STOCK PURCHASE AGREEMENT
AMONG
HOMADA LLC,
HABITAT SOLUTIONS, INC.
AND
INTERIORS, INC.,
JANUARY 16 2002
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS ..................................................1
ARTICLE II PURCHASE AND SALE OF SHARES ......................................7
SECTION 2.01 Purchase and Sale of Shares ............................7
SECTION 2.02 Purchase Price .........................................7
SECTION 2.03 Adjustment for Future Performance ......................9
SECTION 2.04 Closing ................................................10
SECTION 2.05 Actions Prior to and at the Closing ....................10
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY .........11
SECTION 3.01 Organization and Good Standing; Authorization...........11
SECTION 3.02 No Conflicts............................................11
SECTION 3.03 Capitalization .........................................12
SECTION 3.04 Financial Statements; Completion Schedule ..............12
SECTION 3.05 Title to Property; Encumbrances. .......................13
SECTION 3.06 Inventory ..............................................14
SECTION 3.07 Compliance with Law ....................................14
SECTION 3.08 Insurance ..............................................15
SECTION 3.09 Indebtedness ...........................................16
SECTION 3.10 Judgments; Litigation ..................................16
SECTION 3.11 Income and Other Taxes .................................17
SECTION 3.12 Corporate Records ......................................18
SECTION 3.13 Employee Benefit Matters ...............................18
SECTION 3.14 No Undisclosed Liabilities .............................18
SECTION 3.15 Permits, Licenses, Etc. ................................18
SECTION 3.16 Regulatory Filings .....................................18
SECTION 3.17 Consents ...............................................19
SECTION 3.18 Material Contracts; No Defaults ........................19
SECTION 3.19 Absence of Certain Changes .............................21
SECTION 3.20 Employees and Labor Matters ............................21
SECTION 3.21 Affiliations ...........................................22
SECTION 3.22 Warranty Liability .....................................23
SECTION 3.23 Hazardous Materials ....................................23
SECTION 3.24 Brokers' Fees ..........................................24
SECTION 3.25 Disclosure .............................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER ......................24
SECTION 4.01 Organization, Power and Authority of Buyer .............24
SECTION 4.02 Authorization ..........................................24
SECTION 4.03 No Conflict or Violation ...............................24
SECTION 4.04 Capitalization .........................................25
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SECTION 4.05 Consents and Approvals .................................25
SECTION 4.06 Reports and Financial Statements .......................25
SECTION 4.07 Brokers' Fees ..........................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF Shareholder ...............26
SECTION 5.01 Ownership of Shares ....................................26
SECTION 5.02 Delivery of Good Title .................................26
SECTION 5.03 Execution and Delivery .................................26
SECTION 5.04 No Conflicts ...........................................26
ARTICLE VI CONDITIONS TO CONSUMMATION OF SALE OF SHARES .................28
SECTION 6.01 Conditions to Obligations of Buyer .....................28
SECTION 6.02 Conditions to Obligations of the Shareholder ...........30
ARTICLE VII ADDITIONAL COVENANTS .........................................33
SECTION 7.01 Covenants of the Shareholder ...........................33
SECTION 7.02 Covenants of Buyer .....................................34
SECTION 7.03 Access and Information .................................34
SECTION 7.04 Expenses ...............................................35
SECTION 7.05 Certain Notifications ..................................35
SECTION 7.06 Publicity; Employee Communications .....................35
SECTION 7.07 Further Assurances .....................................36
SECTION 7.08 Competing Offers; Merger or Liquidation ................36
SECTION 7.09 Inconsistent Action ....................................36
SECTION 7.10 Post-Termination Employment ............................36
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER ............................37
SECTION 8.01 Termination ............................................37
SECTION 8.02 Effect of Termination ..................................37
SECTION 8.03 Amendment ..............................................37
SECTION 8.04 Waiver .................................................37
ARTICLE IX INDEMNIFICATION ..............................................38
SECTION 9.01 Survival of Representations and Warranties
and Covenants ........................................38
SECTION 9.02 Indemnification ........................................38
SECTION 9.03 Third Party Claims .....................................39
SECTION 9.04 Indemnification Non-Exclusive ..........................40
ARTICLE X GENERAL PROVISIONS ...........................................40
SECTION 10.01 Notices ................................................40
SECTION 10.02 Severability ...........................................41
SECTION 10.03 Entire Agreement .......................................41
SECTION 10.04 Successors and Assigns..................................42
SECTION 10.05 Counterparts............................................42
SECTION 10.06 Schedules and Annexes ..................................42
SECTION 10.07 Construction ...........................................42
SECTION 10.08 Governing Law ..........................................42
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SECTION 10.09 Arbitration Concerning Disputes Regarding EBIT .........42
LIST OF ANNEXES
Annex A - Form of Shareholder Certificate
Annex B - Certificate of the Company's Officers
Annex C - Certificate of the Company's Secretary
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
January 16, 2002, by and among Habitat Solutions, Inc., a Delaware corporation
("SHAREHOLDER"), Interiors, Inc., a Delaware corporation and the parent
corporation of the Shareholder ("Interiors"), and Homada LLC, a California
Limited Liability Company ("BUYER").
R E C I T A L S
(d) The Shareholder owns 100 shares of common stock (the "SHARES") of ------
Concepts 4, Inc., a California corporation (the "COMPANY"). The -------
Shareholder is the owner of all the issued and outstanding common stock of
the Company.
(e) The Shareholder desires to sell to Buyer, and Buyer desires to purchase
from the Shareholder, the Shares in accordance with the terms of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
Unless the context otherwise requires, the terms defined in this Article I
shall have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined. All accounting terms defined in this Article I and those accounting
terms used in this Agreement and not defined in this Article I shall, except as
otherwise provided for herein, be construed in accordance with GAAP.
"ACTION" shall mean any actual or threatened claim, action, suit,
arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by
or before any Governmental Entity or arbitrator and any appeal from any of the
foregoing.
"AFFILIATE" shall mean any Person which directly or indirectly controls,
is controlled by, or is under common control with, the indicated Person.
"AGREEMENT" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"BALANCE SHEET DATE" shall have the meaning assigned to such term in
Section 3.04(a) hereof.
"BROKER" shall have the meaning assigned to such term in Section 3.24
hereof.
"BUYER" shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.
"CLAIM NOTICE" shall have the meaning assigned to such term in Section
9.03 hereof.
"CLOSING" and "CLOSING DATE" shall have the respective meanings assigned
to such terms in Section 2.05 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" shall mean the common stock of the Company.
"COMPANY" shall have the meaning assigned to such term in Recital A
hereof.
"DAMAGES" shall mean any and all losses, liabilities, obligations, costs,
expenses, damages or judgments of any kind or nature whatsoever (including
without limitation reasonable attorneys', accountants' and experts' fees,
disbursements of counsel, and other costs and expenses incurred pursuing
indemnification claims under Article X hereof).
"EARNOUT PAYMENTS" shall have the meaning assigned to such term in Section
2.03 hereof.
