EXHIBIT 10.32
STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 31, 2002
AMONG
▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇,
AND
HOME INTERIORS & GIFTS, INC.
TABLE OF CONTENTS
Page No.
--------
ARTICLE I - PURCHASE OF SHARES....................................................................................1
SECTION 1.1 PURCHASE AND SALE OF SHARES..................................................................1
SECTION 1.2 NOTE.........................................................................................1
SECTION 1.3 DEFERRED PAYMENTS............................................................................1
SECTION 1.4 LIABILITIES..................................................................................2
SECTION 1.5 POST CLOSING ADJUSTMENT......................................................................2
ARTICLE II - CLOSING..............................................................................................3
SECTION 2.1 CLOSING......................................................................................3
SECTION 2.2 DELIVERY OF SHARES; PAYMENT..................................................................3
SECTION 2.3 CERTAIN EVENTS PRECEDING CLOSING AND OCCURRING AT THE TIME OF CLOSING..............................3
(a) Buell Agreement.......................................................................................3
(b) Resignations..........................................................................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES......................................................................3
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES........................................3
(a) Organization, Standing and Corporate Power of BBA.....................................................4
(b) Capital Structure of BBA..............................................................................4
(c) Authority; Noncontravention...........................................................................4
(d) Financial Statements..................................................................................5
(e) Undisclosed Liabilities...............................................................................5
(f) Absence of Certain Changes or Events with Respect to BBA..............................................5
(g) Litigation............................................................................................6
(h) Absence of Changes in Benefit Plans...................................................................6
(i) ERISA Compliance......................................................................................6
(j) Taxes.................................................................................................7
(k) Brokers...............................................................................................9
(l) Compliance with Laws; Environmental Laws.............................................................10
(m) Title to Properties; Liens...........................................................................10
(n) Leased Real Property.................................................................................10
(o) Accounts Receivable; Inventories.....................................................................10
(p) Employee Relations...................................................................................11
(q) Insurance............................................................................................11
(r) Customers and Suppliers..............................................................................12
(s) Leased Personal Property.............................................................................12
(t) Transactions with Related Parties....................................................................12
(u) Material Agreements..................................................................................12
(v) No Additional Representations........................................................................14
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF BUELL.....................................................14
(a) Authority of Buell...................................................................................14
(b) Title to Common Shares...............................................................................15
(c) Brokers..............................................................................................15
(d) No Additional Representations........................................................................15
SECTION 3.3 Representations and Warranties of HIG.......................................................15
(a) Organization, Standing and Corporation Power of HIG..................................................16
(b) Authority; Noncontravention..........................................................................16
(c) Litigation...........................................................................................16
(d) Brokers..............................................................................................16
-i-
(e) Investment Intent....................................................................................16
(f) Transfer Restrictions................................................................................16
(g) HIG Status...........................................................................................17
(h) No Additional Representations........................................................................17
ARTICLE IV - COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................................17
SECTION 4.1 CONDUCT OF BUSINESS BY THE SELLING PARTIES..................................................17
SECTION 4.2 SECTION 338(H)(10) ELECTION.................................................................18
SECTION 4.3 ALLOCATION OF PURCHASE PRICE................................................................19
SECTION 4.4 S CORPORATION ELECTION......................................................................19
SECTION 4.5 PREPARATION OF TAX RETURNS..................................................................19
SECTION 4.6 COOPERATION ON TAXES........................................................................19
SECTION 4.7 TAX SHARING AGREEMENTS......................................................................20
SECTION 4.8 OTHER ACTIONS...............................................................................20
ARTICLE V - ADDITIONAL AGREEMENTS................................................................................20
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY......................................................20
SECTION 5.2 REASONABLE EFFORTS; NOTIFICATION............................................................20
SECTION 5.3 FEES AND EXPENSES...........................................................................21
SECTION 5.4 PUBLIC ANNOUNCEMENTS........................................................................21
SECTION 5.5 BANK ACCOUNTS...............................................................................22
SECTION 5.6 RESTRICTIVE COVENANTS.......................................................................22
SECTION 5.7 BUELL EMPLOYMENT AND NON-COMPETITION AGREEMENT..............................................24
SECTION 5.8 CANCELLATION OF CERTAIN AGREEMENTS..........................................................24
SECTION 5.9 LIFE INSURANCE ON THE LIFE OF BUELL.........................................................24
ARTICLE VI - CONDITIONS PRECEDENT................................................................................25
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE CLOSING.................................25
(a) Authorizations, Consents, and Approvals..............................................................25
(b) No Injunctions or Restraints.........................................................................25
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF HIG............................................................25
(a) Representations and Warranties.......................................................................25
(b) Performance of Obligations of the Selling Parties....................................................25
(c) No Suit or Judgment..................................................................................25
(d) Opinion of Counsel...................................................................................26
(e) Consents.............................................................................................26
(f) BBA Records..........................................................................................26
(g) Material Adverse Change..............................................................................26
(h) Resignations.........................................................................................26
(i) Share Certificates...................................................................................26
(j) Lender Authorizations................................................................................26
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SELLING PARTIES............................................26
(a) Representations and Warranties.......................................................................27
(b) Performance of Obligations of HIG....................................................................27
(c) No Suit or Judgment..................................................................................27
(d) Opinion of Counsel...................................................................................27
(e) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇ de ▇▇ ▇▇▇▇...................................................27
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS...........................................................27
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER..................................................................27
SECTION 7.1 TERMINATION.................................................................................27
SECTION 7.2 EFFECT OF TERMINATION.......................................................................28
SECTION 7.3 AMENDMENT...................................................................................28
-ii-
SECTION 7.4 EXTENSION: WAIVER...........................................................................28
SECTION 7.5 PROCEDURE FOR TERMINATION...................................................................28
ARTICLE VIII - INDEMNIFICATION...................................................................................28
SECTION 8.1 INDEMNIFICATION.............................................................................28
(a) By the Selling Parties...............................................................................28
(b) By HIG...............................................................................................29
(c) Direct Liability.....................................................................................29
(d) Third Party Claim....................................................................................30
(e) Tax Claim............................................................................................31
(f) Limitation of Indemnity..............................................................................31
SECTION 8.2 RIGHT TO SET-OFF............................................................................31
SECTION 8.3 BUELL PAYS BROKER FEE.......................................................................31
ARTICLE IX - CONFIDENTIALITY.....................................................................................32
ARTICLE X - GENERAL PROVISIONS...................................................................................32
SECTION 10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS....................................32
SECTION 10.2 NOTICES..................................................................................32
SECTION 10.3 DEFINITIONS..............................................................................33
SECTION 10.4 INTERPRETATION...........................................................................35
SECTION 10.5 COUNTERPARTS; FACSIMILES.................................................................36
SECTION 10.6 ENTIRE AGREEMENT: NO THIRD PARTY BENEFICIARIES...........................................36
SECTION 10.7 GOVERNING LAW............................................................................36
SECTION 10.8 ASSIGNMENT...............................................................................36
SECTION 10.9 ENFORCEMENT..............................................................................36
SECTION 10.10 EXHIBITS AND SCHEDULES...................................................................37
SIGNATURE PAGE...................................................................................................38
-iii-
EXHIBITS
Exhibit A - Note
Exhibit B - Buell Agreement
Exhibit C- Opinion of Counsel for Buell
Exhibit D - Opinion of Counsel for HIG
SCHEDULES
Schedule 1.5 - Post-Closing Adjustment
Schedule 3.1(b) - Capital Structure of BBA
Schedule 3.1(c) - Authority; Noncontravention
Schedule 3.1(d) - Financial Statements
Schedule 3.1(f) - Absence of Certain Changes or Events with Respect to BBA
Schedule 3.1(g) - Litigation
Schedule 3.1(h) - Absence of Changes in Benefit Plans
Schedule 3.1(i) - ERISA Compliance
Schedule 3.1(j) - Taxes
Schedule 3.1(k) - Brokers
Schedule 3.1(m) - Title to Properties; Liens
Schedule 3.1(n) - Leased Real Property
Schedule 3.1(o) - Accounts Receivable; Inventories
Schedule 3.1(p) - Employee Relations
Schedule 3.1(q) - Insurance
Schedule 3.1(r) - Customers and Suppliers
Schedule 3.1(s) - Leased Personal Property
Schedule 3.1(t) - Transactions with Related Parties
Schedule 3.1(u) - Material Agreements
Schedule 3.2(b) - Title to Common Shares
Schedule 3.2(c) - Brokers
Schedule 3.3(d) - Brokers
Schedule 4.1(g) - Capital Expenditures
Schedule 4.3 - Allocation of Purchase Price
Schedule 5.8 - Cancellation of Certain Agreements
Schedule 6.2(e) - Consents
-iv-
STOCK PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT (this "Agreement") is made as of December
31, 2002, among ▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC., a
Texas corporation ("BBA"),
▇▇▇▇▇▇ ▇▇▇▇▇ ("Buell") and HOME INTERIORS & GIFTS, INC., a
Texas
corporation("HIG"). BBA and Buell are sometimes referred to as the "Selling
Parties." Other capitalized terms used in this Agreement are defined or
cross-referenced to the applicable definition in Section 10.3 of this Agreement.
ARTICLE I
PURCHASE OF SHARES
SECTION 1.1 Purchase and Sale of Shares. Upon the terms and subject to
the conditions set forth in this Agreement, HIG shall purchase from Buell, and
Buell shall sell to HIG, One Thousand (1,000) shares of the $1.00 par value
common stock (the "Common Stock") of BBA constituting one hundred percent (100%)
of the issued and outstanding shares of Common Stock (the "Acquired Stock"), in
consideration of the payment by HIG to Buell of the following amounts (the
"Purchase Price"):
(a) the sum of U.S. Two Hundred Thousand Dollars ($200,000.00)
in cash at Closing and the sum of U.S. Three Million Three Hundred
Thousand Dollars ($3,300,000.00) in cash on January 3, 2003
(collectively, the "Initial Payments");
(b) the sum of U.S. Two Million Twenty Five Thousand Twenty
Six and 15/00 Dollars ($2,025,026.15) in accordance with the Note (as
defined in Section 1.2); and
(c) the Deferred Payments (as defined in Section 1.3).
SECTION 1.2 Note. HIG shall deliver to Buell a Promissory Note in
substantially the form attached to this Agreement as Exhibit "A", which shall
provide for payment of $ 2,025,026.15, bearing interest at the rate of one and
84/100ths percent (1.84%) per annum, in equal annual installments of principal
and interest in the amount of $700,000.00, with the first and second
installments due on the first and second anniversaries of the Closing Date,
respectively, and all remaining unpaid interest and principal due and payable on
December 30, 2005.
SECTION 1.3 Deferred Payments. If the gross revenue from all outside
sales of HIG and its Affiliates, including BBA, to third party retailers ("HIG
Retail Sales") for the fiscal year ending December 31, 2003 is greater than U.S.
$12,000,000.00, HIG shall make a cash payment to Buell, within ninety (90) days
following the first anniversary of the Closing Date in the amount of Four
Hundred Ninety Thousand Nine Hundred Sixty Six and 22/100 Dollars ($490,966.22)
plus interest on that amount from the Closing Date to the date of payment at the
rate of one and 84/100ths percent (1.84%) per annum. If the gross revenue from
HIG Retail Sales for the fiscal year ending
STOCK PURCHASE AGREEMENT - PAGE 1
December 31, 2004 is greater than U.S. $24,000,000.00, HIG shall make a cash
payment to Buell, within ninety (90) days following the second anniversary of
the Closing Date in the amount of Four Hundred Eighty Two Thousand Ninety Five
and 66/100 Dollars ($482,095.66) plus interest on that amount from the Closing
Date to the date of payment at the rate of one and 84/100ths percent (1.84%) per
annum. If the gross revenue from HIG Retail Sales for the fiscal year ending
December 31, 2005 is greater than U.S. $30,000,000.00 HIG shall make a cash
payment to Buell, within ninety (90) days following December 30, 2005 in the
amount of Four Hundred Seventy Three Thousand Three Hundred Eighty Five and
37/100 Dollars ($473,385.37) plus interest on that amount from the Closing Date
to the date of payment at the rate of one and 84/100ths percent (1.84%) per
annum. The payments described in this Section 1.3 are referred to as the
"Deferred Payments." It is expressly agreed that the obligation of HIG to pay
the amounts set forth in this Section 1.3 is subject to Section 5.7 of this
Agreement.
SECTION 1.4 Liabilities. In connection with the purchase of the
Acquired Stock, HIG shall not assume, or be deemed to assume any debts,
obligations or liabilities of any nature of the Selling Parties whatsoever.
Except as set forth in Sections 1.5, 3.1(k), 5.8, 8.1, 8.2 and 8.3, BBA shall,
following Closing, continue to be liable for its debts, obligations and
liabilities existing at Closing, but Buell shall have no liability therefor.
SECTION 1.5 Post Closing Adjustment.
(a) As promptly as practicable following the Closing Date (but
in any event not later than thirty (30) days thereafter), Buell shall have
prepared and deliver to HIG a balance sheet of BBA as of the Closing Date (the
"Closing Balance Sheet"). The Closing Balance Sheet shall (i) be derived from
and be in accordance with the books and records of BBA; (ii) fairly present the
financial condition of BBA at the Closing Date in conformity with GAAP; (iii)
have been prepared in accordance with GAAP applied on a basis consistent with
prior periods except for the Exceptions to GAAP; and (iv) have been prepared in
the format of Schedule 1.5, including the adjustments in the second, third and
fourth columns thereof. The Closing Balance Sheet shall be prepared without
giving effect to the Section 338(h)(10) Election, as noted in Section 4.2.
(b) HIG shall deliver to Buell within thirty (30) days after
receiving the Closing Balance Sheet a statement describing any objections to the
Closing Balance Sheet. HIG and Buell shall use all reasonable efforts to resolve
any such objections, but if they do not reach a final resolution within twenty
(20) days after Buell has received HIG's statement of objections, HIG and Buell
shall submit the Closing Balance Sheet and HIG's statement of objections to an
independent certified public accountant satisfactory to each party, to resolve
any remaining objections and to deliver a revised Closing Balance Sheet within
thirty (30) days following such submission. The determination of such accounting
firm shall be conclusive and binding upon HIG and Buell, absent fraud or
manifest error. Except as set forth in the following sentence, Buell and HIG
shall share evenly the cost of services provided by such accounting firm. In the
event that the parties are not able to agree upon the selection of such
accounting firm, HIG shall be entitled to select such firm, provided that (i)
such firm shall not be a firm that provides accounting or consulting services to
HIG or its Affiliates, and (ii) HIG shall bear the entire cost of services
provided by such firm.
STOCK PURCHASE AGREEMENT - PAGE 2
(c) To the extent that the Total Liabilities less Total Assets
(the "Excess Liabilities") of BBA as set forth on the Closing Balance Sheet are
greater than $100,000.00, HIG shall be entitled to treat such amount as HIG's
Indemnifiable Losses (as defined in Section 8.1(a)) and Buell shall pay BBA an
amount in cash equal to such amount within thirty (30) days, without giving
effect to the Threshold Amount (as defined in Section 8.1(f)(i)).
ARTICLE II
CLOSING
SECTION 2.1 Closing. The closing of the purchase and sale of the
Acquired Stock (the "Closing") will take place on or before December 31, 2002
(the "Closing Date"), at the offices of ▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, unless another time, date
or place is agreed to in writing by the parties hereto.
