schedule, which are in dispute, have
otherwise not been paid in full or which are not covered by
insurance for which premiums have already been paid by the
Company.
(gg) Pre-paid Advertising. All of the pre-paid advertising
expenses of the Company are properly reflected on its books
and records and arose from bona fide transactions in the
Ordinary Course of Business. The accrual of the pre-paid
advertising expenses set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) has
been determined in accordance with GAAP on a basis
consistent with the past custom and practice of the Company.
(hh) EPCRA Filings. Except as set forth on section 3B(hh)
of the Disclosure Schedule, the Company is in compliance
with the Emergency Planning and Community Right to Know Act
("EPCRA"), 42 U.S.C. section 11001 et seq.
4. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Sellers as follows:
(a) Organization. The Purchaser is a corporation duly
organized, validly existing, and in good standing under the
laws of Florida.
(b) Authorization of Transaction; Binding Obligation. The
Purchaser has full corporate power and authority to execute
and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform its
obligations hereunder and thereunder. This Agreement
constitutes , and such other Transaction Documents, when
executed and delivered, will constitute the valid and
legally binding obligations of the Purchaser, enforceable in
accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization and other similar laws affecting creditors?
rights generally and by general principles of equity,
regardless of whether asserted in a proceeding in equity or
at law.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement or the other Transaction
Documents to which either the Purchaser is a party, nor the
consummation of the transactions contemplated hereby or
thereby, will (i) violate any statute, regulation or rule of
any Authority to which the Purchaser is subject (except for
violations which would not have a Material Adverse Effect or
prevent or materially delay the consummation of the
transactions contemplated hereby), (ii) violate any
injunction, judgment, order, decree or ruling of any
Authority to which the Purchaser is subject or any provision
of its Charter or bylaws or other organizational document,
as the case may be, or (iii) except as set forth in
section4(c) of the Disclosure Schedule conflict with, result
in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license or
instrument to which the Purchaser is a party or by it is
bound or to which any of its assets is subject. Except as
disclosed in section 4(c) of the Disclosure Schedule, the
Purchaser is not required give any notice to, make any
filing with, or obtain any authorization, consent or
approval of any Authority in order for it to consummate the
transactions contemplated by this Agreement or the other
Transaction Documents to which it is a party.
Notwithstanding the foregoing, in order to purchase the
Shares herein, the Purchaser is required to obtain consent
from its lender under a credit agreement between Purchaser
and its lender. With respect to any such disclosures listed
in section 4(c) of the Disclosure Schedule, the Purchaser
shall, prior to the Closing Date, perform all acts necessary
to consummate the transactions contemplated by this
Agreement or the other Transaction Documents to which such
Purchaser is a party.
(d) Brokers Fees. Neither the Purchaser nor any Person
acting on the Purchaser's behalf has engaged any broker,
finder or intermediary for or on account of the transactions
contemplated by this Agreement as a result of which the
Company (unless the Closing shall occur) or the Sellers will
have any legal responsibility.
(e) Acquisition of Shares for Investment. The Purchaser
is an "accredited investor" as defined by Rule 501 under the
Securities Act. The Shares to be purchased by the Purchaser
pursuant to this Agreement are being acquired for investment
only and not with a view to any public distribution thereof,
and the Purchaser will not offer to sell or otherwise
dispose of the Shares so acquired by it in violation of any
of the registration requirements of the Securities Act or
any comparable state laws.
5. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this
Agreement and the Closing:
(a) General. Each of the Parties will use commercially
reasonable efforts to take all action and to do all things
necessary, proper or advisable in order to consummate and
make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in section 9 below).
(b) Notices and Consents. Each of the Parties will give
any notices to, make any filings with, and use commercially
reasonable efforts to obtain any authorizations, consents
and approvals of governments and governmental agencies in
connection with consummation of the transactions
contemplated by this Agreement. Without limiting the
generality of the foregoing, each of the Parties will file
any Notification and Report Forms and related material that
such Party may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will
use commercially reasonable efforts to obtain a waiver from
the applicable waiting period, and will make any further
filings pursuant thereto that may be necessary, proper or
advisable in connection therewith.
(c) Operation of Business. Without the prior consent of
the Purchaser or except as otherwise contemplated by this
Agreement, the Company will not engage in any practice, take
any action, or enter into any transaction of the sort
described in section 3B(f) above. In addition, each of the
Company will continue to conduct its business in the
Ordinary Course of Business and will not (i) except in the
Ordinary Course of Business liquidate Inventory or accept
product returns, (ii) accelerate receivables, (iii) delay
payables, or (iv) change in any material respect either the
Company's practices in connection with the payment of
payables in respect of raw materials purchases.
(d) Preservation of Business. The Company will use
commercially reasonable efforts to maintain its business and
properties, including its present operations, physical
facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers and employees.
(e) Full Access. The Company will permit representatives
of the Purchaser to have full access at all reasonable
times, and in a manner so as not to interfere with the
normal business operations of the Company, to the premises,
properties, personnel, books, records (including tax
records), contracts and documents of or pertaining to the
Company. The Purchaser reaffirms its obligations under the
Confidentiality Agreement.
(f) Notice of Developments. Each Party will promptly give
notice to the other Party(ies) of its, his or her discovery
of any material adverse development which, had such
development been in existence on the date hereof, would
constitute a breach of the representations and warranties
contained in section3A and 3B (in the case of a Seller) or
section4 (in the case of the Purchaser). No disclosure by
any Party pursuant to this section5(f) shall be deemed to
amend or supplement the Disclosure Schedules or to prevent
or cure any misrepresentation or breach of warranty.
6. Post-Closing Covenants. The Parties agree as follows
with respect to the period following the Closing:
(a) General. In the event that at any time after the
Closing any further action is necessary to carry out the
purposes of this Agreement, each of the Parties will take
such further action (including the execution and delivery of
such further instruments and documents) as any other Party
may reasonably request, all at the sole cost and expense of
the requesting Party; provided, however, that the taking of
any action necessary to execute or deliver to the Purchaser
any stock powers and such other instruments of transfer as
may be necessary to transfer ownership of the Shares by the
Sellers shall be borne by the Sellers, jointly and
severally.
(b) Transition. The Sellers will not take any action
that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier or
other business associate of the Company from maintaining the
same business relationships with the Company after the
Closing as it maintained with the Company prior to the
Closing.
(c) Litigation Support. In the event and for so long as
any Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (i) any
transaction contemplated under this Agreement, or (ii) any
fact, situation, circumstance, status, condition, activity,
practice, occurrence, event, incident, action, failure to
act, or transaction on or prior to the Closing Date
involving the Company, each of the Parties will cooperate
with the contesting or defending Party and its, his or her
counsel in the contest or defense, all at the sole cost and
expense of the contesting or defending Party (except to the
extent that the contesting or defending party is entitled to
indemnification therefor under this Agreement).
(d) Noncompetition.
(i) In order to induce the Purchaser to enter into this
Agreement, each Seller expressly covenants and agrees that,
for a period of five (5) years from and after the Closing
Date, such Seller will not, directly or indirectly, engage
in or have any interest in any sole proprietorship,
partnership, corporation, limited liability company or
business or any other Person (other than the Purchaser or
any of its Subsidiaries), whether as an employee, officer,
director, partner, agent, security holder, consultant or
otherwise, that directly or indirectly is engaged in the
Business of the Company in the Restricted Area; provided,
however, that nothing herein shall be deemed to prevent the
Seller from acquiring through market purchases and owning,
solely as an investment, less than five percent in the
aggregate of the equity securities of any class of any
issuer whose shares are registered under section 12(b) or
section 12(g) of the Securities Exchange Act, and are listed
or admitted for trading on any United States national
securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotations
System, or any similar system of automated dissemination of
quotations of securities prices in common use, so long as
neither of them is a member of any "control group" (within
the meaning of the rules and regulations of the United
States Securities and Exchange Commission) of any such
issuer.
(ii) Each Seller acknowledges and agrees that the covenants
provided for in this section 6(d) are reasonable and
necessary in terms of time, area and line of business to
protect the Purchaser's legitimate business interests as a
buyer of the Common Stock and in protecting the Company's
Trade Secrets. Each Seller further acknowledges and agrees
that such covenants are reasonable and necessary in terms of
time, area and line of business to protect the Purchaser's
other legitimate business interests, which include its
interests in protecting the Company's (i) valuable
confidential business information, (ii) substantial
relationships with customers throughout the Restricted Area
and (iii) customer goodwill associated with the Company's
ongoing business. The Sellers expressly authorize the
enforcement of the covenants provided for in this
section6(d) by (A) the Purchaser and its Subsidiaries, (B)
the Purchaser's permitted assigns and (C) the Company and
any successors to the Company's business. The covenants
provided for in this section6(d) shall be construed as a
separate and independent covenant for each of the separate
states, territories and possessions included in the
Restricted Area and, with respect to the State of Indiana,
for each of the separate counties of that state. To the
extent that the covenant provided for in this section6(d)
may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any
particular activity or geographic area, the court making
such determination shall have the power to reduce the
duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The
provision as modified shall then be enforced.
(e) Non-Solicitation of Employees, Agents and Independent
Contractors. In order to induce the Purchaser to enter into
this Agreement, each Seller expressly covenants and agrees
that for a period of five (5) years from and after the
Closing Date, such Seller will not, directly or indirectly,
(i) solicit for employment or employ or engage as an agent
or independent contractor (or attempt to solicit for
employment or employ or engage as an agent or independent
contractor), for himself or herself or on behalf of any sole
proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the
Purchaser or any of its Subsidiaries), any employee of the
Company or any Person who was an employee, agent or
independent contractor of the Company at any time during the
two (2) year period preceding the later of (x) the date
hereof and (y) the date of such solicitation, employment or
attempted solicitation or employment, or (ii) encourage any
such employee to leave his or her employment with the
Company or (iii) encourage any such agent or independent
contractor to terminate his, her or its engagement with the
Company. The covenants provided for in this section 6(e)
shall be construed as a separate and independent covenant
for each of the separate states, territories and possessions
included in the Restricted Area and, with respect to the
State of Indiana, for each of the separate counties of that
state. To the extent that the covenant provided for in this
section6(e) may later be deemed by a court to be too broad
to be enforced with respect to its duration or with respect
to any particular activity or geographic area, the court
making such determination shall have the power to reduce the
duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The
provision as modified shall then be enforced.
(f) Confidentiality. In order to induce the Purchaser to
enter into this Agreement, each Seller expressly covenants
and agrees that from and after the Closing Date, no such
Seller nor any of his or her Affiliates (to the extent any
such Affiliate has received Confidential Information or
Trade Secrets) will disclose, divulge, furnish or make
accessible to anyone (other than the Purchaser or any of its
Affiliates or representatives) any Confidential Information
or Trade Secrets, or in any way use any Confidential
Information or Trade Secrets in the conduct of any business;
provided, however, that nothing in this section 6(f) will
prohibit the disclosure of any Confidential Information or
Trade Secrets (i) which is or are required to be disclosed
by the Seller or any such Affiliate in connection with any
court action or any proceeding before any Authority, (ii) in
connection with the enforcement of any of the rights of the
Seller hereunder, or (iii) in connection with the defense by
the Seller of any claim asserted against him or her
hereunder; provided, however, that in the case of a
disclosure contemplated by clause (i), no disclosure shall
be made until the Seller shall give notice to the Purchaser
of the intention to disclose such Confidential Information
or Trade Secrets so that the Purchaser may contest the need
for disclosure, and the Seller will cooperate (and will
cause his or her Affiliates and their respective
representatives to cooperate) with the Purchaser in
connection with any such proceeding. Notwithstanding any
provision of this Agreement which may be to the contrary (x)
the Sellers shall be entitled to use Confidential
Information consisting of databases of contacts and
customers for personal purposes which do not constitute
competition with the Company, including community and
charitable affairs, (y) the foregoing provisions restricting
the use of Confidential Information shall survive the
Closing for a period of five years, and (z) the foregoing
provisions restricting the use of Trade Secrets shall
survive the Closing for the applicable statute of
limitations period under the Indiana Uniform Trade Secrets
Act
(g) Section 338(h)(10) Election; Certain Tax Matters.
(i) The Sellers will join with the Purchaser in making an
election under section 338(h)(10) of the Code and Treasury
Regulations section 1.338(h)(10)-1(d) (and any corresponding
elections under any applicable state and local laws)
(collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Shares hereunder. The Sellers,
jointly and severally, will be liable for all Taxes of the
Company for all periods ending prior to the open of business
on the Closing Date ("Pre-Closing Tax Periods") (including
all Taxes attributable to the making of the
section 338(h)(10) election, as the result of the recognition
of any built-in gain pursuant to the provisions of
section 1374 of the Code, or the "recapture" of previously
deducted items), and the Sellers, jointly and severally,
will indemnify the Purchaser and the Company from and
against any Losses arising out of any failure to pay such
Tax.
(ii) The income of the Company will be apportioned to the
period up to the open of business on the Closing Date and
the period from and after the open of business on the
Closing Date in accordance with the provisions of
section 1362(e)(6)(D) of the Code by closing the books of the
Company as of the close of business on the last calendar day
immediately preceding the Closing Date. Taxes (such as
property Taxes) that are imposed on a periodic basis shall
be allocated on a per diem basis. The Sellers will be
responsible for preparing and filing all income Tax Returns
of the Company relating to all Pre-Closing Tax Periods.
After the Closing has occurred, the Purchaser will provide,
or cause to be provided, to the Sellers, without charge, any
information that may reasonably be requested by the Sellers
in connection with the preparation of any Tax Returns
relating to Pre-Closing Tax Periods. The Sellers will allow
the Purchaser an opportunity to review and comment on such
Tax Returns (including any amended Tax Returns.) The
Sellers will take no new positions on the Tax Returns of the
Company that relate to Pre-Closing Tax Periods that would
adversely affect the Company after the Closing Date.
(iii) Section 6(g)(iii) of the Disclosure Schedule sets forth
an allocation of the Modified "adjusted Deemed Sales Price",
as defined in Treasury Regulations section 1.338(h)(10)-1(f),
among the assets of the Company (the "Allocation Schedule").
Under the Allocation Schedule, $500,000.00 shall be
allocated as consideration for the Sellers' agreement not to
compete. Within 30 days after the Closing Date, the Sellers
and the Purchaser shall exchange completed and executed
copies of IRS Form 8023 (or other applicable form), required
schedules thereto, and any similar forms required by any
state or local Tax Authority. If any changes are required to
these forms as a result of information which is first
available after the Closing Date, the Sellers and the
Purchaser will in good faith use commercially reasonable
efforts to promptly agree on such changes. The Purchaser and
the Sellers each agree to file all Tax Returns in accordance
with the Allocation Schedule.
(iv) The Purchaser and the Sellers shall cooperate fully,
as and to the extent reasonably requested by the other
Party, in connection with the filing of Tax Returns pursuant
to this section 6(g) and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other Party's request)
the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding, and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Sellers
shall, and the Purchaser shall cause the Company (A) to
retain all books and records with respect to Tax matters
pertinent to the Company relating to Pre-Closing Tax Periods
until the expiration of the statute of limitations (and, to
the extent notified by the Purchaser or the Sellers, any
extensions thereof) of the respective taxable periods, and
to abide by all record retention agreements entered into
with any Tax Authority, and (B) to give the other Party
reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other
Party so requests, the Purchaser or the Sellers, as the case
may be, shall allow the other Party to take possession of
such books and records.
(v) Notwithstanding anything contained in section 7(b)(iv)
below or elsewhere in this Agreement to the contrary (but
subject to the provisions of paragraphs (ii), (iii) and (iv)
of this section 6(g)), the Sellers shall have the right to
(a) control any audit or proceeding by any taxing Authority,
(B) initiate any claim for refund, (C) file any amended
return, (D) contest, defend against, resolve and settle any
assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes or (E) otherwise resolve any
issues relating to Losses which the Purchaser or the Company
shall incur as a result of any breach of the Sellers'
covenants in section 2(g) above, this section 6(g) or the
Sellers' representations and warranties in section 3B(j)
above and as to which the Purchaser are entitled to
indemnification from the Sellers pursuant to this Agreement
("Tax Losses"); provided, however, that the Sellers shall
consult with the Purchaser in contesting any such
assessment, notice of deficiency or other adjustment or
proposed adjustment of Taxes and shall, in good faith,
consider any reasonable advice from the Purchaser with
respect to any such contest.
(h) Certain Employee Matters. The Purchaser shall (i) give
the employees of the Company who continue immediately after
the Closing Date as an employee of the Company full credit
for purposes of eligibility and vesting under any employee
benefits plans or arrangements maintained by the Purchaser
for such employees' service with the Company to the same
extent recognized by the Company immediately prior to the
Closing, and (ii) through the second anniversary of the
Closing Date, offer to employees of the Company who continue
immediately after the Closing Date as an employee of the
Company levels of compensation and benefits that are no less
favorable than those offered by the Company (including but
not limited to the Profit Sharing Plan described in
section3B[t] of the Disclosure Schedule) for the period
immediately before the Closing; provided, that the Purchaser
may replace or cause the Company to replace the 401(k) plan
with a new 401(k) plan on terms that are no less favorable
than those offered by the Company immediately prior to
Closing. Notwithstanding anything contained in this
section 6(h) to the contrary, this section 6(h) shall in no
way create any type of employment contract for any employee
of the Company or alter in any way the "employment at will"
status of such employee.
7. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. The
representations and warranties of the Sellers contained in
section 3 above and of the Purchaser contained in section 4
above shall survive the Closing and continue in full force
and effect subsequent to Closing, subject to the limitation
periods provided in section 7(b). Any claim for which any
Party shall have given proper notice in accordance with the
terms of this Agreement on or prior to the expiration of the
applicable limitation periods under section 7(b) shall
survive until such claim is resolved pursuant to the terms
of this Agreement. To preserve any claim for breach of any
such representation or warranty, the Party claiming a breach
shall be obligated to notify the party claimed to be in
breach in writing of any such breach, or facts that can
reasonably be expected to give rise to such breach, before
termination of the applicable limitation period under
section 7(b) in respect of such representation or warranty;
otherwise, such Party's claim for breach shall be forever
barred.
(b) Indemnification.
(i) Subject to section 7(a) above and the conditions and
limitations set forth in this section 7(b), subsequent to the
Closing Date the Sellers shall, jointly and severally,
indemnify, defend and hold harmless the Purchaser from,
against and in respect of any Losses which the Purchaser
shall suffer, sustain or become subject to by virtue of or
which arise out of, or result from any breach of the
representations and warranties of the Sellers set forth in
section 3B above.
(ii) Subject to section 7(a) above and the conditions and
limitations set forth in this section 7(b), subsequent to the
Closing Date each Seller shall, severally and not jointly,
indemnify, defend and hold harmless the Purchaser and the
Company from, against and in respect of any Losses which the
Purchaser or the Company shall suffer, sustain or become
subject to by virtue of or which arise out of, or result
from, any breach of the representations and warranties of
the Seller set forth in section3A above and any breach by
the Seller of his or her covenants and agreements set forth
in this Agreement; provided, however, that such
indemnification obligations of the Sellers with respect to
the covenants contained in section 2(g) and 6(g) above shall
be joint and several.
(iii) Subject to section 7(a) above and the conditions
set forth in this section 7(b), subsequent to the Closing
Date the Purchaser shall indemnify, defend and hold harmless
the Sellers and their respective estates, heirs, personal
representatives or successors from, against and in respect
of any Losses which the Sellers shall suffer, sustain or
become subject to by virtue of or which arise out of, or
result from, any breach by the Purchaser of its
representations, warranties covenants and agreements set
forth in this Agreement.
(iv) Promptly after the assertion by any third party of any
claim, demand or notice (a "Third Party Claim") against any
Person or Persons entitled to indemnification under this
section 7(b) (the "Indemnified Parties") that results or may
result in the incurrence by such Indemnified Parties of any
Losses for which such Indemnified Parties would be entitled
to indemnification pursuant to this Agreement, such
Indemnified Parties shall promptly notify the parties from
whom such indemnification could be sought (the "Indemnifying
Parties") of such Third Party Claim. Thereupon, the
Indemnifying Parties shall have the right, upon written
notice (the "Defense Notice") to the Indemnified Parties
within 30 days after receipt by the Indemnifying Parties of
notice of the Third Party Claim (or sooner if such claim so
requires) to conduct, at their own expense, the defense
against the Third Party Claim in their own names or, if
necessary, in the names of the Indemnified Parties. The
Defense Notice shall specify the counsel the Indemnifying
Parties shall appoint to defend such Third Party Claim (the
"Defense Counsel") and the Indemnified Parties shall have
the right to approve the Defense Counsel, which approval
shall not be unreasonably withheld. In the event the
Indemnified Parties and the Indemnifying Parties cannot
agree on such counsel within 10 days after the Defense
Notice is given, then the Indemnifying Parties shall propose
an alternate Defense Counsel, which shall be subject again
to the Indemnified Parties' approval which approval shall
not be unreasonably withheld. Any Indemnified Party shall
have the right to employ separate counsel in any such Third
Party Claim and/or to participate in the defense thereof,
but the fees and expenses of such counsel shall not be
included as part of any Losses incurred by the Indemnified
Party unless (A) the Indemnifying Parties shall have failed
to give the Defense Notice within the prescribed period, (B)
such Indemnified Party shall have received an opinion of
counsel, reasonably acceptable to the Indemnifying Parties,
to the effect that the interests of the Indemnified Party
and the Indemnifying Parties with respect to the Third Party
Claim are sufficiently adverse to prohibit the
representation by the same counsel of both parties under
applicable ethical rules, or (C) the employment of such
counsel at the expense of the Indemnifying Parties has been
specifically authorized by the Indemnifying Parties. The
Party or Parties conducting the defense of any Third Party
Claim shall keep the other Parties apprized of all
significant developments and shall not enter into any
settlement, compromise or consent to judgment with respect
to such Third Party Claim unless the Company and the Sellers
consent, such consent not to be unreasonably withheld.
(v) Any amounts payable by the Sellers, or any of them,
under this section 7(b) shall first be satisfied by resort to
the Escrow Funds and, only after the Escrow Funds have been
exhausted or distributed in accordance with the Escrow
Agreement shall the Sellers be obligated to make any further
payment under this section 7(b).
(vi) No indemnification will be required under this
section 7 unless the person claiming the right to be
indemnified gives notice to the person from which it is
claiming indemnification of the facts the claimant thinks
are the basis for such indemnification within 18 months
subsequent to the Closing Date, with the exception that
there shall be no time limitation on claims arising out of
environmental matters under section 10(d) and section 10(i)
and claims for breach of the representations and warranties
of the Sellers contained in section 3A.
(vii) Except as otherwise stated in this Agreement, no
party will be required to indemnify another party unless and
only to the extent that the aggregate amount of the agreed
to or adjudicated indemnification claims against such party
shall exceed the deductible amount of $25,000; provided,
that the foregoing limitation will not apply to payments
pursuant to section 2. Any reserves or deductible amounts
taken into account in determining any indemnification
obligations of the Sellers under this Agreement, including
without limitation any such provision in section10, shall be
in addition to the deductible amount provided in this
section 7(b)(vii).
(viii) Notwithstanding any other provision of this
Agreement, the Sellers shall, in the aggregate have no
liability to make indemnification payments under this
Agreement in excess of $1,500,000.00, except for Losses
arising out of environmental matters under section 10(d) and
section 10(i) and the NLRB proceeding under section 10(h),
which Losses shall not be subject to any monetary limit.
(c) Effect of Knowledge of Breach; Determination of
Losses; Treatment of Indemnification Payments.
(i) The Purchaser and the Company, on the one hand, and
the Sellers, on the other hand, shall not be entitled to
indemnification with respect to a breach of any
representation or warranty made by the other Party(ies)
under this Agreement if such Party(ies) can prove by a
preponderance of the evidence that such other Party(ies) had
actual knowledge at any time on or prior to the Closing Date
of the events or conditions constituting or resulting in
such breach of such representation or warranty.