"EBIT" shall mean Net Income plus the Company's provision and other
expenses for federal income taxes and Interest Expense, less any Interest
Income, attributable solely to the business of the Company for a particular
fiscal year. For the purpose of calculating EBIT in connection with Section 2.03
only, any increase in the operating expenses of the Company (which increase, for
the purposes of calculating EBIT, shall be calculated by comparing the current
operating expenses against the operating expenses for the preceding twelve (12)
month period), which operating expenses are incurred as a result of the actions
of Buyer, shall be excluded from EBIT upon Shareholder' written notice to Buyer
if the increase in operating expenses is (i) not in the Ordinary Course; or (ii)
incurred to increase the revenue or profits of the Company during periods which
do not include the First Earnout Period, the Second Earnout Period or the Third
Earnout Period. Any increase in operating expenses of the Company incurred as a
result of the actions of Buyer shall be included in EBIT if the increase in
operating expenses is (x) incurred to preserve the assets of the Company; or (y)
incurred to maintain Buyer's financial control of the Company.
"ENVIRONMENTAL LAWS" shall mean all Legal Requirements pertaining to the
protection of the environment, the treatment, emission and discharge of gaseous,
particulate and effluent pollutants and the use, handling, storage, treatment,
removal, transport, transloading, cleanup, decontamination, discharge and
disposal of Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FINANCIAL STATEMENTS" shall have the meaning assigned to such term in
Section 3.04(a) hereof.
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"FIRST EARNOUT PERIOD" shall mean the period of time beginning on the
Closing Date and ending on the first anniversary of the Closing Date.
"FORMER SHAREHOLDERS" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇ and his assignee, the ▇▇▇▇▇▇
Family Trust dated March 21, 2000, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇ Family Trust
dated October 1, 1997.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL ENTITY" shall mean any local, state, federal or foreign (i)
court, (ii) government or (iii) governmental department, commission,
instrumentality, board, agency or authority, including the IRS and other taxing
authorities.
"HAZARDOUS MATERIAL" shall mean any flammable, ignitable, corrosive,
reactive, radioactive or explosive substance or material, hazardous waste, toxic
substance or related material and any other substance or material defined or
designated as a hazardous or toxic substance, material or waste by any
Environmental Law currently in effect or as amended or promulgated in the
future.
"INDEBTEDNESS" shall mean, when used with reference to any Person, without
duplication, (i) any liability of such Person created or assumed by such Person,
or any Subsidiary thereof, (A) for borrowed money, (B) evidenced by a bond,
note, debenture or similar instrument (including a purchase money obligation,
deed of trust or mortgage) given in connection with the acquisition of, or
exchange for, any property or assets (other than inventory or similar property
acquired and consumed in the Ordinary Course), including securities and other
Indebtedness, (C) in respect of letters of credit issued for such Person's
account and "swaps" of interest and currency exchange rates (and other interest
and currency exchange rate hedging agreements) to which such Person is a party
or (D) for the payment of money as lessee under leases that should be, in
accordance with GAAP, recorded as capital leases for financial reporting
purposes; (ii) any liability of others described in the preceding clause (i)
guaranteed as to payment of principal or interest by such Person or in effect
guaranteed by such Person through an agreement, contingent or otherwise, to
purchase, repurchase or pay the related Indebtedness or to acquire the security
therefor; (iii) all liabilities or obligations secured by a Lien upon property
owned by such Person and upon which liabilities or obligations such Person
customarily pays interest or principal, whether or not such Person has not
assumed or become liable for the payment of such liabilities or obligations; and
(iv) any amendment, renewal, extension, revision or refunding of any such
liability or obligation.
"INDEMNIFIABLE CLAIM" shall have the meaning assigned to such term in
Section 9.03 hereof.
"INDEMNIFIED PARTY" shall have the meaning assigned to such term in
Section 9.02 hereof.
"INDEMNIFYING PARTY" shall have the meaning assigned to such term in
Section 9.03 hereof.
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"INTEREST EXPENSE" and "INTEREST INCOME" for a fiscal year shall mean,
respectively, the Company's interest expense and interest income for such fiscal
year used in determining Net Income for that fiscal year.
"IRS" shall mean the United States Internal Revenue Service. ---
"JANUARY 30 NOTE" shall have the meaning assigned to such term in Section
2.02(a)(i) hereof.
"JUNE BALANCE SHEET" shall have the meaning assigned to such term in
Section 3.04 hereof.
"LEGAL REQUIREMENT" shall mean any statute, law, ordinance, rule,
regulation, permit, order, writ, judgment, injunction, decree or award issued,
enacted or promulgated by any Governmental Entity or any arbitrator.
"LIEN" shall mean all liens (including judgment and mechanics' liens,
regardless of whether liquidated), mortgages, assessments, security interests,
easements, claims, pledges, trusts (constructive or other), deeds of trust,
options or other charges, encumbrances or restrictions.
"MANAGEMENT GROUP" shall mean ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ Vechi.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, financial condition, properties, profitability, prospects or
operations of the Company. "NET INCOME" shall mean the net income of the Company
for such period, determined in accordance with GAAP, applied in a manner
consistent with the prior accounting practices of the Company, attributable
solely to the business of the Company for a particular fiscal year.
"OPTIONS" shall mean all outstanding options, warrants and other rights to
acquire Common Stock.
"ORDINARY COURSE" shall mean, when used with reference to the Company, the
ordinary course of the Company's business consistent with past practices.
"PERMITTED LIENS" shall mean (a) Liens for ad valorem real or personal
property taxes or assessments not at the time due and (b) Liens in respect of
pledges or deposits under workers' compensation laws or similar legislation,
carriers', warehousemen's, mechanics', laborers' and materialmen's and similar
liens, if the obligations secured by such Liens are not then delinquent.
"PERSON" shall mean all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures, Governmental Entities and any other entities.
"PRE-CLOSING BALANCE SHEET" shall have the meaning assigned to such term
in Section 2.03(a) hereof.
4
"PURCHASE PRICE" shall have the meaning assigned to such term in Section
2.02(a) hereof.
"SECOND EARNOUT PERIOD" shall mean the period of time beginning on the
Closing Date and ending on the second anniversary of the Closing Date.
"SECTION 2.02 NOTE" shall have the meaning assigned to such term in
Section 2.02(a) of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDER" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"SHARES" shall have the meaning assigned to such term in Recital A hereof.
"SHAREHOLDER STOCK PURCHASE AGREEMENT" shall have the meaning assigned to
such term in Section 2.04 of this Agreement.
"STRUCTURE" shall mean any facility, building, plant, factory, office,
warehouse structure or other improvement owned or leased by the Company.
"SUBSIDIARY" of a Person shall mean any corporation, partnership,
association or other business entity at least 50% of the outstanding voting
power of which is at the time owned or controlled directly or indirectly by such
Person or by one or more of such subsidiary entities, or both.
"TAX" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, unemployment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including, without limitation, taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), employment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated tax or other tax, assessment or charge
of any kind whatsoever, including, without limitation, any interest, fine
penalty or addition thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim for refund
or information, or statement relating to Taxes, and any exhibit, schedule,
attachment or amendment thereto.
"THIRD EARNOUT PERIOD" shall mean the period of time beginning on the
Closing Date and ending on the third anniversary of the Closing Date.
ARTICLE II.
PURCHASE AND SALE OF SHARES
SECTION 2.01. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions set forth herein, the Shareholder agrees to sell and deliver the
Shares to Buyer, and Buyer agrees to purchase and accept the Shares from the
Shareholder free and clear of all Liens, for the Purchase Price described in
Section 2.02 hereof.