SECTION 2.2 Delivery of Shares; Payment. At the Closing, Buell shall
deliver to HIG certificates representing the Acquired Stock, accompanied by duly
executed stock powers transferring the Acquired Stock to HIG. HIG shall deliver
to Buell Two Hundred Thousand and No/100 Dollars ($200,000.00) in cash at the
Closing and Three Million Three Hundred Thousand and No/100 Dollars
($3,300,000.00) on January 3, 2003; however, the Initial Payments shall be
reduced, if applicable, through a refund to HIG following Closing, in accordance
with Section 1.5. Buell may direct HIG to deliver a portion of the Purchase
Price to certain third parties for fees, expenses, costs or other obligations
arising out of or in connection with the transactions contemplated in this
Agreement.
SECTION 2.3 Certain Events Preceding Closing and Occurring at the Time
of Closing. The following events shall be deemed to occur prior to or on the
Closing Date in the chronological order set forth below:
(a) Buell Agreement. At Closing, the Buell Agreement shall be
executed by the parties thereto in accordance with Section 5.7.
(b) Resignations. Resignation letters from certain directors
and officers of BBA shall be tendered to BBA and HIG in accordance with
Section 6.2(h).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Selling Parties. As
an inducement to HIG to enter into this Agreement and to consummate the
transactions contemplated hereby, the Selling Parties hereby jointly and
severally represent and warrant to HIG that the following statements are true
and correct as of the date of this Agreement and will be true and correct with
equal force and effect as of the Closing Date.
STOCK PURCHASE AGREEMENT - PAGE 3
(a) Organization, Standing and Corporate Power of BBA. BBA is
a corporation, duly organized, validly existing and in good standing
under the laws of the State of
Texas and has the requisite corporate
power and authority to carry on its business as now being conducted.
BBA is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect.
(b) Capital Structure of BBA. The authorized capital stock of
BBA consists of 1,000,000 shares of Common Stock, $1.00 par value per
share, of which 1,000 shares are issued and outstanding. Schedule
3.1(b) sets forth (i) the names of all of the holders of Common Stock,
and (ii) the number of shares held by each holder. Except as set forth
in Schedule 3.1(b), there are no shares of capital stock or other
securities (whether or not such securities have voting rights) of BBA
issued or outstanding or any subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments of
any character or nature obligating BBA, Buell or any third party to
issue, transfer or sell, or cause the issuance, transfer or sale of,
any shares of capital stock or other securities (whether or not such
securities have voting rights) of BBA. Except as set forth in Schedule
3.1(b), there are no outstanding contractual obligations of any kind or
nature of BBA, Buell or any third party related to the purchase, sale,
issuance, repurchase, redemption, acquisition, transfer, disposition,
holding or voting of any shares of capital stock or other securities of
or the management or operation of BBA. Except as set forth in Schedule
3.1(b), and except for Buell's rights as a holder of the shares of
Common Stock, no person or entity has any right to participate in, or
receive any payment based on or relating to, the revenue, income, value
or net assets of BBA or any component or portion thereof, or any
increase or decrease in any of the foregoing. BBA does not own or
control, directly or indirectly, twenty five percent (25%) or more of
the equity or voting power of any corporation, partnership, limited
liability company or other entity.
(c) Authority; Noncontravention. BBA has the requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by BBA and the consummation by
BBA of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of BBA. This
Agreement has been duly executed and delivered by the Selling Parties
and constitutes a valid and binding obligation of the Selling Parties,
enforceable against the Selling Parties in accordance with its terms.
Except as set forth in Schedule 3.1(c), the execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of
this Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of any benefit under, or result in the
creation of any Liens upon, any of the properties or assets of BBA
under (i) the Articles of Incorporation or Bylaws of BBA, (ii) any loan
or
STOCK PURCHASE AGREEMENT - PAGE 4
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license
applicable to BBA or its properties or assets or any other Material
Agreement, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to BBA or its properties or
assets. Except as set forth in Schedule 3.1(c), no consent, approval,
order or authorization of, or registration, declaration or filing with,
any Governmental Entity, is required by or with respect to the Selling
Parties in connection with the execution and delivery of this Agreement
by the Selling Parties or the consummation by the Selling Parties of
the transactions contemplated by this Agreement.
(d) Financial Statements. Schedule 3.1(d) contains (i) the
reviewed balance sheets of BBA as of December 31, 2000 and 2001 and the
year-to-date reviewed balance sheets as of June 30, 2002, as reviewed
by (and together with the reports of his review) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, and
the related statements of operations and cash flows for the fiscal
years or periods then ended, including the footnotes thereto
(collectively, the "Financial Statements"), and (ii) the unreviewed
balance sheet of BBA as of November 30, 2002 and the related statement
of operations for the eleven-month period then ended (collectively, the
"Current Financial Statements"). With the exception of the Exceptions
to GAAP, such Financial Statements and Current Financial Statements
have been prepared in conformity with U.S. generally accepted
accounting principles ("GAAP") consistently applied, and present
fairly, in all material respects, the financial position of and results
of operations of BBA as of and for the periods then ended.
(e) Undisclosed Liabilities. Except (i) as disclosed,
reflected or reserved against in the Current Financial Statements, or
(ii) for liabilities and obligations incurred in the ordinary course of
business consistent with past practices since the date of the Current
Financial Statements, BBA does not have any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on the Financial Statements or Current
Financial Statements of BBA. No facts or circumstances exist whereby
any employee, officer, director or agent of BBA would be entitled to
make a claim for indemnification under the Articles of Incorporation or
Bylaws of BBA or under the applicable law of the State of
Texas.
(f) Absence of Certain Changes or Events with Respect to BBA.
Except as set forth in Schedule 3.1(f) hereto, since December 31, 2001,
BBA has conducted its business in the ordinary course, and there has
not been (i) any Material Adverse Change in or to BBA, (ii) any debt
incurred or assumed (other than accounts payable in the ordinary course
of business consistent with past practices), (iii) any redemption,
repurchase, split, combination or reclassification of any of the Common
Stock or any issuance or the authorization of any issuance of any other
securities of BBA, (iv) any granting by BBA to any employee of BBA of
any increase in compensation, except increases not in excess of five
percent (5%) for all employees in the aggregate in any calendar year,
made in the ordinary course of business consistent with prior practice,
or any granting by BBA to any employee of any severance or termination
pay, (v) any damage, destruction or loss, whether or not covered by
insurance, that has or could reasonably be expected to have a Material
Adverse Effect on BBA, (vi) any
STOCK PURCHASE AGREEMENT - PAGE 5
change in accounting methods, principles or practices by BBA,
materially affecting its assets, liabilities or business, except
insofar as any have been required by a change in GAAP and disclosed in
the Financial Statements or Current Financial Statements, (vii) any
acquisition of real property or undertaking or commitment to undertake
capital expenditures exceeding $50,000.00 in the aggregate, (viii) any
cancellation of any debts owed to or claims held by BBA, other than in
the ordinary course of business consistent with past practices, (ix)
any sale, lease, transfer or other disposition of, or mortgage, pledge
or creation of any encumbrance on any assets of BBA, except
transactions having an aggregate value of less than $25,000.00, made in
the ordinary course of business consistent with past practices, or (x)
any repayments by BBA of loans made by Buell to BBA.
(g) Litigation. Except as set forth in Schedule 3.1(g), there
is no suit, action or legal proceeding pending or, to the Knowledge of
the Selling Parties, threatened against or affecting BBA nor is there
any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against BBA.
(h) Absence of Changes in Benefit Plans. Except to the extent
necessary to qualify or remain qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code"), since January
1, 2000, there has not been any adoption or amendment of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of BBA
(collectively, "Benefit Plan"). Except as set forth in Schedule 3.1(h),
there exist no employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between BBA
and any current or former employee, officer or director of BBA.
(i) ERISA Compliance.
(i) Schedule 3.1(i) contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), and all other Benefit Plans
maintained, or contributed to, by BBA for the benefit of any
current or former employees, officers or directors of BBA. BBA
has delivered to HIG true, complete and correct copies of (x)
each Benefit Plan (or, in the case of any unwritten Benefit
Plans, descriptions thereof), (y) the most recent annual
report on Form 5500 filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was
required), and (z) each trust agreement and group annuity
contract relating to any Benefit Plan.
(ii) With respect to any Benefit Plan that is an
employee welfare benefit plan, except as set forth in Schedule
3.1(i), (x) no such Benefit Plan is unfunded or
STOCK PURCHASE AGREEMENT - PAGE 6
funded through a "welfare benefits fund," as such term is
defined in Section 419(e) of the Code, (y) with respect to
each such Benefit Plan that is a "group health plan," as such
term is defined in Section 5000(b)(1) of the Code, BBA has
complied in all material respects with the applicable
requirements of Section 4980B of the Code ("COBRA"), and (z)
each such Benefit Plan (including any such Benefit Plan
covering retirees or other former employees) may be amended or
terminated without material liability to BBA on or at any time
after the Closing. None of the Benefit Plans provides
post-employment health or other welfare benefits except to the
extent required by COBRA or except to the extent the
liabilities for such benefits are fully insured, fully funded
or entirely paid for by the participant.
(iii) BBA does not have any funding liability under
each Benefit Plan that is not subject to Title IV of ERISA,
whether insured or otherwise, and specifically any liabilities
under any retiree medical arrangement and specifically any
insured plan which provides for retroactive premium or other
adjustments. With respect to each Benefit Plan, all
contributions which are due have been paid, and all
contributions for the period ending on the Closing Date which
are not due have been fully accrued. No Benefit Plan is
subject to Title IV of ERISA or Section 412 of the Code.
(iv) Other than claims for benefits arising in the
ordinary course of the administration and operation of the
Benefit Plans, no claims, investigations or arbitrations are
pending or, to the Knowledge of the Selling Parties,
threatened against any Benefit Plan, BBA, any trust or
arrangement created under or as part of any Benefit Plan, any
trustee, fiduciary, custodian, administrator or other person
or entity holding or controlling assets of any Benefit Plan,
and no basis to anticipate any such claim or claims exists.
Each Benefit Plan complies in form and operation, in all
material respects, with the applicable requirements of law.
(v) Except as set forth in Schedule 3.1(i), neither
the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this
Agreement will (x) accelerate the time of payment or vesting,
or increase the amount, of compensation or benefits due under
any Benefit Plan, (y) constitute or result in a prohibited
transaction with respect to any Benefit Plan under Section
4975 of the Code or ERISA Section 406 or 407 for which an
exemption is not available, or (z) constitute a "deemed
severance" or "deemed termination" under any Benefit Plan or
with respect to any Benefit Plan under any applicable law.
(vi) Each Benefit Plan that is intended to qualify
under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service and the
Selling Parties are not aware of any facts or circumstances
which could result in the disqualification of any such Benefit
Plan.
(j) Taxes.
STOCK PURCHASE AGREEMENT - PAGE 7
(i) BBA has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and
complete in all material respects. All Taxes owed by BBA
(whether or not shown on any Tax Return) have been paid when
due. BBA is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever
been made by an authority in a jurisdiction where BBA does not
file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(ii) BBA has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) There is no material dispute or claim
concerning any Tax liability of BBA either (A) claimed or
raised by any taxing authority in writing or (B) as to which
any of the Selling Parties and the directors and officers of
BBA has knowledge based upon personal contact with any agent
of such taxing authority.
(iv) Schedule 3.1(j) lists all federal, state, local,
and foreign income and franchise Tax Returns filed with
respect to BBA for taxable periods on or after December 31,
1998, indicates all Tax Returns for taxable periods ended on
or after December 31, 1998 that have been audited, and
indicates all Tax Returns for taxable periods ended on or
after December 31, 1998 that currently are the subject of
audit. Schedule 3.1(j) also lists all payroll Tax Returns
filed by BBA for the December 31, 2002 fiscal year. The
Selling Parties have delivered or made available to HIG
correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or
agreed to by BBA since August 27, 1998, the date of BBA's
formation. BBA has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) There are no liens with respect to Taxes on any
of the assets of BBA, other than statutory liens for current
taxes not yet due and payable.
(vi) BBA has not filed a consent under Section 341(f)
of the Code concerning collapsible corporations.
(vii) BBA has not made any material payments, is not
obligated to make any material payments, and is not a party to
any agreement that under certain circumstances could obligate
it to make any material payments that will not be deductible
under Code Section 280G.
(viii) BBA is not and has not been a United States
real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period in Code Section
897(c)(1)(A)(ii).
STOCK PURCHASE AGREEMENT - PAGE 8
(ix) BBA is not a party to a tax allocation or
sharing agreement. BBA has not (A) been a member of an
affiliated group filing a consolidated federal income Tax
Return and (B) has no liability for Taxes of any Person (other
than BBA) under Treasury Regulations Section 1.1502-6, or any
similar provision of state, local or foreign law, as a
transferee or successor, by contract, or otherwise.
(x) The unpaid Taxes of BBA (A) did not, as of the
most recent fiscal month end, exceed the reserve for Tax
liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and Tax
income) set forth in the Current Financial Statements and (B)
will not exceed that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the
past custom and practice of BBA in filing its Tax Returns,
except for unpaid Taxes of BBA payable to the State of
Texas,
if any, which Buell shall not be responsible for under Section
4.2.
(xi) BBA will not be required to include any item of
income in, or exclude an item of deduction from, taxable
income for any taxable period (or portion thereof) ending
after the Closing Date as a result of (A) any change in method
of accounting for a taxable period ending on or prior to the
Closing Date under Code Section 481(c) (or any corresponding
or similar provision of state, local or foreign Tax law); (B)
a "closing agreement" as described in Code Section 7121 (or
any corresponding or similar provision of state, local or
foreign Tax law) executed on or prior to the Closing Date; (C)
an installment sale or open transaction disposition made on or
prior to the Closing Date; or (D) a prepaid amount received on
or prior to the Closing Date.
(xii) BBA (and any predecessor thereof) has been a
validly electing S corporation within the meaning of Code
Sections 1361 and 1362 at all times during its existence and
will be an S corporation up to and including the Closing Date.
BBA has no "qualified Subchapter S subsidiary" within the
meaning of Code Section 1361(b)(3)(B).
(xiii) BBA will not be liable for any Tax under Code
Section 1374 in connection with the deemed sale of BBA's
assets caused by the Code Section 338(h)(10) election. BBA has
not in the past ten (10) years, (A) acquired assets from
another corporation in a transaction in which BBA's Tax basis
for the acquired assets was determined, in whole or in part,
by reference to the Tax basis of the acquired assets (or any
other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S
subsidiary.
(k) Brokers. Except as set forth in Schedule 3.1(k), no
broker, investment banker, financial advisor or other person, the fees
and expenses of which will be paid by BBA, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon
STOCK PURCHASE AGREEMENT - PAGE 9
arrangements made by or on behalf of BBA. It is agreed that any
broker's, finder's, financial advisor's or other similar fee or
commission due by BBA shall be paid by Buell.
(l) Compliance with Laws; Environmental Laws.
(i) BBA has in effect all Permits necessary for it to
own, lease or operate its properties and assets and to carry
on its business substantially as now conducted, and there has
occurred no default under any such Permit except where the
failure to have a Permit or the existence of a default would
not have a Material Adverse Effect. BBA is and has been in
compliance with all applicable statutes, laws, ordinances,
regulations, rules, judgments, decrees or orders of any
Governmental Entity in the conduct of its business, except
where the failure to be in compliance would not have a
Material Adverse Effect.
(ii) Neither BBA nor Buell has received any written
communication from a Governmental Entity alleging that BBA is
not in compliance in any material respect with, or has
liability under, any Environmental Laws. BBA holds, and has
complied with and is in compliance with, all Permits required
for BBA to conduct its business under Environmental Laws, and
BBA is in compliance with all Environmental Laws except where
the failure to have a Permit or to be in compliance would not
have a Material Adverse Effect.