(ii) The amount of any Losses subject to
indemnification under sections 7(b)(i) and (ii) above shall
be calculated net of any amounts which have been previously
recovered by the Purchaser or the Company under insurance
policies or other collateral sources. In the event any such
amounts recovered or recoverable under insurance policies or
other collateral sources are not received before any claim
for indemnification is paid pursuant to this section 7(b),
then the Purchaser or the Company shall pursue such
insurance policies or collateral sources with reasonable
diligence (unless the Purchaser or the Company shall notify
the Sellers that they have elected not to pursue such
insurance policies or collateral sources, in which case,
notwithstanding any provision of this Agreement to the
contrary, neither the Purchaser nor the Company shall be
entitled to indemnification with respect to such Losses),
and in the event they receive any recovery, the amount of
such recovery shall be applied first, to reimburse the
Purchaser and the Company for their out-of-pocket expenses
(including reasonable attorneys' fees) expended in pursuing
such recovery, second, to refund any indemnification
payments made by the Sellers which would not have been so
paid had such recovery been obtained prior to such payment,
and third, any excess to the Purchaser. In addition, all
Losses subject to indemnification hereunder shall be
calculated net of any tax benefits which have been actually
realized by the Purchaser or the Company as a result thereof
plus the net present value (using a discount factor of 8.5%
per annum and assuming the income tax rates then in effect
for any given period remain unchanged) of tax benefits which
are reasonably probable of realization by the Purchaser or
the Company in subsequent tax years.
(iii) All indemnification payments under this section7
shall be deemed adjustments to the Purchase Price.
(d) Enforcement of Escrow Agreement. Notwithstanding any
other provisions contained herein, the costs of enforcement
of the Escrow Agreement by the Purchaser or either Seller
shall not constitute Losses hereunder. Rather, such costs
and expenses shall be considered "Litigation Expenses"
within the meaning of the Escrow Agreement and, therefore,
paid in accordance with the terms of the Escrow Agreement.
(e) No Contribution from Company. Each Seller hereby
waives any rights to seek or obtain indemnification or
contribution from the Company for Losses pursuant to
section 7 or the Escrow Agreement as a result of any breach
by the Company of any representation, warranty or covenant
(other than covenants to be performed by the Company after
the Closing) contained in this Agreement.
(f) Assignment by Purchaser. Provided that the Closing
shall occur, the Purchaser hereby assigns and transfers to
the Company, effective as of the Closing, all benefits of
the Purchaser pursuant to sections 6 and 7 above.
(g) Exclusive Remedy. The remedies provided in this
section7 constitute the sole and exclusive remedies for
recoveries against another party in connection with the
transactions described in this Agreement.
8. No Shop. From the date of this Agreement until the
earlier of (i) the Closing Date, or (ii) the termination of
this Agreement, the Company shall not, and the Sellers shall
cause the Company and their respective officers, directors,
employees and other agents not to, directly or indirectly,
take any action to solicit, initiate or encourage any offer
or proposal or indication of interest in a merger,
consolidation or other business combination involving any
equity interest in, or a substantial portion of the assets
of the Company, other than in connection with the
transactions contemplated by this Agreement. The Company
and the Sellers shall immediately advise the Purchaser of
the terms of any written offer, proposal or indication of
interest that they receive or otherwise become aware of.
9. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser. The
obligation of the Purchaser to consummate the transactions
to be performed by it in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
section 3 above that are qualified as to their materiality
shall be true and correct and any such representations and
warranties that are not so qualified shall be true and
correct in all material respects at and as of the Closing
Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement);
(ii) the Sellers and the Company shall have performed and
complied with all of their respective covenants hereunder in
all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation
of any of the transactions contemplated by this Agreement,
and no action, suit, claim or proceeding shall be pending
before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this
Agreement;
(iv) each of the Sellers (or the Sellers' Representative
acting on their behalf) shall have delivered to the
Purchaser a certificate to the effect that the conditions
specified above in sections 9(a)(i) and (ii), as they pertain
to such Seller, have been satisfied in all respects;
(v) the Sellers shall have delivered to the Purchaser a
certificate to the effect that the conditions specified
above in sections 9(a)(i) and (ii) have been satisfied in all
respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated;
(vii) all of the directors and officers of the Company
designated by the Purchaser prior to the Closing shall have
delivered duly signed resignations effective at the time of
the Closing (or the Sellers or the Company shall have taken
such other action as is necessary to ensure that such
persons are not directors or officers of the Company at the
time of the Closing);
(viii) Jerry Shilling and Michael Shilling shall have
executed and delivered to the Purchaser their respective
Employment Agreements;
(ix) there shall be no payables or receivables between the
Sellers and the Company or between Affiliates of the Sellers
and the Company;
(x) the Purchaser shall have obtained consent
of its lender for financing of the purchase of the Shares;
and
(xi) the Sellers shall have delivered to Purchaser an
Opinion Letter from the Sellers' attorney in the form of
Exhibit F.
The Purchaser may waive any condition specified in this
section 9(a) if it executes a writing so stating at or prior
to the Closing.
(b) Conditions to Obligation of the Sellers. The
obligation of the Sellers to consummate the transactions to
be performed by them in connection with the Closing is
subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
section4 above shall be true and correct in all material
respects at and as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date
of this Agreement);
(ii) the Purchaser shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation
of any of the transactions contemplated by this Agreement,
and no action, suit, claim or proceeding shall be pending
before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this
Agreement;
(iv) the Purchaser shall have delivered to the Sellers'
Representative a certificate to the effect that each of the
conditions specified above in sections 9(b)(i) and (ii) has
been satisfied in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated;
(vi) the Purchaser shall have executed and delivered the
Employment Agreements to Jerry L. Shilling and Michael
Shilling; and
(vii) the Purchaser shall have delivered to Sellers an
Opinion Letter from the Purchaser's attorney in the form of
Exhibit G.
The Sellers' Agents Committee may waive any condition
specified in this section9(b) if it executes a writing so
stating at or prior to the Closing.
10. Additional Agreements.
(a) Sellers' Guarantee of Accounts Receivable.
(i) With respect to accounts receivable on the Closing
Balance Sheet which as of the Closing are 90 days or over
from the invoice date thereof (the "90 and Over Accounts
Receivable"), the Sellers guarantee the collectibility of
the 90 and Over Accounts Receivable in full minus any
remaining reserve for bad debts included in the Closing
Balance Sheet.
(ii) The Purchaser agrees to use efforts consistent with
the Company's past custom and practice to cause the Company
to collect all 90 and Over Accounts Receivable, but shall
not be obligated to resort to litigation. Any sums payable
by account debtors on account of any accounts receivable of
such account debtors shall be credited to the earliest
invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor.
Subject to the foregoing, to the extent any 90 and Over
Accounts Receivable existing at the Closing are unpaid for a
period of 60 days after the Closing, the Purchaser shall
send written notice to the Sellers' Representative
indicating the specific account debtors, the amount of the
unpaid invoices representing 90 and Over Accounts Receivable
to each such account debtor and the total of all such unpaid
90 and Over Accounts Receivable. The Sellers shall pay the
Purchaser the amount of all such unpaid 90 and Over Accounts
Receivable minus any remaining reserve for bad debts
included in the Closing Balance Sheet within 30 days of the
receipt of any notice pursuant to this section 10(b)(ii) on
the condition that the Purchaser shall simultaneously cause
the Company to assign such unpaid 90 and Over Accounts
Receivable (the "Assigned Receivables") to the Sellers'
Agent Committee. Such assignment shall include the right to
sue as an assignee of the Company. In the event that after
such assignment the Company receives any payment on the
Assigned Receivables, the Purchaser shall cause the Company
to promptly remit such amount to the Sellers' Agent
Committee. Thereafter, the Sellers' Agent Committee, as
owner of the Assigned Receivables, may take any action the
Sellers' Agent Committee deems necessary to collect the
Assigned Receivables and any collections shall be the
property of the Sellers. The Purchaser agrees to cooperate
and shall cause the Company to cooperate with the Sellers'
Agent Committee in any action the Sellers' Agent Committee
wishes to take to collect the Assigned Receivables
consistent with the Company's past custom and practice . In
the event the Purchaser does not want to assign any Account
Receivable to the Sellers' Agent Committee because it does
not want the Sellers' Agent Committee to initiate collection
action thereon, the Sellers shall be relieved of any
liability under this section10(a) with respect to such 90
and Over Accounts Receivable.
(iii) In the event any 90 and Over Accounts Receivable is
subject to a valid dispute by the account debtor and/or the
Purchaser wishes to grant a discount on any 90 and Over
Accounts Receivable, the Purchaser shall send written notice
or notices to the Sellers' Agent Committee indicating the
specific account debtors and the amount of the dispute or
discount. The Purchaser shall consult with the Sellers'
Agent Committee with respect to the resolution of any
dispute and/or the amount of any discount and shall not
settle any such dispute or grant any discount without the
consent of the Sellers' Representative, which consent shall
not be unreasonably withheld. Where consent is given to the
settlement of any dispute and/or the granting of any
discount, the Sellers shall pay the Purchaser the difference
between the original amount of the 90 and Over Accounts
Receivable and the amount actually received by the Purchaser
after settlement or discount, with payment to be made within
30 days after the settlement or granting of the discount.
Where consent is withheld by the Sellers' Representative,
the Purchaser may either assign the 90 and Over Accounts
Receivable, or settle the dispute or grant the discount at
its own expense and the Sellers shall be relieved of any
liability under this section 10(a) with respect to such 90
and Over Accounts Receivable.
(b) Litigation. Notwithstanding the disclosures made by
the Sellers in section 3B(r) of the Disclosure Schedule, the
Sellers shall be responsible for and shall pay the Purchaser
the full amount of all Losses resulting from the matters
described in section 3B(r) of the Disclosure Schedule which
are not covered by insurance, subject to the provisions of
section7. Such litigation shall be considered to be a
"Third Party Claim" and shall be handled in accordance with
the provisions of section 7(b)(iv) of this Agreement.
(c) Computer Software Licenses. Notwithstanding the
disclosures made by the Sellers in section3B(i) of the
Disclosure Schedule, the Sellers shall perform all acts
necessary to cause the Company to obtain all required
computer software licenses and/or network licenses (the
"Licenses") for computer software and/or networks currently
owned or operated by the Company necessary to bring the
Company into compliance with all licensing requirements. In
the event that all necessary licenses have not been obtained
as of Closing, the Sellers shall be responsible for any and
all Losses incurred by the Company after Closing related to
the Company's non-compliance with said licensing
requirements including, but not limited to, the payment of
any audit fees, fines, license fees, user fees, network
fees, installation fees, service charges, etc. Said Losses
shall be paid out of the Escrow Funds without regard to the
$25,000.00 deductible under section 7(b)(vii). Said Losses
shall be subject to the cap under section 7(b)(viii).
(d) Environmental Matters. Notwithstanding the
disclosures made by the Sellers in section3B(u) of the
Disclosure Schedule, the Sellers shall be responsible for
payment of any and all Losses relating to any Environmental
Claim arising out of the ownership or operation of the
Company prior to the Closing Date. Said Losses shall be
paid out of the Escrow Funds subject to the deductible under
section 7(b)(vii). Said Losses shall not be subject to the
cap under section 7(b)(viii) and any excess over the Escrow
Funds shall be the joint and several liability of the
Sellers.
(e) Product Returns. Notwithstanding the disclosures
made by the Sellers in section 3B(z) of the Disclosure
Schedule, in the event within 18 months subsequent to
Closing (i) customers of the Company return any defective or
non-conforming merchandise sold prior to Closing, (ii) the
Company is required to provide any customers with a credit
against their accounts receivable within such 18-month
period as a result of the receipt of defective or non-
conforming merchandise sold prior to Closing, or (iii) any
product warranty claims are brought with respect to
merchandise sold prior to Closing which are not covered by
insurance, the Sellers shall be required to pay the
Purchaser the amount equal to the sum of (A) the
difference between the original sales price of the returned
merchandise and the resale price thereof, (B) re-work costs
and shipping costs (net of any recoveries from shippers),
and (C) the cost of any returned merchandise which was sold
prior to Closing and which is not resold by the Company less
the amount of $150,000.00 deducted from the sum of (A)
through (C) above. Such amount, if any, shall be paid out
of the Escrow Funds subject to the cap under
section 7(b)(viii) and to the $25,000.00 deductible under
section 7(b)(vii).
(f) Product Liability Insurance. Notwithstanding the
disclosures made by the Sellers in section 3B(aa) of the
Disclosure Schedule, the Sellers shall cause the Company to
have a product liability insurance tail policy in effect as
of the Closing Date insuring the Company against any and all
Pre-Closing Product Liabilities as defined under
section 3B(aa) with respect to injuries to property or
persons occurring subsequent to Closing with the same policy
limits as currently exist per occurrence and in the
aggregate. The Sellers shall be responsible for paying the
premiums on said insurance policy and shall maintain said
insurance coverage for the Pre-Closing Liabilities until the
fifth (5th) anniversary of the Closing Date.
Medical and Dental Reserves. Notwithstanding the
disclosures made by the Sellers in section 3B(ff) of the
Disclosure Schedule, to the extent that the medical and
dental reserves for medical and dental claims submitted but
not paid as of Closing, as provided in the definition of
"Net Working Capital at Closing" in section1 above, are
exhausted prior to the administration and payment of all of
the Pre-Closing Claims as defined under section 3B(ff), the
Sellers shall be responsible to the Purchaser and the
Company for the costs of the administration and payment of
said Pre-Closing Claims. Said costs shall be paid from the
Escrow Funds subject to the deductible under
section 7(b)(vii) and the cap under section 7(b)(viii), and
must be submitted within 18 months of the Closing Date. In
the event that the medical and dental reserves are not
exhausted within ninety days of the Closing Date, then the
remaining reserves shall be disbursed to the Sellers in
accordance with the instructions of the Sellers' Agent
Committee, but the Sellers shall be responsible to the
Purchaser and the Company for the costs of administration
and payment of any remaining unpaid Pre-Closing Claims,
which shall be paid out of the Escrow Funds subject to the
deductible under section 7(b)(vii) and the cap under
section 7(b)(viii), and must be submitted within 18 months of
the Closing Date. Any such obligations of the Sellers under
this section 10(g) shall be reduced to extent of any
available insurance coverage.
(h) NLRB Proceeding. Notwithstanding the disclosures
made by the Sellers in section 3B(s) of the Disclosure
Schedule, the Sellers shall be responsible for and shall pay
the Purchaser the full amount of all expenses and costs,
including legal fees, incurred by the Company directly in
connection with the NLRB proceeding listed on said
Disclosure Schedule. Any such Losses shall first be paid
out of the Escrow Funds without regard to the deductible
under section 7(b)(vii). Said expenses and costs shall not
be subject to the cap under section 7(b)(viii) and any excess
over the Escrow Funds shall be the joint and several
liability of the Sellers.
(1) Zinc. Notwithstanding the disclosures made by the
Sellers in section 3B(u) of the Disclosure Schedule, the
Seller shall be responsible for payment of any capital
expenditures to the extent required to bring the Company
into compliance with any and all environmental or health
laws relating to the levels of zinc in the Company's
discharge into the sewage system of the Town of Silver Lake,
and any Losses resulting from noncompliance with said laws,
without regard to the deductible under section 7(b)(vii). Any
such capital expenditures shall first be paid out of the
Escrow Funds. Said capital expenditures and Losses shall
not be subject to the cap under section 7(b)(viii) and any
excess over the Escrow Funds shall be the joint and several
liability of the Sellers. The Sellers shall have the
reasonable discretion to determine and implement the most
cost-effective approach to bringing the Company's facilities
into compliance with environmental and health laws relating
to levels of zinc, subject to consultation with Purchaser.
(j) Union Organization. Notwithstanding the disclosures
made by the Sellers in section 3B(s) of the Disclosure
Schedule, the Sellers shall be responsible for and shall pay
up to $100,000.00 for the Company's cost of representing
the Company and/or Purchaser after closing in connection
with any union organization effort at the Company's Silver
Lake, Indiana facility, including any organizational
proceedings which are initiated by filing of a
representation petition by the union, which cost is incurred
within the first six months subsequent to the Closing Date.
Said costs shall be paid out of the Escrow Funds without
regard to the deductible under section 7(b)(vii). The
Seller's Agent Committee shall have the right to select
counsel to defend the Company.
11. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Purchaser and the Sellers' Agent Committee may
terminate this Agreement by mutual written consent at any
time prior to the Closing;
(ii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Agent Committee at any time
prior to the Closing in the event the Company has within the
previous 10 Business Days given the Purchaser any notice
pursuant to section 5(f) above;
(iii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Agent Committee at any time
prior to the Closing (A) in the event that the Sellers or
the Company have breached any representation, warranty or
covenant contained in this Agreement in any material
respect, the Purchaser has notified the Sellers' Agent
Committee of the breach, and the breach has continued
without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or
before April 7, 2000, by reason of the failure of any
condition precedent under section 9(a) hereof (unless the
failure results primarily from the Purchaser breaching any
representation, warranty or covenant contained in the
Agreement); and
(iv) the Sellers' Agent Committee may terminate this
Agreement by giving written notice to the Purchaser at any
time prior to the Closing (A) in the event the Purchaser has
breached any material representation, warranty or covenant
contained in this Agreement in any material respect, the
Sellers' Agent Committee has notified the Purchaser of the
breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before April 7, 2000,
by reason of the failure of any condition precedent under
section 9(b) hereof (unless the failure results primarily
from the Sellers or the Company breaching any
representation, warranty or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to section 11(a) above, all rights and
obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party (except for
any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in
this Agreement shall survive the termination of this
Agreement.
12. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall
not confer any rights or remedies upon any Person other than
the Parties and their respective successors and permitted
assigns.
(b) Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in
any way to the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any
of its rights, interests or obligations hereunder without
the prior written approval of the other Parties; provided,
however, that, unless expressly prohibited hereunder, (i)
any or all of the rights and interests of the Purchaser
hereunder may be assigned to any purchaser of substantially
all of the assets of Purchaser, (ii) any or all of the
rights and interests of the Purchaser hereunder may be
assigned as a matter of law to the surviving entity in any
merger of the Purchaser, and (iii) any or all of the rights
and interests of the Purchaser hereunder may be assigned as
collateral security to any lender or lenders (including any
agent for any such lender or lenders) providing financing to
the Purchaser in connection with the transactions
contemplated hereby, or to any assignee or assignees of any
such lender, lenders or agent (it being understood that in
any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain
responsible for the performance of all of its obligations
hereunder).
(d) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and
the same instrument.
(e) Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices, requests, demands, claims and
other communications hereunder will be in writing. Any
notice, request, demand, claim or other communication
hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
If to Seller(s):
Jerry L. Shilling
540 EMS D-15 Lane
Syracuse, Indiana 46567
With copies to (which shall not constitute notice to the
Sellers):
Kendall C. Crook, Esq.
Bose, McKinney & Evans, LLP
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, IN 46204
Fax: (317) 684-5173
If to the Purchaser:
WinsLoew Furniture, Inc.
Attention: Bobby Tesney
160 Village Street
Birmingham, Alabama 35242
Fax: (205) 408-7028
Any Party may send any notice, request, demand, claim or
other communication hereunder to the intended recipient at
the address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands,
claims and other communications hereunder are to be
delivered by giving the other Parties notice in the manner
herein set forth.
(g) Governing Law; Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal
laws of the State of Indiana (i.e., without giving effect to
any choice or conflict of law provision or rule (whether of
the State of Indiana or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other
than the State of Indiana) Subject to the last sentence of
this section 12(g), each of the Parties hereby (i)
irrevocably submits to the exclusive jurisdiction of any
state or federal court sitting in Marion County, Indiana in
any action, suit or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such
court, (ii) waives, and agrees not to assert in any such
suit, action or proceeding, any claim that (A) such Party is
not personally subject to the jurisdiction of such court or
of any other court to which proceedings in such court may be
appealed, (B) such suit, action or proceeding is brought in
an inconvenient forum or (C) the venue of such suit, action
or proceeding is improper, (iii) expressly waives any
requirement for the posting of a bond by the party bringing
such suit, action or proceeding and (iv) consents to process
being served in any such suit, action or proceeding by
mailing, certified mail, return receipt requested, a copy
thereof to such party at the address in effect for notices
hereunder, and agrees that such services shall constitute
good and sufficient service of process and notice thereof.
Nothing in this Agreement shall affect or limit any right
to serve process in any other manner permitted by law or
shall be construed to prevent the Purchaser or the Company
from bringing and pursuing, or in any way limit, the right
of the Purchaser or the Company to bring or pursue, any
action arising out of or in connection with section?6(d),
(e) or (f) in any jurisdiction where any Seller is subject
to personal jurisdiction and venue is proper.
(h) Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in
writing and signed by the Purchaser and the Sellers. No
waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior
or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any
rights arising by virtue of any prior or subsequent such
occurrence.
(i) Arbitration. If the Parties should have a material
dispute arising out of or relating to this Agreement or the
Parties' respective rights and duties (other than a dispute
in connection with the determination of the Net Working
Capital at Closing, which shall be resolved in accordance
with section 2(h) above), then the Parties will resolve such
dispute in the following manner: (i) any Party may at any
time deliver to the others a written dispute notice setting
forth a brief description of the issue for which such notice
initiates the dispute resolution mechanism contemplated by
this section 12(i); (ii) during the 45 day period following
the delivery of the notice described in clause (i) above,
appropriate representatives of the various Parties will meet
and seek to resolve the disputed issue through negotiation,
(iii) if representatives of the Parties are unable to
resolve the disputed issue through negotiation, then within
30 days after the period described in clause (ii) above, the
Parties will refer the issue (to the exclusion of a court of
law) to final and binding arbitration in Marion County,
Indiana in accordance with the then existing rules (the
"Rules") of the American Arbitration Association ("AAA"),
and judgment upon the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof;
provided, however, that the law applicable to any
controversy shall be the law of the State of Indiana,
regardless of principles of conflicts of laws. In any
arbitration pursuant to this Agreement, (A) discovery shall
be allowed and governed by the Indiana Rules of Civil
Procedure and (B) the award or decision shall be rendered by
an arbitrator appointed by Purchaser and the Sellers. In
the event of failure of Purchaser and the Sellers to agree
within 60 days after the commencement of the arbitration
proceeding upon the appointment of the arbitrator, the
arbitrator shall be appointed by the AAA in accordance with
the Rules. Upon the selection of the arbitrator, an award or
decision shall be rendered within no more than 45 days.
Notwithstanding the foregoing, the request by any Party for
preliminary or permanent injunctive relief, whether
prohibitive or mandatory, shall not be subject to
arbitration and may be adjudicated in any jurisdiction
where any Seller is subject to personal jurisdiction and
where venue is proper.
(j) Equitable Remedies. Each Seller acknowledges and
agrees that the Purchaser and the Company would not have an
adequate remedy at law in the event any of the provisions of
sections 6(d), (e) and (f) of this Agreement are not
performed in accordance with their specific terms or are
breached. Accordingly, each Seller agrees that the Purchaser
and the Company shall be entitled to an injunction or
injunctions to prevent breaches of any provision of any of
section?6(d), (e) and (f) and to enforce specifically the
terms and provisions thereof in any action instituted in any
court of competent jurisdiction. The obligations of the
Sellers under sections 6(d), (e) and (f) of this Agreement
shall constitute covenants that are independent from any
obligations that are or in the future may be owing to the
Sellers by the Purchaser or the Company and, accordingly,
shall be enforceable by the Purchaser and the Company
notwithstanding any breach or alleged breach by the
Purchaser or the Company of any obligation to the Sellers.
(k) Waiver of Jury Trial. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT SUCH PARTY MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL
BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(l) Prevailing Parties. In the event of any litigation
with regard to this Agreement, the prevailing Party or
Parties shall be entitled to receive from the nonprevailing
Party or Parties and the nonprevailing Party or Parties
shall pay all reasonable fees and expenses of counsel for
the prevailing Party or Parties.
(m) Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(n) Expenses. Except as provided herein, each Party
shall pay all costs and expenses incident to its, his or her
negotiation and preparation of this Agreement and to such
Party's performance and compliance with all agreements and
conditions contained herein its, his or her part to be
performed or complied with, including the fees, expenses and
disbursements of such Party's counsel and accountants and
other advisors (provided that at any time after Closing, the
Purchaser may cause the Company to reimburse the Purchaser
or any of its Affiliates for any such costs or expenses
incurred by it or its Affiliates). Notwithstanding the
foregoing, the Purchaser shall pay all filing fees payable
by the Parties in connection with the filing by the Parties
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976. The Purchaser acknowledges and agrees that the
Company has borne certain of the costs and expenses of the
Sellers (including their legal fees and expenses) in
connection with this Agreement and the transactions
contemplated hereby. Neither the Purchaser nor the Company
will have any liability for any such costs or expenses of
the Sellers after the Closing.
(o) Construction. The Parties have participated jointly
in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of
the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context
requires otherwise. The specification of any dollar amount
in the representations and warranties or otherwise in this
Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of
the materiality of such amounts or items, nor shall the same
be used in any dispute or controversy between the parties to
determine whether any obligation, item or matter (whether or
not described herein or included in any schedule) is or is
not material for purposes of this Agreement.