5
SECTION 2.02. PURCHASE PRICE.
(a) Buyer shall pay an aggregate purchase price (the "PURCHASE PRICE") for
the Shares equal to the sum of:
(i) Eight Hundred Seventy-five Thousand Dollars ($875,000) in cash
(the "CASH PAYMENT") payable as follows: (A) Seven Hundred and Fifty Thousand
Dollars ($750,000) payable at the Closing, and (B) One Hundred and Twenty Five
Thousand Dollars ($125,000) payable no later than January 31, 2002, the
obligation for which shall be evidenced at Closing by an unsecured promissory
note, in substantially the form attached hereto as Exhibit A-1, which note shall
be payable in full on January 30, 2002 in immediately available funds (the
"JANUARY 30 NOTE").
(ii) Buyer's unsecured Promissory Note, in substantially the form as
attached hereto as Exhibit A-2, in the amount of Six Hundred Twenty-five
Thousand Dollars ($625,000), bearing interest of five percent per annum from the
Closing Date to the first anniversary of the closing date and bearing interest
at six percent per annum thereafter and with annual payments amortized over
seven years and the note payable in full within five years (the "SECTION 2.02
NOTE"). The first payment on the Section 2.02 Note shall be made January 2,
2003.
(b) If Company enters into a currently contemplated agreement with ▇▇▇▇▇▇
del Rio hotel in Carmel, California within 120 days of the Closing Date
execution of the purchase, then Buyer shall pay, in one or more payments, an
amount up to $100,000 in a prepayment on the Section 2.02 Note, which prepayment
will be paid from any monies received by the Company from the ▇▇▇▇▇▇ del Rio
hotel as they are received by the Company, with no less than ten percent (10%)
of each payment received from the ▇▇▇▇▇▇ del Rio hotel used to fund said
prepayment.
(c) If the balance owing to Seller under Section 2.02(a) is paid in full
within the first six months following the Closing of the purchase, Buyer shall
be entitled to discount the Purchase Price by $75,000 so that the total Purchase
Price is reduced to $1,425,000.
(d) In the event that, prior to payment in full of its obligations owing
under the Section 2.02 Note, the stockholders or holders of equity of the Buyer
shall sell all or a majority the capital stock or assets of the Buyer or the
Buyer shall sell a majority of the Shares in the Company, AND either prior to or
simultaneous with such sale all obligations owed to the Former Stockholders
pursuant to Section 2.04. are paid, then all the remaining balance due under the
Section 2.02 Note, shall be paid to Shareholder as an advance payment of the
Section 2.02 Note.
SECTION 2.03. ADJUSTMENT FOR FUTURE PERFORMANCE. Buyer shall make the
following additional payments to Shareholder for the Shares, at the times and in
the amounts specified below (in the aggregate, the "EARNOUT PAYMENTS"):
(a) In the event the Company's EBIT during the First Earnout Period
exceeds Three Million Dollars ($3,000,000), then within seventy-five (75) days
following the end of said period, Buyer shall pay to Shareholder as additional
purchase price One Dollar ($1.00) for each One Dollar ($1) that Company's EBIT
during the first calendar year exceeds Three Million Dollars ($3,000,000) up to
a maximum of Two Hundred Fifty Thousand Dollars ($250,000).
6
Buyer shall not be obligated to pay any additional purchase price in the event
that Company's EBIT during said earnout period is less than Three Million
Dollars ($3,000,000).
(b) In the event the Company's EBIT during the Second Earnout Period
exceeds Three Million Dollars ($3,000,000), then seventy-five (75) days
following the end of said period, Buyer shall pay to Shareholder as additional
purchase price One Dollar ($1.00) for each One Dollar ($1.00) that Company's
EBIT during the Second Earnout Period exceeds Three Million Dollars ($3,000,000)
up to a maximum of Two Hundred Fifty Thousand Dollars ($250,000). Buyer shall
not be obligated to pay any additional purchase price in the event that
Company's EBIT during said earnout period is less than Three Million Dollars
($3,000,000).
(c) In the event the Company's EBIT during the Third Earnout Period
exceeds Three Million Dollars ($3,000,000), then seventy-five (75) days
following the end of said period, Buyer shall pay to Shareholder as additional
purchase price One Dollar ($1.00) for each One Dollar ($1.00) that Company's
EBIT during the Third Earnout Period exceeds Three Million Dollars ($3,000,000)
up to a maximum of Two Hundred Fifty Thousand Dollars ($250,000). Buyer shall
not be obligated to pay any additional purchase price in the event that
Company's EBIT during said earnout period is less than Three Million Dollars
($3,000,000).
(d) In the event that (i) Buyer satisfies its obligations to the Former
Shareholders pursuant to Section 2.04 in the amounts set forth in Schedule
2.03(d) attached hereto and (ii) Buyer receives or has the right to receive cash
proceeds or securities on account of its ownership interest in Company within
six years from the Closing Date, then Buyer shall pay to Shareholder as
additional purchase price fifteen percent (15%) of all cash proceeds or
securities received or receivable by the Management Group of Buyer.
SECTION 2.04. ASSUMPTION OF LIABILITIES. Buyer will assume the following
obligations of Interiors:
(a) The obligations of Interiors to the Former Shareholders under Section
2.02(a)(iv), (v), (vi) and (vii) and Section 2.04 of the Stock Purchase
Agreement between Interiors and the Former Shareholders dated October 27, 1999,
as amended on December 15, 1999, October 12, 2000, and February 28, 2001, (the
"Shareholder Stock Purchase Agreement") and will obtain a release in favor of
Interiors of all obligations to Former Shareholders under Shareholder Stock
Purchase Agreement.
(b) The obligations of Interiors to the Former Shareholders under the
Employment Agreements entered into between the Former Shareholders and Company
concurrently with the Shareholder Stock Purchase Agreement.
(c) The obligations of Interiors to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇ under the Employment Agreements entered into between them and
Company concurrently with the Shareholder Stock Purchase Agreement.
SECTION 2.05. CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 9.01 hereof, the closing of the purchase and sale of the
Shares contemplated hereby (the "CLOSING") shall take place at the Law Office of
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Eighth Floor, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, at 10:00 A.M. local time on or prior to January 18, 2002,
7
as promptly as practicable upon satisfaction of the conditions appearing in
Article VI hereof or at such other time and place as Buyer and Shareholder may
mutually establish (such time and date being referred to herein as the "CLOSING
DATE").
SECTION 2.06. ACTIONS PRIOR TO AND AT THE CLOSING.
(a) At the Closing the Company and Shareholder shall deliver or cause to
be delivered to Buyer:
(i) a certificate or certificates representing the Shares registered
in the name of the Buyer; and
(ii) all of the documents, certificates and instruments required to
be delivered to Buyer pursuant to Section 6.01.
(b) At the Closing Buyer shall deliver or cause to be delivered to
Shareholder:
(i) Seven Hundred and Fifty Thousand Dollars ($750,000) of the Cash
Payment (as required by Section 2.02(a)(i) hereof), the January 30 Note (as
required by Section 2.02(a)(i) hereof), and the Section 2.02 Note (as required
by Section 2.02(a)(ii) hereof); and
(ii) all of the documents, certificates and instruments required to
be delivered to Shareholder pursuant to Section 6.02.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Shareholder and Interiors each hereby represent and warrant to and
covenant and agree with Buyer that:
SECTION 3.01. ORGANIZATION AND GOOD STANDING; AUTHORIZATION.