(m) Title to Properties; Liens. BBA has good title to, or
valid leasehold interests in, all of its tangible properties and
assets. All such tangible assets and properties, other than assets and
properties in which it has a leasehold interest, are free and clear of
all Liens, except as set forth on Schedule 3.1(m). Upon consummation of
the transactions proposed herein, BBA will own the assets of BBA free
and clear of all Liens.
(n) Leased Real Property. Schedule 3.1(n) contains a list and
brief description of all of the leased real property of BBA (the
"Leased Real Property"). The Leased Real Property constitutes all real
properties used or occupied by BBA in connection with its business. BBA
owns no real property.
(o) Accounts Receivable; Inventories.
(i) Except as disclosed on Schedule 3.1(o), all
accounts of BBA reflected in the Current Financial Statements
(other than accounts receivable due by HIG) have arisen from
bona fide arms length transactions by BBA in the ordinary
course of business, and BBA has performed all of its
obligations in connection with such accounts receivable.
Schedule 3.1(o) contains a true and accurate aging schedule of
all accounts receivable of BBA (including those with HIG) as
of November 30, 2002.
(ii) Except as disclosed on Schedule 3.1(o), the
inventories of BBA (including raw materials, supplies and
other materials) are accurately reflected in all
STOCK PURCHASE AGREEMENT - PAGE 10
material respects in the Current Financial Statements at the
lower of cost or market in accordance with GAAP.
(p) Employee Relations.
(i) Schedule 3.1(p) hereto sets forth a list of (x)
all employees, commission salespersons and independent
contractors of BBA as of November 30, 2002, (y) then current
annual compensation of, and a description of fringe benefits
provided by BBA to any such employees, commission salespersons
and independent contractors, and (z) any increase, effective
on or after November 30, 2002, in the rate or manner of
compensation of any employees, commission salespersons or
independent contractors.
(ii) BBA has no employment, consulting or collective
bargaining agreement with any director, officer or employee of
BBA, except as set forth on Schedule 3.1(p).
(iii) BBA is and has complied with all laws, rules
and regulations which relate to hiring, termination, wages,
hours, discrimination in employment, working conditions,
including without limitation, laws, rules and regulations
relating to equal employment opportunities, fair employment
practices and occupational health and safety, and collective
bargaining and is not liable for any arrears of wages or any
Taxes (including penalties) for failure to so comply with any
of the foregoing.
(iv) Except as set forth on Schedule 3.1(p), none of
the employees of BBA is represented for purposes of their
employment by a labor organization and, to the best of the
Knowledge of the Selling Parties, no petition has been filed.
(v) There is no unfair labor practice charge or
complaint against BBA pending before any Governmental Entity.
There is no charge or complaint against BBA pending, or to the
Knowledge of the Selling Parties, threatened under any Legal
Requirement. There is no labor strike, dispute or stoppage, or
any union organizing campaign or petition for certification
actually pending or, to the best Knowledge of the Selling
Parties, threatened against or involving BBA. No labor
grievance has been filed with BBA, has arisen out of or under
a collective bargaining or other labor agreement and is
pending, and no claim therefor has been asserted. BBA has not
experienced any work stoppage over the past two (2) years.
(q) Insurance. Schedule 3.1(q) sets forth a list of all
policies of insurance maintained, owned or held by or for the benefit
of BBA on the date hereof. BBA shall use reasonable efforts to keep or
cause such insurance or comparable insurance to be kept in effect
through the Closing Date. BBA has complied with its obligations under
each of such insurance policies, and to the Knowledge of Selling
Parties, has not failed to give any notice or present any claim
thereunder in a due and timely manner.
STOCK PURCHASE AGREEMENT - PAGE 11
(r) Customers and Suppliers. Schedule 3.1(r) sets forth a list
of names and addresses of all customers (other than HIG) and all
suppliers, individually accounting for $50,000.00 or more of BBA's
sales or purchases during the twelve (12) calendar months prior to
November 1, 2002. Except as set forth in Schedule 3.1(r), there exists
no actual termination or cancellation of the business relationship of
BBA with any customer or group of customers or with any supplier or
group of suppliers listed therein with respect to which BBA has
received written or oral notice of such termination or cancellation, as
the case may be.
(s) Leased Personal Property. Schedule 3.1(s) contains a list
of all leases involving aggregate lease payments over the life of such
lease in excess of $1,000.00 under which BBA is a lessee of or holds or
operates any personal property owned by any third person, and true,
complete and correct copies (or, in the case of oral leases, written
descriptions) of such leases have been previously furnished to HIG.
(t) Transactions with Related Parties. Except as set forth on
Schedule 3.1(t), Buell, nor any spouse, child, parent, sibling or any
other person or entity closely related to or affiliated with Buell, as
the case may be, (i) owns any equity interest, directly or indirectly
in, or is an officer or director of, any proprietorship, firm, company,
corporation, partnership or other entity which: (a) is a competitor of
BBA; (b) is a customer or supplier of BBA; or (c) has any contractual
or business relationship whatsoever with BBA; provided that the
foregoing does not apply to the ownership by any of them of not more
than five percent (5%) of any outstanding security (or any class
thereof) of any corporation or partnership listed on a national
securities exchange or traded over-the-counter on NASDAQ; or (ii) has
or claims to have any direct or indirect interest in any tangible or
intangible property of BBA, except with respect to Buell as a holder of
Common Stock of BBA.
(u) Material Agreements.
(i) Schedule 3.1(u) contains a true and complete list
of all written and oral contracts, agreements, instruments and
other understandings and commitments to which BBA is a party
(all such contracts, agreements, instruments and other
understandings and commitments, together with those listed on
the other Schedules hereto, being collectively called
"Material Agreements" herein). Except as set forth on Schedule
3.1(u), BBA is not a party to any of the following, whether
written or oral:
(A) distributorship, dealer, sales,
advertising, agency, manufacturer's representative or
other contract relating to the payment of a
commission;
(B) collective bargaining agreement or other
contract with or commitments to any labor union or
proposed labor union;
STOCK PURCHASE AGREEMENT - PAGE 12
(C) continuing contract for the purchase of
products, materials, supplies, equipment or services
under which the undelivered balance thereof has a
selling price in excess of $10,000.00 and under which
BBA is obligated to perform for a period in excess of
ninety (90) days after Closing, which is not
terminable by BBA with less than thirty (30) days
prior written notice without cost, forfeiture or
other liability at or at any time after the Closing;
(D) contract for sales under which the
undelivered balance thereof has a selling price in
excess of $10,000.00 and under which BBA is obligated
to perform for a period in excess of ninety (90) days
after Closing, which is not immediately terminable by
BBA without cost or other liability at or at any time
after the Closing;
(E) contract for future sales which is not
immediately terminable by BBA without cost or other
liability at or at any time after the Closing;
(F) contract or commitment for the
employment of any officer, employee or consultant or
any other type of contract or understanding with any
officer, employee or consultant, including any
agreement or understanding relating to severance
payments;
(G) indenture, mortgage, promissory note,
loan agreement, pledge agreement, guarantee or other
agreement or commitment for the borrowing of money,
for a line of credit or for a leasing transaction of
a type required to be capitalized in accordance with
the Statement of Financial Accounting Standards No.
13 of the Financial Accounting Standards Board;
(H) contract or commitment for charitable
contributions, either in excess of $1,000.00
individually, or $5,000.00 in the aggregate;
(I) contract or commitment for capital
expenditures in excess of either $10,000.00
individually, or $25,000.00 in the aggregate;
(J) agreement or arrangement for the sale of
any assets, properties or rights or services or
products other than the sale thereof in the ordinary
course of business at normal profit margins;
(K) contract with respect to the lending or
investing of funds;
(L) contract or indemnification with respect
to any form of intangible property, including any
intellectual property rights or confidential and
proprietary information (except prepackaged software
used in the ordinary course of business);
STOCK PURCHASE AGREEMENT - PAGE 13
(M) contract which restricts BBA from
engaging in any aspect of its business anywhere in
the world;
(N) contract or group of related contracts
with the same person (excluding purchase orders
entered into in the ordinary course of business which
are to be completed within three (3) months of
entering into such purchase orders) for the purchase
or sale of products or services under which the
undelivered balance thereof has a selling price in
excess of $10,000.00;
(O) agreement for the acquisition or
disposition of any entity or a division of an entity
made within the preceding ten (10) years; or
(P) any other contract material to the
business of BBA.
(ii) All Material Agreements are in full force and
effect, constitute legal, valid and binding obligations of the
respective parties thereto, and are enforceable in accordance
with their respective terms. BBA has in all material respects
performed all of the obligations required to be performed by
it to date pursuant to the Material Agreements, and there
exists no material default, or any event which upon the giving
of notice or the passage of time, or both, would give rise to
a claim of a material default in the performance by BBA or, to
the Knowledge of the Selling Parties, any other party to any
of the Material Agreements. HIG has been furnished with true,
complete and correct copies of all Material Agreements.
(v) No Additional Representations. THE SELLING PARTIES DO NOT
MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT.
SECTION 3.2 Representations and Warranties of Buell. As an inducement
to HIG to enter into this Agreement and to consummate the transactions
contemplated hereby, Buell hereby represents and warrants to HIG that the
following statements (in addition to those set forth in Section 3.1) are true
and correct as of the date of this Agreement and will be true and correct with
equal force and effect as of the Closing Date:
(a) Authority of Buell.
(i) This Agreement has been duly executed and
delivered by Buell and is the legal, valid and binding
obligation of Buell enforceable against Buell in accordance
with its terms.
STOCK PURCHASE AGREEMENT - PAGE 14
(ii) Neither the execution and delivery of this
Agreement nor the consummation of any of the transactions
contemplated hereby or compliance with or fulfillment of the
terms, conditions and provisions hereof or thereof, by Buell,
will:
(y) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a
default, an event of default or an event creating
rights of acceleration, termination or cancellation
or a loss of rights under, (1) any material note,
instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right,
restriction or obligation to which Buell is a party
or is bound, or (2) any court order to which Buell is
a party or to which any of the assets or properties
of Buell is subject or by which Buell is bound; or
(z) require the approval, consent,
authorization or act of, or making by Buell of any
declaration, filing or registration with, any person
or entity.
(b) Title to Common Shares.
(i) Except for this Agreement and as set forth in
Schedule 3.2(b), Buell has no agreements, arrangements,
options, warrants, calls, rights or commitments of any
character relating to the issuance, sale, purchase or
redemption of any Common Stock.
(ii) The delivery by Buell of her Acquired Stock to
HIG pursuant to this Agreement will transfer and convey good
title thereto to HIG, free and clear of all Liens.
(c) Brokers. Except as set forth in Schedule 3.2(c), no
broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of Buell.
(d) No Additional Representations. BUELL DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT.
SECTION 3.3 Representations and Warranties of HIG. HIG hereby
represents and warrants to the Selling Parties that the following statements are
true and correct as of the date of this Agreement and will be true and correct
with equal force and effect as of the Closing Date:
STOCK PURCHASE AGREEMENT - PAGE 15
(a) Organization, Standing and Corporation Power of HIG. HIG
is a corporation duly organized, validly existing and in good standing
under the laws of the State of
Texas and has the requisite corporate
power and authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. HIG has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of HIG. This Agreement
has been duly executed and delivered by HIG and constitutes a valid and
binding obligation of HIG, enforceable against HIG in accordance with
its terms. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of the Articles of Incorporation or
Bylaws of HIG. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to HIG in connection with the execution and
delivery of this Agreement or the consummation by HIG, of any of the
transactions contemplated by this Agreement.
(c) Litigation. There is no suit, action or proceeding pending
or, to the knowledge of HIG, threatened against or affecting HIG that,
individually or in the aggregate, could reasonably be expected to (i)
impair the ability of HIG to perform its obligations under this
Agreement or (ii) prevent the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against HIG having, or which, insofar as reasonably can be
foreseen, would have any such effect in the future.
(d) Brokers. Except as set forth in Schedule 3.3(d), no
broker, investment banker, financial advisor or other person, the fees
and expenses of which will be paid by HIG, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of HIG.
(e) Investment Intent. The Acquired Stock to be acquired by
HIG hereunder is being acquired for its own account for investment and
with no intention of distributing or reselling such Acquired Stock or
any part thereof or interest therein in any transaction which would be
in violation of the securities laws of the United States of America or
any state or any foreign country or jurisdiction.
(f) Transfer Restrictions. If HIG should decide to dispose of
any of the Acquired Stock, HIG understands and agrees that it may do so
only pursuant to an effective registration statement under the
Securities Act of 1933, as amended ("Securities Act") or pursuant to an
exemption from registration under the Securities Act.
STOCK PURCHASE AGREEMENT - PAGE 16
(g) HIG Status. At the date hereof, HIG is, and at the Closing
Date, HIG will be, an accredited investor as defined in Rule 501(a)
under the Securities Act, and HIG has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating BBA and an investment in the Acquired Stock, and is able to
bear the economic risk of such investment.
(h) No Additional Representations. HIG DOES NOT MAKE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business by the Selling Parties. During the
period from the date of this Agreement to the Closing Date, the Selling Parties
shall carry on the businesses of BBA in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact BBA's
current business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it
to the end that BBA's goodwill, ongoing business and the assets of BBA shall be
unimpaired at the Closing Date. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Closing
Date, without the prior written consent of HIG, BBA shall not, and Buell shall
not cause or permit BBA to:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, (ii)
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of, or in substitution for shares of its capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of its capital stock
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities;
(c) amend its Articles of Incorporation and Bylaws, or other
comparable charter or organizational documents;
(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division
STOCK PURCHASE AGREEMENT - PAGE 17
thereof, or (ii) any assets that are material, individually or in the
aggregate, to it, except purchases of inventory and other assets in the
ordinary course of business consistent with past practice and capital
expenditures permitted by clause (g) below;
(e) mortgage or otherwise encumber or subject to any Lien or
sell, lease or otherwise dispose of any of its material properties or
assets, except in the ordinary course of business consistent with past
practice;
(f) (i) incur any additional indebtedness for borrowed money,
guarantee any indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of it, or guarantee any debt securities of another person, or (ii) make
any loans, advances or capital contributions to, or investments in, any
other person;
(g) except for the capital expenditures set forth in Schedule
4.1(g) hereto, make or agree to make any new capital expenditures which
in the aggregate are in excess of $10,000.00;
(h) settle or compromise any Tax liability or make any Tax
election or change in any method, practice or principle regarding
Taxes;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the Current Financial Statements or
incurred in the ordinary course of business consistent with past
practice, or waive the benefits of, or agree to modify in any manner,
any confidentiality, standstill or similar agreement;
(j) enter into any employment, bonus or severance agreements
(or amend any of the foregoing) with any of its present employees or
officers;
(k) amend, modify, terminate or breach any Material Agreement
or enter into any agreement that would constitute a Material Agreement
hereunder; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 4.2 Section 338(h)(10) Election. At HIG's option, BBA and Buell
shall join with HIG in making an election under Code Section 338(h)(10) (and any
corresponding election under state, local, and foreign tax law) with respect to
the purchase and sale of the Acquired Stock hereunder (collectively, a "Section
338(h)(10) Election"). Buell shall include any income, gain, loss, deduction, or
other tax item resulting from the Section 338(h)(10) Election on her Tax Returns
to the extent required or permitted by applicable law. Buell shall also pay any
Taxes imposed on BBA attributable to the making of the Section 338(h)(10)
Election, including but not limited to (i) any Taxes imposed under Code Section
1374, (ii) any Taxes imposed under the Treasury Regulations
STOCK PURCHASE AGREEMENT - PAGE 18
promulgated with respect to Code Section 338(h)(10), and (iii) any local or
foreign Taxes imposed on BBA's gain, but excluding any state Taxes imposed on
BBA's gain, which BBA will pay. Buell shall indemnify HIG and BBA against any
adverse consequences arising out of any failure to pay any such Taxes for which
Buell has responsibility, and HIG and BBA shall indemnify Buell against any
adverse consequence arising out of any failure to pay any such Taxes for which
BBA has responsibility.