SIGNATURES APPEAR ON THE FOLLOWING PAGES
IN WITNESS WHEREOF, the Parties hereto have executed this
Stock Purchase Agreement as of the date first above written.
WINSLOEW FURNITURE, INC.
By:___________________________________
Its:___________________________________
WABASH VALLEY MANUFACTURING, INC.
By:___________________________________
Its:___________________________________
Douglas H. Curtis
Anne D. Phillipp
Edward T. Phillipp
_____________________________________
Rebecca J. Baclawski, not individually but as Guardian for
Diana J. Baclawski
_____________________________________
Rebecca J. Baclawski, not individually but as Guardian for
James C. Baclawski
_____________________________________
Rebecca J. Baclawski, not individually but as Guardian for
John D. Baclawski
_____________________________________
Linda A. Phillipp, not individually but as Guardian for
Christopher R. Phillipp
_____________________________________
Edward T. Phillipp, not individually but as Guardian for
Christopher R. Phillipp
_____________________________________
Linda A. Phillipp, not individually but as Guardian for
Michael C. Phillipp
_____________________________________
Edward T. Phillipp, not individually but as Guardian for
Michael C. Phillipp
_____________________________________
Robert P. Curtis, not individually but as Guardian for
Michael M. Curtis
_____________________________________
Ellen M. Curtis, not individually but as Guardian for
Michael M. Curtis
_____________________________________
Robert P. Curtis, not individually but as Guardian for
Andrew B. Curtis
_____________________________________
Ellen M. Curtis, not individually but as Guardian for Andrew
B. Curtis
_____________________________________
Robert P. Curtis, not individually but as
Guardian for Catherine A. Curtis
_____________________________________
Ellen M. Curtis, not individually but as Guardian for
Catherine A. Curtis
_____________________________________
Colleen Kalsbeek, not individually but as Conservator for
Douglas W. Kalsbeek
_____________________________________
Paul Kalsbeek, not individually but as
Conservator for Douglas W. Kalsbeek
_____________________________________
Colleen Kalsbeek, not individually but as
Conservator for Claire C. Kalsbeek
_____________________________________
Paul Kalsbeek, not individually but as
Conservator for Claire C. Kalsbeek
_____________________________________
Colleen Kalsbeek, not individually but as
Conservator for Mark J. Kalsbeek
_____________________________________
Paul Kalsbeek, not individually but as
Conservator for Mark J. Kalsbeek
_____________________________________
Gwendolyn Curtis Holton
_____________________________________
Patricia Curtis Pirnie
_____________________________________
Jerry L. Shilling
_____________________________________
Brenda K. Shilling
_____________________________________
Jodi L. Shilling
_____________________________________
Justin T.Shilling
_____________________________________
Michael R. Shilling
_____________________________________
Kathy K. Shilling
_____________________________________
Derek M. Shilling
_____________________________________
Michael R. Shilling, not individually but as
Guardian for Drew M. Shilling
EXHIBIT 2.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of March 31, 2000 by and between WABASH VALLEY
MANUFACTURING, INC., an Indiana corporation (the "Company"),
and Jerry L. Shilling (the "Executive").
Recitals
A. The Executive is currently employed as President of the
Company.
B. The Executive possesses intimate knowledge of the
business and affairs of the Company, its policies, methods
and personnel.
C. The Company recognizes that the Executive has contributed
to its growth and success, and desires to assure the
Executive's employment by the Company following the
acquisition of the Company by WinsLoew Furniture, Inc. and
to compensate him therefor pursuant to this Agreement.
D. The Executive is willing to make his services available
to the Company on the terms and conditions hereinafter set
forth.
Agreement
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
1. Employment.
1.1 General. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the
Company on the terms and conditions set forth herein.
1.2 Duties of Executive. During the term of this
Agreement, the Executive shall serve as President of the
Company, shall diligently perform all services as may be
assigned to him by the Company's Board of Directors or any
authorized Committee of the Board of Directors (the full
Board or such Committee, as the case may be, is referred to
herein as the "Board"), and shall exercise such power and
authority as may from time to time be delegated to him by
the Board. The Executive shall devote his full time and
attention to the business and affairs of the Company, render
such services to the best of his ability, and use his best
efforts to promote the interests of the Company. Unless he
otherwise consents in writing, Executive shall perform his
duties under this Agreement based at the Wabash Valley
Manufacturing, Inc. office located in Silver Lake, Indiana,
subject to routine business travel and to temporary
assignment to other locations mutually approved by the
Company and Executive not to exceed thirty (30) days per
year.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and
the employment of the Executive hereunder, shall be for the
five-year period commencing on the date hereof (the
"Initial Term"), unless sooner terminated in accordance with
the terms and conditions hereof.
2.2 Renewal Terms. The Initial Term of this Agreement,
and the employment of the Executive hereunder, may be
renewed and extended for such period or periods as may be
mutually agreed to by the Company and the Executive in a
written supplement to this Agreement signed by the Executive
and the Company ("Written Supplement"). If this Agreement
is not so renewed and extended prior to the expiration of
the Initial Term, this Agreement, and the employment of the
Executive hereunder, shall automatically terminate upon the
expiration of the Initial Term.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base
salary at the annual rate of not less than $100,000 (the
"Base Salary") during the Initial Term of this Agreement,
with such Base Salary payable in installments consistent
with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary
shall be adjusted annually to reflect, at a minimum, any
increase from the previous year in the national Consumer
Price Index. The Base Salary shall also be reviewed, at
least annually, for merit increases and may, by action and
in the discretion of the Board, be increased at any time or
from time to time. The Base Salary, if so increased, shall
not thereafter be decreased for any reason. If the term of
this Agreement shall be renewed and extended as provided in
Section 2.2 hereof, then during such renewal term of his
employment hereunder, the Executive shall be paid a base
salary as set forth in the Written Supplement.
3.2 Incentive Compensation.
(a) In addition to the Base Salary, the Executive shall be
entitled to receive annual incentive compensation
("Incentive Compensation"), in the amount determined
pursuant to this Section 3.2, for each fiscal year ending
during the term of this Agreement, commencing with fiscal
2000, for which the Company has Operating Earnings (as
hereafter defined) of at least seventy-five percent (75%) of
the Target Earnings (as hereinafter defined) of the Company
for such year. For purposes of this Section 3.2, "Operating
Earnings" shall mean the consolidated operating earnings of
the Company as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently
applied with the Company's past practices, provided,
however, that such Operating Earnings shall not reflect
(i.e., shall not be reduced by) any amortization of
goodwill. The determination of Operating Earnings made by
the Company shall be final and binding on the parties to
this Agreement. For purposes of this Section 3.2, the
"Target Earnings" of the Company shall be as determined by
the Board of Directors. The Board of Directors shall have
the right to modify, at any time and in its sole discretion,
any previously established "Target Earnings" for reasons
such as, but not limited to, any acquisition, disposition,
merger, reorganization, liquidation, dissolution or other
transaction involving the Company or any of its
subsidiaries, or other extraordinary or significant events
or changes in circumstances relating to the Company or any
of its subsidiaries, businesses or operations.
(b) The amount of the Executive's Incentive Compensation
for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do not exceed
the Target Earnings for the year, the Incentive Compensation
shall be calculated by (A) multiplying (i) fifty percent
(50%) of the Executive's Base Salary for the year (the
"Maximum Bonus") by (ii) the remainder of (w) the fraction
obtained by dividing the Operating Earnings by the Target
Earnings, less (x) 0.75, and then (B) multiplying the
resulting product by three (3); or
II. If the Operating Earnings for the year exceed the
Target Earnings for the year, the Incentive Compensation
shall be calculated by (A) multiplying (i) the Maximum Bonus
by (ii) the remainder of (y) the fraction obtained by
dividing the Operating Earnings by the Target Earnings, less
(z) 1.0, and then (B) multiplying the resulting product by
two (2), and then adding 75% of the Maximum Bonus; provided,
however, that in no event shall the Incentive Compensation
for any year exceed the Maximum Bonus.
III. For example, (A) if Operating Earnings are 75% of the
applicable Target Earnings or less, the Executive's
Incentive Compensation for that year would be zero, (B) if
Operating Earnings are 90% of the applicable Target
Earnings, the Executive's Incentive Compensation for that
year would be 45% of the Maximum Bonus, (C) if Operating
Earnings are 100% of the Target Earnings, the Executive's
Incentive Compensation for that year would be 75% of the
Maximum Bonus, (D) if the Operating Earnings are 110% of the
Target Earnings, the Executive's Incentive Compensation for
that year would be 95% of the Maximum Bonus, and (E) if the
Operating Earnings are 120% of the Target Earnings, the
Executive's Incentive Compensation for that year would be
limited to 100% of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal
year (net of any tax or other amount properly withheld
therefrom) shall be paid by the Company to Executive within
one hundred twenty (120) days after the end of the fiscal
year; provided, however, that any amount paid shall be
subject to increase or decrease based upon the results of
any audited financial statements with respect to such year.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursable Expenses. During the term of the
Executive's employment hereunder, the Company, upon the
submission of proper substantiation by the Executive, shall
reimburse the Executive for all reasonable expenses actually
and necessarily paid or incurred by the Executive in the
course of and pursuant to the business of the Company.
4.2 Other Benefits. The Executive shall be entitled to
participate in all medical and hospitalization, group life
insurance, and any and all other plans as are presently and
hereinafter provided by the Company to its executives. The
Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives;
provided, however, that in no event may a vacation be taken
at a time when to do so could, in the reasonable judgment of
the Board, adversely affect the Company's business.
4.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder
5. Termination.
5.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to
terminate the Executive's employment hereunder for "Cause"
(as defined below in this paragraph 5.1). Upon any
termination pursuant to this Section 5.1, the Executive
shall be entitled to be paid his Base Salary to the date of
termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination,
subject, however to the provisions of Section 4.1). For
purposes of this Agreement, the term "Cause" shall mean (i)
the willful failure or refusal of the Executive to perform
the duties or render the services assigned to him from time
to time by the Board, (ii) gross negligence or misconduct by
the Executive in the performance of his duties to the
Company, (iii) the charging or indictment of the Executive
in connection with a felony, (iv) the association, directly
or indirectly, of the Executive, for his profit or financial
benefit, with any person, firm, partnership, association,
entity or corporation that competes, in any material way,
with the Company, (v) the disclosing or using of any
material trade secret or confidential information of the
Company at any time by the Executive, except as required in
connection with his duties to the Company, or (vi) the
breach by the Executive of his fiduciary duty or duty of
trust to the Company.
5.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, if the Executive
shall, as the result of mental or physical incapacity,
illness or disability, become unable to perform his duties
hereunder for in excess of ninety (90) days in any 12-month
period. Upon any termination pursuant to this Section 5.2,
the Company shall pay to the Executive any unpaid amounts of
his Base Salary and Incentive Compensation accrued through
the effective date of termination and the Company shall have
no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date
of termination, subject, however to the provisions of
Section 4.1).
5.3 Death. In the event of the death of the Executive
during the term of his employment hereunder, the Company
shall pay to the estate of the deceased Executive any unpaid
amounts of his Base Salary and Incentive Compensation
accrued through the date of his death and the Company shall
have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however
to the provisions of Section 4.1).
5.4 Termination Without Cause. At any time the Company
shall have the right to terminate the Executive's employment
hereunder by written notice to the Executive; provided,
however, that, the Company shall (i) pay to the Executive
any unpaid Base Salary and Incentive Compensation accrued
through the effective date of termination specified in such
notice, and (ii) pay Executive's Base Salary in the manner
set forth in Section 3.1 hereof until the date which is six
months following such effective date (the "Severance Date").
The Company shall have no further liability hereunder (other
than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however
to the provisions of Section 4.1).
5.5 Voluntary Resignation. At any time, the Executive
shall have the right to terminate his employment hereunder
by written or oral notice to the Company of his voluntary
resignation. Upon any termination pursuant to this Section
5.5, the Executive shall be entitled to be paid his Base
Salary to the date of termination and the Company shall have
no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date
of termination, subject, however, to the provisions of
Section 4.1).
6. Restrictive Covenants.
6.1 Non-competition. While employed by the Company and
for a period of one year (except that such period shall be
six months if Executive's employment is terminated pursuant
to Section 5.4 hereof) following the later of the date his
employment is terminated hereunder or, if applicable, the
Severance Date, the Executive shall not, directly or
indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer,
director, partner, agent, security holder, creditor,
consultant or otherwise) that directly or indirectly engages
in competition with the Company in any state, country,
commonwealth, territory or other place in which the Company
sells its products (it being agreed that for all purposes of
this Section 6, "the Company" shall include all of its
subsidiaries).
6.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any
way, any trade secrets or confidential information
pertaining to the business of the Company. Any confidential
information, trade secrets or data now known or hereafter
acquired by the Executive with respect to the business of
the Company (which shall include, but not be limited to,
information concerning the Company's financial condition,
prospects, customers, sources of leads, methods of doing
business, and the manner of design, manufacture, financing,
marketing and distribution of the Company's products) shall
be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and
as a fiduciary, and Executive shall remain a fiduciary to
the Company with respect to all of such information.
6.3 Nonsolicitation of Employees and Customers. While
employed by the Company and for a period of three years
(except that the period with respect to the prohibitions in
clause (ii) hereof shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof)
following the later of the date his employment is terminated
hereunder or, if applicable, the Severance Date, the
Executive shall not, directly or indirectly, for himself or
for any other person, firm, corporation, partnership,
association or other entity, (i) attempt to employ or enter
into any contractual arrangement with any employee or former
employee of the Company, unless such employee or former
employee has not been employed by the Company for a period
in excess of six months, and/or (ii) call on or solicit any
of the actual or targeted prospective customers or clients
of the Company, nor shall the Executive make known the names
and addresses of such customers or any information relating
in any manner to the Company's trade or business
relationships with such customers.
6.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the
Company, whether prepared by the Executive or otherwise
coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned
immediately to the Company on termination of the Executive's
employment hereunder or on the Company's request at any
time.
7. Injunction. It is recognized and hereby acknowledged
by the parties hereto that a breach by the Executive of any
of the covenants contained in Section 6 of this Agreement
will cause irreparable harm and damage to the Company, the
monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive recognizes and hereby
acknowledges that the Company shall be entitled to an
injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the
covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or
agents, either directly or indirectly, and that such right
to injunction shall be cumulative and in addition to
whatever other remedies the Company may possess.
8. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Florida.
9. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to
the subject matter hereof and, upon the commencement of the
Initial Term of this Agreement, shall supersede all prior
agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of
its respective affiliates) with respect to such subject
matter. All such prior agreements, understandings and
arrangements for the provision of services by the Executive
to the Company and the compensation of the Executive in any
form shall automatically terminate upon the commencement of
the Initial Term of this Agreement, and each party shall
thereupon and thereby, without any further action, release
and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature
arising out of or in connection with any and all such prior
agreements, understandings or arrangements. This Agreement
may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
10. Notices. Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or
when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid,
(i) if to the Company, to the address of the Company's
principal offices in Birmingham, Alabama (with a copy to
Trivest, Inc., 2665 South Bayshore Drive, Eighth Floor,
Miami, Florida 33133, Attention: Chief Financial Officer,
and (ii) if to the Executive, to his address as reflected on
the payroll records of the Company, or to such other address
as either party hereto may from time to time give notice of
to the other.
11. Benefits; Binding Effect. This Agreement shall be for
the benefit of and binding upon the parties hereto and their
respective heirs, personal representative, legal
representatives, successors and, where applicable, assigns,
including, without limitation, any successor to the Company,
whether by merger, consolidation, sale of stock, sale of
assets or otherwise; provided, however that the Executive
shall not delegate his employment obligations hereunder, or
any portion thereof, to any other person.
12. Severability. The invalidity of any one or more of
the words, phrases, sentences, clauses or sections contained
in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words,
phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such
invalidity is caused by length of time or size of area, or
both, the otherwise invalid provision will be considered to
be reduced to a period or area which would cure such
invalidity.
13. Waivers. The waiver by either party hereto of a
breach or violation of any term or provision of this
Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation.
14. Damages. Nothing contained herein shall be construed
to prevent the Company or the Executive from seeking and
recovering from the other damages sustained by either or
both of them as a result of its or his breach of any term or
provision of this Agreement. In the event that either party
hereto brings suit for the collection of any damages
resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of
this Agreement, then the party found to be at fault shall
pay all reasonable court costs and attorneys' fees of the
other.
15. Section Headings. The section headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
16. No Third Party Beneficiary. Nothing expressed or
implied in this Agreement is intended, or shall be
construed, to confer upon or give any person other than the
Company, the parties hereto and their respective heirs,
personal representatives, legal representatives, successors
and assigns, any rights or remedies under or by reason of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
WABASH VALLEY MANUFACTURING, INC.
By:
Michael R. Shilling
Vice President
EXECUTIVE
Jerry L. Shilling
EXHIBIT 2.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of March 31, 2000 by and between WABASH VALLEY
MANUFACTURING, INC., an Indiana corporation (the "Company"),
and Michael R. Shilling (the "Executive").
Recitals
A. The Executive is currently employed as Vice President of
the Company.
B. The Executive possesses intimate knowledge of the
business and affairs of the Company, its policies, methods
and personnel.
C. The Company recognizes that the Executive has contributed
to its growth and success, and desires to assure the
Executive's employment by the Company following the
acquisition of the Company by WinsLoew Furniture, Inc. and
to compensate him therefor pursuant to this Agreement.
D. The Executive is willing to make his services available
to the Company on the terms and conditions hereinafter set
forth.
Agreement
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties agree as follows:
17. Employment.
17.1 General. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the
Company on the terms and conditions set forth herein.
17.2 Duties of Executive. During the term of this
Agreement, the Executive shall serve as Vice President of
the Company, shall diligently perform all services as may be
assigned to him by the Company's Board of Directors or any
authorized Committee of the Board of Directors (the full
Board or such Committee, as the case may be, is referred to
herein as the "Board"), and shall exercise such power and
authority as may from time to time be delegated to him by
the Board. The Executive shall devote his full time and
attention to the business and affairs of the Company, render
such services to the best of his ability, and use his best
efforts to promote the interests of the Company. Unless he
otherwise consents in writing, Executive shall perform his
duties under this Agreement based at the Wabash Valley
Manufacturing, Inc. office located in Silver Lake, Indiana,
subject to routine business travel and to temporary
assignment to other locations mutually approved by the
Company and Executive not to exceed thirty (30) days per
year.
18. Term.
18.1 Initial Term. The initial term of this Agreement, and
the employment of the Executive hereunder, shall be for the
five-year period commencing on the date hereof (the
"Initial Term"), unless sooner terminated in accordance with
the terms and conditions hereof.
18.2 Renewal Terms. The Initial Term of this Agreement,
and the employment of the Executive hereunder, may be
renewed and extended for such period or periods as may be
mutually agreed to by the Company and the Executive in a
written supplement to this Agreement signed by the Executive
and the Company ("Written Supplement"). If this Agreement
is not so renewed and extended prior to the expiration of
the Initial Term, this Agreement, and the employment of the
Executive hereunder, shall automatically terminate upon the
expiration of the Initial Term.
19. Compensation.
19.1 Base Salary. The Executive shall receive a base
salary at the annual rate of not less than $100,000 (the
"Base Salary") during the Initial Term of this Agreement,
with such Base Salary payable in installments consistent
with the Company's normal payroll schedule, subject to
applicable withholding and other taxes. The Base Salary
shall be adjusted annually to reflect, at a minimum, any
increase from the previous year in the national Consumer
Price Index. The Base Salary shall also be reviewed, at
least annually, for merit increases and may, by action and
in the discretion of the Board, be increased at any time or
from time to time. The Base Salary, if so increased, shall
not thereafter be decreased for any reason. If the term of
this Agreement shall be renewed and extended as provided in
Section 2.2 hereof, then during such renewal term of his
employment hereunder, the Executive shall be paid a base
salary as set forth in the Written Supplement.
19.2 Incentive Compensation.
(a) In addition to the Base Salary, the Executive shall be
entitled to receive annual incentive compensation
("Incentive Compensation"), in the amount determined
pursuant to this Section 3.2, for each fiscal year ending
during the term of this Agreement, commencing with fiscal
2000, for which the Company has Operating Earnings (as
hereafter defined) of at least seventy-five percent (75%) of
the Target Earnings (as hereinafter defined) of the Company
for such year. For purposes of this Section 3.2, "Operating
Earnings" shall mean the consolidated operating earnings of
the Company as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently
applied with the Company's past practices, provided,
however, that such Operating Earnings shall not reflect
(i.e., shall not be reduced by) any amortization of
goodwill. The determination of Operating Earnings made by
the Company shall be final and binding on the parties to
this Agreement. For purposes of this Section 3.2, the
"Target Earnings" of the Company shall be as determined by
the Board of Directors. The Board of Directors shall have
the right to modify, at any time and in its sole discretion,
any previously established "Target Earnings" for reasons
such as, but not limited to, any acquisition, disposition,
merger, reorganization, liquidation, dissolution or other
transaction involving the Company or any of its
subsidiaries, or other extraordinary or significant events
or changes in circumstances relating to the Company or any
of its subsidiaries, businesses or operations.
(b) The amount of the Executive's Incentive Compensation
for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do not exceed
the Target Earnings for the year, the Incentive Compensation
shall be calculated by (A) multiplying (i) fifty percent
(50%) of the Executive's Base Salary for the year (the
"Maximum Bonus") by (ii) the remainder of (w) the fraction
obtained by dividing the Operating Earnings by the Target
Earnings, less (x) 0.75, and then (B) multiplying the
resulting product by three (3); or
II. If the Operating Earnings for the year exceed the
Target Earnings for the year, the Incentive Compensation
shall be calculated by (A) multiplying (i) the Maximum Bonus
by (ii) the remainder of (y) the fraction obtained by
dividing the Operating Earnings by the Target Earnings, less
(z) 1.0, and then (B) multiplying the resulting product by
two (2), and then adding 75% of the Maximum Bonus; provided,
however, that in no event shall the Incentive Compensation
for any year exceed the Maximum Bonus.
III. For example, (A) if Operating Earnings are 75% of the
applicable Target Earnings or less, the Executive's
Incentive Compensation for that year would be zero, (B) if
Operating Earnings are 90% of the applicable Target
Earnings, the Executive's Incentive Compensation for that
year would be 45% of the Maximum Bonus, (C) if Operating
Earnings are 100% of the Target Earnings, the Executive's
Incentive Compensation for that year would be 75% of the
Maximum Bonus, (D) if the Operating Earnings are 110% of the
Target Earnings, the Executive's Incentive Compensation for
that year would be 95% of the Maximum Bonus, and (E) if the
Operating Earnings are 120% of the Target Earnings, the
Executive's Incentive Compensation for that year would be
limited to 100% of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal
year (net of any tax or other amount properly withheld
therefrom) shall be paid by the Company to Executive within
one hundred twenty (120) days after the end of the fiscal
year; provided, however, that any amount paid shall be
subject to increase or decrease based upon the results of
any audited financial statements with respect to such year.
20. Expense Reimbursement and Other Benefits.
20.1 Reimbursable Expenses. During the term of the
Executive's employment hereunder, the Company, upon the
submission of proper substantiation by the Executive, shall
reimburse the Executive for all reasonable expenses actually
and necessarily paid or incurred by the Executive in the
course of and pursuant to the business of the Company.
20.2 Other Benefits. The Executive shall be entitled to
participate in all medical and hospitalization, group life
insurance, and any and all other plans as are presently and
hereinafter provided by the Company to its executives. The
Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives;
provided, however, that in no event may a vacation be taken
at a time when to do so could, in the reasonable judgment of
the Board, adversely affect the Company's business.
20.3 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and such other
facilities and services suitable to his position and
adequate for the performance of his duties hereunder
21. Termination.
21.1 Termination for Cause. The Company shall at all times
have the right, upon written notice to the Executive, to
terminate the Executive's employment hereunder for "Cause"
(as defined below in this paragraph 5.1). Upon any
termination pursuant to this Section 5.1, the Executive
shall be entitled to be paid his Base Salary to the date of
termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination,
subject, however to the provisions of Section 4.1). For
purposes of this Agreement, the term "Cause" shall mean (i)
the willful failure or refusal of the Executive to perform
the duties or render the services assigned to him from time
to time by the Board, (ii) gross negligence or misconduct by
the Executive in the performance of his duties to the
Company, (iii) the charging or indictment of the Executive
in connection with a felony, (iv) the association, directly
or indirectly, of the Executive, for his profit or financial
benefit, with any person, firm, partnership, association,
entity or corporation that competes, in any material way,
with the Company, (v) the disclosing or using of any
material trade secret or confidential information of the
Company at any time by the Executive, except as required in
connection with his duties to the Company, or (vi) the
breach by the Executive of his fiduciary duty or duty of
trust to the Company.