(a) The Company has been duly organized and is existing as a corporation
in good standing under the laws of the State of California with full power and
authority (corporate and other) to own and lease its properties and to conduct
its business as currently conducted. The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction set forth on Schedule 3.01(a), such
jurisdictions comprising all jurisdictions in which the Company owns or leases
any property, or conducts any business, so as to require such qualification.
(b) The Company has no Subsidiaries nor owns or controls, or has any other
equity investment or other interest in, directly or indirectly, any corporation,
joint venture, partnership, association or other Person.
SECTION 3.02. NO CONFLICTS. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby
8
will not (a) conflict with or result in a breach or violation of any term or
provision of, or constitute a default under (with or without notice or passage
of time, or both), or otherwise give any Person a basis for accelerated or
increased rights or termination or nonperformance under, any indenture,
mortgage, deed of trust, loan or credit agreement, lease, license or other
agreement or instrument to which the Company is a party or by which the Company
is bound or affected or to which any of the property or assets of the Company is
bound or affected including, without limitation, all arrangements in Section
3.17 hereof, (b) result in the violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any Legal Requirement applicable to or
binding upon it, (c) result in the creation or imposition of any Lien upon any
property or asset of the Company or (d) otherwise adversely affect the
contractual or other legal rights or privileges of the Company. Schedule 3.02
sets forth a list of all agreements requiring the consent of any party thereto
to any of the transactions contemplated hereby.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company
consists solely of 10,000 shares of Common Stock, of which 100 are, and on the
Closing Date will be, issued and outstanding. Schedule 3.03 sets forth a
complete and accurate list of the holders of shares of Common Stock, indicating
the number of Shares held by each holder and their respective addresses. All of
the issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. Other than
as set forth on Schedule 3.03, (i) there are no existing Options, warrants,
right, calls or commitments of any character relating to shares of Common Stock,
(ii) there are no outstanding securities or other instruments convertible into
or exchangeable for shares of Common Stock and no commitments to issue such
securities or instruments and (iii) no Person has any right of first refusal,
preemptive right, subscription right or similar right with respect to any shares
of Common Stock. The offer, issuance and sale of the Shares were (i) exempt from
the registration and prospectus delivery requirements of the Securities Act,
(ii) registered or qualified (or exempt from registration or qualification)
under the registration or qualification requirements of all applicable state
securities laws and (iii) accomplished in conformity with all other Legal
Requirements.
SECTION 3.04. FINANCIAL STATEMENTS; COMPLETION SCHEDULE.
(a) Schedule 3.04(a) contains true and complete copies of the unaudited
balance sheet of the Company (the "JUNE BALANCE SHEET") at June 30, 2001 (the
"BALANCE SHEET DATE") and the related unaudited statements of income,
Shareholder' equity and cash flows for the six-month period ended on the Balance
Sheet Date, and the Pre-Closing Balance Sheet at the Pre-Closing Date and the
related unaudited statements of income, Shareholder' equity and cash flows for
the six-month period ended on the Pre-Closing Date (such unaudited financial
statements are collectively referred to as the "FINANCIAL STATEMENTS").
(b) The Financial Statements present fairly the financial condition of the
Company as of the dates indicated therein and the results of operations and
changes in financial position of the Company for the periods specified therein,
have been prepared in conformity with GAAP during the periods covered thereby
and prior periods (except that the Balance Sheet, the Pre-Closing Balance Sheet
and the related unaudited statements of income, Shareholder' equity and cash
flows for the periods ended on the Balance Sheet Date and on the Pre-Closing
Date, respectively, do not contain footnotes and are subject to year end
adjustments which would not,
9
either individually or in the aggregate, be material), have been derived from
the accounting records of the Company and represent only actual, bona fide
transactions. The Financial Statements are true and correct in all material
respects.
(c) Other than as set forth in Balance Sheet or disclosed in this
Agreement and attached schedules, there are no liabilities of the Company other
than in the Ordinary Course of business.
SECTION 3.05. TITLE TO PROPERTY; ENCUMBRANCES.
(a) The Company does not own any real property or any Structures.
(b) The Company has, and immediately prior to the Closing will have, good,
valid and marketable title in fee simple to all personal property reflected on
the Balance Sheet as owned by the Company and all personal property acquired by
the Company since the Balance Sheet Date, in each case free and clear of all
Liens except Permitted Liens.
(c) Company has not leased any material real or personal property that is
not known to the management of Company.
SECTION 3.06. INVENTORY. The value at which inventories are carried on the
Balance Sheet reflects the normal inventory valuation policy of the Company, on
a basis consistent with that of preceding period, of stating inventory at its
lower of cost or market value, and, consistent therewith, all non-current or
obsolete inventory held by the Company on the Balance Sheet Date has been valued
at its current market value on the Balance Sheet.
SECTION 3.07. COMPLIANCE WITH LAW. Except where it has not had a Material
Adverse Effect, through and including the Closing Date, the Company (i) has not
violated, has not conducted its business or operations in violation of, and has
not used or occupied its properties or assets in violation of, any Legal
Requirement, (ii) has not been alleged to be in violation of any Legal
Requirement, and (iii) has not received any notice of any alleged violation of,
nor any citation for noncompliance with, any Legal Requirement.
SECTION 3.08. INSURANCE. Except as set forth in Schedule 3.08, neither the
Shareholder nor Interiors has modified, terminated or allowed to lapse any of
Company's insurance policies or any of Shareholder's or Interiors' insurance
policies covering Company since the date of Shareholder Stock Purchase
Agreement.
SECTION 3.09. INDEBTEDNESS. Except as set forth in Schedule 3.09 or on
Balance Sheet, no liability or obligation for Indebtedness. and documents
evidencing, creating, securing or otherwise relating to such Indebtedness have
been delivered to Buyer heretofore. Except as described in Schedule 3.09, no
event has occurred and no condition has become known to Shareholder or Interiors
(including the transactions contemplated hereby) that constitutes or, with
notice or passage of time, or both, would constitute a default or a basis of
FORCE MAJEURE or other claim of accelerated or increased rights, termination,
excusable delay or nonperformance by the Company or any other Person under any
instrument or document relating to or evidencing Indebtedness that would entitle
any Person to require the Company to pay any portion of the principal amount of
such Indebtedness prior to the scheduled maturity thereof. Except as set
10
forth in Schedule 3.09, no instrument or document evidencing, creating, securing
or otherwise relating to Indebtedness will require the consent of any Person to
or as a result of the consummation of the transactions contemplated by this
Agreement.
SECTION 3.10 JUDGMENTS; LITIGATION. Except as set forth on Schedule 3.10:
(a) There is no (i) outstanding judgment, order, decree, award,
stipulation, injunction of any Governmental Entity or arbitrator against or
affecting the Company or its properties, assets or business or (ii) Action
pending against or affecting the Company or its properties, assets or business.