SECTION 4.3 Allocation of Purchase Price. HIG and the Selling Parties
agree that the Purchase Price and the liabilities of BBA (plus other relevant
items) will be allocated to the assets of BBA for all Tax purposes, in a manner
consistent with the allocation schedule attached as Schedule 4.3. HIG and the
Selling Parties agree to file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent with such
allocation.
SECTION 4.4 S Corporation Election. BBA will not revoke its election to
be taxed as an S corporation within the meaning of Code Sections 1361 and 1362
prior to the Closing Date. BBA will not take or allow any action that would
result in the termination of BBA's status as a validly electing S corporation
within the meaning of Code Sections 1361 and 1362 prior to the Closing Date.
SECTION 4.5 Preparation of Tax Returns. HIG shall prepare or cause to
be prepared and file or cause to be filed all Tax Returns for BBA for all
periods ending on or prior to the Closing Date which are filed after the Closing
Date. HIG shall provide such Tax Returns to Buell at least forty five (45) days
prior to the due date of same (except in circumstances in which HIG is unable,
despite diligent efforts, to prepare Tax Returns sufficiently in advance of the
filing deadlines to permit a forty five (45) day review period, in which case
the review period shall be as close to forty five (45) days as is reasonably
possible) to permit Buell to review and comment on each such Tax Returns prior
to filing. To the extent permitted by applicable law, Buell shall include any
income, gain, loss, deduction or other tax items for such periods on her Tax
Returns in a manner consistent with the Schedule K-1s furnished by HIG with
respect to BBA for such periods. Subject to Section 4.2, Buell shall reimburse
HIG for any Taxes of BBA with respect to such periods within fifteen (15) days
after payment by HIG or BBA of such Taxes to the extent such Taxes are not
reflected in the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown in the Current Financial Statements.
SECTION 4.6 Cooperation on Taxes. HIG and the Selling Parties 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 Agreement and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include (A) 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 (B) making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Buell agrees to (A) retain all books and
records with respect to Tax matters pertinent to BBA relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and any extensions thereof) of the respective taxable periods and
to abide by all record retention agreements
STOCK PURCHASE AGREEMENT - PAGE 19
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records.
SECTION 4.7 Tax Sharing Agreements. All Tax sharing or similar
agreements with respect to or involving BBA shall be terminated as of the
Closing Date, and after the Closing Date, BBA shall not be bound thereby or have
any liability thereunder.
SECTION 4.8 Other Actions. The Selling Parties and HIG shall not take
any action that would result in (i) any of the representations and warranties of
such party set forth in this Agreement becoming untrue, or (ii) any of the
conditions to the Closing set forth in Article VI not being satisfied.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Access to Information; Confidentiality. The Selling Parties
shall afford to HIG reasonable access, during normal business hours during the
period prior to the Closing Date, to BBA's properties, books, contracts,
licenses, commitments, personnel and operating and other records and, during
such period, BBA shall furnish promptly to HIG all information concerning its
business, properties and personnel as HIG may reasonably request with regard to
BBA's business. Each party shall treat in confidence all documents, materials
and other information which it shall have obtained regarding the other party
during the course of the negotiations leading to the consummation of the
transactions contemplated hereby (whether obtained before or after the date of
this Agreement), and, in the event the transactions contemplated hereby shall
not be consummated, each party will return to the other party all copies of
nonpublic documents and materials which have been furnished in connection
therewith. Such documents, materials and information shall not be communicated
to any third person (other than to the respective counsel, accountants,
financial advisors, engineers, or the lenders of any party). Prior to the
Closing, HIG shall not use any confidential information in any manner whatsoever
except solely for the purpose of evaluating the proposed purchase and sale of
the Acquired Stock, or the negotiation or enforcement of this Agreement or any
agreement contemplated hereby. The obligation of each party to treat such
documents, materials and other information in confidence shall not apply to any
information that (i) is or becomes lawfully available to such party from a
source other than the furnishing party, provided that such confidential
information is not known by the receiving party to be subject to another
confidentially agreement with or other obligation of secrecy to the furnishing
party, (ii) is or becomes generally available to the public other than as a
result of disclosure by such receiving party or its agents, or (iii) is required
to be disclosed under applicable law or judicial process, but only to the extent
it must be disclosed, and after notice to the furnishing party.
SECTION 5.2 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, the parties shall use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or
STOCK PURCHASE AGREEMENT - PAGE 20
cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the
Closing, and the other transactions contemplated by this Agreement,
including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings
with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions contemplated
by this Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) The Selling Parties shall give prompt notice to HIG, and
HIG shall give prompt notice to the Selling Parties, of (i) any
representation or warranty made by such party contained in this
Agreement that has become untrue or inaccurate in any material respect,
or (ii) the failure by it to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that such notification shall not, in
and of itself, excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties or the conditions to
the obligations of the parties under this Agreement.
SECTION 5.3 Fees and Expenses.
(a) Except as set forth in Section 5.3(b):
(i) if the Closing and purchase of the Acquired Stock
is consummated, all fees and expenses incurred by HIG in
connection with the Closing, this Agreement and the
transactions contemplated by this Agreement (the "Expenses")
shall be paid by HIG and all Expenses incurred by the Selling
Parties shall be paid by Buell, and
(ii) if the Closing and purchase of the Acquired
Stock is not consummated, all Expenses shall be paid by the
party incurring such expenses.
(b) In the case of a willful and material breach of this
Agreement by any party, all reasonable fees and expenses incurred by
the prevailing, nonbreaching party or parties in connection with such
breach, shall be paid by the party breaching this Agreement.
SECTION 5.4 Public Announcements. HIG and the Selling Parties will
consult with each other before issuing, and will provide to each other the
opportunity to review and comment upon,
STOCK PURCHASE AGREEMENT - PAGE 21
any press release or other public statements with respect to the transactions
contemplated by this Agreement, and shall not issue any press release or make
any public statement prior to such consultation and prior to the Closing Date,
except as may be required by applicable law, court process or obligations
pursuant to any listing agreement with any national securities exchange, in
which case the party required to make the release or announcement shall allow
the other parties reasonable time to comment on such release or announcement in
advance of such issuance.
SECTION 5.5 Bank Accounts. Prior to the Closing Date, BBA will deliver
to HIG a list of all bank accounts, accounts with any other type of financial
institution and safe deposit boxes of BBA and persons authorized to sign or
otherwise act with respect thereto as of the date thereof.
SECTION 5.6 Restrictive Covenants. As a material inducement to HIG to
enter into and perform its obligations under this Agreement, Buell covenants and
agrees, as follows:
(a) For a period equal to the Restricted Period,
Buell shall not, directly or indirectly, alone or in
conjunction with any other corporation, firm, partnership,
person, venture or other entity (except as a holder of an
aggregate of not more than five percent (5%) of the
outstanding stock of a corporation or partnership whose stock
or partnership interests are listed on a national securities
exchange or traded over the counter on NASDAQ) own, manage,
operate, join, control, work for, permit the use of her name
by, consult with or engage in any activity anywhere within the
United States (the "Territory"), that is in any way
competitive with any aspect of the business of BBA as
presently conducted (the "Business"). The term "Restricted
Period" means the two (2) year period beginning on the date of
termination of Buell's employment with BBA, unless Buell's
employment with BBA was terminated by BBA without Cause or was
terminated by Buell for Good Reason, in which case the
Restricted Period means the one (1) year period beginning on
the date of termination of Buell's employment with BBA.
(b) The covenant contained in Section 5.6(a) above
shall be deemed to be a series of separate and severable
covenants, one for each state located in the Territory. Except
for geographic coverage, each such separate covenant shall be
deemed identical in terms with the covenant contained in
Section 5.6(a). If, in any judicial proceeding, a court should
refuse to enforce all of the separate covenants deemed
included in Section 5.6(a) because taken together they cover
too extensive a geographic area, then it is intended that
those of such covenants which, if eliminated, would permit the
remaining separate covenants to be enforced in such
proceedings shall, for the purpose of such proceeding, be
deemed eliminated from the provisions hereof.
(c) The covenant contained in Section 5.6(a) above
shall be deemed to be a series of separate and severable
covenants, one for each successive month during the terms of
said covenants. If, in any judicial proceeding, a court should
refuse to enforce all of the separate covenants because taken
together they cover too long a
STOCK PURCHASE AGREEMENT - PAGE 22
period of time, then the last of such covenants in time which,
if eliminated, would permit the remaining separate covenants
to be enforced in such proceeding shall, for the purpose of
such proceeding, be deemed eliminated from the provisions
hereof.
(d) Any and all Proprietary Information which Buell
heretofore obtained or may hereafter obtain with respect to
the conduct and/or details of any portion of the Business
conducted by either BBA or HIG or any of HIG's Affiliates, or
their respective successors, shall be held inviolate and shall
not be revealed to any competitor of HIG or any other person,
partnership, firm, corporation or entity. Buell shall not make
any use of such Proprietary Information, except for and on
behalf of HIG. "Proprietary Information" shall mean knowledge
and information, relating to any portion of the Business of
HIG or HIG's Affiliates whether written or oral, which: (i) is
not generally available to the public; (ii) gives or may give
any competitive advantage to HIG with respect to the operation
of the Business or its successors; or, (iii) if disclosed,
could give any advantage to a competitor of the Business or
its successors or could otherwise be deleterious to any
portion of the Business.
(e) During the Restricted Period, Buell will not,
directly or indirectly, request, induce, influence or solicit
any employee, customer, or supplier of BBA, HIG or any
Affiliate of HIG (including, without limitation, any employee
of BBA who is hired as an employee by HIG) known by Buell, as
the case may be (through the exercise of due diligence), to be
an employee, customer or supplier of BBA, HIG or any Affiliate
of HIG, to terminate his, her or its employment or business
relationship with HIG.
(f) The parties recognize that the goodwill and going
concern value of BBA being purchased and acquired by HIG are
very closely related to the special, unique and extraordinary
knowledge and skill of Buell and that the consummation by HIG
of this Agreement will be in reliance upon the unconditional
assurance of Buell that she will fully comply with the terms
of this Agreement, particularly, but not limited to, such
terms as they relate to covenants and undertakings not to
engage in competition or to divulge information. Further, the
period of protection of HIG against the competition of Buell
and the geographical area within which such protection is
essential has been agreed by the parties to be reasonable and
necessary. Therefore, if Buell shall at any time breach or in
any manner violate any such covenant, then HIG in addition to,
but not in substitution for, any and all other relief to which
HIG may be entitled either at law or in equity, shall be
entitled to equitable relief against Buell by way of
injunction to restrain Buell from such breach and to compel
compliance by Buell with her obligations hereunder. Buell does
hereby waive any proof: (i) that such breach will cause
irreparable injury to HIG or, (ii) that there is no adequate
remedy at law.
(g) In the event that a court of competent
jurisdiction shall refuse to enforce the provisions of the
restrictive covenant set forth in Section 5.6(a) of this
STOCK PURCHASE AGREEMENT - PAGE 23
Agreement because it deems the length of time or the
geographical area to be excessive or unreasonable, then the
time period or the geographical area, or both, shall be deemed
to be amended to conform to such time period and geographical
area as such court shall determine to be reasonable and not
excessive.
(h) In the event HIG is in default in its obligation
to pay any amount due under Sections 1.1, 1.2 and 1.3 above or
the Buell Agreement, and such default continues for thirty
(30) days following the receipt by HIG from Buell of written
notice of such default, then the obligations of Buell under
Section 5.6(a) shall terminate. Further, in such event,
obligations of Buell under Section 5.6(e) shall terminate, but
only as to those employees, customers and suppliers of BBA
that were employees, customers and suppliers of BBA as of the
Closing Date.
(i) Capitalized terms used in this Section 5.6 shall
have the meanings set forth in the Buell Agreement.
SECTION 5.7 Buell Employment and Non-Competition Agreement. At Closing,
Buell, HIG (or one of its Affiliates) and BBA shall execute an Employment and
Non-Competition Agreement substantially in the form of Exhibit "B" (the "Buell
Agreement"). The Buell Agreement shall provide for a term of employment through
December 31, 2007 (the "Employment Period"), provided, however, that Buell's
employment may be terminated prior to December 31, 2007 by Buell or by BBA. It
is agreed that, if (a) Buell terminates her employment during the Employment
Period without Good Reason, or (b) BBA terminates Buell's employment during the
Employment Period for Cause, then no payment scheduled to be paid after the date
of such termination shall be due to Buell under Section 1.3 of this Agreement.
It is further agreed that if (a) Buell terminates her employment during the
Employment Period with Good Reason, (b) BBA terminates Buell's employment during
the Employment Period without Cause, (c) Buell dies during the Employment
Period, or (d) Buell's employment terminates during the Employment Period as a
result of Disability, then Buell shall, nevertheless, be entitled to the
Deferred Payments under Section 1.3 of this Agreement, provided that the
requirements of Section 1.3 (regarding gross revenue from HIG Retail Sales) are
satisfied. Capitalized terms used in this Section 5.7 shall have the meanings
set forth in the Buell Agreement.
SECTION 5.8 Cancellation of Certain Agreements. Prior to the Closing
Date, the Selling Parties shall cause the cancellation of the agreements listed
in Schedule 5.8. The cancellation of the agreements listed in Schedule 5.8 will
be done in such a manner that (i) each such agreement shall be of no further
force and effect, (ii) no rights, duties, or obligations shall exist between the
parties to each such agreement (or any other party) by virtue of such agreement
and (iii) HIG and BBA shall have no rights, duties or obligations of any kind or
nature on or after the Closing Date to any person with respect to such
agreement. Any agreement(s) and other documents evidencing the transactions
contemplated in this Section 5.8 shall be in form and substance reasonably
satisfactory to HIG.
SECTION 5.9 Life Insurance on the Life of Buell. HIG shall be entitled,
at its option, to obtain as owner and beneficiary life insurance on the life of
Buell. Buell agrees to cooperate fully
STOCK PURCHASE AGREEMENT - PAGE 24
with HIG and insurance carriers selected by HIG in providing information and
submitting to medical testing necessary to obtain such life insurance.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Closing. The respective obligations of each party to effect the Closing are
subject to the satisfaction, or waiver on or prior to the Closing Date of the
following conditions:
(a) Authorizations, Consents, and Approvals. Any
authorizations, consents, approvals, orders or waivers required to be
obtained, and all filings, notices or declarations required to be made
with any Federal, foreign, state or local governmental regulatory
agency, shall have been obtained or made.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the Closing shall be in effect; provided, however, that each
of the parties shall have used such party's reasonable efforts to
prevent the entry of any such injunction or other order and to appeal
as promptly as possible any injunction or other order that may be
entered.
SECTION 6.2 Conditions to Obligations of HIG. The obligations of HIG to
effect the Closing and to purchase the Acquired Stock pursuant to this Agreement
shall, at the option of HIG, be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Selling Parties, set forth in this Agreement, in each
case as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, shall be true and correct,
and HIG shall have received a certificate to such effect, signed on
behalf of BBA by an authorized officer of BBA with respect to
representations and warranties of BBA, and signed by Buell with respect
to representations and warranties of Buell.