21.2 Disability. The Company shall at all times have the
right, upon written notice to the Executive, to terminate
the Executive's employment hereunder, if the Executive
shall, as the result of mental or physical incapacity,
illness or disability, become unable to perform his duties
hereunder for in excess of ninety (90) days in any 12-month
period. Upon any termination pursuant to this Section 5.2,
the Company shall pay to the Executive any unpaid amounts of
his Base Salary and Incentive Compensation accrued through
the effective date of termination and the Company shall have
no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date
of termination, subject, however to the provisions of
Section 4.1).
21.3 Death. In the event of the death of the Executive
during the term of his employment hereunder, the Company
shall pay to the estate of the deceased Executive any unpaid
amounts of his Base Salary and Incentive Compensation
accrued through the date of his death and the Company shall
have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however
to the provisions of Section 4.1).
21.4 Termination Without Cause. At any time the Company
shall have the right to terminate the Executive's employment
hereunder by written notice to the Executive; provided,
however, that, the Company shall (i) pay to the Executive
any unpaid Base Salary and Incentive Compensation accrued
through the effective date of termination specified in such
notice, and (ii) pay Executive's Base Salary in the manner
set forth in Section 3.1 hereof until the date which is six
months following such effective date (the "Severance Date").
The Company shall have no further liability hereunder (other
than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however
to the provisions of Section 4.1).
21.5 Voluntary Resignation. At any time, the Executive
shall have the right to terminate his employment hereunder
by written or oral notice to the Company of his voluntary
resignation. Upon any termination pursuant to this Section
5.5, the Executive shall be entitled to be paid his Base
Salary to the date of termination and the Company shall have
no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date
of termination, subject, however, to the provisions of
Section 4.1).
22. Restrictive Covenants.
22.1 Non-competition. While employed by the Company and
for a period of one year (except that such period shall be
six months if Executive's employment is terminated pursuant
to Section 5.4 hereof) following the later of the date his
employment is terminated hereunder or, if applicable, the
Severance Date, the Executive shall not, directly or
indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer,
director, partner, agent, security holder, creditor,
consultant or otherwise) that directly or indirectly engages
in competition with the Company in any state, country,
commonwealth, territory or other place in which the Company
sells its products (it being agreed that for all purposes of
this Section 6, "the Company" shall include all of its
subsidiaries).
22.2 Nondisclosure. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any
way, any trade secrets or confidential information
pertaining to the business of the Company. Any confidential
information, trade secrets or data now known or hereafter
acquired by the Executive with respect to the business of
the Company (which shall include, but not be limited to,
information concerning the Company's financial condition,
prospects, customers, sources of leads, methods of doing
business, and the manner of design, manufacture, financing,
marketing and distribution of the Company's products) shall
be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and
as a fiduciary, and Executive shall remain a fiduciary to
the Company with respect to all of such information.
22.3 Nonsolicitation of Employees and Customers. While
employed by the Company and for a period of three years
(except that the period with respect to the prohibitions in
clause (ii) hereof shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof)
following the later of the date his employment is terminated
hereunder or, if applicable, the Severance Date, the
Executive shall not, directly or indirectly, for himself or
for any other person, firm, corporation, partnership,
association or other entity, (i) attempt to employ or enter
into any contractual arrangement with any employee or former
employee of the Company, unless such employee or former
employee has not been employed by the Company for a period
in excess of six months, and/or (ii) call on or solicit any
of the actual or targeted prospective customers or clients
of the Company, nor shall the Executive make known the names
and addresses of such customers or any information relating
in any manner to the Company's trade or business
relationships with such customers.
22.4 Books and Records. All books, records, and accounts
relating in any manner to the customers or clients of the
Company, whether prepared by the Executive or otherwise
coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned
immediately to the Company on termination of the Executive's
employment hereunder or on the Company's request at any
time.
23. Injunction. It is recognized and hereby acknowledged
by the parties hereto that a breach by the Executive of any
of the covenants contained in Section 6 of this Agreement
will cause irreparable harm and damage to the Company, the
monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive recognizes and hereby
acknowledges that the Company shall be entitled to an
injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the
covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or
agents, either directly or indirectly, and that such right
to injunction shall be cumulative and in addition to
whatever other remedies the Company may possess.
24. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Florida.
25. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to
the subject matter hereof and, upon the commencement of the
Initial Term of this Agreement, shall supersede all prior
agreements, understandings and arrangements, both oral and
written, between the Executive and the Company (or any of
its respective affiliates) with respect to such subject
matter. All such prior agreements, understandings and
arrangements for the provision of services by the Executive
to the Company and the compensation of the Executive in any
form shall automatically terminate upon the commencement of
the Initial Term of this Agreement, and each party shall
thereupon and thereby, without any further action, release
and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature
arising out of or in connection with any and all such prior
agreements, understandings or arrangements. This Agreement
may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
26. Notices. Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand or
when deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid,
(i) if to the Company, to the address of the Company's
principal offices in Birmingham, Alabama (with a copy to
Trivest, Inc., 2665 South Bayshore Drive, Eighth Floor,
Miami, Florida 33133, Attention: Chief Financial Officer,
and (ii) if to the Executive, to his address as reflected on
the payroll records of the Company, or to such other address
as either party hereto may from time to time give notice of
to the other.
27. Benefits; Binding Effect. This Agreement shall be for
the benefit of and binding upon the parties hereto and their
respective heirs, personal representative, legal
representatives, successors and, where applicable, assigns,
including, without limitation, any successor to the Company,
whether by merger, consolidation, sale of stock, sale of
assets or otherwise; provided, however that the Executive
shall not delegate his employment obligations hereunder, or
any portion thereof, to any other person.
28. Severability. The invalidity of any one or more of
the words, phrases, sentences, clauses or sections contained
in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words,
phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted. If such
invalidity is caused by length of time or size of area, or
both, the otherwise invalid provision will be considered to
be reduced to a period or area which would cure such
invalidity.
29. Waivers. The waiver by either party hereto of a
breach or violation of any term or provision of this
Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation.
30. Damages. Nothing contained herein shall be construed
to prevent the Company or the Executive from seeking and
recovering from the other damages sustained by either or
both of them as a result of its or his breach of any term or
provision of this Agreement. In the event that either party
hereto brings suit for the collection of any damages
resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of
this Agreement, then the party found to be at fault shall
pay all reasonable court costs and attorneys' fees of the
other.
31. Section Headings. The section headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
32. No Third Party Beneficiary. Nothing expressed or
implied in this Agreement is intended, or shall be
construed, to confer upon or give any person other than the
Company, the parties hereto and their respective heirs,
personal representatives, legal representatives, successors
and assigns, any rights or remedies under or by reason of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
WABASH VALLEY MANUFACTURING, INC.
By:
Jerry L. Shilling
President
EXECUTIVE
Michael R. Shilling
EXHIBIT 2.4
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
THIS SUBSCRIPTION AND SHAREHOLDERS AGREEMENT (this
"Agreement") is made as of March 31, 2000, among WinsLoew
Furniture, Inc., a Florida corporation (the "Company"), the
Lead Trivest Investor (as hereinafter defined) and Michael
R. Shilling (the "Shareholder").
Preliminary Statements:
The Shareholder desires to purchase shares (the "Shares") of
the Company's common stock, par value $.01 per share
("Common Stock"), on the terms and subject to the conditions
set forth in this Agreement.
The Company desires to issue and sell the Shares to the
Shareholder.
The Company and the Shareholder desire to enter into this
Agreement setting forth the terms and conditions relating to
the purchase and sale of the Shares.
The Company, the Lead Trivest Investor and the Shareholder
believe that it would be in the best interest of the Company
to make provisions governing the purchase of the Shareholder
Stock in the event of his death or disability or if he
ceases to be employed by the Company or any of its
Subsidiaries for any reason.
The Company, the Lead Trivest Investor and the Shareholder
believe that it would be in the best interest of the Company
to place certain restrictions upon the right of transfer of
the Shareholder Stock.
The directors of the Company, having considered the
provisions of this Agreement, have resolved that in their
opinion the restrictions upon the transfer of the
Shareholder Stock, the provisions for the redemption and/or
purchase of the Shareholder Stock, and the establishment of
rights and obligations upon the occurrence of certain
events, all as hereinafter set forth, are in the best
interest of the Company and its shareholders.
Contemporaneously with the execution and delivery of this
Agreement and pursuant to that certain Stock Purchase
Agreement dated as of March 31, 2000 (the "Stock Purchase
Agreement") among the Company, Wabash Valley Manufacturing,
Inc., an Indiana corporation ("Wabash"), and the
shareholders of Wabash, the Company will acquire all of the
issued and outstanding shares of capital stock of Wabash.
Agreement:
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Interpretation of this Agreement.
a) Terms Defined. As used herein, the following
terms when used in this Agreement have the meanings set
forth below:
"Acquisition" means the acquisition of Wabash by Acquisition
pursuant to the Stock Purchase Agreement, together with the
merger of Acquisition with and into Wabash immediately
thereafter.
"Affiliate" (whether or not capitalized) has the meaning set
forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
"Annual Report" means the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, filed with
the Securities and Exchange Commission.
"Applicable Percentage" on any date shall mean a fraction
(expressed as a percentage), the numerator of which is the
aggregate number of Company Securities to be transferred by
the Lead Trivest Investor and the denominator of which is
the aggregate number of Company Securities owned by (and/or
purchasable by) the Lead Trivest Investor; all such
calculations shall be on a fully-diluted basis and carried
out to one hundredth of a share and then rounded to the
nearest share.
"Authorization Period" shall have the meaning given to it in
Section 4(b) of this Agreement.
"Available Shares" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Board" shall mean the Company's Board of Directors.
"Buyer" shall have the meaning specified in Section 4 of
this Agreement.
"Cause" shall have the meaning assigned to it in any written
employment agreement to between the Company (or any of its
Subsidiaries) and the Shareholder and, if there shall be no
such written employment agreement, shall mean (i) the
commission of any act by the Shareholder constituting
financial dishonesty against the Company or its
Subsidiaries, (ii) the commission by the Shareholder of a
felony or other crime involving moral turpitude, (iii) the
repeated failure by the Shareholder to follow the reasonable
written directives of the Company's Board, (iv) the
Shareholder's gross dereliction of duty to the Company or
its Subsidiaries or (v) any breach by the Shareholder of any
of the provisions of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Common Stock" shall have the meaning given to it in Clause
A of the recitals hereof.
"Company" shall have the meaning given to it in the first
sentence of this Agreement.
"Company's Board" means the Board of Directors of the
Company.
"Company Registration Statement" shall have the meaning
specified in Section 7.5.
"Company Securities" shall mean all shares of Common Stock
and all securities convertible into or exercisable or
exchangeable for Common Stock. For purposes of this
Agreement (1) each holder of Restricted Securities shall be
deemed to own or control that number of shares of Common
Stock then directly owned or controlled by such holder, plus
that number of shares of Common Stock into or for which any
securities then directly or indirectly owned or controlled
by such holder are then, directly or indirectly,
convertible, exercisable or exchangeable and (2) references
in this Agreement to "shares" of Restricted Securities other
than Common Stock shall be deemed to refer to the number of
shares of Common Stock into or for which any securities then
directly or indirectly owned or controlled by such holder
are then, directly or indirectly, convertible, exercisable
or exchangeable.
"Drag Along Notice" shall have the meaning specified in
Section 5 of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exempt Transfer" shall have the meaning specified in
Section 4(a) of this Agreement.
"Family Group" shall mean an individual's spouse and lineal
descendants, parents, grandparents and any family limited
partnership or trust or other fiduciary relationship solely
for the benefit of such individual and/or such individual's
spouse, parents, grandparents and/or lineal descendants.
"Fleet Credit Facility" means the credit facility provided
for pursuant to that certain Loan and Security Agreement
dated as of August 27, 1999 among (i) the Company, Winston
Furniture Company of Alabama, Inc., Loewenstein, Inc.,
Texacraft, Inc., Tropic Craft, Inc., Winston Properties,
Inc. and Pompeii Furniture Co., Inc., as Borrowers, (ii) the
Lenders named therein, (iii) Heller Financial, Inc. and
Canadian Imperial Bank of Commerce, as Co-Agents, (iv) Fleet
Capital Corporation, as Administrative Agent, and (v)
BancBoston Robertson Stephens Inc., as Arranger, pursuant to
and as more fully described in the Prospectus, and as
amended as of the date hereof.
"Indemnified Person" shall have the meaning specified in
Section 7 of this Agreement.
"Investors Agreement" means that certain Investors'
Agreement dated as of August 27, 1999 among the Company and
the Investors named therein.
"Key Employee Equity Plan" means the WinsLoew 1999 Key
Employee Equity Plan under which an aggregate of 20,000
shares of Common Stock are reserved for direct sale to
employees and independent sales representatives of WinsLoew
Furniture, Inc.
"Lead Trivest Investor" means Trivest Fund II Group, Ltd., a
Florida limited partnership, and its successors and assigns.
"Liquidity Event" means (i) the sale of all, or
substantially all, of the Company's consolidated assets in
any single transaction or series of related transactions;
(ii) the sale or issuance, or series of related sales or
issuances, of Common Stock in any single transaction or
series of related transactions which results in any Person
or group of affiliated Persons (other than the holders of
Common Stock as of the date of this Agreement and affiliates
of such holders) owning more than 50% of the Common Stock
outstanding at the time of such sale or issuance or such
series of sales and/or issuances; (iii) the consummation of
a Qualified Public Offering; or (iv) any merger or
consolidation of the Company with or into another
corporation (regardless of which entity is the surviving
corporation) if, after giving effect to such merger or
consolidation, the holders of the Company's voting
securities (on a fullydiluted basis) immediately prior to
the merger or consolidation own voting securities of the
surviving or resulting corporation representing less than a
majority of the ordinary voting power to elect directors of
the surviving or resulting corporation (on a fullydiluted
basis).
"Management Stock Option Plan" means any stock option plan
which may be adopted by the Company for the benefit of the
employees of the Company or its Subsidiaries, as the same
may from time to time be amended or supplemented.
"Market Value" of each share of Shareholder Stock means the
fair value of a share of the Common Stock as of the
Termination Date (without applying any minority or
illiquidity discounts to such valuation), as determined
jointly by the Board and the Shareholder. If such parties
are unable to reach an agreement within 21 days after the
Termination Date, then (i) Market Value will be determined
by an independent investment banker or other valuation
expert of national standing selected by the Board and
reasonably acceptable to the Shareholder (the "Valuation
Firm"), (ii) the Company shall promptly deliver to the
Valuation Firm and the Shareholder a certificate setting
forth in reasonable detail the Board's calculation of Market
Value (the "Company's Proposed Value") and (iii) the
Shareholder shall promptly deliver to the Valuation Firm and
the Company a certificate setting forth in reasonable detail
the Shareholder's calculation of Market Value (the
"Shareholder's Proposed Value"). The parties shall use
reasonable efforts to cause the Valuation Firm to complete
such valuation within 55 days after the Termination Date.
Each party shall pay its, his or her own costs and expenses
incurred in connection with such determination of Market
Value; provided, that the fees and expenses of the Valuation
Firm shall be borne as follows:
(4) if the Valuation Firm determines that the Market
Value is equal to or less than the Company's Proposed Value
(the Market Value so determined is referred to herein as the
"Low Amount"), the Shareholder will be responsible for all
of the fees and expenses of the Valuation Firm;
(5) if the Valuation Firm determines that the Market
Value is equal to or greater than the Shareholder's Proposed
Value (the Market Value so determined is referred to herein
as the"High Amount"), the Company will be responsible for
all of the fees and expenses of the Valuation Firm; and
if the Valuation Firm determines that the Market Value is
greater than the Company's Proposed Value but less than the
Shareholder's Proposed Value (the Market Value so determined
is referred to herein as "Actual Amount"), the Shareholder
will be responsible for that fraction of the fees and
expenses of the Valuation Firm equal to (1) the difference
between the High Amount and the Actual Amount over (2) the
difference between the High Amount and the Low Amount, and
the Company will be responsible for the remainder of the
fees and expenses.
"Notice of Transfer" shall have the meaning specified in
Section 6 of this Agreement.
"Option Notice" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Original Cost" of each share of Shareholder Stock means
$124.34 for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other
recapitalization affecting Common Stock subsequent to the
date of this Agreement); provided, however, that the
Original Cost for each share of Common Stock purchased by
the Shareholder pursuant to the exercise of options granted
to him under any Management Stock Option Plan shall be the
exercise price thereof (as such term is defined in such
Management Stock Option Plan), as proportionally adjusted
pursuant to the provisions of the Management Stock Option
Plan.
"Other Subscriptions" means, collectively, the subscriptions
of shares of Common Stock simultaneously herewith by the
following Persons who will acquire, together with the Shares
acquired hereunder, an aggregate of 57,103.6009 shares of
Common Stock at the Subscription Price: (i) the
subscription of 11,351.53611 shares of Common Stock by Jerry
Shilling pursuant to that certain Subscription and
Shareholders Agreement dated as of the date hereof among the
Company, the Lead Trivest Investor and Jerry Shilling; and
(ii) the subscription of 18,902.3202 shares of Common stock
by the Lead Trivest Investor and 18,094.3789 shares of
Common Stock by Trivest Furniture Partners, Ltd.
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department,
agency or political subdivision thereof.
"Prohibited Amount" shall have the meaning given to it in
Section 3(f) of this Agreement.
"Prospectus" means the Company's Prospectus, dated November
19, 1999, a copy of which has been previously provided to
the Shareholder.
"qualification" or "compliance" shall mean the qualification
or compliance of all Registrable Shares included in any
registration pursuant to Section 7 under all applicable blue
sky or other applicable securities laws.
"Qualified Public Offering" shall mean a firm commitment
underwritten public offering of the Company's Common Stock
underwritten by a nationally recognized full-service
investment bank pursuant to which the aggregate gross
proceeds received by the Company is at least $20,000,000 at
a price per share of not less than $10.00 (following
appropriate adjustment in the event of any stock dividends,
stock split, combination or other similar recapitalization
affecting such shares).
"register", "registered" and "registration" as used in
Section 7 refer to a registration effected by filing a
registration statement in compliance with the Securities Act
to permit the sale and disposition of the Registrable Shares
and any amendment filed or required to be filed to permit
any such disposition.
"Registrable Shares" shall mean any shares of Shareholder
Stock, except that, as to any particular Registrable Shares,
such securities, once issued, shall cease to be Registrable
Shares when (a) a registration statement covering such
securities has been declared effective and such securities
have been disposed of pursuant to an effective registration
statement, or (b) such securities have been sold to the
public without registration in accordance with Rule 144 (or
any similar provision then in force) under the Securities
Act.
"Registration Expenses" shall mean all fees, expenses and
disbursements related to any registration, qualification or
compliance pursuant to Section 7, including, without
limitation, all registration, filing, rating and listing
fees, blue sky fees and expenses, printing expenses,
reasonable fees and disbursements of counsel (including,
without limitation, the reasonable fees, expenses and
disbursements of one counsel for the holder or holders of
the Registrable Shares), and reasonable expenses of any
special audits incidental to or required by any
registration, qualification or compliance, except that
Registration Expenses shall not include any Selling
Expenses.
"Repurchase Notice" shall have the meaning given to it in
Section 3(c) of this Agreement.
"Repurchase Note(s)" shall have the meaning given to it in
Section 3(f) of this Agreement.
"Repurchase Option" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Sale Notice" shall have the meaning given to it in Section
4(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriters' discounts,
selling commissions, transfer taxes and other similar
expenses (except to the extent included in Registration
Expenses) attributable to the Registrable Shares.
"Senior Debt" shall have the meaning given to it in Section
3(f) of this Agreement.
"Senior Subordinated Notes" means the Senior Subordinated
Notes of the Company in the aggregate principal amount of
$105 million pursuant to and as more fully described in the
Prospectus.
"Shareholder" shall have the meaning given to it in the
first sentence of this Agreement.
"Shareholder Stock" means (i) all Company Securities now
owned or hereafter acquired by the Shareholder or any member
of the Shareholder's Family Group, and (ii) all Company
Securities issued with respect to the Company Securities
referred to in clause (i) above by way of stock dividend or
stock split or in connection with any combination of shares,
merger, consolidation, recapitalization or other
reorganization. All Shareholder Stock will continue to be
Shareholder Stock in the hands of any transferee, other than
(x) the Company, (y) any Trivest Affiliate and (z)
purchasers pursuant to an offering registered with the
Securities and Exchange Commission pursuant to the
Securities Act or purchasers pursuant to a public sale
through a marketmaker, broker or dealer under Rule 144 (or
any successor rule) promulgated under the Securities Act.
Shareholder Stock under this Agreement does not include any
stock which is "Shareholder Stock" under other agreements
among the Company, the Lead Trivest Investor and employees
(or independent sales representatives) of the Company or its
Subsidiaries regarding the purchase of the Company's Common
Stock.
"Shareholders Agreements" means, collectively, the
Shareholders Agreements, each substantially in the form
attached as Exhibit B to the Key Employee Equity Plan,
entered into by the Company with the respective shareholders
party thereto.
"Shares" shall have the meaning given to it in Clause A of
the recitals hereof.
"Subject Securities" shall have the meaning specified in
Section 8 hereof.
"Subscription Closing" shall have the meaning given to it in
Section 2(a) hereof.
"Subscription Price" shall have the meaning given to it in
Section 2(a) hereof.
"Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of
which (i) more than 50% of the securities or other ownership
interests or (ii) securities or other interests having by
their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar
functions with respect to such corporation or other
organization, is directly owned or controlled by such Person
or by any one or more of its Subsidiaries.
"Supplemental Repurchase Notice" shall have the meaning
given to it in Section 3(d) of this Agreement.
"Termination Date" shall have the meaning given to it in
Section 3(c) of this Agreement.
"Transfer" shall mean any issue, sale, pledge, gift,
assignment or other transfer.
"Trivest Affiliates" shall mean each of the Trivest
Investors and each other Person that is controlled directly
or indirectly by the Persons now or hereafter controlling
directly or indirectly the Trivest Investors.
"Trivest Investors" shall mean each of Trivest Furniture
Partners, Ltd., a Florida limited partnership, and the Lead
Trivest Investor.
b) Interpretation. The words "herein," "hereof,"
"hereunder" and other words of similar import refer to this
Agreement as a whole, as the same from time to time may be
amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this
Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and
pronouns stated in masculine, feminine or neuter gender
shall include the masculine, feminine and the neuter.