(b) There is no (i) outstanding judgment, order, decree, award,
stipulation, injunction of any Governmental Entity or arbitrator against or
affecting any officer, director or employee of the Company relating to the
Company or its business, (ii) Action threatened against the Company or its
properties, assets or business, (iii) Action pending or threatened against the
Company's officers, directors or employees relating to the Company or its
business or (iv) basis for the institution of any Action against the Company or
any of its officers, directors, employees, properties or assets which, if
decided adversely, would have a Material Adverse Effect.
SECTION 3.11. INCOME AND OTHER TAXES. Except as set forth on Schedule
3.11, for the period from December 15, 1999 through the date of Closing:
(a) All Tax Returns required to be filed through and including the date
hereof in connection with the operations of the Company are true, complete and
correct in all respects and have been properly and timely filed. The Company has
not requested any extension of time within which to file any Tax Return, which
Tax Return has not since been filed. Buyer has heretofore been furnished by the
Company with true, correct and complete copies of each Tax Return of the Company
with respect to the past two (2) taxable years, and of all reports of, and
communications from, any Governmental Entities relating to such period. (b) All
Taxes required to be paid or withheld and deposited through and including the
date hereof in connection with the operations of the Company have been duly and
timely paid or deposited by the Company. The Company has properly withheld or
collected all amounts required by law for income Taxes and employment Taxes
relating to its employees, creditors, independent contractors and other third
parties, and for Taxes on sales, and has properly and timely remitted such
withheld or collected amounts to the appropriate Governmental Entity. The
Company has no liabilities for any Taxes for any taxable period ending prior to
or coincident with the Closing Date.
(c) The Company has made adequate provision on its books of account for
all Taxes with respect to its business, properties and operations through the
Balance Sheet Date, and the accruals for Taxes in the Balance Sheet are adequate
to cover all liabilities for Taxes of the Company for all periods ending on or
before the Closing Date.
(d) The Company has not heretofore (i) had a tax deficiency proposed,
asserted or assessed against it, (ii) executed any waiver of any statute of
limitations on the assessment or collection of any Taxes, or (iii) been
delinquent in the payment of any Taxes.
11
(e) No Tax Return of the Company has been audited or the subject of other
Action by any Governmental Entity. The Company has not received any notice from
any Governmental Entity of any pending examination or any proposed deficiency,
addition, assessment, demand for payment or adjustment relating to or affecting
the Company or its assets or properties and the Shareholder and Interiors have
no reason to believe that any Governmental Entity may assess (or threaten to
assess) any Taxes for any periods ending on or prior to the Closing Date.
(f) The Company (i) has not filed any consent or agreement pursuant to
Code Section 341(f), and no such consent or agreement will be filed at any time
on or before the Closing Date; (ii) has not made any payments, is not obligated
to make any payments and is not a party to any agreement that under certain
circumstances could obligate the Company to make any payments that will not be
deductible under Code Section 280G; (iii) is not a United States real property
holding corporation within the meaning of Code Section 897(c)(2); (iv) is not a
party to a tax allocation or sharing agreement; (v) has never been (or does not
have any liability for unpaid Taxes because it was) a member of an affiliated
group with the meaning of Code Section 1504(a); (vi) has never applied for a tax
ruling from a Governmental Entity; and (vii) has never filed or been the subject
of an election under Code Section 338(g) or Code Section 338(h)(10) or caused or
been the subject of a deemed election under Code Section 338(e).
(g) Set forth on Schedule 3.11(g) is the amount, as of the most recent
practicable date, of any net operating loss, net capital loss, unused investment
or other credit, unused foreign tax or excess charitable contribution. The net
operating losses incurred by Company after June 30, 2001 have not been used or
impaired.
SECTION 3.12. CORPORATE RECORDS. The copies or originals of the Articles
of Incorporation, Bylaws, minute books and stock records of the Company
previously delivered to, or made available for inspection by, Buyer are true,
complete and correct.
SECTION 3.13. EMPLOYEE BENEFIT MATTERS. Except as set forth in Schedule
3.13, the Company maintains no pension, retirement, profit-sharing, employee
stock ownership plan, deferred compensation, stock bonus or other similar plan;
medical, vision, dental or other health plan; life insurance plan; vacation,
severance, golden parachute or other similar plan or arrangement; stock option,
stock appreciation or other similar plan or arrangement; and any other employee
benefit plan, including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of ERISA, which, in any case, relates to the Company.
SECTION 3.14. NO UNDISCLOSED LIABILITIES. Except (i) to the extent set
forth or provided for in the Financial Statements or the notes thereto, (ii) as
set forth on Schedule 3.14 or (iii) for non-material current liabilities
incurred since the Balance Sheet Date in the Ordinary Course, as of the date
hereof the Company has no liabilities, whether accrued, absolute, contingent or
otherwise, whether due or to become due and whether the amounts thereof are
readily ascertainable or not, or any unrealized or anticipated losses from any
commitments of a contractual nature, including Taxes with respect to or based
upon the transactions or events occurring at or prior to the Closing.
12
SECTION 3.15. REGULATORY FILINGS. The Company has made all required
registrations and filings with and submissions to all applicable Governmental
Entities relating to the operations of the Company as currently conducted and as
proposed to be conducted, including, without limitation, all such applicable
Governmental Entities having jurisdiction over any matters pertaining to
conservation or protection of the environment, and the treatment, discharge,
use, handling, storage or production, or disposal of Hazardous Materials. All
such registrations, filings and submissions were in compliance with all Legal
Requirements (including all Environmental Laws) and other requirements when
filed, no material deficiencies have been asserted by any such applicable
Governmental Entities with respect to such registrations, filings or submissions
and no facts or circumstances exist which would indicate that a material
deficiency may be asserted by any such authority with respect to any such
registration, filing or submission.
SECTION 3.16. CONSENTS. All consents, authorizations and approvals of any
Person to, or as a result of the consummation of, the transactions contemplated
hereby that are necessary or advisable in connection with the operations and
business of the Company as currently conducted and as proposed to be conducted,
or for which the failure to obtain the same might have, individually or in the
aggregate, a Material Adverse Effect, have been lawfully and validly obtained by
the Company, except as described in Schedules 3.02, 3.05(d) and 3.09(a) hereto.
All consents, authorizations and approvals described in Schedules 3.02, 3.05(d)
and 3.09(a) will have been lawfully and validly obtained prior to the Closing.
SECTION 3.17. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date,
except as disclosed in Schedule 3.17, neither the Shareholder nor Interiors has
caused the Company to engage in any transaction
SECTION 3.18. AFFILIATIONS. Except as disclosed on Schedule 3.18, no
Shareholder, officer, director or key employee of the Company or any associate
or Affiliate of the Company or any of such Persons has, directly or indirectly,
(i) an interest in any Person that (A) furnishes or sells, or proposes to
furnish or sell, services or products that are furnished or sold by the Company
or (B) purchases from or sells or furnishes to, or proposes to purchase from or
sell or furnish to, the Company any goods or services or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which the Company or any of the assets of the Company are bound or affected.
SECTION 3.19. BROKERS' FEES. Shareholder has retained broker DN Partners
LLC ("BROKER") in connection with the sale of its interest in the Company.
Shareholder is responsible for payment of any finder's fees or any similar
compensation due to Broker in connection with this Agreement or the transactions
contemplated hereby.