(b) Performance of Obligations of the Selling Parties. The
Selling Parties shall have performed all obligations required to be
performed by them under this Agreement at or prior to the Closing Date,
and HIG shall have received a certificate to such effect signed on
behalf of BBA by an authorized officer of BBA as well as a certificate
to such effect signed by Buell with respect to obligations of Buell.
(c) No Suit or Judgment. There shall be no suit or proceeding
instituted to prohibit or otherwise challenge the legality or validity
of the transactions contemplated hereby, and there shall be no
judgment, order or decree by any court with proper jurisdiction
prohibiting consummation of such transactions.
STOCK PURCHASE AGREEMENT - PAGE 25
(d) Opinion of Counsel. HIG shall have received a written
opinion, dated as of the Closing Date, from counsel for Buell
substantially in the form of Exhibit "C" hereto.
(e) Consents. The Selling Parties shall have received consents
to the transactions contemplated hereby from the parties to contracts
and debt instruments listed in Schedule 6.2(e).
(f) BBA Records. HIG shall have received from BBA:
(i) a copy of the Articles of Incorporation of BBA,
certified by the Secretary of State of the State of
Texas;
(ii) a certificate of existence of BBA by the
Secretary of State of
Texas and certificate of the Comptroller
of the State of
Texas showing payment of state Taxes issued as
of a date not less than seven (7) days prior to Closing; and
(iii) a certificate of the Secretary or an Assistant
Secretary of BBA dated the Closing Date, in form and substance
satisfactory to HIG, as to (w) no amendments to the Articles
of Incorporation of BBA since a specified date, (x) the Bylaws
of BBA, (y) the resolutions of the shareholders and Board of
Directors of BBA authorizing the execution, delivery and
performance of this Agreement and the transactions
contemplated hereby, and (z) incumbency and signatures of the
officers of BBA executing this Agreement and any related
documents.
(g) Material Adverse Change. From and after the date of this
Agreement, there shall not have been any Material Adverse Change to any
of the operations, financial condition, revenues or properties of BBA.
(h) Resignations. HIG shall have received a resignation letter
of members of the Board of Directors and officers of BBA designated by
HIG, dated as of the Closing Date.
(i) Share Certificates. HIG shall have received certificates
representing all of the issued and outstanding shares of the Acquired
Stock of BBA accompanied by stock powers.
(j) Lender Authorizations. HIG shall have received any
authorizations, consents or waivers required to be obtained by HIG from
its lenders in order for HIG to enter into the transactions made the
subject of this Agreement.
SECTION 6.3 Conditions to Obligations of the Selling Parties. The
obligations of the Selling Parties to effect the Closing and the obligations of
Buell to deliver and sell the Acquired Stock pursuant to this Agreement shall,
at the option of the Selling Parties, be subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
STOCK PURCHASE AGREEMENT - PAGE 26
(a) Representations and Warranties. The representations and
warranties of HIG set forth in this Agreement, in each case as of the
date of this Agreement, and as of the Closing Date as though made on
and as of the Closing Date, shall be true and correct, and the Selling
Parties, shall have received a certificate to such effect signed on
behalf of HIG by an authorized officer of HIG.
(b) Performance of Obligations of HIG. HIG shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Selling Parties
shall have received a certificate to such effect, signed on behalf of
HIG by an authorized officer of HIG.
(c) No Suit or Judgment. There shall be no suit or proceeding
instituted to prohibit or otherwise challenge the legality or validity
of the transactions contemplated hereby, and there shall be no
judgment, order or decree by any court with proper jurisdiction
prohibiting consummation of such transactions.
(d) Opinion of Counsel. The Selling Parties shall have
received a written opinion, dated as of the Closing Date, from counsel
for HIG substantially in the form of Exhibit "D" hereto.
(e) Employment Agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇ de ▇▇ ▇▇▇▇. An
Affiliate of HIG shall have offered to hire ▇▇▇▇▇ ▇▇▇▇▇▇▇ de ▇▇ ▇▇▇▇
for an annual salary of $120,000 and a term of employment of one (1)
year, or upon such other terms as shall be satisfactory to ▇▇▇▇▇
▇▇▇▇▇▇▇ de ▇▇ ▇▇▇▇ and such Affiliate.
SECTION 6.4 Frustration of Closing Conditions. Neither HIG nor the
Selling Parties may rely on the failure of any condition set forth on this
Article VI to be satisfied, if such failure was caused by such party's failure
to act in good faith or to use its reasonable efforts to cause the Closing to
occur.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date without liability:
(a) by the unanimous written consent of HIG and the Selling
Parties;
(b) by HIG or the Selling Parties if the Closing shall not
have occurred on or before January 30, 2003, unless the failure to
effect the Closing is the result of a material breach of this Agreement
by the party seeking to terminate; and
(c) by HIG or the Selling Parties, as applicable:
STOCK PURCHASE AGREEMENT - PAGE 27
(i) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Closing
and such order, decree, ruling or other action shall have
become final and nonappealable; and
(ii) in the event of any breach by HIG, on the one
hand, or by any of the Selling Parties, on the other hand, of
its or her respective agreements, representations or
warranties contained herein and the failure of such party to
cure such breach within ten (10) days after receipt of notice
from any other party requesting such breach to be cured.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of any
party, other than the provisions of this Section 7.2 and Article IX. In the
event that HIG or the Selling Parties shall terminate this Agreement pursuant to
Section 7.1(b) or (c) hereof, the rights of the parties, as the case may be, to
pursue any and all rights they may have at law or equity or hereunder shall
survive unimpaired.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at
any time prior to the Closing Date by an instrument in writing signed on behalf
of each of the parties hereto.
SECTION 7.4 Extension: Waiver. At any time prior to the Closing Date,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement, or (c) waive compliance with any
of the agreements or conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 7.5 Procedure for Termination. A termination of this Agreement
pursuant to Section 7.1 in order to be effective, shall require, in the case of
HIG or BBA, action by its respective Board of Directors or the duly authorized
designee of its Board of Directors, and in the case of Buell, a signed consent
by Buell or by Buell's attorney-in-fact.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Indemnification.
(a) By the Selling Parties. Subject to the limitations set
forth in Section 8.1(f), from and after the Closing Date, the Selling
Parties, shall jointly and severally (i) indemnify
STOCK PURCHASE AGREEMENT - PAGE 28
and hold harmless HIG and HIG's officers, directors, employees and
attorneys from and against any and all losses which HIG or such persons
may suffer or incur, resulting from, related to or arising out of (a)
any misrepresentation or breach of warranty of the Selling Parties
contained in or made pursuant to this Agreement; (b) any breach by the
Selling Parties of any of their agreements or obligations contained in
or made pursuant to this Agreement; (c) any liability or exposure of
any kind or nature to the extent that such liability or exposure was
not disclosed in the Current Financial Statements or was disclosed in
the Current Financial Statement but not adequately reserved; or (d) any
and all claims or litigation arising out of any of the foregoing; and
(ii) reimburse HIG and its officers, directors, employees and attorneys
for any and all reasonable fees, costs and expenses related thereto
(including without limitation, reasonable legal expenses) ((i) and
(ii), collectively, "HIG's Indemnifiable Losses"). Notwithstanding the
foregoing, the Selling Parties shall not be obligated to provide an
indemnity under Section 8.1(a)(i)(c) for any liability or exposure, the
dollar amount of which is disclosed in a Schedule to this Agreement,
but the Selling Parties shall nevertheless be obligated to provide an
indemnify for losses in excess of the dollar amount disclosed in such
Schedule.
(b) By HIG. From and after the Closing Date, HIG shall (i)
indemnify and hold harmless the Selling Parties and their heirs,
personal representatives and administrators, successors and assigns,
from and against any and all losses, which any of them may suffer or
incur, resulting from, related to or arising out of (x) any
misrepresentation or breach of warranty of HIG which is contained in or
made pursuant to this Agreement; (y) any breach by HIG of any of its
agreements or obligations contained in or made pursuant to this
Agreement; and (z) any and all claims or litigation arising out of any
of the foregoing; and (ii) reimburse Buell and her heirs, personal
representatives, administrators, trustees, agents or employees, and BBA
and its officers, directors, employees and attorneys for any and all
reasonable fees, costs and expenses related thereto (including, without
limitation, reasonable legal expenses) ((i) and (ii), collectively,
"Selling Parties' Indemnifiable Losses").
(c) Direct Liability. In the event that the person or entity
seeking indemnification under this Article VIII (the "Indemnified
Party") shall become aware of an event which will give rise to or
result in an Indemnifiable Loss, he, she or it shall, within thirty
(30) days thereafter, give written notice to the party from whom
indemnification under this Article VIII is sought (the "Indemnifying
Party") of the amount of the Indemnifiable Loss, together with
sufficient information to enable the Indemnifying Party to determine
the accuracy and nature of the claimed Indemnifiable Loss (the
"Indemnity Notice"). The failure of the Indemnified Party to give the
Indemnifying Party an Indemnity Notice shall not release the
Indemnifying Party from liability under this Article VIII; provided,
however, that the Indemnifying Party shall not be liable for losses
which would not have been incurred but for the delay in the delivery
of, or the failure to deliver, the Indemnity Notice. Within thirty (30)
days after the receipt by the Indemnifying Party of the Indemnity
Notice, the Indemnifying Party shall either (i) pay to the Indemnified
Party an amount equal to the Indemnifiable Loss, or (ii) object to such
claim, in which case the Indemnifying Party shall give written notice
to the Indemnified Party of such objection together with the reasons
therefor, it being understood
STOCK PURCHASE AGREEMENT - PAGE 29
that the failure of the Indemnifying Party to so object shall preclude
the Indemnifying Party from asserting any claim, defense or
counterclaim relating to the Indemnifying Party's failure to pay any
Indemnifiable Loss.
(d) Third Party Claim. In the event the facts giving rise to
the claim for indemnification under this Article VIII shall involve any
action or threatened claim or demand by any third party against the
Indemnified Party (a "Third Party Claim"), within the earlier of, as
applicable, ten (10) days after receiving notice of the filing of a
lawsuit or thirty (30) days after receiving notice of the existence of
a claim, demand, suit or proceeding (each a "Claim") giving rise to the
claim for indemnification, the Indemnified Party shall send written
notice of such Claim to the Indemnifying Party (the "Claim Notice") .
The failure of the Indemnified Party to give the Indemnifying Party the
Claim Notice shall not release the Indemnifying Party from liability
under this Article VIII; provided, however, that the Indemnifying Party
shall not be liable for losses incurred by the Indemnified Party which
would not have been incurred but for the delay in the delivery of, or
the failure to deliver, the Claim Notice. Except as set forth below,
the Indemnifying Party shall be entitled to defend such Claim in the
name of the Indemnified Party at his or its own expense and through
counsel of his or its own choosing. The Indemnifying Party shall give
the Indemnified Party notice in writing within ten (10) days after
receiving the Claim Notice from the Indemnified Party in the event the
Claim is one involving an instituted suit or proceeding, or otherwise
within thirty (30) days, of his or its intent to do so. If the
Indemnifying Party chooses to defend or prosecute a Third Party Claim,
all the Indemnified Parties shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and
(upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information that are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the
Indemnifying Party assumes the defense of a Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. The Indemnified Party
may elect, by notice in writing to the Indemnifying Party, to continue
to participate through his or its own counsel, at his or its expense,
but the Indemnifying Party shall have the right to control the defense
of the Claim with counsel reasonably acceptable to the Indemnified
Party. In the event that the Indemnifying Party is controlling the
defense of the Claim and shall have negotiated a settlement thereof,
which proposed settlement is final and unconditional as to the parties
thereto and contains an unconditional release of the Indemnified Party,
without the Indemnified Party being liable for damages of any kind or
nature or being otherwise required to pay any amount of money to any
third party and does not include the imposition of any restrictions on
the part of the Indemnified Party or require that the Indemnified Party
make an admission of guilt or liability or deliver a confession of
judgment, or any other non-financial obligation which, in the
reasonable judgment of the Indemnified Party, renders such settlement
unacceptable, the Indemnified Party shall consent to such settlement.
STOCK PURCHASE AGREEMENT - PAGE 30
(e) Tax Claim. Notwithstanding any of the provisions of
Article VIII hereof, if a Third Party Claim is related to a matter
which, if adversely determined, would have a material adverse impact on
any Tax or accounting position of HIG, then HIG shall have the
exclusive right to defend, contest, settle and otherwise control the
resolution of any such Third Party Claim, with one counsel selected by
HIG and reasonably satisfactory to Buell. Buell may participate through
use of her own counsel at her own expense. However, notwithstanding
anything herein, all disputes, audits or claims, and all proceedings
with respect thereto, or with respect to any Tax or Tax Return of HIG
or BBA, shall be defended, controlled and resolved and may be settled
exclusively by HIG.
(f) Limitation of Indemnity. Anything herein to the contrary
notwithstanding,
(i) neither HIG (or any other HIG Affiliate), on the
one hand, nor the Selling Parties on the other hand, shall be
required to indemnify the other for any Indemnifiable Losses
unless and until (x) the aggregate amount for which all
Indemnifiable Losses such party would otherwise (but for this
provision) be liable on account thereof exceeds Fifty Thousand
and No/100 Dollars ($50,000.00) (the "Threshold Amount"), but
following the exceeding of the Threshold Amount the
Indemnifying Party shall be liable for all Indemnifiable
Losses (including those below the Threshold Amount); provided,
however, that this subsection shall not apply to amounts due
by HIG to Buell under Sections 1.1, 1.2 and 1.3;
(ii) in no event shall Buell be required to indemnify
HIG for Indemnifiable Losses in excess of $7,100,000.00 and in
no event shall HIG (or any other HIG Affiliate) be required to
indemnify the Selling Parties for Indemnifiable Losses in
excess of $7,100,000.00; provided, however, that this
subsection shall not apply to amounts due by HIG or its
Affiliates to Buell under the Buell Agreement; and
(iii) neither party shall be entitled to make a claim
for indemnity with respect to a misrepresentation or breach of
warranty after the Expiration Date thereof as set forth in
Section 10.1.
SECTION 8.2 Right to Set-Off. To secure the indemnification provided
for in Section 8.1(a) hereof, and to compensate HIG for any claim having as its
basis the indemnification provided for in Section 8.1(a) hereof, HIG shall have
a right of set-off from any sum due to any of the Selling Parties, including
sums due under this Agreement and the Buell Agreement.
SECTION 8.3 Buell Pays Broker Fee. Buell shall indemnify and hold
harmless HIG, and BBA and HIG's and BBA's officers, directors, employees and
attorneys from and against any and all Claims for broker's, finder's, financial
advisors or other similar fees and expenses which are to be paid by Buell
pursuant to Schedule 3.1(k).
STOCK PURCHASE AGREEMENT - PAGE 31
ARTICLE IX
CONFIDENTIALITY
In addition to the provisions of Section 5.1 herein, HIG will maintain
the confidential nature of any non-public information concerning the Selling
Parties or the Acquired Stock obtained by HIG during the course of its due
diligence investigations, and, if applicable, will disclose such information
only to its own officers, directors, employees, attorneys, accountants,
engineers, lenders, representatives and advisors, or as otherwise required by
applicable law, regulation, judicial process or applicable stock exchange
listing requirement, all in accordance with that certain Confidentiality
Agreement between the parties dated July 19, 2002, which agreement shall remain
in full force and effect through and including the Closing Date.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing Date for a period of two
(2) years, except that (i) the representations in Section 3.1(j) shall survive
so long as any claim may be made in respect of such matters by a taxing
authority, including any waivers or extensions; and (ii) the representations in
Section 3.1(l) to the extent same relate to Environmental Laws shall survive for
so long as any claim may be made in respect of such matters by any third party.