2. Subscription to Purchase Shares.
a) Purchase, Issuance and Sale of Stock.
i) The Shareholder hereby subscribes for and agrees to
purchase and the Company hereby agrees to issue and sell to
the Shareholder EIGHT THOUSAND SEVEN HUNDRED FIFTY-FIVE AND
36,559/100,000 (8,755.36559) Shares of Common Stock, for the
purchase price of $124.34 per share (the "Subscription
Price").
ii) The purchase and sale of the Shares (the "Subscription
Closing") will be consummated immediately prior to the
consummation of the transactions contemplated by the Stock
Purchase Agreement and contemporaneously with the Other
Subscriptions, at which time the Company shall deliver to
the Shareholder a certificate representing the Shares
against the Shareholder's delivery of the Subscription
Price. The Subscription Price for the Shares shall be paid
by wire transfer of immediately available funds to an
account designated by the Company in writing.
b) Representations and Warranties of the Company. The
Company hereby represents and warrants to the Shareholder as
follows:
i) Organization; Power and Authority. The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of Florida. The Company has full
corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned
and used by it.
ii) Authorization of Transaction. The Company has full
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with
its terms.
iii) Capitalization. The Common Stock
constitutes the Company's only authorized
class of capital stock. Upon the Shareholder's
payment of the Subscription Price, the Shares
purchased by the Shareholder pursuant to the
provisions of this Agreement will be duly
authorized, validly issued, fully paid and
nonassessable. Immediately following the
Subscription Closing and after giving effect
to the Other Subscriptions,
828,103.3509 shares of Common Stock will be issued and
outstanding. Except for this Agreement, the Other
Subscriptions, the Shareholders' Agreements, the
Investors' Agreement and the Trivest Furniture
Partners, Ltd. Partnership Agreement, there
are no outstanding subscriptions, warrants,
options or other agreements or rights of any kind to
purchase or otherwise receive or be issued,
or securities or obligations of any kind convertible into, any shares of
capital stock or any other security of the Company.
iv) Other Subscriptions. The shares of Common Stock issued
in connection with the Other Subscriptions are of the same
class with identical rights under the Company's Articles of
Incorporation and are being issued at the identical
Subscription Price, as the Shares issued to Shareholder
under this Agreement.
c) Representations and Warranties of Shareholder. The
Shareholder hereby represents and warrants to the Company as
follows:
i) State Securities Laws. The Shareholder received this
Agreement and first learned of the offer and sale of the
Shares contemplated hereby in the State set forth below the
Shareholders' name on the signature page hereof. The
Shareholder intends that the laws of such state govern the
offering of the Shares to the Shareholder. The Shareholder
is a resident of such State.
ii) Capacity. The Shareholder has full capacity to execute
and deliver this Agreement and to perform the Shareholder's
obligations hereunder.
iii) Agreement Binding. This Agreement constitutes the
valid and legally binding obligation of the Shareholder,
enforceable in accordance with its terms.
iv) Acquisition for Investment. The Shareholder is
acquiring the Shares for investment solely for the
Shareholder's account and not for distribution, transfer or
resale to others in violation of the federal securities laws
or this Agreement.
v) Restrictions on Transfer. The Shareholder understands
that the Shareholder must bear the economic risk of the
purchase of the Shares for an indefinite period of time
because, except as provided in this Agreement, (A) the
Company's sale of the Shares to the Shareholder will not be
registered under the Securities Act and applicable state
securities laws in reliance on the Shareholder's
representations, (B) the Shares may not be sold,
transferred, pledged, or otherwise disposed of without an
opinion of counsel for or satisfactory to the Company that
registration under the Securities Act or any applicable
state securities laws is not required, (C) the Company does
not have an obligation to register a sale of the Shares nor
has it agreed to do so in the future, (D) the exemption
provided in Rule 144 under the Securities Act is not
presently available for the resale of any of the Shares and
it is unlikely that such exemption will be available at any
time in the future with respect to any proposed transfer of
the Shares, and (E) the Company is not under any obligation
to perfect any exemption for the resale of any of the
Shares. The Shareholder also acknowledges the Shareholder's
understanding that transfers of the Shares will be subject
to the limitations set forth in this Agreement.
vi) Restrictive Legends. The Shareholder understands that
the certificate evidencing the Shares will bear a
restrictive legend prohibiting the transfer thereof except
in compliance with (A) applicable state and federal
securities laws (and may not be transferred of record except
in compliance therewith), and (B) the terms of this
Agreement, as well as any other legends required by
applicable state securities laws.
vii) Opportunity to Ask Questions. The Shareholder has had
an opportunity to ask questions and receive answers
concerning the capitalization of the Company and the terms
hereof and has had full access to such other information
concerning the Company, both prior to and following the
Merger, as the Shareholder has requested.
viii) Certain Risk Factors. The Shareholder understands the
speculative nature of and risks involved in the proposed
investment in the Company, and all matters relating to the
structure and the operations of the Company and its
Subsidiaries, both prior to and following the Acquisition,
have been discussed and explained to Shareholder's
satisfaction, including but not limited to:
A) the senior loans provided to the Company pursuant to the
Fleet Credit Facility; and
B) the Senior Subordinated Notes.
The Shareholder specifically acknowledges the Shareholder's
understanding that:
aa) the presence of substantial amounts of debt creates
significant risks, including that (1) although equity
investments in highly leveraged companies such as the
Company offer the opportunity for significant capital
appreciation, such investments involve the highest degree of
risks and can result in the loss of the Shareholder's entire
investment, (2) other general business risks, including the
effects of a recession, may have a more pronounced effect,
(3) lending institutions may have rights to participate in
certain decisions relating to the management of the Company,
and (4) for the Company's debt to be repaid and for the
Shareholder's equity investment in the Common Stock to have
any value, the Company must achieve significant continued
growth in financial performance;
bb) the Subscription Price may not be indicative of the fair
market value of the Shares;
cc) the Shareholder, as a minority shareholder, will have no
control over or influence in the management of the company,
and that the purchase of the Shares does not entitle the
Shareholder to continued employment by the Company;
dd) the terms of the Fleet Credit Facility, the Senior Subordinated
Notes and other documents relating to an
investment in the Company are quite complex, that all
such documents are available for inspection, that a review
thereof is recommended, and that the Shareholder
should consider obtaining counsel or other competent advisors before
purchasing the Shares; and
ee) Trivest Partners, L.P. (an affiliate of the controlling
shareholders of the Company) will receive from the
Company (i) an annual management fee of $350,000,
subject to cost of living increases and certain increases in
respect of business operations acquired, as
well as certain fees in connection with acquisitions
and dispositions of business operations negotiated by Trivest Partners,
L.P. pursuant to that certain
Management Agreement dated as of August 27, 1999, a
copy of which has been made available to the Shareholder, and
(ii) a one-time transaction fee of $618,750 upon consummation of the
Acquisition.
ix) Representations Relied Upon by Shareholder. The
Shareholder acknowledges receipt of (i) the Prospectus,
which describes, among other things, the issuance of the
Senior Subordinated Notes, the Fleet Credit Facility and
certain risk factors relating to such matters and (ii) the
Annual Report. The Shareholder is acquiring the Shares
without having been furnished any representations or
warranties of any kind whatsoever with respect to the
business and financial condition of the Company and its
Subsidiaries, other than the representations contained
herein. The Shareholder specifically understands that the
financial projections for the Company that have been made
available for such Shareholder's review are based upon
certain key assumptions, that such assumptions are subject
to uncertainties relating to the effect that economic or
other circumstances may have on future events, and that
there can be no assurance that the assumptions or data upon
which they are based are achievable.
x) Reliance. The Shareholder has discussed with, and
relied upon the advice of the Shareholder's counsel with
regard to, the meaning and legal consequences of the
Shareholder's representations and warranties herein and the
considerations involved in making an investment in the
Company, and the Shareholder understands that the Company is
relying on the information set forth herein.
xi) No Liquidity. The Shareholder has adequate means of
providing for such Shareholder's current financial needs and
possible personal contingencies and has no need for
liquidity in such Shareholder's investment in the Company.
xii) Risk of Loss. The Shareholder is able to bear the
economic risks inherent in an investment in the Company and
can afford a complete loss of such Shareholder's entire
investment in the Company.
xiii) Other Illiquid Investments. The Shareholder's overall
commitment to investments which are not readily marketable
is not disproportionate to such Shareholder's net worth, and
such Shareholder's investment in the Company will not cause
such overall commitment to be disproportionate.
xiv) Sophistication; Accredited Investor Status. The
Shareholder has such knowledge and experience in financial
and business matters that such Shareholder is capable of
evaluating the merits and risks of an investment in the
Company and of making an informed investment decision. The
Shareholder is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act.
xv) Certain Tax Matters. The Shareholder certifies under
penalty of perjury that (i) the Taxpayer Identification
Number and address provided under the Shareholder's name on
the signature page to this Agreement are correct, (ii) the
Shareholder is not subject to backup withholding either
because the Shareholder has not been notified that she is
subject to backup withholding as a result of a failure to
report all interest or dividends or because the Internal
Revenue Service has notified the Shareholder that she is no
longer subject to backup withholding and (iii) the
Shareholder is not a nonresident alien, foreign partnership,
foreign trust or foreign estate.
xvi) Lender Agreements. The Shareholder acknowledges and
agrees that, notwithstanding anything to the contrary in
this Agreement, any purchase or sale of Restricted
Securities under this Agreement is subject in all respects
to the provisions of the Fleet Credit Facility.
3. Termination Repurchase Option.
a) If the Shareholder's employment with the Company or
any of its Subsidiaries is terminated by the Company or any
such Subsidiary for any reason whatsoever other than Cause
or the Shareholder's resignation (including termination
without Cause, death or disability), then all (but not less
than all) of the Shareholder Stock (whether held by the
Shareholder, any member of the Shareholder's Family Group or
one or more transferees), shall be subject to repurchase by
the Company at the Company's option at a price per share
equal to Market Value and on the other terms and conditions
set forth in this Section 3.
b) If the Shareholder's employment with the Company or
any of its Subsidiaries is terminated by the Company or any
such Subsidiary for Cause or by the Shareholder's
resignation, then all (but not less than all) of the
Shareholder Stock (whether held by the Shareholder, any
member of the Shareholder's Family Group or one or more
transferees) shall be subject to repurchase by the Company
at the Company's option at a price per share determined as
follows:
i) If the date on which the Shareholder's employment
terminates is on or after the date of this Agreement, but
prior to the first anniversary date of this Agreement, then
all of the outstanding shares of Shareholder Stock shall be
subject to repurchase at a price per share equal to the
lower of Original Cost or Market Value.
ii) If the date on which the Shareholder's employment
terminates is on or after the first anniversary date of this
Agreement, but prior to the second anniversary date of this
Agreement, two-thirds of the outstanding shares of
Shareholder Stock shall be subject to repurchase at a price
per share equal to Original Cost and the remaining one-third
of the outstanding shares of Shareholder Stock shall be
subject to repurchase at a price per share equal to Market
Value; provided, however, that if the Market Value of such
shares is less than their Original Cost, then all of such
shares shall be subject to repurchase at a price per share
equal to Market Value.
iii) If the date on which the Shareholder's employment
terminates is on or after the second anniversary date of
this Agreement, but prior to the third anniversary date of
this Agreement, one-third of the outstanding shares of
Shareholder Stock shall be subject to repurchase at a price
per share equal to Original Cost and the remaining two-
thirds of the outstanding shares of Shareholder Stock shall
be subject to repurchase at a price per share equal to
Market Value; provided, however, that if the Market Value of
such shares is less than their Original Cost, then all of
such shares shall be subject to repurchase at a price per
share equal to Market Value.
iv) If the date on which the Shareholder's employment
terminates is on or after the third anniversary date of this
Agreement, then all of the outstanding shares of Shareholder
Stock shall be subject to repurchase at a price per share
equal to Market Value.
c) The Company's Board may elect to cause the Company to
purchase all (but not less than all) of Shareholder Stock
subject to repurchase by delivery of written notice (the
"Repurchase Notice") to the holder or holders of Shareholder
Stock within 95 days after the termination of the
Shareholder's employment (the date of such termination is
herein referred to as the "Termination Date"). The
Repurchase Notice shall set forth the number of shares of
Shareholder Stock to be acquired from such holder, the
aggregate consideration to be paid for such shares (if
known) and the time and place for the closing of the
transaction.
d) If for any reason the Company does not elect to
purchase all of the shares of Shareholder Stock pursuant to
the repurchase option under Section 3(a) or Section 3(b), as
the case may be (the "Repurchase Option"), the Lead Trivest
Investor shall be entitled to exercise the Company's
Repurchase Option in the manner set forth in Section 3(c)
for all of the shares of Shareholder Stock (the "Available
Shares"). As soon as practicable after the Company has
determined that there will be Available Shares, but in any
event within 60 days after the Termination Date, the Company
shall deliver written notice (the "Option Notice") to the
Lead Trivest Investor setting forth the number of Available
Shares and the price thereof (if known). The Lead Trivest
Investor may elect to purchase all of Available Shares by
delivering written notice to the Company within 30 days
after receipt of the Option Notice from the Company. As
soon as practicable, and in any event within 5 days after
the expiration of the 30day period set forth above, the
Company shall notify each holder of Shareholder Stock as to
the number of shares being purchased from such holder by the
Lead Trivest Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental
Repurchase Notice to the holder(s) of Shareholder Stock, the
Lead Trivest Investor shall also receive written notice from
the Company setting forth the number of shares it is
entitled to purchase, the aggregate purchase price (if
known) and the time and place of the closing of the
transaction.
e) The closing of the purchase transactions shall take
place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which
date shall not be more than 30 days and not less than 10
days after the delivery of the later of either such notice
to be delivered, provided that, if the Market Value has not
yet been determined, the closing shall be delayed to a date
designated by the Company, which date shall be not more than
20 days after such determination is made. The Company and/or
Lead Trivest Investor will pay for the Shareholder Stock to
be purchased pursuant to the Repurchase Option, by delivery
of a check or checks (or, at the election of the Company
and/or Lead Trivest Investor, by wire transfer of
immediately available funds) in an amount equal to the
purchase price of the shares being repurchased. The
purchasers of Shareholder Stock under this Agreement will be
entitled to receive customary representations and warranties
from the seller(s) regarding the seller(s)' good title to,
and freedom from liens, encumbrances and restrictions on the
sale of Shareholder Stock.
f) Notwithstanding anything contained herein to the
contrary, the provisions of this Section 3 will terminate
if, prior to the Termination Date, a Liquidity Event is
consummated.
4. Restrictions on Transfer.
a) Transfer of Shareholder Stock. The Shareholder will
not sell, pledge or otherwise directly or indirectly
transfer any interest in or any beneficial interest in any
shares of Shareholder Stock except pursuant to the
provisions of Sections 3, 5, 6 or 7 of this Agreement
("Exempt Transfers") and except pursuant to the provisions
of this Section 4. Any transfer of Shareholder Stock which
is not consummated in accordance with this Agreement shall
be void.
b) First Refusal Rights. At least 60 days prior to making
any transfer other than an Exempt Transfer, the Shareholder
will deliver a written notice (the "Sale Notice") to the
Company and the Lead Trivest Investor. The Sale Notice will
disclose in reasonable detail the identity of the
prospective transferee(s) and the terms and conditions of
the proposed transfer. The Company may elect to purchase
all (but not less than all) of the shares of Shareholder
Stock to be transferred upon the same terms and conditions
as those set forth in the Sale Notice by delivering a
written notice of such election to the Shareholder within 30
days after the receipt of the Sale Notice by the Company. If
the Company has not elected to purchase all of the shares of
Shareholder Stock to be transferred, the Lead Trivest
Investor may elect to purchase all (but not less than all)
of the shares of Shareholder Stock to be transferred upon
the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to
the Shareholder within 60 days after the receipt of the Sale
Notice by the Lead Trivest Investor. Any Person who has the
right to acquire Shareholder Stock pursuant to this Section
4(b) will be given up to 60 days (after it has been
determined that such Person has such right) to consummate
the purchase and sale of Shareholder Stock (the
"Authorization Period"). If neither the Company nor the Lead
Trivest Investor has elected to purchase all of the shares
of Shareholder Stock specified in the Sale Notice, the
Shareholder may transfer the shares of Shareholder Stock
specified in the Sale Notice at a price and on terms no more
favorable to the transferee(s) thereof than specified in the
Sale Notice during the 60day period immediately following
the Authorization Period. Any shares of Shareholder Stock
not transferred within such 60day period will be subject to
the provisions of this Section 4(b) upon subsequent
transfer.
c) Certain Permitted Transfers. The restrictions contained
in this Section 4 will not apply with respect to transfers
of Shareholder Stock (i) pursuant to applicable laws of
descent and distribution or (ii) among the Shareholder's
Family Group; provided that the restrictions contained in
this Section 4 will continue to be applicable to Shareholder
Stock after any such transfer; and provided further that the
transferees of such Shareholder Stock have agreed in writing
to be bound by the provisions of this Agreement relating to
Shareholder Stock.
d) Termination of Restrictions. The restrictions on the
transfer of Shareholder Stock set forth in this Section 4
will continue with respect to each share of Shareholder
Stock until the date on which such Shareholder Stock has
been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(c));
provided, however, that in any event the restrictions on
transfers set forth in this Section 4 will terminate upon a
Liquidity Event.
5. Drag Along Rights.
a) If, at any time following the date hereof, the Lead
Trivest Investor shall enter into an agreement to sell, in a
single transaction or a series of transactions, any of the
Company Securities at the time owned by (and/or purchasable
by) the Lead Trivest Investor to any Person or group of
Persons who is not a Trivest Affiliate or an Affiliate of
the Company (the "Buyer") (including, without limitation, a
sale of the Company by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the
outstanding Common Stock or otherwise), then the Lead
Trivest Investor may require each holder of Shareholder
Stock to sell all of the Shareholder Stock owned by (and/or
purchasable by) such holders to the Buyer contemporaneously
with the sale by the Lead Trivest Investor and at the same
price per share and on the same terms and conditions as are
applicable to the Company Securities to be sold by the Lead
Trivest Investor; provided, that if the Lead Trivest
Investor is selling less than all of Company Securities
owned by (and/or purchasable by) it, each holder of
Shareholder Stock shall sell an Applicable Percentage of the
Shareholder Stock owned by (and/or purchasable by) such
holder. Without limitation as to the foregoing, each holder
of Shareholder Stock shall consent to and raise no
objections against such a sale. If such sale is structured
as a merger or consolidation, each such holder shall waive
any dissenters rights, appraisal rights or similar rights in
connection with such merger or consolidation to the fullest
extent permitted by law.
b) If the Lead Trivest Investor wishes to exercise the right
granted pursuant to Section 5(a), the Lead Trivest Investor
must give written notice to such effect to each holder of
Shareholder Stock (a "DragAlong Notice") not less than 20
nor more than 60 days prior to the date upon which such sale
is scheduled to close. Each DragAlong Notice shall (i)
specify in reasonable detail all of the terms and conditions
upon which such sale is to occur (including a description of
all consideration payable in connection with the sale) and
(ii) make explicit reference to this Section 5 and state
that each such holder is obligated to sell its Shareholder
Stock pursuant to such sale.
c) If the Lead Trivest Investor exercises the right granted
pursuant to Section 5(a), subject to the consummation of the
sale of all Shareholder Stock to the Buyer and subject to
compliance with the other applicable terms of this
Agreement, each holder of Shareholder Stock shall promptly
take such actions and shall promptly execute such documents
and instruments as shall be necessary and desirable to
consummate the proposed sale.
d) At the closing of any such sale, each holder of
Shareholder Stock shall deliver a certificate or
certificates, registered in such holder's name, properly
endorsed and with all required transfer stamps, if any,
representing the securities being sold by such holder
against delivery of the applicable consideration from the
Buyer.
e) The provisions of this Section 5 shall terminate upon
the completion of a Qualified Public Offering.
6. Co-Sale Rights of the Shareholder with Respect to
Transfers by the Lead Trivest Investor.
a) Subject to Section 5, if the Lead Trivest Investor at any
time proposes to transfer any Company Securities, then, as a
condition precedent thereto, the Lead Trivest Investor shall
afford each holder of Shareholder Stock the right to
participate in such transfer in accordance with this Section
6. Notwithstanding the foregoing, the provisions of this
Section 6 shall not apply to (i) any transfer of Restricted
Securities by the Lead Trivest Investor to any Trivest
Affiliate or any Affiliate of the Company, (ii) any transfer
of Restricted Securities by the Lead Trivest Investor which
is a pledge, (iii) any transfer to the public pursuant to a
registration effected in accordance Section 7 hereof or (iv)
a distribution by the Lead Trivest Investor to its partners.
b) The Lead Trivest Investor shall give written notice to
each holder of Shareholder Stock (a "Notice of Transfer")
not less than twenty (20) nor more than sixty (60) days
prior to any proposed transfer of any such Company
Securities. Each such Notice of Transfer shall:
i) specify in reasonable detail (A) the number and type of
Company Securities which the Lead Trivest Investor proposes
to transfer, (B) the identity of the proposed transferee or
transferees of such Company Securities, (C) the time within
which, the price per share at which and all other terms and
conditions upon which the Lead Trivest Investor proposes to
transfer such Company Securities, (including a description
of all consideration payable in connection with the
transfer) and (D) the percentage of the Company Securities
then owned by the Lead Trivest Investor which the Lead
Trivest Investor proposes to transfer to such proposed
transferee or transferees; and
ii) make explicit reference to this Section 6 and state that
the right of each such holder to participate in such
transfer under this Section 6 shall expire unless exercised
within fifteen (15) days after receipt of such Notice of
Transfer.
c) Each holder of Shareholder Stock shall have the right
to transfer to the proposed transferee or transferees that
number of shares of Shareholder Stock which is equal to the
Applicable Percentage of the Shareholder Stock owned by
(and/or purchasable by) such holder, at the same price per
share and on the same terms and conditions as are applicable
to the proposed transfer by the Lead Trivest Investor.
d) Each holder of Shareholder Stock must notify the Lead
Trivest Investor, within fifteen (15) days after receipt of
the Notice of Transfer, if he desires to accept such offer
and to transfer any of his Shareholder Stock in accordance
with this Section 6. The failure of any such holder to
provide such notice within such 15day period shall, for the
purposes of this Section 6, be deemed to constitute a waiver
by any such holder of his right to transfer any of his
Shareholder Stock in connection with the proposed transfer
described in such Notice of Transfer. The Lead Trivest
Investor shall use all commercially reasonable efforts to
obtain the agreement of the prospective transferee or
transferees to the participation of each such holder
electing to participate in such proposed transfer and shall
not consummate any such proposed transfer unless each such
electing holder is permitted to participate in accordance
with the provisions of this Section 6. No holder of
Shareholder Stock shall be obligated to transfer any
Shareholder Stock pursuant to this Section 6. Any and all
transfers of Shareholder Stock by a holder of Shareholder
Stock pursuant to this Section 6 shall be made concurrently
with the transfer of Company Securities by the Lead Trivest
Investor.
e) Subject to the consummation of the transfer contemplated
by the Notice of Transfer and subject to compliance with the
other applicable terms of this Agreement, each holder that
exercises his right granted pursuant to Section 6(a) shall
promptly execute such documents and instruments as shall be
necessary and desirable to consummate the proposed sale.
f) At the closing of any such transfer, each holder of
Shareholder Stock exercising the right granted pursuant to
Section 6(a) shall deliver a certificate or certificates,
registered in his name, properly endorsed and with all
required transfer stamps, if any, representing the
securities being sold by him against delivery of the
applicable consideration by the proposed transferee.
g) Notwithstanding anything to the contrary contained in
this Section 6, no holder of Shareholder Stock shall have
any rights pursuant to this Section 6 to participate in any
other transfer by the Lead Trivest Investor.
h) The provisions of this Section 6 shall terminate upon the
completion of a Qualified Public Offering.
7. Registration Rights.
7. 1 Incidental Registration.
a) If, after a Qualified Public Offering, the Company at any
time or from time to time shall determine to effect the
registration, qualification and/or compliance of any of its
equity securities (otherwise than pursuant to a registration
on a form inappropriate for an underwritten public offering
or relating solely to securities to be issued in a merger,
acquisition of the stock or assets of another entity or in a
similar transaction or relating solely to securities issued
or to be issued under any employee stock option or purchase
plan), then, in each such case, the Company shall:
i) promptly give written notice of the proposed
registration, qualification and/or compliance (which shall
include a list of the jurisdictions in which the Company
intends to register or qualify such securities under the
applicable blue sky or other securities laws) to the
Shareholder; and
ii) use all commercially reasonable efforts to include
among the securities which it then registers or qualifies
all Registrable Shares specified by the Shareholder in a
written request or requests, made within 30 days after
receipt of such written notice from the Company.
b) The obligations of the Company under this Section 7.1 are
subject to the following qualifications:
i) subject to Section 7.7, the Company shall pay all
Registration Expenses related to any registration,
qualification and/or compliance requested pursuant to this
Section 7.1 and the Shareholder shall pay his Selling
Expenses pro rata on the basis of the Registrable Shares so
registered and sold; and
ii) in the event that any registration pursuant to this
Section 7.1 shall be, in whole or in part, an underwritten
public offering of Common Stock, the number of Registrable
Shares to be included in such an underwriting may be reduced
if and to the extent that the managing underwriter shall be
of the opinion that the inclusion of some or all of the
Registrable Shares would adversely affect the marketing of
the securities to be sold by the Company therein; provided,
that any such limitation shall be imposed in such manner so
as to avoid any diminution in the number of shares the
Company may register for sale by (i) giving first priority
for the shares to be registered for issuance and sale by the
Company and, pursuant to Section 5.2 of the Investors'
Agreement, the Trivest Investors and any demanding
shareholder, (ii) giving second priority pari passu for the
shares requested to be registered pursuant to Section 5.1 of
the Investors' Agreement, pursuant to this Agreement and
pursuant to that certain Subscription and Shareholders
Agreement dated as of the date hereof among the Company, the
Lead Trivest Investor and Jerry Shilling and for other
securities with pari passu registration rights requested to
be registered (pro rata among the requesting holders of the
securities covered by this clause (ii) based upon the number
of securities owned by such holders), and (iii) giving third
priority for the other securities requested to be included
in such registration not covered by clauses (i) or (ii)
above.