SECTION 3.20. DISCLOSURE. Except as set forth on Schedule 3.20, no
representation or warranty of the Shareholder or Interiors in this Agreement and
no information contained in any Schedule or other writing delivered by the
Shareholder or Interiors pursuant to this Agreement or at the Closing contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to make the statements herein or therein not
misleading. There is no fact that the Shareholder or Interiors has not disclosed
to Buyer in writing that has
13
had or, insofar as the Shareholder or Interiors can now foresee, may have a
material adverse effect on the ability of the Shareholder to perform fully this
Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to, and covenants and agrees with,
the Shareholder that:
SECTION 4.01 ORGANIZATION, POWER AND AUTHORITY OF BUYER. Buyer has been
duly organized and is existing as a limited liability company in good standing
under the laws of the State of California with full power and authority to
conduct its business as currently conducted.
SECTION 4.02 AUTHORIZATION. Buyer has the power and authority to execute
and deliver this Agreement, to consummate the transactions contemplated hereby
and to perform its obligations under this Agreement. The execution and delivery
by Buyer of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary action by Buyer.
This Agreement, upon its execution and delivery by Buyer (assuming the due
authorization, execution and delivery hereof by the other parties hereto), will
constitute the legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency and similar laws relating to creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 4.03 NO CONFLICT OR VIOLATION. Subject to compliance with the
applicable requirements of the Securities Act and any applicable state
securities laws, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not (a) conflict
with or result in a breach or violation of any term or provision of, or
constitute a default under (with or without notice or passage of time, or both),
or otherwise give any Person a basis for accelerated or increased rights or
termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument to
which Buyer is a party or by which Buyer is bound or affected or to which any of
the property or assets of Buyer is bound or affected, (b) result in the
violation of the provisions of the Operating Agreement of Buyer or any Legal
Requirement applicable to or binding upon it, (c) result in the creation or
imposition of any Lien upon any property or asset of Buyer or (d) otherwise
adversely affect the contractual or other legal rights or privileges of Buyer.
Schedule 4.03 sets forth a list of all agreements to which Buyer is a party
requiring the consent of any party thereto to any of the transactions
contemplated hereby.
SECTION 4.04 CONSENTS AND APPROVALS. No consent, approval, authorization,
license, permit or other action by, or filing with, any governmental or
regulatory authority is required in connection with the execution and delivery
of this Agreement by Buyer or the consummation by Buyer of the transactions
contemplated hereby, except for such consents, approvals, authorizations,
licenses, permits, actions or filings as will have been obtained, taken or filed
at or prior to the Closing.
SECTION 4.05 BROKERS' FEES. No broker, finder or similar agent has been
employed by or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and Buyer has not entered into any agreement
or understanding of any kind with any person or entity for the payment of any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
14
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER
Shareholder hereby represents and warrants to, and covenants and agrees
with, Buyer that:
SECTION 5.01. OWNERSHIP OF SHARES. Shareholder owns of record and
beneficially 100 Shares, and has, and at all times prior to and as of the
Closing will have, good and marketable title to such Shares free and clear of
all Liens. SECTION 5.02. DELIVERY OF GOOD TITLE. All consents, approvals,
authorizations and orders necessary for the sale and delivery of the Shares to
be sold hereunder have been obtained, and Shareholder has, and immediately prior
to the Closing will have, full right, power, authority and capacity to sell,
assign, transfer and deliver such Shares pursuant to this Agreement.
SECTION 5.03. EXECUTION AND DELIVERY. Shareholder has the power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations under this Agreement. This
Agreement, upon its execution and delivery by Shareholder (assuming the due
authorization, execution and delivery hereof by the other parties hereto), will
constitute the legal, valid and binding obligation of Shareholder, enforceable
against Shareholder in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency and similar laws relating to
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.04. NO CONFLICTS. The execution, delivery and performance of
this Agreement by Shareholder and the consummation by Shareholder of the
transactions contemplated hereby will not (a) conflict with or result in a
breach or violation of any term or provision of, or constitute a default (with
or without notice or passage of time, or both) under, or otherwise give any
Person a basis for accelerated or increased rights or termination or
nonperformance under any indenture, mortgage, deed of trust, trust (constructive
and other), loan or credit agreement or other agreement or instrument to which
Shareholder is a party or by which Shareholder or Shareholder's Shares are
bound, (b) result in the violation of any Legal Requirement applicable to or
binding upon Shareholder, (c) result in the creation or imposition of any Lien
upon any property or asset of Shareholder, or (d) otherwise adversely affect the
contractual or other legal rights or privileges of Shareholder.
15
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF SALE OF SHARES
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF BUYER. Notwithstanding any
other provision of this Agreement, the obligations of Buyer to consummate the
Agreement and the other transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) There shall not be instituted and pending or threatened any Action (i)
challenging the Agreement or otherwise seeking to restrain or prohibit the
consummation of the transactions contemplated hereby, or (ii) seeking to
prohibit the direct or indirect ownership or operation by Buyer of all or a
material portion of the business or assets of the Company, or to compel Buyer or
the Company to dispose of or hold separate all or a material portion of the
business or assets of the Company or Buyer.
(b) The representations and warranties of Shareholder and Interiors in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date, and the
Shareholder and Interiors shall have complied with all covenants and agreements
and satisfied all conditions on the Company's or its part, as applicable, to be
performed or satisfied on or prior to the Closing Date.
(c) Buyer shall have received from Shareholder a certificate dated the
Closing Date in substantially the form attached as ANNEX A hereto.
(d) All authorizations, consents, waivers and approvals by or from third
parties required for the consummation of the transactions contemplated hereby
shall have been obtained and all Liens on the assets and properties of the
Company shall have been released or terminated.
(e) No act, event or condition shall have occurred after the date hereof
which Buyer determines has had or could reasonably be expected to have a
Material Adverse Effect.
(f) Buyer shall have concluded (through its representatives, agents,
accountants, legal counsel and other experts) satisfactorily an investigation,
including without limitation a legal and financial review, of the Company and
shall be satisfied in its sole discretion with the results thereof.
(g) All corporate and other proceedings and actions taken in connection
with the transactions contemplated hereby and all certificates, opinions,
agreements, instruments, releases and documents referenced herein or incident to
the transactions contemplated hereby shall be in form and substance reasonably
satisfactory to Buyer and its counsel.
(h) Except as otherwise approved by the Buyer, the assets of Company shall
be free and clear of all liens.
(i) Company shall have received from Shareholder, Interiors and/or its
Affiliates the originals of all outstanding Promissory Notes issued by Company
or by its officers
16
to Shareholder or to an affiliate of Shareholder marked "cancelled" and Company
shall have agreed to pay all tax obligations owing on account of said
cancellation.
(j) Shareholder shall have established to the satisfaction of Buyer that
the federal income tax obligations of Company for the tax years ending June 30,
2000 and June 30, 2001 have been paid in full.
(k) Shareholder shall deliver to Buyer the resignations of all of the
directors of Company effective on the Closing Date.
(l) Buyer shall have received confirmation that Broker has been paid all
monies owing to it on account of this Agreement.
(m) The Former Stockholders shall have received a full and unconditional
general release from the Shareholder and Interiors.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDER.