The date on which a representation or warranty ceases to survive as above set
forth shall be its "Expiration Date". This Section 10.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Closing Date.
SECTION 10.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally when received if or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to HIG or, on or after the Closing Date, if to BBA, to:
Home Interiors & Gifts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
STOCK PURCHASE AGREEMENT - PAGE 32
with a mandatory copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(b) if to Buell, or before the Closing Date, if to BBA, to:
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a mandatory copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Hanger, L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
SECTION 10.3 Definitions. For purposes of this Agreement, the following
terms shall have the following respective meanings:
"Acquired Stock": As defined in Section 1.1 hereof.
"Affiliate": Any corporation, partnership, limited liability company or
other entity of which twenty five percent (25%) of the equity or voting
power is controlled directly or indirectly by HIG or another Affiliate
of HIG, or which owns ninety five percent (95%) or more of the equity
or voting power of HIG (the "HIG Parent"), or which is an Affiliate of
the HIG Parent.
"Agreement": As defined in opening paragraph hereof.
"BBA": As defined in opening paragraph hereof.
"Benefit Plan": As defined in Section 3.1(h) hereof.
"Buell": As defined in opening paragraph hereof.
"Buell Agreement": As defined in Section 5.7 hereof.
"Business": As defined in Section 5.6(a) hereof.
"Claim": As defined in Section 8.1(d) hereof.
"Claim Notice": As defined in Section 8.1(d) hereof.
"Closing": As defined in Section 2.1 hereof.
"Closing Balance Sheet": As defined in Section 1.5 hereof.
"Closing Date": As defined in Section 2.1 hereof.
"COBRA": As defined in Section 3.1(i) hereof.
"Code": As defined in Section 3.1(h) hereof.
"Common Stock": As defined in Section 1.1 hereof.
"Current Financial Statements": As defined in Section 3.1(d) hereof.
STOCK PURCHASE AGREEMENT - PAGE 33
"Deferred Payments": As defined in Section 1.3 hereof.
"Employment Period": As defined in Section 5.7 hereof.
"Environmental Laws": means, as of the Closing Date, any applicable
treaties, laws, regulations, enforceable requirements, order, decrees
or judgments issued, promulgated or entered into by any Governmental
Entity, which relate to (x) pollution or protection of the environment
or (y) Hazardous Materials generation, storage, use, handling, disposal
or transportation, including with respect to real property in the U.S.,
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601 et seq. ("CERCLA"), the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6901 et seq., the Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251 et seq., the Clean Air Act of 1970, as amended, 42
U.S.C. Section 7401 et seq., the Toxic Substances Control Act of 1976,
15 U.S.C. Section 2601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. Section 541 et seq, and any similar
or implementing state or local law, and all amendments or regulations
promulgated thereunder.
"ERISA": As defined in Section 3.1(i) hereof.
"Exceptions to GAAP": means the absence of footnotes, the use of
alternative depreciation methods, the lack of a statement of cash
flow/changes in financial position, the use of a direct write-off for
accounts receivable (i.e. no allowance for doubtful accounts) and no
accrual of vacation or sick pay.
"Excess Liabilities": as define in Section 1.5(c) hereof.
"Expenses": As defined in Section 5.3 hereof.
"Expiration Date": As defined in Section 10.1 hereof.
"Financial Statements": As defined in Section 3.1(d) hereof.
"GAAP": As defined in Section 3.1(d) hereof.
"Governmental Entity": Any court or any foreign, federal, state,
municipal or other governmental department, commission, board, bureau,
agency, authority or instrumentality.
"Hazardous Materials": means all explosive or regulated radioactive
materials or substances, hazardous or toxic substances, wastes or
chemicals, petroleum or petroleum distillates, asbestos or asbestos
containing materials and all other materials or chemicals regulated
pursuant to any Environmental Law, including materials listed in 49
C.F.R. Section 172.101 and materials defined as hazardous pursuant to
Section 101(14) of CERCLA.
"HIG": As defined in opening paragraph hereof.
"HIG's Indemnifiable Losses": As defined in Section 8.1(a) hereof.
"HIG Retail Sales": As defined in Section 1.3 hereof.
"Indemnified Party": As defined in Section 8.1(c) hereof.
"Indemnifying Party": As defined in Section 8.1(c) hereof.
"Indemnity Notice": As defined in Section 8.1(c) hereof.
"Initial Payments": As defined in Section 1.1 hereof.
"Knowledge of the Selling Parties": means the current actual knowledge
of a person, and with respect to BBA, current actual knowledge obtained
(through the exercise of due diligence) of any of its officers.
"Leased Real Property": As defined in Section 3.1(n) hereof.
STOCK PURCHASE AGREEMENT - PAGE 34
"Legal Requirement": means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty as in effect on the date in question.
"Liens": All mortgages, deeds of trust, claims, liens, security
interests, pledges, leases, conditional sale contracts, rights of first
refusal, options, charges, liabilities, obligations, agreements,
easements, rights-of-way, powers of attorney, limitations,
reservations, restrictions and other encumbrances of any kind.
"Material Adverse Change" or "Material Adverse Effect": Any change
(individually or in the aggregate) that has a material adverse effect
on the business, results of operations or financial condition of BBA
that is likely to result in a cost, expense, charge or liability equal
to or greater than $10,000. "Material Agreement": As defined in Section
3.1(u) hereof.
"Note": As defined in Section 1.2 hereof.
"Order": Any judgment, writ, decree, injunction, order, stipulation,
compliance agreement or settlement agreement issued or imposed by,
entered into with, a Governmental Entity, whether or not having the
force of law.
"Permits": All permits, authorizations, certificates, approvals,
registrations, variances, exemptions, rights-of-way, franchises,
privileges, immunities, grants, ordinances, licenses and other rights
of every kind and character (a) under any (1) federal, state, local or
foreign statute, ordinance or regulation, (2) Order or (3) contract
with any Governmental Entity or (b) granted by any Governmental Entity.
"Proprietary Information": As defined in Section 5.6(d) hereof.
"Purchase Price": As defined in Section 1.1 hereof.
"Restricted Period": As defined in Section 5.6(a) hereof.
"Section 338(h)(10) Election": As defined in Section 4.2 hereof.
"Securities Act": As defined in Section 3.3(f) hereof.
"Selling Parties": As defined in opening paragraph hereof.
"Selling Parties' Indemnifiable Losses": As defined in Section 8.1(b)
hereof.
"Tax" or "Taxes": means all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including all Federal, state,
local, foreign and other income, franchise, profits, capital gains,
capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and
other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever, including all estimated
taxes, deficiency assessments, additions to tax, penalties and interest
with respect thereto.
"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.
"Territory": As defined in Section 5.6(a) hereof.
"Third Party Claim": As defined in Section 8.1(d) hereof.
"Threshold Amount": As defined in Section 8.1(f)(i) hereof.
SECTION 10.4 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table
STOCK PURCHASE AGREEMENT - PAGE 35
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
SECTION 10.5 Counterparts; Facsimiles. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties. Facsimile
signatures shall be effective.
SECTION 10.6 Entire Agreement: No Third Party Beneficiaries. This
Agreement constitutes the entire agreement and supersedes all prior
representations, agreements or understandings among the parties with respect to
the subject matter of this Agreement both written and oral. This Agreement is
not intended to confer upon any person other than the parties any rights or
remedies hereunder.
SECTION 10.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Texas, regardless of the
laws that might otherwise govern under applicable principles of conflict of laws
thereof.
SECTION 10.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by the Selling Parties without the prior
written consent of the other. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns. All rights, interest or
obligations of HIG may be assigned without notice to any HIG Affiliate, and HIG
or any HIG Affiliate may assert any such right, interest or obligation in the
name of HIG or any HIG Affiliate. Notwithstanding the foregoing, it is agreed
that following any assignment by HIG of its obligations under this Agreement,
whether pursuant to an acquisition by a third party of stock of HIG or assets of
HIG or otherwise, adequate arrangements will be made thereafter for ascertaining
compliance with the conditions for the Deferred Payments under Section 1.3, such
that calculation of gross revenue from HIG Retail Sales is not negatively
affected.
SECTION 10.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Texas, County of Dallas, or in any Texas State court located in the
County of Dallas, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit himself, herself or itself to the personal jurisdiction of
any Federal court located in the State of Texas, County of Dallas, or any Texas
State court located in the County of Dallas, in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that he, she or it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that he, she or it will not bring any action relating to this Agreement
or any of the transactions contemplated by this
STOCK PURCHASE AGREEMENT - PAGE 36
Agreement in any court other than a Federal court located in the State of Texas,
County of Dallas, or a Texas State court located in the County of Dallas.
SECTION 10.10 Exhibits and Schedules. Any matter set forth on any
Schedule shall be deemed set forth on all other Schedules to the extent
relevant. Except when the context requires otherwise, any reference in this
Agreement to any Article, Section, clause, Schedule or Exhibit shall be to the
Articles, Sections and clauses of, and Schedules and Exhibits to, this
Agreement. The words "include," "includes" and "including" are deemed to be
followed by the phrase "without limitation." Any reference to the masculine,
feminine or neuter gender shall include such other genders and any reference to
the singular or plural shall include the other, in each case unless the context
otherwise requires. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. When a reference is made in this Agreement to a Section,
Exhibit or Schedule, such reference shall be to a Section of, or an exhibit or
Schedule to, this Agreement unless otherwise indicated.
STOCK PURCHASE AGREEMENT - PAGE 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
BBA:
▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, President
BUELL:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
HIG:
HOME INTERIORS & GIFTS, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
STOCK PURCHASE AGREEMENT - PAGE 38
EXHIBIT "A"
PROMISSORY NOTE
$2,025,026.15 December 31, 2002
FOR VALUE RECEIVED, HOME INTERIORS & GIFTS, INC., a Texas corporation
("Maker") promises to pay to the order of ▇▇▇▇▇▇ ▇▇▇▇▇, an individual residing
in Dallas, Texas ("Holder"), TWO MILLION TWENTY FIVE THOUSAND TWENTY SIX and
15/100 Dollars ($2,025,026.15), together with interest at the rate of one and
eighty-four one hundredths percent (1.84%) per annum from the date of this
Promissory Note ("Note") until paid. This Note is made and delivered in
connection with that certain Stock Purchase Agreement dated December 31, 2002
among Maker, Holder and ▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., a Texas corporation
(the "Agreement"), and the obligation of Maker to make the payments described in
this Note is subject to the terms and conditions of that Agreement.
Maker shall make three equal installments of principal and interest in
the amount of Seven Hundred Thousand and No/100 Dollars $700,000.00 each, which
shall be due on December 31, 2003, December 31, 2004, and December 30, 2005.
Such payments shall be made at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at
such other address as shall be specified by Holder.
Failure of Maker to make any payment due under this Note within five
(5) days of the date when due (provided payment is not excused under the
Agreement), which failure continues for thirty (30) days following receipt by
Maker of written notice thereof, shall constitute an Event of Default. Following
the occurrence of an Event of Default, all past due principal and interest shall
bear interest from maturity at the rate of eighteen percent (18%) per annum,
calculated, notwithstanding any other provision hereof, on a 365 or 366 day
year, as applicable, commencing on the date on which demand for payment shall be
made in writing and continuing through the date on which payment is made.
Maker shall have the right to prepay, at any time and from time to time
without premium or penalty, the entire unpaid principal balance of this Note or
any portion thereof, any such partial prepayment to be applied in inverse order
of maturity to the last maturing installments of principal.
Following the occurrence of an Event of Default, the Holder may at her
option declare the entire principal balance and accrued interest owing hereon
immediately due and payable. Failure to exercise this option shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent default.
Except as otherwise provided in this Note or the Agreement, each maker,
surety, endorser, guarantor and/or other party liable hereon, and all parties
assuming any payment hereof, severally waives grace, presentment, protest,
notice of every type, including, without limitation, notice of default, notice
of intention to accelerate, notice of acceleration, and notice of protest, and
consents that time of payment may be extended without notice. Each maker,
surety, endorser, guarantor and/or other party liable hereon agrees that their
liability on this Note shall be
PROMISSORY NOTE - PAGE SOLO
joint and several with that of any other party obligated hereon, shall not be
affected by any renewal or extension of this Note, by any indulgences, or by any
release or change in any security for this Note, and hereby consents to any and
all renewals, extensions, indulgences, releases or changes, regardless of the
number. It is agreed that the waiving by Holder of any default of Maker shall be
limited to the particular incident, and shall not be deemed to waive any other
default of the same or other covenants hereunder. It is hereby specially agreed
that if this Note is placed in the hands of an attorney for collection, or if
collected by suit or through bankruptcy proceedings, Maker agrees to pay
reasonable attorney's fees in addition to the principal and interest then due
hereon, and together with all costs of collection.
THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. VENUE FOR ANY ACTION ARISING
OUT OF THIS NOTE SHALL BE IN DALLAS COUNTY, TEXAS.
MAKER:
HOME INTERIORS & GIFTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
PROMISSORY NOTE - PAGE SOLO
EXHIBIT "B"
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (the "Agreement") is
entered into effective as of DECEMBER 31, 2002, between ▇▇▇▇▇▇ ▇▇▇▇▇ &
ASSOCIATES, INC., a Texas corporation (together with its successors and assigns,
the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company on the terms and conditions set forth
herein;
WHEREAS, the Company is a subsidiary of Home Interiors & Gifts, Inc., a
Texas corporation ("Home Interiors");
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. EMPLOYMENT PERIOD. The Company agrees to employ the Executive, and
the Executive agrees to be employed by the Company, in accordance with the terms
and conditions of this Agreement, for the period commencing as of the date of
this Agreement and continuing until December 31, 2007 (the "Employment Period");
provided, however, that such Employment Period shall be extended for successive
terms of one (1) year unless either party advises the other in writing, at least
ninety (90) days prior to the end of the initial term, or any annual extension
thereof, that it will not agree to extend this Agreement.
2. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall perform
the functions of President of the Company, and, in so doing, shall report to the
Board of Directors of the Company. The Executive shall have such powers and
duties as may from time to time be assigned or delegated to her by the Board of
Directors of the Company, or, in the absence of such assignment or delegation,
will have such powers and duties as are normally associated with and inherent
with such position.
(ii) During the Employment Period, excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote such time as the Board of Directors shall deem necessary (which shall
not be less than forty (40) hours during a regular work week), up to and
including substantially all of her business time, to the business and affairs of
the Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable best
efforts to perform faithfully, effectively and efficiently such
responsibilities. The Executive will use her reasonable best efforts to promote
the success of the Company's business, and will cooperate fully with the Board
of Directors of the Company and with the management of Home Interiors.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive, at such intervals and in accordance with such Company policies as
may be in effect from
EMPLOYMENT AGREEMENT - PAGE 1
time to time, an annual salary (pro rata for any partial year) equal to
$200,000.00, payable in equal installments no less often than monthly (the
"Annual Base Salary"), which Annual Base Salary shall be subject to appropriate
increase, as determined in the sole and absolute discretion of the Board of
Directors of the Company in the advancement of the best interests of the
Company.
(ii) Annual Bonus. The Executive shall be eligible to
participate in the Company's Key Employee Bonus Plan applicable to executives of
Home Interiors (the "Annual Bonus") for each fiscal year of Home Interiors
commencing with the fiscal year ending December 31, 2003 as approved by the
Board of Directors of Home Interiors in good faith, and such other criteria as
may be recommended by management and established by the Board of Directors of
Home Interiors from time to time. Each Annual Bonus (or portion thereof) shall
be paid in cash promptly following delivery to the Board of Directors of Home
Interiors of audited financial statements of Home Interiors and the Company for
the fiscal year for which the Annual Bonus (or pro rated portion) is earned or
awarded, unless electively deferred by the Executive pursuant to any deferral
programs or arrangements that the Company may make available to the Executive.