7.2 Registration Procedures. In the case of' each
registration, qualification and/or compliance contemplated
by this Section 7, the Company shall keep the Shareholder
advised in writing as to the initiation of proceedings for
such registration, qualification and compliance and as to
the completion thereof, and shall advise the Shareholder,
upon request, of the progress of such proceedings. In
addition, the Company shall follow procedures customarily
observed by issuers in public offerings, and accord to the
Shareholder all rights (including, without limitation, the
right to perform appropriate "due diligence") customarily
accorded to selling shareholders in secondary distributions
and accord such rights to the managing underwriters if the
transaction in question is an underwritten public offering.
At the expense of the Company or of the party or parties
bearing the expenses of such registration, qualification and
compliance, the Company shall (a) use all commercially
reasonable efforts to keep such registration, qualification
and compliance current and effective by such action as may
be necessary or appropriate, including, without limitation,
the filing of post-effective amendments and supplements to
any registration statement or prospectus, for such period
(not to exceed one hundred eighty (180) days) as is
necessary to permit the sale and distribution of the
Registrable Shares pursuant thereto, (b) use all
commercially reasonable efforts to take all necessary action
under any applicable blue sky or other applicable securities
law to permit such sale and/or distribution, all as
reasonably requested by the Shareholder, and comply with
applicable requirements of all regulatory entities,
provided, that the Company shall not be required to so
register or qualify the Registrable Shares in any
jurisdiction if, solely as a result thereof, the Company
must qualify generally to do business therein, consent to
general service of process therein, or submit to liability
for state or local taxes, (c) furnish the Shareholder such
number of registration statements, prospectuses,
supplements, amendments, and offering circulars as the
Shareholder from time to tie may reasonably request, (d) use
all commercially reasonable efforts to list all Registrable
Shares on each securities exchange on which securities of
the same class are then listed and (e) use all commercially
reasonable efforts to furnish (or cause to be furnished) to
the managing underwriters all undertakings, agreements,
certificates, opinions, financial statements and "comfort
letters" of the sort customarily provided to managing
underwriters, if the transaction in question is an
underwritten public offering. In connection with and as a
condition to each registration hereunder, the Shareholder
shall (a) provide such information and execute such
documents as may reasonably be required in connection with
such registration, (b) agree to sell Registrable Shares on
the basis provided in any underwriting arrangements, and (c)
complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents
reasonably required or requested under the terms of such
underwriting arrangements. In connection with each
registration pursuant to Section 7.1 covering an
underwritten public offering, the Company and the
Shareholder agree to enter into a written agreement with the
managing underwriter in such form and containing such
provisions as are customary in the securities business for
such an arrangement between such underwriter and companies
of the Company's size and investment stature.
7.3 Indemnification.
a) The Company shall indemnify, defend and hold harmless the
Shareholder, to the fullest extent enforceable under
applicable law against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration
statement, prospectus, supplement, amendment or offering
circular related to any registration, qualification or
compliance or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
any violation (or alleged violation) of applicable
securities laws in connection with any such registration,
qualification or compliance, and shall reimburse the
Shareholder for any legal or any other expenses reasonably
incurred in connection with investigating and/or defending
(and/or preparing for any investigation or defense of) any
such claim, loss, damage, liability, action or violation;
provided, that the Company shall not be liable in any such
case to the Shareholder if, but only to the extent that, any
such claim, loss, damage, liability, action, violation or
expense arises out of or is based upon any untrue statement
or alleged untrue statement in or omission or alleged
omission if so made in reliance upon and in conformity with
written information furnished to the Company by the
Shareholder specifically for use therein; provided, further,
however, that the Company shall not be liable to the
Shareholder in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is
based upon an untrue or alleged untrue statement or omission
or an alleged omission made in any preliminary prospectus or
final prospectus if (1) the Shareholder failed to send or
deliver a copy of the final prospectus or prospectus
supplement with or prior to the delivery of written
confirmation of the sale of the Registrable Shares, and (2)
the final prospectus or prospectus supplement would have
corrected such untrue statement or omission.
b) The Shareholder shall, if securities held by him are
included in a registration, qualification or compliance
contemplated pursuant to this Section 7, indemnify, defend
and hold harmless the Company, each of its directors and
officers and each Person, if any, who controls the Company
or such underwriter within the meaning of applicable
securities laws, and their respective directors, officers,
employees, agents, advisors and Affiliates, to the fullest
extent enforceable under applicable law against all claims,
losses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, supplement,
amendment or offering circular related to any such
registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the
Company and such directors, officers or other Persons for
any legal or any other expenses reasonably incurred in
connection with investigating or defending (and/or preparing
for any investigation or defense of') any such claim, loss,
damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made
in (or omitted from) such registration statement,
prospectus, supplement, amendment or offering circular in
reliance upon and in conformity with written information
furnished to the Company by the Shareholder specifically for
use therein; provided, that the aggregate liability of the
Shareholder under this Section 7.3 shall be limited to the
net sales proceeds actually received by the Shareholder as a
result of the sale by it of securities in such registration,
qualification or compliance.
c) Promptly after receipt by an indemnified party under this
Section 7.3 of notice of the commencement of any action,
such party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 7.3,
notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it
may have to such indemnified party except to the extent the
indemnifying party is prejudiced by such omission. In case
any such action shall be brought against any indemnified
party and such indemnified party shall notify the
indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified part, under this
Section 7.3 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense
thereof, provided, that, if the defendants in any such
action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded (based upon the advice of counsel) that
there may be reasonable defenses available to it that are
different from or additional to those available to the
indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the
interests of the indemnifying party, then the indemnified
party shall have the right to select one separate counsel
and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses
and fees of such one separate counsel and other expenses
related to such participation to be reimbursed by the
indemnifying party as incurred, it being understood,
however, that the indemnifying party shall not, in
connection with any one such action or separate but
substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with
appropriate local counsel as required by the local rules of
such jurisdiction) at any time for all such indemnified
parties.
d) To provide for just and equitable, contribution to
joint liability under the Securities Act in any case in
which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 7.3 but it is
judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 7.3
provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the
part of the Shareholder or the Company, any director or
officer of the Company or any controlling Person of the
Company (within the meaning of applicable securities laws)
of the Company in circumstances for which indemnification is
provided under this Section 7.3, then, and in each such
case, the Company and the Shareholder shall contribute to
the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others)
as is appropriate to reflect the relative fault of the
Company and the Shareholder in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as the relative
benefit received by the Company and the Shareholder as a
result of the offering in question, it being understood that
the parties acknowledge that the overriding equitable
consideration to be given effect in connection with this
provision is the ability of one party or the other to
correct the statement or omission which resulted in such
losses, claims, damages or liabilities, and that it would
not be just and equitable if contribution pursuant thereto
were to be determined by pro rata allocation or by any other
method of allocation which does not take into consideration
the foregoing equitable considerations; provided, that (x)
in any such case no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation, and (y) in no event shall the Shareholder
be obligated to make any contribution in excess of the
amount specified in Section 7.3(b).
7.4 Restrictions on Other Agreements. The Company shall
not grant any right relating to the registration,
qualification or compliance of its securities if the
exercise thereof violates or is inconsistent with any of the
rights granted under this Section 7, without the written
consent of the Shareholder, which consent may be given or
withheld in the sole discretion of such holders. The
Company shall not permit any of its Subsidiaries to effect,
or to grant any right relating to, the registration of its
securities.
7.5 Limitations on Registration Rights. Notwithstanding
anything to the contrary contained in this Agreement, the
Company may delay the filing or effectiveness of, or may
terminate or withdraw, any registration statement referred
under Section 7.1 at any time for any reason whatsoever
without incurring any liability to the Shareholder, but the
Company shall be and remain obligated to pay all
Registration Expenses, if any, incurred in connection
therewith.
7.6 Holdback Agreement.
a) In addition to any other restrictions on transfer of the
Registrable Shares contained in this Agreement, if the
Company shall at any time register securities under the
Securities Act (including, without limitation, any
registration relating to a Qualified Public Offering or any
registration pursuant to this Section 7) for offer or sale
to the public, then the Shareholder shall not make any short
sale of, grant an option for the transfer of, or otherwise
transfer, any Registrable Shares (other than (i) for the
public sale of those Registrable Shares included in and sold
pursuant to such registration in accordance with this
Section 7 or (ii) in a private sale complying with this
Agreement to transferee who agrees to the restrictions in
this Section 7.6(a)) without the prior written consent of
the Company for such reasonable period (but in no event
longer than 180 days following the effective date of the
related registration statement) as may be designated in
writing to the Shareholder by the Company, or, if the
registration shall be, in whole or in part, an underwritten
offering, by the managing underwriter; provided, that after
the Company's initial public offering, the foregoing
provisions of this Section 7.6(a) shall only apply to the
Shareholder if he (A) is offering Registrable Shares for
sale to the public in connection with such registration or
(B) beneficially owns (as that term is used in Rule 13d-3
promulgated under the Exchange Act) five percent or more of
the outstanding shares of Common Stock.
b) In addition to the restriction contained in Section
7.6(a), the Shareholder shall execute any restrictive
agreement or "lock-up" agreement that any underwriter
engaged by the Company in connection with any underwritten
public offering shall request; provided, that the
restrictive or "lock-up" period thereunder is not more than
one hundred eighty (180) days after the effective date of
the registration statement for which such restrictive
agreement or "lock-up" agreement is sought; provided,
further, that, after the Company's initial public offering,
the foregoing provisions of this Section 7.6(b) shall only
apply to the Shareholder if he (A) is offering Registrable
Shares for sale to the public in the offering or (B)
beneficially owns (as that term is used in Rule 13d-3
promulgated under the Exchange Act) five percent or more of
the outstanding shares of Company Common Stock.
c) The Company may impose stop-transfer instructions with
respect to the Registrable Shares until the end of any
restrictive period provided for pursuant to this Section
7.6.
7.7 Registration Expenses and Selling Expenses. The Company
shall pay all Registration Expenses related to any
registration, qualification and/or compliance contemplated
by this Agreement, except to the extent that such
Registration Expenses relate to any Registrable Shares
requested to be included in any registration proceeding
pursuant to Section 7.1, the request of which has been
withdrawn by the Shareholder.
7.8 Changes in Common Stock. If, and as often as, there is
any change in the Common Stock by way of a stock split,
stock dividend, combination or reclassification, or through
a merger, consolidation, reorganization or recapitalization,
or by any other means, appropriate adjustment shall be made
in the provisions hereof so that the rights and privileges
granted hereby shall continue with respect to the Common
Stock as so changed.
7.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Securities
and Exchange Commission that may at any time permit the
resale of the Registrable Shares without registration, the
Company will at all times after 90 days after the first
registration statement covering a public offering of
securities of the Company under the Securities Act shall
have become effective or following registration under
Section 12 of the Exchange Act, use its commercially
reasonable efforts to: (i) make and keep public information
available, as those terms are understood and defined in Rule
144 under the Securities Act; (ii) file with the Securities
and Exchange Commission in a timely manner all reports and
other documents required of the Company under the Securities
Act and the Exchange Act; and (iii) furnish to the
Shareholder forthwith upon request a written statement by
the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and
documents so filed by the Company as the Shareholder may
reasonably request in availing itself of any rule or
regulation of the Securities and Exchange Commission
allowing the Shareholder to sell any Registrable Shares
without registration.
8. Legends. No Shareholder Stock may be transferred
except pursuant to a registration under applicable
securities laws or pursuant to an exemption from such
registration. Until the date on which Shareholder Stock is
so registered, each certificate evidencing the same shall
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY OTHER APPLICABLE SECURITIES LAW AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF REGISTRATION THEREUNDER OR AN
EXEMPTION THEREFROM."
So long as any Shareholder Stock shall be subject to the
terms of this Agreement, all certificates evidencing the
same shall bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE
TERMS OF THE SUBSCRIPTION AND SHAREHOLDERS AGREEMENT DATED
MARCH [31], 2000 AMONG THE ISSUER HEREOF AND CERTAIN OTHER
PERSONS, AS AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO
TIME. COPIES OF SUCH AGREEMENT ARE ON FILE AT THE ISSUER'S
PRINCIPAL OFFICES AND, UPON WRITTEN REQUEST, COPIES THEREOF
SHALL BE MAILED WITHOUT CHARGE WITHIN TEN DAYS OF RECEIPT OF
SUCH REQUEST TO APPROPRIATELY INTERESTED PERSONS."
Upon receipt from any holder of Shareholder Stock by the
Company of an opinion of counsel reasonably satisfactory to
it to the effect that any of the foregoing legends are no
longer required or applicable, the Company shall reissue the
certificates evidencing the applicable Shareholder Stock
without such legends.
9. Notices. Any notice provided for in this Agreement
must be in writing and must be either personally delivered,
or mailed by certified or registered mail, return receipt
requested, postage prepaid to the recipient at the address
below indicated:
To the Company:
c/o Trivest, Inc.2665 South Bayshore DriveSuite 800Miami,
Florida 33133Attention: [General Counsel]
To the Shareholder:
at the address of the Shareholder set forth on the signature
page hereto
or such other address or to the attention of such other
person as the recipient party shall have specified by prior
written notice to the sending party. Any notice under this
Agreement will be deemed to have been given when so
delivered or mailed.
10. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any
other jurisdiction, but this Agreement will be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.
11. Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even
date herewith embody the complete agreement and
understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by
or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
12. Counterparts. This Agreement may be executed on
separate counterparts, each of which is deemed to be an
original and all of which taken together constitute one and
the same agreement. Any telecopied signature shall be
deemed a manually executed and delivered original.
13. Successors and Assigns. This Agreement is intended to
bind and inure to the benefit of and be enforceable by the
Shareholder and the Company, and their respective successors
and assigns and, where applicable, heirs and personal
representatives, including subsequent holders of Shareholder
Stock (except as otherwise provided herein).
14. Choice of Law. Except as otherwise provided herein,
this Agreement shall be governed and construed in accordance
with the laws of the State of Florida without regard to
conflicts of laws principles thereof and all questions
concerning the validity and construction hereof shall be
determined in accordance with the laws of said state. Each
party hereby irrevocably submits to the exclusive
jurisdiction of any state or federal court sitting in the
County of Miami-Dade, State of Florida in any action or
proceeding arising out of or relating to this Agreement and
hereby irrevocably agrees, on behalf of itself or herself
and on behalf of such party's successor's and assigns, that
all claims in respect of such action or proceeding may be
heard and determined in any such court and irrevocably
waives any objection such person may now or hereafter have
as to the venue of any such suit, action or proceeding
brought in such a court or that such court is an
inconvenient forum.
15. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
16. Remedies. Each of the parties to this Agreement will
be entitled to enforce its rights under this Agreement
specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
17. Amendments and Waivers. No provision of this Agreement
may be amended or waived without the prior written consent
of the Company and the Shareholder.
18. Business Days. Whenever the terms of this Agreement
call for the performance of a specific act on a specified
date, which date falls on a Saturday, Sunday or legal
holiday, the date for the performance of such act shall be
postponed to the next succeeding regular business day
following such Saturday, Sunday or legal holiday.
19. No Third Party Beneficiary. Except for the parties to
this Agreement and their respective successors and assigns,
nothing expressed or implied in this Agreement is intended,
or will be construed, to confer upon or give any person
other than the parties hereto and their respective
successors and assigns any rights or remedies under or by
reason of this Agreement.
SIGNATURES APPEAR ON FOLLOWING PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
WINSLOEW FURNITURE, INC.
By:__________________________________
Bobby Tesney
President and Chief Executive Officer
SHAREHOLDER:
_____________________________________
Michael Shilling
Address:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Taxpayer Identification Number:
_____________________________________
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc., General Partner
By:____________________________
William F. Kaczynski, Jr.
Managing Director
EXHIBIT 2.5
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
THIS SUBSCRIPTION AND SHAREHOLDERS AGREEMENT (this
"Agreement") is made as of March 31, 2000, among WinsLoew
Furniture, Inc., a Florida corporation (the "Company"), the
Lead Trivest Investor (as hereinafter defined) and Jerry L.
Shilling (the "Shareholder").
Preliminary Statements:
1. The Shareholder desires to purchase shares (the "Shares")
of the Company's common stock, par value $.01 per share
("Common Stock"), on the terms and subject to the conditions
set forth in this Agreement.
2. The Company desires to issue and sell the Shares to the
Shareholder.
3. The Company and the Shareholder desire to enter into this
Agreement setting forth the terms and conditions relating to
the purchase and sale of the Shares.
4. The Company, the Lead Trivest Investor and the
Shareholder believe that it would be in the best interest of
the Company to make provisions governing the purchase of the
Shareholder Stock in the event of his death or disability or
if he ceases to be employed by the Company or any of its
Subsidiaries for any reason.
5. The Company, the Lead Trivest Investor and the
Shareholder believe that it would be in the best interest of
the Company to place certain restrictions upon the right of
transfer of the Shareholder Stock.
6. The directors of the Company, having considered the
provisions of this Agreement, have resolved that in their
opinion the restrictions upon the transfer of the
Shareholder Stock, the provisions for the redemption and/or
purchase of the Shareholder Stock, and the establishment of
rights and obligations upon the occurrence of certain
events, all as hereinafter set forth, are in the best
interest of the Company and its shareholders.
7. Contemporaneously with the execution and delivery of this
Agreement and pursuant to that certain Stock Purchase
Agreement dated as of March 31, 2000 (the "Stock Purchase
Agreement") among the Company, Wabash Valley Manufacturing,
Inc., an Indiana corporation ("Wabash"), and the
shareholders of Wabash, the Company will acquire all of the
issued and outstanding shares of capital stock of Wabash.
Agreement:
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Interpretation of this Agreement.
a) Terms Defined. As used herein, the following terms when
used in this Agreement have the meanings set forth below:
"Acquisition" means the acquisition of Wabash by Acquisition
pursuant to the Stock Purchase Agreement, together with the
merger of Acquisition with and into Wabash immediately
thereafter.
"Affiliate" (whether or not capitalized) has the meaning set
forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
"Annual Report" means the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, filed with
the Securities and Exchange Commission.
"Applicable Percentage" on any date shall mean a fraction
(expressed as a percentage), the numerator of which is the
aggregate number of Company Securities to be transferred by
the Lead Trivest Investor and the denominator of which is
the aggregate number of Company Securities owned by (and/or
purchasable by) the Lead Trivest Investor; all such
calculations shall be on a fully-diluted basis and carried
out to one hundredth of a share and then rounded to the
nearest share.
"Authorization Period" shall have the meaning given to it in
Section 4(b) of this Agreement.
"Available Shares" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Board" shall mean the Company's Board of Directors.
"Buyer" shall have the meaning specified in Section 4 of
this Agreement.
"Cause" shall have the meaning assigned to it in any written
employment agreement to between the Company (or any of its
Subsidiaries) and the Shareholder and, if there shall be no
such written employment agreement, shall mean (i) the
commission of any act by the Shareholder constituting
financial dishonesty against the Company or its
Subsidiaries, (ii) the commission by the Shareholder of a
felony or other crime involving moral turpitude, (iii) the
repeated failure by the Shareholder to follow the reasonable
written directives of the Company's Board, (iv) the
Shareholder's gross dereliction of duty to the Company or
its Subsidiaries or (v) any breach by the Shareholder of any
of the provisions of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Common Stock" shall have the meaning given to it in Clause
A of the recitals hereof.
"Company" shall have the meaning given to it in the first
sentence of this Agreement.
"Company's Board" means the Board of Directors of the
Company.
"Company Registration Statement" shall have the meaning
specified in Section 7.5.
"Company Securities" shall mean all shares of Common Stock
and all securities convertible into or exercisable or
exchangeable for Common Stock. For purposes of this
Agreement (1) each holder of Restricted Securities shall be
deemed to own or control that number of shares of Common
Stock then directly owned or controlled by such holder, plus
that number of shares of Common Stock into or for which any
securities then directly or indirectly owned or controlled
by such holder are then, directly or indirectly,
convertible, exercisable or exchangeable and (2) references
in this Agreement to "shares" of Restricted Securities other
than Common Stock shall be deemed to refer to the number of
shares of Common Stock into or for which any securities then
directly or indirectly owned or controlled by such holder
are then, directly or indirectly, convertible, exercisable
or exchangeable.
"Drag Along Notice" shall have the meaning specified in
Section 5 of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exempt Transfer" shall have the meaning specified in
Section 4(a) of this Agreement.
"Family Group" shall mean an individual's spouse and lineal
descendants, parents, grandparents and any family limited
partnership or trust or other fiduciary relationship solely
for the benefit of such individual and/or such individual's
spouse, parents, grandparents and/or lineal descendants.
"Fleet Credit Facility" means the credit facility provided
for pursuant to that certain Loan and Security Agreement
dated as of August 27, 1999 among (i) the Company, Winston
Furniture Company of Alabama, Inc., Loewenstein, Inc.,
Texacraft, Inc., Tropic Craft, Inc., Winston Properties,
Inc. and Pompeii Furniture Co., Inc., as Borrowers, (ii) the
Lenders named therein, (iii) Heller Financial, Inc. and
Canadian Imperial Bank of Commerce, as Co-Agents, (iv) Fleet
Capital Corporation, as Administrative Agent, and (v)
BancBoston Robertson Stephens Inc., as Arranger, pursuant to
and as more fully described in the Prospectus, and as
amended as of the date hereof.
"Indemnified Person" shall have the meaning specified in
Section 7 of this Agreement.
"Investors Agreement" means that certain Investors'
Agreement dated as of August 27, 1999 among the Company and
the Investors named therein.
"Key Employee Equity Plan" means the WinsLoew 1999 Key
Employee Equity Plan under which an aggregate of 20,000
shares of Common Stock are reserved for direct sale to
employees and independent sales representatives of WinsLoew
Furniture, Inc.
"Lead Trivest Investor" means Trivest Fund II Group, Ltd., a
Florida limited partnership, and its successors and assigns.
"Liquidity Event" means (i) the sale of all, or
substantially all, of the Company's consolidated assets in
any single transaction or series of related transactions;
(ii) the sale or issuance, or series of related sales or
issuances, of Common Stock in any single transaction or
series of related transactions which results in any Person
or group of affiliated Persons (other than the holders of
Common Stock as of the date of this Agreement and affiliates
of such holders) owning more than 50% of the Common Stock
outstanding at the time of such sale or issuance or such
series of sales and/or issuances; (iii) the consummation of
a Qualified Public Offering; or (iv) any merger or
consolidation of the Company with or into another
corporation (regardless of which entity is the surviving
corporation) if, after giving effect to such merger or
consolidation, the holders of the Company's voting
securities (on a fullydiluted basis) immediately prior to
the merger or consolidation own voting securities of the
surviving or resulting corporation representing less than a
majority of the ordinary voting power to elect directors of
the surviving or resulting corporation (on a fullydiluted
basis).
"Management Stock Option Plan" means any stock option plan
which may be adopted by the Company for the benefit of the
employees of the Company or its Subsidiaries, as the same
may from time to time be amended or supplemented.
"Market Value" of each share of Shareholder Stock means the
fair value of a share of the Common Stock as of the
Termination Date (without applying any minority or
illiquidity discounts to such valuation), as determined
jointly by the Board and the Shareholder. If such parties
are unable to reach an agreement within 21 days after the
Termination Date, then (i) Market Value will be determined
by an independent investment banker or other valuation
expert of national standing selected by the Board and
reasonably acceptable to the Shareholder (the "Valuation
Firm"), (ii) the Company shall promptly deliver to the
Valuation Firm and the Shareholder a certificate setting
forth in reasonable detail the Board's calculation of Market
Value (the "Company's Proposed Value") and (iii) the
Shareholder shall promptly deliver to the Valuation Firm and
the Company a certificate setting forth in reasonable detail
the Shareholder's calculation of Market Value (the
"Shareholder's Proposed Value"). The parties shall use
reasonable efforts to cause the Valuation Firm to complete
such valuation within 55 days after the Termination Date.
Each party shall pay its, his or her own costs and expenses
incurred in connection with such determination of Market
Value; provided, that the fees and expenses of the Valuation
Firm shall be borne as follows:
(6) if the Valuation Firm determines that the Market Value
is equal to or less than the Company's Proposed Value (the
Market Value so determined is referred to herein as the "Low
Amount"), the Shareholder will be responsible for all of the
fees and expenses of the Valuation Firm;
(7) if the Valuation Firm determines that the Market Value
is equal to or greater than the Shareholder's Proposed Value
(the Market Value so determined is referred to herein as the
"High Amount"), the Company will be responsible for all of
the fees and expenses of the Valuation Firm; and
(8) if the Valuation Firm determines that the Market Value
is greater than the Company's Proposed Value but less than
the Shareholder's Proposed Value (the Market Value so
determined is referred to herein as "Actual Amount"), the
Shareholder will be responsible for that fraction of the
fees and expenses of the Valuation Firm equal to (1) the
difference between the High Amount and the Actual Amount
over (2) the difference between the High Amount and the Low
Amount, and the Company will be responsible for the
remainder of the fees and expenses.