Notwithstanding any other provision of this Agreement, the obligations of the
Shareholder to consummate the Agreement and the other transactions contemplated
hereby shall be subject to the satisfaction, at or prior to the Closing Date, of
the following conditions:
(a) The representations and warranties of Buyer in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date, and Buyer shall have complied with
all covenants and agreements and satisfied all conditions on its part to be
performed or satisfied on or prior to the Closing Date.
(b) The Shareholder shall have received a certificate of the Secretary of
Buyer dated the Closing Date in substantially the form attached as ANNEX C
hereto.
(c) The Shareholder shall have received a certificate of the President of
Buyer in substantially the form attached as ANNEX D hereto.
(d) No act, event or condition shall have occurred after the date hereof
which Shareholder determines has had or could reasonably be expected to have a
material adverse effect on the business, financial condition, properties,
profitability, prospects or operations of Buyer.
(e) All proceedings and actions taken in connection with the transactions
contemplated hereby and all certificates, opinions, agreements, instruments,
releases and documents referenced herein or incident to the transactions
contemplated hereby shall be in form and substance reasonably satisfactory to
Shareholder and its counsel.
(f) The Former Shareholders shall have agreed to the assumption by Buyer
of Interiors' remaining obligations for payment of the purchase price under the
Stock Purchase Agreement dated October 27, 1999, by and between Interiors and
the Former Shareholders.
17
(g) Shareholder shall receive from the Former Shareholders written
instructions to the Escrow Holder under the Shareholder Stock Purchase Agreement
to return to Interiors all of the stock certificates of Interiors held by said
Escrow Holder.
(h) Shareholder shall have received from Company the original of all
outstanding promissory notes payable to Company from Shareholder marked
cancelled.
(i) Interiors shall have received from the Former Shareholders and from
Buyer the originals of all outstanding Promissory Notes issued by Interiors to
the Former Shareholders or to Buyer pursuant to the Shareholder Stock Purchase
Agreement marked cancelled.
(j) The Shareholder and Interiors shall have received a full and
unconditional general release from the Former Shareholders.
ARTICLE VII.
ADDITIONAL COVENANTS
SECTION 7.01. EXPENSES. Except as otherwise specifically provided herein,
each party to this Agreement shall bear its own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby,
including, without limitation, all legal fees and fees of any brokers, finders
or similar agents.
SECTION 7.02. PUBLICITY; EMPLOYEE COMMUNICATIONS. At all times prior to
the Closing Date, Shareholder shall obtain the written consent of Buyer prior to
issuing, or permitting any of the directors, officers, employees or agents of
the Company to issue, any press release or other information to the press,
employees of the Company or any third party with respect to this Agreement or
the transactions contemplated hereby; PROVIDED, HOWEVER, that no party shall be
prohibited from supplying any information to any of is representatives, agents,
attorneys, advisors, financing sources and others to the extent necessary to
complete the transactions contemplated hereby so long as such representatives,
agents, attorneys, advisors, financing sources and others are made aware of and
agree to be bound by the terms of this Section 7.02. Nothing contained in this
Agreement shall prevent any party to this Agreement at any time from furnishing
any required information to any Governmental Entity or authority pursuant to a
Legal Requirement or from complying with its legal or contractual obligations.
SECTION 7.03. POST-TERMINATION EMPLOYMENT. Shareholder and Interiors
acknowledge and agree that, subject to any written contracts of employment, if
any, after the Closing (a) Buyer shall not be required to employ or retain any
employee of the Company or any other Person, and (b) Buyer, in its sole and
absolute discretion, may cause the Company to retain all, some, or none of such
employees.
18
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual consent of all of the parties hereto;
(b) by Shareholder, on the one hand, or by Buyer, on the other hand, by
written notice to the other party or parties hereto if the Agreement shall not
have been consummated on or before January 31, 2002 (or such later date as Buyer
and Shareholder may agree), provided that in the case of a termination under
this clause (b), the party or parties terminating this Agreement shall not then
be in material breach of any of its or their obligations under this Agreement;
(c) by Buyer if (i) there has been a material misrepresentation, breach of
warranty or breach of covenant by Shareholder and/or Interiors under this
Agreement or (ii) any of the conditions precedent to Closing set forth in
Section 6.01 have not been met on the Closing Date, and, in each case, Buyer is
not then in material default of its obligations hereunder; or
(d) by Shareholder if (i) there has been a material misrepresentation,
breach of warranty or breach of covenant by Buyer under this Agreement or (ii)
any of the conditions precedent to Closing set forth in Section 6.02 have not
been met on the Closing Date, and, in each case, Shareholder is not then in
material default of its obligations hereunder.
SECTION 8.02. EFFECT OF TERMINATION.
(a) Upon termination of this Agreement as provided in Section 8.01(a),
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto or their respective directors,
officers, employees, agents or other representatives.
(b) In the event of termination of this Agreement as provided in Section
8.01(b), hereof, such termination shall be without prejudice to any rights that
the terminating party or parties may have against the breaching party or parties
or any other Person under the terms of this Agreement or otherwise.
SECTION 8.03. AMENDMENT. This Agreement may be amended only by a written
instrument executed by each of the parties hereto. Any amendment effected
pursuant to this Section 8.03 shall be binding upon all parties hereto.
SECTION 8.04. WAIVER. Any term or provision of this Agreement may be
waived in writing at any time by the party or parties entitled to the benefits
thereof. Any waiver effected pursuant to this Section 8.04 shall be binding upon
all parties hereto. No failure to exercise and no delay in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude the exercise of any
other right, power or privilege. No waiver of any breach of any covenant or
agreement hereunder shall be deemed a waiver of any preceding or subsequent
breach of the same or any other covenant or agreement. The rights and remedies
of each party under this Agreement are in addition to all other rights and
remedies, at law or in equity, that such party may have against the other
parties.
19
ARTICLE IX.
INDEMNIFICATION
SECTION 9.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
(a) The representations and warranties of the parties hereto contained in
this Agreement or in any writing delivered pursuant hereto or at the Closing
shall survive the execution and delivery of this Agreement and the Closing and
the consummation of the transactions contemplated hereby (and any examination or
investigation by or on behalf of any party hereto) until the June 30, 2003
(except for claims in respect thereof pending at such time, which shall survive
until finally resolved or settled).
(b) No Action may be commenced with respect to any representation,
warranty, covenant or agreement in this Agreement, or in any writing delivered
pursuant hereto, unless written notice, setting forth in reasonable detail the
claimed breach thereof, shall be delivered pursuant to Section 10.01 to the
party or parties against whom liability for the claimed breach is charged on or
before the termination of the survival period specified in Section 9.01(a) for
such representation, warranty, covenant or agreement.
SECTION 9.02. INDEMNIFICATION.
(a) Shareholder and Interiors each covenant and agree to defend, indemnify
and hold harmless Buyer and each Person who controls Buyer within the meaning of
the Securities Act, and after the Closing, the Company, from and against any
Damages aggregating in excess of $25,000 arising out of or resulting from: (i)
any inaccuracy in or breach of any representation or warranty made by
Shareholder or Interiors in this Agreement or in any writing delivered pursuant
to this Agreement or at the Closing; PROVIDED, HOWEVER, that neither the
Shareholder nor Interiors shall be liable to the Buyer for any breach of any
representation or warranty made by them in Article III hereof with regard to any
fact or circumstance which any of the Buyer, its officers, directors, employees,
agents, affiliates or representatives know of or have reason to know of as of
the Closing Date, or (ii) the failure of Shareholder or Interiors to perform or
observe fully any covenant, agreement or provision to be performed or observed
by Shareholder or Interiors pursuant to this Agreement. The Shareholder and
Interiors shall not be liable for any Damages to the extent that the aggregate
amount thereof which shall be incurred by the Buyer and each Person who controls
Buyer shall be $25,000 or less.