Any disputes regarding the award of an Annual Bonus shall be resolved and
conclusively determined by the Compensation Committee of the Board of Directors
of Home Interiors and neither the Executive nor the Company shall contest such
decision of such Board of Directors.
(iii) Stock Options. On or before June 30, 2003, Home Interiors
shall grant to the Executive non-qualified stock options to purchase 60,000
shares of Common Stock of Home Interiors at an exercise price of $19.42 per
share. The stock options will be evidenced by a separate Option Agreement and
will be granted pursuant to, and subject to the terms and conditions of Home
Interiors' 2002 Stock Option Plan for Key Executives. The options will vest and
become exercisable in the manner and at the times provided in the Option
Agreement.
(iv) Incentive, Savings and Retirement Plans. During the term of
the Executive's employment, the Executive shall also be entitled to participate
in all incentive, savings, and retirement plans, practices, policies and
programs applicable generally to other employees of Home Interiors ("Investment
Plans"), following adoption by the Company of Home Interiors' Investment Plans.
(v) Welfare Benefit Plans. During the term of the Executive's
employment, the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs ("Welfare Plans")
provided by Home Interiors (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs) to the extent
offered and applicable generally to other executives of the Company and to the
extent Executive is eligible under the terms of the Welfare Plans, following
adoption by the Company of Home Interiors' Welfare Plans.
(vi) Expenses. During the term of the Executive's employment,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive at the request of, or on behalf
of, the Company in the performance of the
EMPLOYMENT AGREEMENT - PAGE 2
Executive's duties pursuant to this Agreement, and in accordance with the
Company's policies, practices and procedures. The Executive must file expense
reports with respect to such expenses in accordance with the Company's policies.
(vii) Vacation and Holidays. During the term of the Executive's
employment, the Executive shall be entitled to paid vacation of three (3) weeks
per calendar year and paid holidays in accordance with the plans, policies,
programs and practices of Home Interiors for its employees, except as otherwise
provided in this Agreement. Such vacation shall be taken at such time or times
reasonably acceptable to the Company. In no case shall vacation time be in
excess of two (2) consecutive weeks.
3. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), the Company shall give to the
Executive no less than thirty (30) days written notice in accordance with
Section 11(b) hereof of its intention to terminate the Executive's employment
based upon Disability. In such event, the Executive's employment with the
Company shall terminate effective on the date specified in such notice (the
"Disability Effective Date"). For purposes of this Agreement, "Disability" shall
mean the Executive's inability to perform her duties and obligations hereunder
for a period of sixty (60) consecutive days or any sixty (60) days in any twelve
(12) month period due to mental or physical incapacity as determined by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Termination by the Company. The Company may terminate the
Executive's employment during the Employment Period without Cause, upon ten (10)
days prior written notice to Executive of Company's intention to do so. Further,
the Company may terminate the Executive's employment during the Employment
Period for Cause immediately upon written notice (following expiration of the
cure period, if any, described below) to Executive of Company's intention to do
so. For purposes of this Agreement, the phrase "for Cause" means: (i) the
Executive's material breach of this Agreement or any other document, agreement
or contract to which the Executive and the Company are a party, which
constitutes a material nonperformance by the Executive of her obligations and
duties hereunder or thereunder, as reasonably determined by the Board of
Directors of the Company, which is not remedied within thirty (30) days after
receipt of written notice from the Company specifying such breach; (ii) the
Executive's intentional failure to adhere to any material written policy of the
Company, which is not remedied within thirty (30) days after receipt of written
notice from the Company specifying such failure; (iii) the Executive's
appropriation (or attempted appropriation) of a material business opportunity of
the Company, including, without limitation, attempting to secure or securing,
any personal profit in connection with any transaction entered into on behalf of
the Company; (iv) the Executive's commission of (or attempt to commit) an act of
fraud, illegality, theft or willful misconduct toward the Company in the course
of employment with the Company that relates to the Company's assets, activities,
operations or other employees; (v) the Executive's conviction of, the indictment
for (or its procedural equivalent), or the entering of a
EMPLOYMENT AGREEMENT - PAGE 3
guilty plea or plea of no contest or deferred adjudication with respect to, a
felony, the equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment; (vi) the Executive's absence from her
duties without the consent of the Company's Board of Directors for more than ten
(10) consecutive business days for reasons other than vacation authorized under
this Agreement, illness or injury; (vii) a material breach by the Executive of
Section 6 or Section 9 hereof; or (viii) the intentional failure of the
Executive to carry out, or comply with, in any material respect any directive of
the Board of Directors consistent with the terms of this Agreement, which is not
remedied within thirty (30) days after receipt of written notice from the
Company specifying such failure.
(c) Voluntary Termination by Executive. Notwithstanding anything in
this Agreement to the contrary, the Executive's employment may be terminated
during the Employment Period by the Executive for any reason or no reason,
provided Executive gives three (3) months prior written notice to Company of
Executive's intention to do so.
(d) Termination by Executive for Good Reason. The Executive may
terminate Executive's employment during the Employment Period with Good Reason
immediately upon written notice (following expiration of the cure period
described below). For purposes of this Agreement the phrase "with Good Reason"
means the Company's material breach of this Agreement or of the Stock Purchase
Agreement between Home Interiors and Executive dated December 31, 2002 (the
"Stock Purchase Agreement"), which is not remedied within thirty (30) days after
receipt by Home Interiors of written notice from the Executive specifying with
reasonable detail the act or omission of which Executive complains. It is agreed
that assignment by the Board of Directors of duties to Executive that are
materially inconsistent with her position as President of the Company shall
constitute Good Reason, provided that such assignment of duties continues beyond
the cure period described above.
(e) Notice of Termination. Any termination by the Company (for Cause
or otherwise), or by the Executive, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
(f) Date of Termination. "Date of Termination" means (i) the date of
receipt of a Notice of Termination or any later date specified therein, and (ii)
if the Executive's employment is terminated by reason of death or Disability,
the date of death of the Executive or the Disability Effective Date, as the case
may be.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Termination by the Company Other Than For Cause or by Executive
for Good Reason. If the Company terminates the employment of Executive without
Cause (other than or in connection with death or Disability) or if the Executive
terminates Executive's employment with Good Reason during the Employment Period,
the Company shall pay to the Executive: (i) in a lump sum in cash within thirty
(30) days after the Date of Termination (1) the sum of the Executive's
applicable Annual Base Salary through the Date of Termination to the extent not
theretofore paid ("Accrued Obligations") and (2) any amount arising from
Executive's participation in, or benefits under, any Investment Plans ("Accrued
Investments"), which amounts shall be payable in accordance with the terms and
conditions of such Investment Plans;
EMPLOYMENT AGREEMENT - PAGE 4
(ii) monthly severance payments of $16,666.67, payable in accordance with the
Company's regular pay schedule, from the date of termination of employment
through the earlier to occur of the date twelve (12) months following the Date
of Termination and December 31, 2007; and (iii) any earned but unpaid Annual
Bonus in respect of any full fiscal year ended prior to the date the Executive's
employment is terminated, payable in a lump sum in cash at such time as such
Annual Bonus otherwise would be payable ("Accrued Bonus"), but not a prorated or
partial bonus with respect to the time period between the end of the previous
full fiscal year and the date the Executive's employment is terminated. An
election by the Company not to extend the initial term beyond its initial
expiration date, shall not be considered a termination without Cause for
purposes of this Section 4(a), and Company shall have no obligation to pay
severance pay to the Executive.
(b) Termination by the Company for Death or Disability. If the
Executive's employment is terminated by reason of the Executive's death or
Disability during the Employment Period, the Company shall pay to her legal
representatives: (i) in a lump sum in cash within thirty (30) days after the
Date of Termination the aggregate Accrued Obligations; (ii) the Accrued
Investments, which shall be payable in accordance with the terms and conditions
of the Investment Plans; and (iii) any Accrued Bonus, which shall be payable at
such time as such Annual Bonus otherwise would be payable. The Company shall
have no further payment obligations to the Executive or her legal
representatives under this Agreement.
(c) Termination by the Company for Cause or by Executive Without
Good Reason. If the Executive's employment shall be terminated by the Company
for Cause or by the Executive without Good Reason, during the Employment Period,
the Company shall have no further payment obligations to the Executive other
than for payment of Accrued Obligations, Accrued Investments (which, shall be
payable in accordance with the terms and conditions of the Investment Plans),
and Accrued Bonus (which shall be payable at such time as such Annual Bonus
otherwise would be payable).
5. FULL SETTLEMENT, MITIGATION. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. Company shall not be liable to Executive for any
damages in addition to the amounts payable under Section 4 arising out of the
termination of the Executive's employment, for any reason, prior to the end of
the Employment Period, provided, however, that the Company shall be entitled to
seek damages from the Executive for any breach of Sections 6, 7, or 9 hereof or
criminal misconduct.
6. NON-DISCLOSURE COVENANT.
(a) The Executive acknowledges that during the Employment Period and
as part of her employment, the Executive will be and has been afforded access to
confidential information of the Company and Home Interiors and its Affiliates.
For purposes of this Agreement, "Affiliates" shall be defined as corporations,
partnerships, limited liability companies or other entities controlled by or
under common control with Home Interiors, including, without limitation, the
Company, all of which have trade, business, and financial secrets and other
confidential and proprietary information, including, but not limited to, product
EMPLOYMENT AGREEMENT - PAGE 5
information, designs, formulas, and processes, sales and marketing information
and strategy, including unique marketing and sales methods and systems, and
vendor and manufacturer lists, customer lists, displayer and independent
contractor or manager list (collectively, the "Confidential Information") and
that such Confidential Information constitutes valuable, special and unique
property of the Company and Home Interiors. As defined herein, Confidential
Information shall not include (i) information that is generally known to other
persons or entities, or (ii) information required to be disclosed by the
Executive pursuant to a subpoena or court order, or pursuant to a requirement of
a governmental agency or law of the United States of America or a state thereof
or any governmental or political subdivision thereof; provided, however, that
the Executive shall take all reasonable steps, at the cost of the Company, to
prohibit disclosure pursuant to subsection (ii) herein. The Executive also
acknowledges that public disclosure of such Confidential Information could have
an adverse effect on the Company, Home Interiors, and their business and that
the provisions of this Section 6 are reasonable and necessary to prevent the
improper use or disclosure of Confidential Information.
(b) In consideration of the compensation and benefits to be paid or
provided to the Executive by the Company under this Agreement, the Executive
covenants that both during and after the Employment Period, the Executive shall
(i) hold Confidential Information in confidence; (ii) not disclose, disseminate,
publish or release (either directly or indirectly) Confidential Information to
any person (other than Company employees and other persons to whom the Company
has authorized the Executive to disclose such information and then only to the
extent that such Company employees and other persons authorized by the Company
have a need for such knowledge); and (iii) not use any Confidential Information
for the benefit of any person or entity other than the Company.
7. SURRENDER OF MATERIALS UPON TERMINATION. Upon termination of the
Executive's employment, for any reason, the Executive shall immediately return
to the Company all originals and/or copies, in whatever form, of any and all
Confidential Information and any other property of the Company and its
Affiliates, which are in the Executive's possession, custody or control, whether
or not provided by the Company.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company may assign this Agreement to any successor in
interest that agrees to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such succession
had taken place. The failure of any successor of Company to expressly assume to
perform this Agreement in writing shall, at the election of Executive, be deemed
to be a termination of this Agreement without cause.
EMPLOYMENT AGREEMENT - PAGE 6
9. NON-COMPETITION AND NON-SOLICITATION.
(a) The Executive acknowledges that: (i) the services to be
performed by her under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character; (ii) the Company's business is
international in scope and its products are marketed throughout the United
States and the world; (iii) the Company competes with other businesses both
nationally within the United States and internationally; and (iv) the provisions
of this Section 9 are reasonable and necessary to protect the Company's
business.
(b) In consideration of the acknowledgments by the Executive, and in
consideration of the compensation and benefits to be paid or provided to the
Executive by the Company, the Executive agrees that she will not, directly or
indirectly:
(i) during the Employment Period, except in the course of her
employment hereunder, and during the Post-Employment Period, engage
or invest in, own, manage, operate, finance, control, or participate
in the ownership, management, operation, financing, or control of,
be employed by, associated with, or in any manner connected with,
lend the Executive's name or any similar name to, lend the
Executive's credit to or render services or advice to, any business
whose products, services or activities compete in whole or in part
with the products, services or activities of the Company, Home
Interiors or its Affiliates, anywhere within the United States where
the Company, Home Interiors or its Affiliates conduct or market
their business or services;
(ii) whether for the Executive's own account or for the
account of any other person, at any time during the Employment
Period and the Post-Employment Period, solicit business of the same
or similar type being carried on by the Company, Home Interiors or
its Affiliates, from any customer of the Company, Home Interiors or
its Affiliates, whether or not the Executive had personal contact
with such person during and by reason of the Executive's employment
with the Company;
(iii) whether for the Executive's own account or the account
of any other person at any time during the Employment Period and the
Post-Employment Period, solicit, employ, or otherwise engage as an
employee, independent contractor, or otherwise, any person who is or
was at the time of such solicitation, employment or engagement an
employee, consultant or independent contractor of the Company or
Home Interiors or in any manner induce or attempt to induce any
employee of the Company, Home Interiors or its Affiliates to
terminate his/her employment with the Company, Home Interiors or its
Affiliates;
(iv) whether for the Executive's own account or the account of
any other person at any time during the Employment Period and the
Post-Employment Period, interfere with the Company's, Home
Interiors' or its Affiliates' relationship with any person,
including any person who is or was at any time during the Employment
Period, an employee, contractor, supplier, or customer of the
Company, Home Interiors or its Affiliates; or
EMPLOYMENT AGREEMENT - PAGE 7
(v) at any time during or after the Employment Period,
including the Post-Employment Period, disparage the Company, Home
Interiors or its Affiliates or any of their shareholders, partners,
members, other holders of equity in the Company or Home Interiors,
directors, officers, employees, or agents or any Affiliate of the
foregoing.
(c) If any covenant in this Section 9 is held to be unreasonable,
arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope, time, and geographic area, and such lesser
scope, time, or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, not arbitrary, and not against
public policy, will be effective, binding, and enforceable against the
Executive.
(d) The period of time applicable to any covenant in this Section 9
will be extended by the duration of any violation by the Executive of such
covenant.
(e) The Executive will, while the covenant under this Section 9 is
in effect, give written notice to the Company, within ten (10) days after
accepting any other employment or consulting arrangement, of the identity of the
Executive's new employer or contractor and all of the material duties and
services to be provided by Executive in such employment or retention, which
shall not require disclosure by Executive of any terms of compensation. The
Company may notify such new employer that the Executive is bound by this
Agreement and, at the Company's election, furnish such new employer with a copy
of this Agreement or relevant portion thereof.
(f) The term "Post-Employment Period" means the two (2) year period
beginning on the date of termination of the Executive's employment with the
Company, unless Executive's employment with the Company was terminated by the
Company without Cause or was terminated by the Executive for Good Reason, in
which case the Post-Employment Period means the one (1) year period beginning on
the date of termination of Executive's employment with the Company.