"Notice of Transfer" shall have the meaning specified in
Section 6 of this Agreement.
"Option Notice" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Original Cost" of each share of Shareholder Stock means
$124.34 for each share of Common Stock (as proportionally
adjusted for all stock splits, stock dividends and other
recapitalization affecting Common Stock subsequent to the
date of this Agreement); provided, however, that the
Original Cost for each share of Common Stock purchased by
the Shareholder pursuant to the exercise of options granted
to him under any Management Stock Option Plan shall be the
exercise price thereof (as such term is defined in such
Management Stock Option Plan), as proportionally adjusted
pursuant to the provisions of the Management Stock Option
Plan.
"Other Subscriptions" means, collectively, the subscriptions
of shares of Common Stock simultaneously herewith by the
following Persons who will acquire, together with the Shares
acquired hereunder, an aggregate of 57,103.6009 shares of
Common Stock at the Subscription Price: (i) the
subscription of 8,755.36559 shares of Common Stock by
Michael Shilling pursuant to that certain Subscription and
Shareholders Agreement dated as of the date hereof among the
Company, the Lead Trivest Investor and Michael Shilling; and
(ii) the subscription of 18,902.3202 shares of Common stock
by the Lead Trivest Investor and 18,094.3789 shares of
Common Stock by Trivest Furniture Partners, Ltd.
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock
company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department,
agency or political subdivision thereof.
"Prohibited Amount" shall have the meaning given to it in
Section 3(f) of this Agreement.
"Prospectus" means the Company's Prospectus, dated November
19, 1999, a copy of which has been previously provided to
the Shareholder.
"qualification" or "compliance" shall mean the qualification
or compliance of all Registrable Shares included in any
registration pursuant to Section 7 under all applicable blue
sky or other applicable securities laws.
"Qualified Public Offering" shall mean a firm commitment
underwritten public offering of the Company's Common Stock
underwritten by a nationally recognized full-service
investment bank pursuant to which the aggregate gross
proceeds received by the Company is at least $20,000,000 at
a price per share of not less than $10.00 (following
appropriate adjustment in the event of any stock dividends,
stock split, combination or other similar recapitalization
affecting such shares).
"register", "registered" and "registration" as used in
Section 7 refer to a registration effected by filing a
registration statement in compliance with the Securities Act
to permit the sale and disposition of the Registrable Shares
and any amendment filed or required to be filed to permit
any such disposition.
"Registrable Shares" shall mean any shares of Shareholder
Stock, except that, as to any particular Registrable Shares,
such securities, once issued, shall cease to be Registrable
Shares when (a) a registration statement covering such
securities has been declared effective and such securities
have been disposed of pursuant to an effective registration
statement, or (b) such securities have been sold to the
public without registration in accordance with Rule 144 (or
any similar provision then in force) under the Securities
Act.
"Registration Expenses" shall mean all fees, expenses and
disbursements related to any registration, qualification or
compliance pursuant to Section 7, including, without
limitation, all registration, filing, rating and listing
fees, blue sky fees and expenses, printing expenses,
reasonable fees and disbursements of counsel (including,
without limitation, the reasonable fees, expenses and
disbursements of one counsel for the holder or holders of
the Registrable Shares), and reasonable expenses of any
special audits incidental to or required by any
registration, qualification or compliance, except that
Registration Expenses shall not include any Selling
Expenses.
"Repurchase Notice" shall have the meaning given to it in
Section 3(c) of this Agreement.
"Repurchase Note(s)" shall have the meaning given to it in
Section 3(f) of this Agreement.
"Repurchase Option" shall have the meaning given to it in
Section 3(d) of this Agreement.
"Sale Notice" shall have the meaning given to it in Section
4(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriters' discounts,
selling commissions, transfer taxes and other similar
expenses (except to the extent included in Registration
Expenses) attributable to the Registrable Shares.
"Senior Debt" shall have the meaning given to it in Section
3(f) of this Agreement.
"Senior Subordinated Notes" means the Senior Subordinated
Notes of the Company in the aggregate principal amount of
$105 million pursuant to and as more fully described in the
Prospectus.
"Shareholder" shall have the meaning given to it in the
first sentence of this Agreement.
"Shareholder Stock" means (i) all Company Securities now
owned or hereafter acquired by the Shareholder or any member
of the Shareholder's Family Group, and (ii) all Company
Securities issued with respect to the Company Securities
referred to in clause (i) above by way of stock dividend or
stock split or in connection with any combination of shares,
merger, consolidation, recapitalization or other
reorganization. All Shareholder Stock will continue to be
Shareholder Stock in the hands of any transferee, other than
(x) the Company, (y) any Trivest Affiliate and (z)
purchasers pursuant to an offering registered with the
Securities and Exchange Commission pursuant to the
Securities Act or purchasers pursuant to a public sale
through a marketmaker, broker or dealer under Rule 144 (or
any successor rule) promulgated under the Securities Act.
Shareholder Stock under this Agreement does not include any
stock which is "Shareholder Stock" under other agreements
among the Company, the Lead Trivest Investor and employees
(or independent sales representatives) of the Company or its
Subsidiaries regarding the purchase of the Company's Common
Stock.
"Shareholders Agreements" means, collectively, the
Shareholders Agreements, each substantially in the form
attached as Exhibit B to the Key Employee Equity Plan,
entered into by the Company with the respective shareholders
party thereto.
"Shares" shall have the meaning given to it in Clause A of
the recitals hereof.
"Subject Securities" shall have the meaning specified in
Section 8 hereof.
"Subscription Closing" shall have the meaning given to it in
Section 2(a) hereof.
"Subscription Price" shall have the meaning given to it in
Section 2(a) hereof.
"Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of
which (i) more than 50% of the securities or other ownership
interests or (ii) securities or other interests having by
their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar
functions with respect to such corporation or other
organization, is directly owned or controlled by such Person
or by any one or more of its Subsidiaries.
"Supplemental Repurchase Notice" shall have the meaning
given to it in Section 3(d) of this Agreement.
"Termination Date" shall have the meaning given to it in
Section 3(c) of this Agreement.
"Transfer" shall mean any issue, sale, pledge, gift,
assignment or other transfer.
"Trivest Affiliates" shall mean each of the Trivest
Investors and each other Person that is controlled directly
or indirectly by the Persons now or hereafter controlling
directly or indirectly the Trivest Investors.
"Trivest Investors" shall mean each of Trivest Furniture
Partners, Ltd., a Florida limited partnership, and the Lead
Trivest Investor.
b) Interpretation. The words "herein," "hereof,"
"hereunder" and other words of similar import refer to this
Agreement as a whole, as the same from time to time may be
amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this
Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and
pronouns stated in masculine, feminine or neuter gender
shall include the masculine, feminine and the neuter.
2. Subscription to Purchase Shares.
a) Purchase, Issuance and Sale of Stock.
i) The Shareholder hereby subscribes for and agrees to
purchase and the Company hereby agrees to issue and sell to
the Shareholder ELEVEN THOUSAND THREE-HUNDRED FIFTY-ONE AND
53,611/100,000 (11,351.53611) Shares of Common Stock, for
the purchase price of $124.34 per share (the "Subscription
Price").
ii) The purchase and sale of the Shares (the "Subscription
Closing") will be consummated immediately prior to the
consummation of the transactions contemplated by the Stock
Purchase Agreement and contemporaneously with the Other
Subscriptions, at which time the Company shall deliver to
the Shareholder a certificate representing the Shares
against the Shareholder's delivery of the Subscription
Price. The Subscription Price for the Shares shall be paid
by wire transfer of immediately available funds to an
account designated by the Company in writing.
b) Representations and Warranties of the Company. The
Company hereby represents and warrants to the Shareholder as
follows:
i) Organization; Power and Authority. The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of Florida. The Company has full
corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned
and used by it.
ii) Authorization of Transaction. The Company has full
corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding
obligation of the Company, enforceable in accordance with
its terms.
iii) Capitalization. The Common Stock constitutes the
Company's only authorized class of capital stock. Upon the
Shareholder's payment of the Subscription Price, the Shares
purchased by the Shareholder pursuant to the provisions of
this Agreement will be duly authorized, validly issued,
fully paid and nonassessable. Immediately following the
Subscription Closing and after giving effect to the Other
Subscriptions, 828,103.3509 shares of Common Stock will be
issued and outstanding. Except for this Agreement, the
Other Subscriptions, the Shareholders' Agreements, the
Investors' Agreement and the Trivest Furniture Partners,
Ltd. Partnership Agreement, there are no outstanding
subscriptions, warrants, options or other agreements or
rights of any kind to purchase or otherwise receive or be
issued, or securities or obligations of any kind convertible
into, any shares of capital stock or any other security of
the Company.
iv) Other Subscriptions. The shares of Common Stock issued
in connection with the Other Subscriptions are of the same
class with identical rights under the Company's Articles of
Incorporation and are being issued at the identical
Subscription Price, as the Shares issued to Shareholder
under this Agreement.
c) Representations and Warranties of Shareholder. The
Shareholder hereby represents and warrants to the Company as
follows:
i) State Securities Laws. The Shareholder received this
Agreement and first learned of the offer and sale of the
Shares contemplated hereby in the State set forth below the
Shareholders' name on the signature page hereof. The
Shareholder intends that the laws of such state govern the
offering of the Shares to the Shareholder. The Shareholder
is a resident of such State.
ii) Capacity. The Shareholder has full capacity to execute
and deliver this Agreement and to perform the Shareholder's
obligations hereunder.
iii) Agreement Binding. This Agreement constitutes the
valid and legally binding obligation of the Shareholder,
enforceable in accordance with its terms.
iv) Acquisition for Investment. The Shareholder is
acquiring the Shares for investment solely for the
Shareholder's account and not for distribution, transfer or
resale to others in violation of the federal securities laws
or this Agreement.
v) Restrictions on Transfer. The Shareholder understands
that the Shareholder must bear the economic risk of the
purchase of the Shares for an indefinite period of time
because, except as provided in this Agreement, (A) the
Company's sale of the Shares to the Shareholder will not be
registered under the Securities Act and applicable state
securities laws in reliance on the Shareholder's
representations, (B) the Shares may not be sold,
transferred, pledged, or otherwise disposed of without an
opinion of counsel for or satisfactory to the Company that
registration under the Securities Act or any applicable
state securities laws is not required, (C) the Company does
not have an obligation to register a sale of the Shares nor
has it agreed to do so in the future, (D) the exemption
provided in Rule 144 under the Securities Act is not
presently available for the resale of any of the Shares and
it is unlikely that such exemption will be available at any
time in the future with respect to any proposed transfer of
the Shares, and (E) the Company is not under any obligation
to perfect any exemption for the resale of any of the
Shares. The Shareholder also acknowledges the Shareholder's
understanding that transfers of the Shares will be subject
to the limitations set forth in this Agreement.
vi) Restrictive Legends. The Shareholder understands that
the certificate evidencing the Shares will bear a
restrictive legend prohibiting the transfer thereof except
in compliance with (A) applicable state and federal
securities laws (and may not be transferred of record except
in compliance therewith), and (B) the terms of this
Agreement, as well as any other legends required by
applicable state securities laws.
vii) Opportunity to Ask Questions. The Shareholder has had
an opportunity to ask questions and receive answers
concerning the capitalization of the Company and the terms
hereof and has had full access to such other information
concerning the Company, both prior to and following the
Merger, as the Shareholder has requested.
viii) Certain Risk Factors. The Shareholder understands the
speculative nature of and risks involved in the proposed
investment in the Company, and all matters relating to the
structure and the operations of the Company and its
Subsidiaries, both prior to and following the Acquisition,
have been discussed and explained to Shareholder's
satisfaction, including but not limited to:
A) the senior loans provided to the Company pursuant to the
Fleet Credit Facility; and
B) the Senior Subordinated Notes.
The Shareholder specifically acknowledges the Shareholder's
understanding that:
aa) the presence of substantial amounts of debt creates
significant risks, including that (1) although equity
investments in highly leveraged companies such as the
Company offer the opportunity for significant capital
appreciation, such investments involve the highest degree of
risks and can result in the loss of the Shareholder's entire
investment, (2) other general business risks, including the
effects of a recession, may have a more pronounced effect,
(3) lending institutions may have rights to participate in
certain decisions relating to the management of the Company,
and (4) for the Company's debt to be repaid and for the
Shareholder's equity investment in the Common Stock to have
any value, the Company must achieve significant continued
growth in financial performance;
bb) the Subscription Price may not be indicative of the fair
market value of the Shares;
cc) the Shareholder, as a minority shareholder, will have no
control over or influence in the management of the Company,
and that the purchase of the Shares does not entitle the
Shareholder to continued employment by the Company;
dd) the terms of the Fleet Credit Facility, the Senior
Subordinated Notes and other documents relating to an
investment in the Company are quite complex, that all such
documents are available for inspection, that a review
thereof is recommended, and that the Shareholder should
consider obtaining counsel or other competent advisors
before purchasing the Shares; and
ee) Trivest Partners, L.P. (an affiliate of the controlling
shareholders of the Company) will receive from the Company
(i) an annual management fee of $350,000, subject to cost of
living increases and certain increases in respect of
business operations acquired, as well as certain fees in
connection with acquisitions and dispositions of business
operations negotiated by Trivest Partners, L.P. pursuant to
that certain Management Agreement dated as of August 27,
1999, a copy of which has been made available to the
Shareholder, and (ii) a one-time transaction fee of $618,750
upon consummation of the Acquisition.
ix) Representations Relied Upon by Shareholder. The
Shareholder acknowledges receipt of (i) the Prospectus,
which describes, among other things, the issuance of the
Senior Subordinated Notes, the Fleet Credit Facility and
certain risk factors relating to such matters and (ii) the
Annual Report. The Shareholder is acquiring the Shares
without having been furnished any representations or
warranties of any kind whatsoever with respect to the
business and financial condition of the Company and its
Subsidiaries, other than the representations contained
herein. The Shareholder specifically understands that the
financial projections for the Company that have been made
available for such Shareholder's review are based upon
certain key assumptions, that such assumptions are subject
to uncertainties relating to the effect that economic or
other circumstances may have on future events, and that
there can be no assurance that the assumptions or data upon
which they are based are achievable.
x) Reliance. The Shareholder has discussed with, and relied
upon the advice of the Shareholder's counsel with regard to,
the meaning and legal consequences of the Shareholder's
representations and warranties herein and the considerations
involved in making an investment in the Company, and the
Shareholder understands that the Company is relying on the
information set forth herein.
xi) No Liquidity. The Shareholder has adequate means of
providing for such Shareholder's current financial needs and
possible personal contingencies and has no need for
liquidity in such Shareholder's investment in the Company.
xii) Risk of Loss. The Shareholder is able to bear the
economic risks inherent in an investment in the Company and
can afford a complete loss of such Shareholder's entire
investment in the Company.
xiii) Other Illiquid Investments. The Shareholder's overall
commitment to investments which are not readily marketable
is not disproportionate to such Shareholder's net worth, and
such Shareholder's investment in the Company will not cause
such overall commitment to be disproportionate.
xiv) Sophistication; Accredited Investor Status. The
Shareholder has such knowledge and experience in financial
and business matters that such Shareholder is capable of
evaluating the merits and risks of an investment in the
Company and of making an informed investment decision. The
Shareholder is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Securities Act.
xv) Certain Tax Matters. The Shareholder certifies under
penalty of perjury that (i) the Taxpayer Identification
Number and address provided under the Shareholder's name on
the signature page to this Agreement are correct, (ii) the
Shareholder is not subject to backup withholding either
because the Shareholder has not been notified that she is
subject to backup withholding as a result of a failure to
report all interest or dividends or because the Internal
Revenue Service has notified the Shareholder that she is no
longer subject to backup withholding and (iii) the
Shareholder is not a nonresident alien, foreign partnership,
foreign trust or foreign estate.
xvi) Lender Agreements. The Shareholder acknowledges and
agrees that, notwithstanding anything to the contrary in
this Agreement, any purchase or sale of Restricted
Securities under this Agreement is subject in all respects
to the provisions of the Fleet Credit Facility.
3. Termination Repurchase Option.
a) If the Shareholder's employment with the Company or any
of its Subsidiaries is terminated by the Company or any such
Subsidiary for any reason whatsoever other than Cause or the
Shareholder's resignation (including termination without
Cause, death or disability), then all (but not less than
all) of the Shareholder Stock (whether held by the
Shareholder, any member of the Shareholder's Family Group or
one or more transferees), shall be subject to repurchase by
the Company at the Company's option at a price per share
equal to Market Value and on the other terms and conditions
set forth in this Section 3.
b) If the Shareholder's employment with the Company or
any of its Subsidiaries is terminated by the Company or any
such Subsidiary for Cause or by the Shareholder's
resignation, then all (but not less than all) of the
Shareholder Stock (whether held by the Shareholder, any
member of the Shareholder's Family Group or one or more
transferees) shall be subject to repurchase by the Company
at the Company's option at a price per share determined as
follows:
i) If the date on which the Shareholder's employment
terminates is on or after the date of this Agreement, but
prior to the first anniversary date of this Agreement, then
all of the outstanding shares of Shareholder Stock shall be
subject to repurchase at a price per share equal to the
lower of Original Cost or Market Value.
ii) If the date on which the Shareholder's employment
terminates is on or after the first anniversary date of this
Agreement, but prior to the second anniversary date of this
Agreement, two-thirds of the outstanding shares of
Shareholder Stock shall be subject to repurchase at a price
per share equal to Original Cost and the remaining one-third
of the outstanding shares of Shareholder Stock shall be
subject to repurchase at a price per share equal to Market
Value; provided, however, that if the Market Value of such
shares is less than their Original Cost, then all of such
shares shall be subject to repurchase at a price per share
equal to Market Value.
iii) If the date on which the Shareholder's employment
terminates is on or after the second anniversary date of
this Agreement, but prior to the third anniversary date of
this Agreement, one-third of the outstanding shares of
Shareholder Stock shall be subject to repurchase at a price
per share equal to Original Cost and the remaining two-
thirds of the outstanding shares of Shareholder Stock shall
be subject to repurchase at a price per share equal to
Market Value; provided, however, that if the Market Value of
such shares is less than their Original Cost, then all of
such shares shall be subject to repurchase at a price per
share equal to Market Value.
iv) If the date on which the Shareholder's employment
terminates is on or after the third anniversary date of this
Agreement, then all of the outstanding shares of Shareholder
Stock shall be subject to repurchase at a price per share
equal to Market Value.
c) The Company's Board may elect to cause the Company to
purchase all (but not less than all) of Shareholder Stock
subject to repurchase by delivery of written notice (the
"Repurchase Notice") to the holder or holders of Shareholder
Stock within 95 days after the termination of the
Shareholder's employment (the date of such termination is
herein referred to as the "Termination Date"). The
Repurchase Notice shall set forth the number of shares of
Shareholder Stock to be acquired from such holder, the
aggregate consideration to be paid for such shares (if
known) and the time and place for the closing of the
transaction.
d) If for any reason the Company does not elect to purchase
all of the shares of Shareholder Stock pursuant to the
repurchase option under Section 3(a) or Section 3(b), as the
case may be (the "Repurchase Option"), the Lead Trivest
Investor shall be entitled to exercise the Company's
Repurchase Option in the manner set forth in Section 3(c)
for all of the shares of Shareholder Stock (the "Available
Shares"). As soon as practicable after the Company has
determined that there will be Available Shares, but in any
event within 60 days after the Termination Date, the Company
shall deliver written notice (the "Option Notice") to the
Lead Trivest Investor setting forth the number of Available
Shares and the price thereof (if known). The Lead Trivest
Investor may elect to purchase all of Available Shares by
delivering written notice to the Company within 30 days
after receipt of the Option Notice from the Company. As
soon as practicable, and in any event within 5 days after
the expiration of the 30day period set forth above, the
Company shall notify each holder of Shareholder Stock as to
the number of shares being purchased from such holder by the
Lead Trivest Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental
Repurchase Notice to the holder(s) of Shareholder Stock, the
Lead Trivest Investor shall also receive written notice from
the Company setting forth the number of shares it is
entitled to purchase, the aggregate purchase price (if
known) and the time and place of the closing of the
transaction.
e) The closing of the purchase transactions shall take place
on the date designated by the Company in the Repurchase
Notice or Supplemental Repurchase Notice, which date shall
not be more than 30 days and not less than 10 days after the
delivery of the later of either such notice to be delivered,
provided that, if the Market Value has not yet been
determined, the closing shall be delayed to a date
designated by the Company, which date shall be not more than
20 days after such determination is made. The Company and/or
Lead Trivest Investor will pay for the Shareholder Stock to
be purchased pursuant to the Repurchase Option, by delivery
of a check or checks (or, at the election of the Company
and/or Lead Trivest Investor, by wire transfer of
immediately available funds) in an amount equal to the
purchase price of the shares being repurchased. The
purchasers of Shareholder Stock under this Agreement will be
entitled to receive customary representations and warranties
from the seller(s) regarding the seller(s)' good title to,
and freedom from liens, encumbrances and restrictions on the
sale of Shareholder Stock.
f) Notwithstanding anything contained herein to the
contrary, the provisions of this Section 3 will terminate
if, prior to the Termination Date, a Liquidity Event is
consummated.
4. Restrictions on Transfer.
a) Transfer of Shareholder Stock. The Shareholder will not
sell, pledge or otherwise directly or indirectly transfer
any interest in or any beneficial interest in any shares of
Shareholder Stock except pursuant to the provisions of
Sections 3, 5, 6 or 7 of this Agreement ("Exempt Transfers")
and except pursuant to the provisions of this Section 4.
Any transfer of Shareholder Stock which is not consummated
in accordance with this Agreement shall be void.
b) First Refusal Rights. At least 60 days prior to making
any transfer other than an Exempt Transfer, the Shareholder
will deliver a written notice (the "Sale Notice") to the
Company and the Lead Trivest Investor. The Sale Notice will
disclose in reasonable detail the identity of the
prospective transferee(s) and the terms and conditions of
the proposed transfer. The Company may elect to purchase
all (but not less than all) of the shares of Shareholder
Stock to be transferred upon the same terms and conditions
as those set forth in the Sale Notice by delivering a
written notice of such election to the Shareholder within 30
days after the receipt of the Sale Notice by the Company. If
the Company has not elected to purchase all of the shares of
Shareholder Stock to be transferred, the Lead Trivest
Investor may elect to purchase all (but not less than all)
of the shares of Shareholder Stock to be transferred upon
the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to
the Shareholder within 60 days after the receipt of the Sale
Notice by the Lead Trivest Investor. Any Person who has the
right to acquire Shareholder Stock pursuant to this Section
4(b) will be given up to 60 days (after it has been
determined that such Person has such right) to consummate
the purchase and sale of Shareholder Stock (the
"Authorization Period"). If neither the Company nor the Lead
Trivest Investor has elected to purchase all of the shares
of Shareholder Stock specified in the Sale Notice, the
Shareholder may transfer the shares of Shareholder Stock
specified in the Sale Notice at a price and on terms no more
favorable to the transferee(s) thereof than specified in the
Sale Notice during the 60day period immediately following
the Authorization Period. Any shares of Shareholder Stock
not transferred within such 60day period will be subject to
the provisions of this Section 4(b) upon subsequent
transfer.
c) Certain Permitted Transfers. The restrictions contained
in this Section 4 will not apply with respect to transfers
of Shareholder Stock (i) pursuant to applicable laws of
descent and distribution or (ii) among the Shareholder's
Family Group; provided that the restrictions contained in
this Section 4 will continue to be applicable to Shareholder
Stock after any such transfer; and provided further that the
transferees of such Shareholder Stock have agreed in writing
to be bound by the provisions of this Agreement relating to
Shareholder Stock.
d) Termination of Restrictions. The restrictions on the
transfer of Shareholder Stock set forth in this Section 4
will continue with respect to each share of Shareholder
Stock until the date on which such Shareholder Stock has
been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(c));
provided, however, that in any event the restrictions on
transfers set forth in this Section 4 will terminate upon a
Liquidity Event.