(b) Buyer covenants and agrees to defend, indemnify and hold harmless
Shareholder from and against any Damages arising out of or resulting from: (i)
any inaccuracy in or breach of any representation or warranty made by Buyer in
this Agreement or in any writing delivered pursuant to this Agreement or at the
Closing; or (ii) the failure by Buyer to perform or observe any covenant,
agreement or condition to be performed or observed by it pursuant to this
Agreement.
(c) The right to indemnification, payment of damages or other remedy based
on the representations, warranties and covenants, and obligations set forth
herein will not be affected by any investigation conducted, whether before or
after the Closing Date, or the parties' agreement as to any purchase price
adjustments pursuant hereto, with respect to the accuracy or inaccuracy of or
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compliance with, any such representation, warranty, covenant or obligation.
Notwithstanding anything in this Article IX to the contrary, each party hereto
shall retain all other rights and remedies to which it may be entitled under
applicable law.
SECTION 9.03. THIRD PARTY CLAIMS.
(a) If an Indemnified Party receives notice of the assertion by any third
party of any claim or of the commencement by any such third person of any Action
(any such claim or Action being referred to herein as an "INDEMNIFIABLE CLAIM")
with respect to which another party hereto (an "INDEMNIFYING PARTY") is or may
be obligated to provide indemnification, the Indemnified Party shall promptly
notify the Indemnifying Party in writing (the "CLAIM NOTICE") of the
Indemnifiable Claim; PROVIDED, HOWEVER, that the failure to provide such notice
shall not relieve or otherwise affect the obligation of the Indemnifying Party
to provide indemnification hereunder, except to the extent that the Indemnifying
Party was materially prejudiced by such failure.
(b) The Indemnifying Party shall have thirty (30) days after receipt of
the Claim Notice to undertake, conduct and control, through counsel of its own
choosing, and at its expense, the settlement or defense thereof, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith; PROVIDED, HOWEVER, that (i) the Indemnifying Party shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by the Indemnified Party (subject to the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld), provided that the fees
and expenses of such counsel shall not be borne by the Indemnifying Party, and
(ii) the Indemnifying Party shall not settle any Indemnifiable Claim without the
Indemnified Party's consent. So long as the Indemnifying Party is vigorously
contesting any such Indemnifiable Claim in good faith, the Indemnified Party
shall not pay or settle such claim without the Indemnifying Party's consent,
which consent shall not be unreasonably withheld.
(c) If the Indemnifying Party does not notify the Indemnified Party within
thirty (30) days after receipt of the Claim Notice that it elects to undertake
the defense of the Indemnifiable Claim described therein, the Indemnified Party
shall have the right to contest, settle or compromise the Indemnifiable Claim in
the exercise of its reasonable discretion; PROVIDED, HOWEVER, that the
Indemnified Party shall notify the Indemnifying Party of any compromise or
settlement of any such Indemnifiable Claim.
(d) Anything contained in this Section 9.03 to the contrary
notwithstanding, Shareholder shall not be entitled to assume the defense for any
Indemnifiable Claim (and shall be liable for the reasonable fees and expenses
incurred by the Indemnified Party in defending such claim) if the Indemnifiable
Claim seeks an order, injunction or other equitable relief or relief for other
than money damages against Buyer or the Company which Buyer determines, after
conferring with its counsel, cannot be separated from any related claim for
money damages and which, if successful, would adversely affect the business,
properties or prospects of Buyer or the Company; PROVIDED, HOWEVER, if such
equitable relief portion of the Indemnifiable Claim can be so separated from
that for money damages, Shareholder shall be entitled to assume the defense of
the portion relating to money damages.
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SECTION 9.04. INDEMNIFICATION NON-EXCLUSIVE. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable or common-law remedy any party may have for breach of representation,
warranty, covenant or agreement.
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.01. NOTICES. All notices and other communications under or in
connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally, upon delivery, (b) if delivered by registered or
certified mail (return receipt requested), upon the earlier of actual delivery
or three (3) days after being mailed, or (c) if given by facsimile, upon
confirmation of transmission by facsimile, in each case to the parties at the
following addresses:
(a) If to Buyer addressed to:
Homada, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: __________________
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Shareholder or Interiors, addressed to:
Interiors, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
MetLife Building
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 10.02. SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any circumstance shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such term or provision shall be
ineffective as to such jurisdiction to the extent of
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such invalidity or unenforceability without invalidating or rendering
unenforceable such term or provision in any other jurisdiction, the remaining
terms and provisions of this Agreement or the application of such terms and
provisions to circumstances other than those as to which it is held invalid or
enforceable.
SECTION 10.03. ENTIRE AGREEMENT. Except as specifically set forth herein,
this Agreement, including the annexes and schedules attached hereto and other
documents referred to herein, contain the entire understanding of the parties
hereto in respect of their subject matter and supersede all prior and
contemporaneous agreements and understandings, oral and written, among the
parties with respect to such subject matter.
SECTION 10.04. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their respective
successors, heirs and assigns; PROVIDED, HOWEVER, that no party may assign
either this Agreement or any of its rights, interests or obligations hereunder
in whole or in part without the prior written consent of the other parties
hereto, and any such transfer or assignment without said consent shall be void,
AB INITIO. Subject to the immediately preceding sentence, this Agreement is not
intended to benefit, and shall not run to the benefit of or be enforceable by,
any other person or entity other than the parties hereto and their permitted
successors and assigns.
SECTION 10.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same Agreement.
SECTION 10.06. SCHEDULES AND ANNEXES. The schedules and annexes to this
Agreement are incorporated herein and, by this reference, made a part hereof as
if fully set forth at length herein.
SECTION 10.07. CONSTRUCTION.
(a) The article, section and subsection headings used herein are inserted
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter gender,
and the singular or plural, shall be deemed to include the others whenever and
wherever the context so requires.
(c) For the purposes of this Agreement, unless the context clearly
requires, "or" is not exclusive.
SECTION 10.08. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of California.
SECTION 10.09. ARBITRATION OF DISPUTES.
(a) At the option of any party hereto, any and all disputes, whether of
law or fact and of any nature whatsoever, shall be decided by binding
arbitration in accordance with the
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Commercial Arbitration Rules of Association. If the parties are unable to agree
upon a single arbitrator, the arbitrator shall be a single, independent
arbitrator selected by the Association.
(b) Any arbitration proceedings hereunder shall be held in Los Angeles,
California.
(c) The decision of the arbitrator shall be final and binding upon all
parties hereto and all Persons claiming under and through them. The fees and
expenses of the arbitrator shall be paid 50% by Shareholder and 50% by Buyer.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
HABITAT SOLUTIONS, INC.
By:
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▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
INTERIORS, INC.
By:
-------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
HOMADA LLC
By:
-------------------------------
Name:
Title:
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