5. Drag Along Rights.
a) If, at any time following the date hereof, the Lead
Trivest Investor shall enter into an agreement to sell, in a
single transaction or a series of transactions, any of the
Company Securities at the time owned by (and/or purchasable
by) the Lead Trivest Investor to any Person or group of
Persons who is not a Trivest Affiliate or an Affiliate of
the Company (the "Buyer") (including, without limitation, a
sale of the Company by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the
outstanding Common Stock or otherwise), then the Lead
Trivest Investor may require each holder of Shareholder
Stock to sell all of the Shareholder Stock owned by (and/or
purchasable by) such holders to the Buyer contemporaneously
with the sale by the Lead Trivest Investor and at the same
price per share and on the same terms and conditions as are
applicable to the Company Securities to be sold by the Lead
Trivest Investor; provided, that if the Lead Trivest
Investor is selling less than all of Company Securities
owned by (and/or purchasable by) it, each holder of
Shareholder Stock shall sell an Applicable Percentage of the
Shareholder Stock owned by (and/or purchasable by) such
holder. Without limitation as to the foregoing, each holder
of Shareholder Stock shall consent to and raise no
objections against such a sale. If such sale is structured
as a merger or consolidation, each such holder shall waive
any dissenters rights, appraisal rights or similar rights in
connection with such merger or consolidation to the fullest
extent permitted by law.
b) If the Lead Trivest Investor wishes to exercise the right
granted pursuant to Section 5(a), the Lead Trivest Investor
must give written notice to such effect to each holder of
Shareholder Stock (a "DragAlong Notice") not less than 20
nor more than 60 days prior to the date upon which such sale
is scheduled to close. Each DragAlong Notice shall (i)
specify in reasonable detail all of the terms and conditions
upon which such sale is to occur (including a description of
all consideration payable in connection with the sale) and
(ii) make explicit reference to this Section 5 and state
that each such holder is obligated to sell its Shareholder
Stock pursuant to such sale.
c) If the Lead Trivest Investor exercises the right granted
pursuant to Section 5(a), subject to the consummation of the
sale of all Shareholder Stock to the Buyer and subject to
compliance with the other applicable terms of this
Agreement, each holder of Shareholder Stock shall promptly
take such actions and shall promptly execute such documents
and instruments as shall be necessary and desirable to
consummate the proposed sale.
d) At the closing of any such sale, each holder of
Shareholder Stock shall deliver a certificate or
certificates, registered in such holder's name, properly
endorsed and with all required transfer stamps, if any,
representing the securities being sold by such holder
against delivery of the applicable consideration from the
Buyer.
e) The provisions of this Section 5 shall terminate upon
the completion of a Qualified Public Offering.
6. Co-Sale Rights of the Shareholder with Respect to
Transfers by the Lead Trivest Investor.
a) Subject to Section 5, if the Lead Trivest Investor at any
time proposes to transfer any Company Securities, then, as a
condition precedent thereto, the Lead Trivest Investor shall
afford each holder of Shareholder Stock the right to
participate in such transfer in accordance with this Section
6. Notwithstanding the foregoing, the provisions of this
Section 6 shall not apply to (i) any transfer of Restricted
Securities by the Lead Trivest Investor to any Trivest
Affiliate or any Affiliate of the Company, (ii) any transfer
of Restricted Securities by the Lead Trivest Investor which
is a pledge, (iii) any transfer to the public pursuant to a
registration effected in accordance Section 7 hereof or (iv)
a distribution by the Lead Trivest Investor to its partners.
b) The Lead Trivest Investor shall give written notice to
each holder of Shareholder Stock (a "Notice of Transfer")
not less than twenty (20) nor more than sixty (60) days
prior to any proposed transfer of any such Company
Securities. Each such Notice of Transfer shall:
i) specify in reasonable detail (A) the number and type of
Company Securities which the Lead Trivest Investor proposes
to transfer, (B) the identity of the proposed transferee or
transferees of such Company Securities, (C) the time within
which, the price per share at which and all other terms and
conditions upon which the Lead Trivest Investor proposes to
transfer such Company Securities, (including a description
of all consideration payable in connection with the
transfer) and (D) the percentage of the Company Securities
then owned by the Lead Trivest Investor which the Lead
Trivest Investor proposes to transfer to such proposed
transferee or transferees; and
ii) make explicit reference to this Section 6 and state that
the right of each such holder to participate in such
transfer under this Section 6 shall expire unless exercised
within fifteen (15) days after receipt of such Notice of
Transfer.
c) Each holder of Shareholder Stock shall have the right
to transfer to the proposed transferee or transferees that
number of shares of Shareholder Stock which is equal to the
Applicable Percentage of the Shareholder Stock owned by
(and/or purchasable by) such holder, at the same price per
share and on the same terms and conditions as are applicable
to the proposed transfer by the Lead Trivest Investor.
d) Each holder of Shareholder Stock must notify the Lead
Trivest Investor, within fifteen (15) days after receipt of
the Notice of Transfer, if he desires to accept such offer
and to transfer any of his Shareholder Stock in accordance
with this Section 6. The failure of any such holder to
provide such notice within such 15day period shall, for the
purposes of this Section 6, be deemed to constitute a waiver
by any such holder of his right to transfer any of his
Shareholder Stock in connection with the proposed transfer
described in such Notice of Transfer. The Lead Trivest
Investor shall use all commercially reasonable efforts to
obtain the agreement of the prospective transferee or
transferees to the participation of each such holder
electing to participate in such proposed transfer and shall
not consummate any such proposed transfer unless each such
electing holder is permitted to participate in accordance
with the provisions of this Section 6. No holder of
Shareholder Stock shall be obligated to transfer any
Shareholder Stock pursuant to this Section 6. Any and all
transfers of Shareholder Stock by a holder of Shareholder
Stock pursuant to this Section 6 shall be made concurrently
with the transfer of Company Securities by the Lead Trivest
Investor.
e) Subject to the consummation of the transfer contemplated
by the Notice of Transfer and subject to compliance with the
other applicable terms of this Agreement, each holder that
exercises his right granted pursuant to Section 6(a) shall
promptly execute such documents and instruments as shall be
necessary and desirable to consummate the proposed sale.
f) At the closing of any such transfer, each holder of
Shareholder Stock exercising the right granted pursuant to
Section 6(a) shall deliver a certificate or certificates,
registered in his name, properly endorsed and with all
required transfer stamps, if any, representing the
securities being sold by him against delivery of the
applicable consideration by the proposed transferee.
g) Notwithstanding anything to the contrary contained in
this Section 6, no holder of Shareholder Stock shall have
any rights pursuant to this Section 6 to participate in any
other transfer by the Lead Trivest Investor.
h) The provisions of this Section 6 shall terminate upon the
completion of a Qualified Public Offering.
7. Registration Rights.
7. 1 Incidental Registration.
a) If, after a Qualified Public Offering, the Company at any
time or from time to time shall determine to effect the
registration, qualification and/or compliance of any of its
equity securities (otherwise than pursuant to a registration
on a form inappropriate for an underwritten public offering
or relating solely to securities to be issued in a merger,
acquisition of the stock or assets of another entity or in a
similar transaction or relating solely to securities issued
or to be issued under any employee stock option or purchase
plan), then, in each such case, the Company shall:
i) promptly give written notice of the proposed
registration, qualification and/or compliance (which shall
include a list of the jurisdictions in which the Company
intends to register or qualify such securities under the
applicable blue sky or other securities laws) to the
Shareholder; and
ii) use all commercially reasonable efforts to include
among the securities which it then registers or qualifies
all Registrable Shares specified by the Shareholder in a
written request or requests, made within 30 days after
receipt of such written notice from the Company.
b) The obligations of the Company under this Section 7.1 are
subject to the following qualifications:
i) subject to Section 7.7, the Company shall pay all
Registration Expenses related to any registration,
qualification and/or compliance requested pursuant to this
Section 7.1 and the Shareholder shall pay his Selling
Expenses pro rata on the basis of the Registrable Shares so
registered and sold; and
ii) in the event that any registration pursuant to this
Section 7.1 shall be, in whole or in part, an underwritten
public offering of Common Stock, the number of Registrable
Shares to be included in such an underwriting may be reduced
if and to the extent that the managing underwriter shall be
of the opinion that the inclusion of some or all of the
Registrable Shares would adversely affect the marketing of
the securities to be sold by the Company therein; provided,
that any such limitation shall be imposed in such manner so
as to avoid any diminution in the number of shares the
Company may register for sale by (i) giving first priority
for the shares to be registered for issuance and sale by the
Company and, pursuant to Section 5.2 of the Investors'
Agreement, the Trivest Investors and any demanding
shareholder, (ii) giving second priority pari passu for the
shares requested to be registered pursuant to Section 5.1 of
the Investors' Agreement, pursuant to this Agreement and
pursuant to that certain Subscription and Shareholders
Agreement dated as of the date hereof among the Company, the
Lead Trivest Investor and Michael Shilling and for other
securities with pari passu registration rights requested to
be registered (pro rata among the requesting holders of the
securities covered by this clause (ii) based upon the number
of securities owned by such holders), and (iii) giving third
priority for the other securities requested to be included
in such registration not covered by clauses (i) or (ii)
above.
7.2 Registration Procedures. In the case of' each
registration, qualification and/or compliance contemplated
by this Section 7, the Company shall keep the Shareholder
advised in writing as to the initiation of proceedings for
such registration, qualification and compliance and as to
the completion thereof, and shall advise the Shareholder,
upon request, of the progress of such proceedings. In
addition, the Company shall follow procedures customarily
observed by issuers in public offerings, and accord to the
Shareholder all rights (including, without limitation, the
right to perform appropriate "due diligence") customarily
accorded to selling shareholders in secondary distributions
and accord such rights to the managing underwriters if the
transaction in question is an underwritten public offering.
At the expense of the Company or of the party or parties
bearing the expenses of such registration, qualification and
compliance, the Company shall (a) use all commercially
reasonable efforts to keep such registration, qualification
and compliance current and effective by such action as may
be necessary or appropriate, including, without limitation,
the filing of post-effective amendments and supplements to
any registration statement or prospectus, for such period
(not to exceed one hundred eighty (180) days) as is
necessary to permit the sale and distribution of the
Registrable Shares pursuant thereto, (b) use all
commercially reasonable efforts to take all necessary action
under any applicable blue sky or other applicable securities
law to permit such sale and/or distribution, all as
reasonably requested by the Shareholder, and comply with
applicable requirements of all regulatory entities,
provided, that the Company shall not be required to so
register or qualify the Registrable Shares in any
jurisdiction if, solely as a result thereof, the Company
must qualify generally to do business therein, consent to
general service of process therein, or submit to liability
for state or local taxes, (c) furnish the Shareholder such
number of registration statements, prospectuses,
supplements, amendments, and offering circulars as the
Shareholder from time to tie may reasonably request, (d) use
all commercially reasonable efforts to list all Registrable
Shares on each securities exchange on which securities of
the same class are then listed and (e) use all commercially
reasonable efforts to furnish (or cause to be furnished) to
the managing underwriters all undertakings, agreements,
certificates, opinions, financial statements and "comfort
letters" of the sort customarily provided to managing
underwriters, if the transaction in question is an
underwritten public offering. In connection with and as a
condition to each registration hereunder, the Shareholder
shall (a) provide such information and execute such
documents as may reasonably be required in connection with
such registration, (b) agree to sell Registrable Shares on
the basis provided in any underwriting arrangements, and (c)
complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents
reasonably required or requested under the terms of such
underwriting arrangements. In connection with each
registration pursuant to Section 7.1 covering an
underwritten public offering, the Company and the
Shareholder agree to enter into a written agreement with the
managing underwriter in such form and containing such
provisions as are customary in the securities business for
such an arrangement between such underwriter and companies
of the Company's size and investment stature.
7.3 Indemnification.
a) The Company shall indemnify, defend and hold harmless the
Shareholder, to the fullest extent enforceable under
applicable law against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration
statement, prospectus, supplement, amendment or offering
circular related to any registration, qualification or
compliance or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
any violation (or alleged violation) of applicable
securities laws in connection with any such registration,
qualification or compliance, and shall reimburse the
Shareholder for any legal or any other expenses reasonably
incurred in connection with investigating and/or defending
(and/or preparing for any investigation or defense of) any
such claim, loss, damage, liability, action or violation;
provided, that the Company shall not be liable in any such
case to the Shareholder if, but only to the extent that, any
such claim, loss, damage, liability, action, violation or
expense arises out of or is based upon any untrue statement
or alleged untrue statement in or omission or alleged
omission if so made in reliance upon and in conformity with
written information furnished to the Company by the
Shareholder specifically for use therein; provided, further,
however, that the Company shall not be liable to the
Shareholder in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is
based upon an untrue or alleged untrue statement or omission
or an alleged omission made in any preliminary prospectus or
final prospectus if (1) the Shareholder failed to send or
deliver a copy of the final prospectus or prospectus
supplement with or prior to the delivery of written
confirmation of the sale of the Registrable Shares, and (2)
the final prospectus or prospectus supplement would have
corrected such untrue statement or omission.
b) The Shareholder shall, if securities held by him
are included in a registration, qualification or compliance
contemplated pursuant to this Section 7, indemnify, defend
and hold harmless the Company, each of its directors and
officers and each Person, if any, who controls the Company
or such underwriter within the meaning of applicable
securities laws, and their respective directors, officers,
employees, agents, advisors and Affiliates, to the fullest
extent enforceable under applicable law against all claims,
losses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, supplement,
amendment or offering circular related to any such
registration, qualification or compliance, or any omission
(or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse the
Company and such directors, officers or other Persons for
any legal or any other expenses reasonably incurred in
connection with investigating or defending (and/or preparing
for any investigation or defense of') any such claim, loss,
damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made
in (or omitted from) such registration statement,
prospectus, supplement, amendment or offering circular in
reliance upon and in conformity with written information
furnished to the Company by the Shareholder specifically for
use therein; provided, that the aggregate liability of the
Shareholder under this Section 7.3 shall be limited to the
net sales proceeds actually received by the Shareholder as a
result of the sale by it of securities in such registration,
qualification or compliance.
c) Promptly after receipt by an indemnified party
under this Section 7.3 of notice of the commencement of any
action, such party shall, if a claim in respect thereof is
to be made against the indemnifying party under this Section
7.3, notify the indemnifying party in writing thereof, but
the omission so to notify the indemnifying party shall not
relieve the indemnifying party from any liability which it
may have to such indemnified party except to the extent the
indemnifying party is prejudiced by such omission. In case
any such action shall be brought against any indemnified
party and such indemnified party shall notify the
indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and,
to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume
and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified part, under this
Section 7.3 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense
thereof, provided, that, if the defendants in any such
action include both the indemnified party and the
indemnifying party and the indemnified party shall have
reasonably concluded (based upon the advice of counsel) that
there may be reasonable defenses available to it that are
different from or additional to those available to the
indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the
interests of the indemnifying party, then the indemnified
party shall have the right to select one separate counsel
and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses
and fees of such one separate counsel and other expenses
related to such participation to be reimbursed by the
indemnifying party as incurred, it being understood,
however, that the indemnifying party shall not, in
connection with any one such action or separate but
substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with
appropriate local counsel as required by the local rules of
such jurisdiction) at any time for all such indemnified
parties.
d) To provide for just and equitable, contribution
to joint liability under the Securities Act in any case in
which (i) an indemnified party makes a claim for
indemnification pursuant to this Section 7.3 but it is
judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right
of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that this Section 7.3
provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the
part of the Shareholder or the Company, any director or
officer of the Company or any controlling Person of the
Company (within the meaning of applicable securities laws)
of the Company in circumstances for which indemnification is
provided under this Section 7.3, then, and in each such
case, the Company and the Shareholder shall contribute to
the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others)
as is appropriate to reflect the relative fault of the
Company and the Shareholder in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as the relative
benefit received by the Company and the Shareholder as a
result of the offering in question, it being understood that
the parties acknowledge that the overriding equitable
consideration to be given effect in connection with this
provision is the ability of one party or the other to
correct the statement or omission which resulted in such
losses, claims, damages or liabilities, and that it would
not be just and equitable if contribution pursuant thereto
were to be determined by pro rata allocation or by any other
method of allocation which does not take into consideration
the foregoing equitable considerations; provided, that (x)
in any such case no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation, and (y) in no event shall the Shareholder
be obligated to make any contribution in excess of the
amount specified in Section 7.3(b).
7.4 Restrictions on Other Agreements. The Company shall
not grant any right relating to the registration,
qualification or compliance of its securities if the
exercise thereof violates or is inconsistent with any of the
rights granted under this Section 7, without the written
consent of the Shareholder, which consent may be given or
withheld in the sole discretion of such holders. The
Company shall not permit any of its Subsidiaries to effect,
or to grant any right relating to, the registration of its
securities.
7.5 Limitations on Registration Rights. Notwithstanding
anything to the contrary contained in this Agreement, the
Company may delay the filing or effectiveness of, or may
terminate or withdraw, any registration statement referred
under Section 7.1 at any time for any reason whatsoever
without incurring any liability to the Shareholder, but the
Company shall be and remain obligated to pay all
Registration Expenses, if any, incurred in connection
therewith.
7.6 Holdback Agreement.
a) In addition to any other restrictions on transfer of the
Registrable Shares contained in this Agreement, if the
Company shall at any time register securities under the
Securities Act (including, without limitation, any
registration relating to a Qualified Public Offering or any
registration pursuant to this Section 7) for offer or sale
to the public, then the Shareholder shall not make any short
sale of, grant an option for the transfer of, or otherwise
transfer, any Registrable Shares (other than (i) for the
public sale of those Registrable Shares included in and sold
pursuant to such registration in accordance with this
Section 7 or (ii) in a private sale complying with this
Agreement to transferee who agrees to the restrictions in
this Section 7.6(a)) without the prior written consent of
the Company for such reasonable period (but in no event
longer than 180 days following the effective date of the
related registration statement) as may be designated in
writing to the Shareholder by the Company, or, if the
registration shall be, in whole or in part, an underwritten
offering, by the managing underwriter; provided, that after
the Company's initial public offering, the foregoing
provisions of this Section 7.6(a) shall only apply to the
Shareholder if he (A) is offering Registrable Shares for
sale to the public in connection with such registration or
(B) beneficially owns (as that term is used in Rule 13d-3
promulgated under the Exchange Act) five percent or more of
the outstanding shares of Common Stock.
b) In addition to the restriction contained in Section
7.6(a), the Shareholder shall execute any restrictive
agreement or "lock-up" agreement that any underwriter
engaged by the Company in connection with any underwritten
public offering shall request; provided, that the
restrictive or "lock-up" period thereunder is not more than
one hundred eighty (180) days after the effective date of
the registration statement for which such restrictive
agreement or "lock-up" agreement is sought; provided,
further, that, after the Company's initial public offering,
the foregoing provisions of this Section 7.6(b) shall only
apply to the Shareholder if he (A) is offering Registrable
Shares for sale to the public in the offering or (B)
beneficially owns (as that term is used in Rule 13d-3
promulgated under the Exchange Act) five percent or more of
the outstanding shares of Company Common Stock.
c) The Company may impose stop-transfer instructions with
respect to the Registrable Shares until the end of any
restrictive period provided for pursuant to this Section
7.6.
7.7 Registration Expenses and Selling Expenses. The Company
shall pay all Registration Expenses related to any
registration, qualification and/or compliance contemplated
by this Agreement, except to the extent that such
Registration Expenses relate to any Registrable Shares
requested to be included in any registration proceeding
pursuant to Section 7.1, the request of which has been
withdrawn by the Shareholder.
7.8 Changes in Common Stock. If, and as often as, there is
any change in the Common Stock by way of a stock split,
stock dividend, combination or reclassification, or through
a merger, consolidation, reorganization or recapitalization,
or by any other means, appropriate adjustment shall be made
in the provisions hereof so that the rights and privileges
granted hereby shall continue with respect to the Common
Stock as so changed.
7.9 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Securities
and Exchange Commission that may at any time permit the
resale of the Registrable Shares without registration, the
Company will at all times after 90 days after the first
registration statement covering a public offering of
securities of the Company under the Securities Act shall
have become effective or following registration under
Section 12 of the Exchange Act, use its commercially
reasonable efforts to: (i) make and keep public information
available, as those terms are understood and defined in Rule
144 under the Securities Act; (ii) file with the Securities
and Exchange Commission in a timely manner all reports and
other documents required of the Company under the Securities
Act and the Exchange Act; and (iii) furnish to the
Shareholder forthwith upon request a written statement by
the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and
documents so filed by the Company as the Shareholder may
reasonably request in availing itself of any rule or
regulation of the Securities and Exchange Commission
allowing the Shareholder to sell any Registrable Shares
without registration.
8. Legends. No Shareholder Stock may be transferred
except pursuant to a registration under applicable
securities laws or pursuant to an exemption from such
registration. Until the date on which Shareholder Stock is
so registered, each certificate evidencing the same shall
bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER
APPLICABLE SECURITIES LAW AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
So long as any Shareholder Stock shall be subject to the
terms of this Agreement, all certificates evidencing the
same shall bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
OF THE SUBSCRIPTION AND SHAREHOLDERS AGREEMENT DATED MARCH
[31], 2000 AMONG THE ISSUER HEREOF AND CERTAIN OTHER
PERSONS, AS AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO
TIME. COPIES OF SUCH AGREEMENT ARE ON FILE AT THE ISSUER'S
PRINCIPAL OFFICES AND, UPON WRITTEN REQUEST, COPIES THEREOF
SHALL BE MAILED WITHOUT CHARGE WITHIN TEN DAYS OF RECEIPT OF
SUCH REQUEST TO APPROPRIATELY INTERESTED PERSONS."
Upon receipt from any holder of Shareholder Stock by the
Company of an opinion of counsel reasonably satisfactory to
it to the effect that any of the foregoing legends are no
longer required or applicable, the Company shall reissue the
certificates evidencing the applicable Shareholder Stock
without such legends.
9. Notices. Any notice provided for in this Agreement
must be in writing and must be either personally delivered,
or mailed by certified or registered mail, return receipt
requested, postage prepaid to the recipient at the address
below indicated:
To the Company:
c/o Trivest, Inc.2665 South Bayshore DriveSuite 800Miami,
Florida 33133Attention: [General Counsel]
To the Shareholder:
at the address of the Shareholder set forth on the signature
page hereto
or such other address or to the attention of such other
person as the recipient party shall have specified by prior
written notice to the sending party. Any notice under this
Agreement will be deemed to have been given when so
delivered or mailed.
10. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any
other jurisdiction, but this Agreement will be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.
11. Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even
date herewith embody the complete agreement and
understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by
or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
12. Counterparts. This Agreement may be executed on
separate counterparts, each of which is deemed to be an
original and all of which taken together constitute one and
the same agreement. Any telecopied signature shall be
deemed a manually executed and delivered original.
13. Successors and Assigns. This Agreement is intended to
bind and inure to the benefit of and be enforceable by the
Shareholder and the Company, and their respective successors
and assigns and, where applicable, heirs and personal
representatives, including subsequent holders of Shareholder
Stock (except as otherwise provided herein).
14. Choice of Law. Except as otherwise provided herein,
this Agreement shall be governed and construed in accordance
with the laws of the State of Florida without regard to
conflicts of laws principles thereof and all questions
concerning the validity and construction hereof shall be
determined in accordance with the laws of said state. Each
party hereby irrevocably submits to the exclusive
jurisdiction of any state or federal court sitting in the
County of Miami-Dade, State of Florida in any action or
proceeding arising out of or relating to this Agreement and
hereby irrevocably agrees, on behalf of itself or herself
and on behalf of such party's successor's and assigns, that
all claims in respect of such action or proceeding may be
heard and determined in any such court and irrevocably
waives any objection such person may now or hereafter have
as to the venue of any such suit, action or proceeding
brought in such a court or that such court is an
inconvenient forum.
15. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.
16. Remedies. Each of the parties to this Agreement will be
entitled to enforce its rights under this Agreement
specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
17. Amendments and Waivers. No provision of this Agreement
may be amended or waived without the prior written consent
of the Company and the Shareholder.
18. Business Days. Whenever the terms of this Agreement
call for the performance of a specific act on a specified
date, which date falls on a Saturday, Sunday or legal
holiday, the date for the performance of such act shall be
postponed to the next succeeding regular business day
following such Saturday, Sunday or legal holiday.
19. No Third Party Beneficiary. Except for the parties to
this Agreement and their respective successors and assigns,
nothing expressed or implied in this Agreement is intended,
or will be construed, to confer upon or give any person
other than the parties hereto and their respective
successors and assigns any rights or remedies under or by
reason of this Agreement.
SIGNATURES APPEAR ON FOLLOWING PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
WINSLOEW FURNITURE, INC.
By:__________________________________
Bobby Tesney
President and Chief Executive Officer
SHAREHOLDER:
_______________________________________
Jerry Shilling
Address:
_____________________________________
_____________________________________
_____________________________________
Taxpayer Identification Number:
_____________________________________
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc., General Partner
By:____________________________
William F. Kaczynski, Jr.
Managing Director