(g) In the event Company violates in any material respect its
obligations under Section 4 of this Agreement, or defaults in its obligations to
pay any amount due under Sections 1.1, 1.2 and 1.3 of the Stock Purchase
Agreement, and such violation or default continues for thirty (30) days
following receipt by Company of written notice of such violations, then
Executive's obligations under Section 9(b)(i) shall terminate. Further, in such
event, obligations of Executive under Sections 9(b)(ii) through 9(b)(iv) shall
terminate, but only as to those employees, customers and suppliers of the
Company that were employees, customers, contractors, consultants and suppliers
of the Company as of the Closing Date.
10. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this
Agreement shall not prohibit or restrict the Executive's entitlement to full
participation in the employee benefit and other plans or programs in which
employees of Home Interiors are eligible to participate, following adoption by
Company of such employee benefit and other plans and programs.
EMPLOYMENT AGREEMENT - PAGE 8
11. MISCELLANEOUS.
(a) Jurisdiction and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
conflict of laws principles. Any legal action to enforce or interpret any
provision of this Agreement shall be brought in Dallas County, Texas, as the
Company may elect. By execution and delivery of this Agreement, the Executive
accepts and consents to for herself, the jurisdiction of the Courts of the State
of Texas, County of Dallas.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to the Company: ▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
c/o Home Interiors & Gifts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With Mandatory
Copy to: Chair of Board of Directors
Home Interiors & Gifts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) Severability.If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a portion of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision there shall be added automatically as part of this
Agreement a provision as similar-in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
(d) Withholding. The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
EMPLOYMENT AGREEMENT - PAGE 9
(e) Obligations Contingent on Performance. The obligations of the
Company hereunder, including its obligation to pay the compensation provided for
herein, are contingent upon the Executive's performance of the Executive's
obligations hereunder.
(f) Waiver. Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
(g) Injunctive Relief and Additional Remedy. The Executive
acknowledges that money damages would be both incalculable and an insufficient
remedy for a breach of Section 6 or 9 by the Executive and that any such breach
would cause the Company irreparable harm. Accordingly, the Company, in addition
to any other remedies at law or in equity it may have, shall be entitled,
without the requirement of posting of bond or other security, to equitable
relief, including injunctive relief and specific performance, in connection with
a breach of Section 6 or 9 by the Executive. If the Executive breaches in any
material respect any of the material provisions of Section 6 or 9, following
termination of Executive's employment, the Company will have the right to cease
making any payments otherwise due to the Executive under this Agreement.
(h) Entire Agreement; Amendments. The provisions of this Agreement
constitute the complete understanding and agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between or among the parties hereto. This
Agreement may not be amended orally, but only by an agreement in writing signed
by the parties hereto or their respective successors and legal representatives.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same Agreement.
(j) Covenants of Sections 6 and 9 are Essential and Independent
Covenants. The covenants by the Executive in Sections 6 and 9 are essential
elements of this Agreement, and without the Executive's agreement to comply with
such covenants, the Company would not have entered into this Agreement or
employed or continued the employment of the Executive. The Company and the
Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Company.
(k) Section Headings, Construction. The captions or headings of
Sections in this Agreement are provided for convenience only and are not part of
the provisions hereof and shall have no force or effect. Whenever the terms
"hereof', "hereby", "herein", or words of similar import are used in this
Agreement they shall be construed as referring to this Agreement in its entirety
rather than to a particular section or provision, unless the context
specifically indicates to the contrary. Any reference to a particular "Section"
or "paragraph" shall be construed as referring to the indicated section or
paragraph of this Agreement unless the context
EMPLOYMENT AGREEMENT - PAGE 10
indicates to the contrary. The use of the term "including" herein shall be
construed as meaning "including without limitation."
EXECUTED to be effective as of December 31, 2002.
EXECUTIVE:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
COMPANY:
▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
GUARANTEE OF PERFORMANCE
Home Interiors hereby guarantees the payment obligations of the Company
to the Executive set forth in this Agreement, recognizing that it is a direct or
indirect beneficiary of its terms.
HOME INTERIORS & GIFTS, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
EMPLOYMENT AGREEMENT - PAGE 11
EXHIBIT "C"
Opinion of Counsel for Buell
See attached.
[▇▇▇▇▇▇ & HANGER, L.L.P. LETTERHEAD]
December 31, 2002
Home Interiors & Gifts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
RE: ▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
Ladies and Gentlemen:
We have acted as counsel for ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Shareholder") in
connection with that certain Stock Purchase Agreement (together with all
schedules and exhibits thereto, the "Agreement") dated as of December 31, 2002,
by and between Home Interiors & Gifts, Inc., a Texas corporation ("HIG"),
▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc., a Texas corporation ("BBA"), and the
Shareholder, pursuant to which the Shareholder has sold to HIG, and HIG has
purchased from the Shareholder, all of the issued and outstanding shares (the
"Shares") of capital stock of BBA. We are providing this opinion pursuant to
Section 6.2(d) of the Agreement. Capitalized terms utilized and not otherwise
defined herein have the meanings given to them in the Agreement.
In connection with the delivery of this opinion, we have examined
originals or copies, certified or otherwise identified to our satisfaction, of
the following documents (the "Transaction Documents"):
1. the Agreement;
2. the Buell Agreement.
We have also examined originals, executed counterparts or copies of
such other agreements, corporate records, instruments and certificates,
certificates of public authorities and such matters of law as we have deemed
necessary for the purpose of rendering this opinion. To the extent we deemed
necessary for purposes of this opinion, we have relied upon: (i) the statements
and representations of BBA and the Shareholder as to factual matters; (ii) the
corporate records provided to us by BBA and the Shareholder; and (iii)
certificates and other documents obtained from public officials. We have assumed
that any certificate, representation, telegram or other document on which we
have relied that was given or dated earlier than the date of this letter
continued to remain accurate, insofar as relevant to such opinions, from such
earlier date through and including the date of this letter. We have further
relied as to factual matters on the representations and warranties contained in
the Transaction Documents, and we have
Home Interiors & Gifts, Inc.
December 31, 2002
Page 2
assumed the completeness and accuracy of all such representations and warranties
as to factual matters.
We have assumed the genuineness of all signatures, the legal capacity
of all individuals who have executed the Transaction Documents and all other
documents we have reviewed, that the Shareholder holds the requisite title and
rights to the Shares, free and clear of all liens,] the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified, photostatic, reproduced or
conformed copies. We have also assumed that the Transaction Documents have been
duly authorized, executed and delivered by HIG (and BBA, as to the Buell
Agreement) and are enforceable in accordance with their terms against HIG (and
BBA, as to the Buell Agreement) and that the execution, delivery and performance
of the Transaction Documents by HIG (and BBA, as to the Buell Agreement) does
not and will not result in a breach of, or constitute a default under, any
agreement, instrument or other document to which HIG (or BBA, as to the Buell
Agreement) is a party or any order, judgment, writ or decree applicable to HIG
(or BBA, as to the Buell Agreement or to which HIG's (or BBA's, as to the Buell
Agreement) property is subject.
We have been retained to represent the Shareholder solely with respect
to the transactions contemplated by the Transaction Documents and do not
represent the Shareholder or BBA on a general basis. Whenever our opinion with
respect to factual matters is indicated to the best of our knowledge, we are
referring to the actual knowledge of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, who are the ▇▇▇▇▇▇ & Hanger, L.L.P. attorneys who have
represented the Shareholder during the course of this transaction. Except as
expressly set forth herein, we have not undertaken any independent investigation
to determine the existence or absence of such facts, and no inference as to the
knowledge of the existence or absence of such facts should be drawn from such
representation.
Based on the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
1. BBA is a corporation organized, validly existing and in good
standing under the laws of the State of Texas. BBA has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as currently conducted.
2. The Agreement has been duly executed and delivered by BBA and the
Transaction Documents have been duly executed and delivered by the Shareholder.
Assuming the valid execution and delivery by HIG and BBA (as to the Buell
Agreement), the Transaction Documents constitute legal, valid and binding
agreements of BBA (as to the Agreement only) and the Shareholder, enforceable
against them in accordance with their terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
and the application of general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and further subject
to the qualifications set forth in the next succeeding sentences. We express no
Home Interiors & Gifts, Inc.
December 31, 2002
Page 3
opinion herein as to the validity or enforceability of: (i) the non-competition
undertakings; or (ii) any provision of the Transaction Documents to the extent
that such provision purports to waive any rights, remedies or defenses. The
opinion expressed in this paragraph is also subject to the qualification that
certain of the remedial, waiver and other provisions of the Transaction
Documents may not be enforceable; but such enforceability will not, in our
judgment, render the Transaction Documents invalid as a whole, or substantially
interfere with the realization of the principle legal benefits provided by the
Transaction Documents, except to the extent of any procedural delay which may
result therefrom.
3. The Shareholder has the power to sell, assign, transfer and deliver
the Acquired Stock to HIG as provided in the Agreement. All corporate
proceedings necessary to be taken by BBA in connection with the transactions
provided for in the Agreement and necessary to make the same effective have been
duly and validly taken.
4. The authorized capital stock of BBA consists of 1,000,000 shares of
common stock, $1.00 par value, of which 1,000 shares are issued and outstanding
and constitute the "Acquired Stock." All of the Acquired Stock has been duly
authorized, is validly issued, fully paid and nonassessable and is not issued in
violation of or subject to any preemptive rights of the Shareholder, or to our
knowledge, subject to any shareholders' agreements, voting trust agreements, or
other similar agreements. To the best of our knowledge, the Shareholder owns the
Acquired Stock, free and clear of all liens, claims, encumbrances and
restrictions of any kind. Upon endorsement by the Shareholder of the Acquired
Shares and delivery to HIG of a certificate representing the Acquired Stock, in
accordance with the terms of and for the consideration specified in the
Agreement, HIG is acquiring record and beneficial ownership of the Acquired
Stock, free and clear of all liens, claims, encumbrances and restrictions of any
kind.
5. To our knowledge, there are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements of any character or nature whatsoever under which BBA or the
Shareholder is, are or may become obligated to issue, assign or transfer any
shares of BBA's capital stock.
6. Except as described in the Agreement, to the best of our knowledge,
based solely on the representations of BBA and the Shareholder contained in the
Agreement, neither BBA nor the Shareholder is a party to any pending suit,
action or investigation by any governmental body, or legal, administrative or
arbitration proceeding.
7. Except as described in the Transaction Documents, neither the
execution, delivery or performance of the Transaction Documents by the
Shareholder, nor the consummation by the Shareholder of the transactions
contemplated thereby will: (a) conflict with or result in the breach of any
provision of the Articles of Incorporation or Bylaws of BBA; (b) constitute or
result in the breach of, conflict with or give rise to a right of forfeiture,
termination, cancellation or acceleration with respect to, any term, condition
or provision of, any note, bond, mortgage, indenture, license, or other material
contract or obligation listed, identified or described in the Agreement as one
to which BBA or the Shareholder is a party or by which BBA or the
Home Interiors & Gifts, Inc.
December 31, 2002
Page 4
Shareholder is subject, except for such conflicts, breaches or defaults as to
which written waivers or consents have been obtained; or (c) violate in any
material respect any law, statute, regulation, judgment, order, writ,
injunction, or decree applicable to BBA or the Shareholder, or the business,
properties or assets of BBA.
8. No consent, order, authorization, qualification, or approval of, or
exemption by or filing with any governmental, public, or regulatory body or
authority is required in connection with the execution, delivery and performance
by BBA and the Shareholder of the Transaction Documents.
The foregoing opinions are limited to the laws and regulations of the
United States and the State of Texas, and we have not considered and express no
opinion on the laws or regulations of any other jurisdiction. This opinion is
rendered only with respect to the laws and the regulations thereunder which are
in effect as of the date hereof that may affect the validity of any of the
opinions expressed therein. This opinion (i) is rendered as of the date hereof,
and we undertake no, and hereby disclaim, any obligation to advise you of any
changes or any new developments which might affect any matters or opinions set
forth herein, and (ii) is limited to the matters stated herein and no opinions
may be inferred or implied beyond the matters expressly stated herein.
This opinion is provided for the purpose of complying with the
requirements of Section 6.2(d) of the Agreement and is for the information of
the addressee hereof and its counsel and accountants. Other than as provided for
above, this opinion is not to be quoted in whole or in part or otherwise
referred to, nor is it to be filed with any governmental agency or other person,
without our prior written consent. Other than HIG and its counsel and
accountants as set forth in this paragraph, no one is entitled to rely upon the
opinions expressed herein.
Very truly yours,
▇▇▇▇▇▇ & HANGER, L.L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, a Partner
EXHIBIT "D"
December 31, 2002
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: STOCK PURCHASE AGREEMENT (THE "AGREEMENT") DATED AS OF
DECEMBER 31, 2002, AMONG ▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC., A
TEXAS CORPORATION (THE "BUYER"), ▇▇▇▇▇▇ ▇▇▇▇▇ ("BUELL"), AND
HOME INTERIORS & GIFTS, INC., A TEXAS CORPORATION ("BUYER")
Dear ▇▇. ▇▇▇▇▇:
We have acted as legal counsel to Buyer in connection with the
transactions evidenced by the Agreement. This letter (this "Opinion Letter") is
being furnished to you pursuant to Section 6.3(d) of the Agreement. Unless
otherwise defined, each capitalized term shall have the meaning attributed to it
in the Agreement. In connection with this Opinion Letter, we have reviewed the
following documents (the "Transaction Documents"):
1. the Agreement;
2. the Note; and
3. the Buell Agreement.
In connection with this Opinion Letter, we have also examined originals
or copies, certified or otherwise identified to our satisfaction as true copies,
of the Articles of Incorporation and the Bylaws of the Buyer, as amended to
date, and such additional records, agreements and other instruments and
certificates or comparable documents of public officials and/or of officers and
representatives of the Buyer, and have made such inquiries of such officers and
representatives as we have deemed relevant and necessary, as the basis for the
opinions hereinafter set forth. In such examination, we have assumed: (i) the
genuineness of all signatures, other than the signatures on behalf of Buyer;
(ii) the authenticity of all documents or other papers submitted to us as
originals, and the conformity to authentic original documents of all documents
or other papers submitted to us as certified, conformed or photo static copies
thereof; and (iii) the legal capacity of each natural person executing the
Transaction Documents. In addition, we are unaware of the existence of any fraud
or dishonesty with respect to any of the
▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
December 31, 2002
Page 2
matters relevant to our opinions and, accordingly, we have assumed that no fraud
or dishonesty exists with respect to any of the matters relevant to our
opinions.
In rendering the opinions expressed below, we have assumed (i) the
valid existence in the jurisdiction of its organization of each party to the
Transaction Documents other than the Buyer, (ii) the due authorization,
execution and delivery of the Transaction Documents by the parties thereto other
than the Buyer and BBA, as to the Buell Agreement, (iii) the power and authority
of each party to the Transaction Documents, other than the Buyer and BBA, as to
the Buell Agreement, to execute, deliver and perform the same without violating
its certificate of incorporation or bylaws or any other organizational or
governing documents or any law or governmental rule or regulation applicable to
it, (iv) that the execution, delivery and performance of the Transaction
Documents by each party thereto, other than the Buyer and BBA, as to the Buell
Agreement, will not conflict with, constitute a default under or result in a
breach of any requirement of law or any contractual obligation of any such
party, (v) the genuineness of all signatures and the authority of all persons
signing each of the Transaction Documents on behalf of the parties thereto,
other than the Buyer and BBA, as to the Buell Agreement, (vi) the authenticity
of all documents submitted to us as certified, conformed or photo static copies
and the authenticity of the originals of such copies, and (vii) the legal
capacity of each natural person executing the Transaction Documents.
As to certain factual matters, we have, to the extent deemed
appropriate by us, relied upon certificates of officers of the Buyer and the
representations and warranties of the Buyer contained in the Transaction
Documents (including the Schedules and Exhibits thereto), and we have not
independently verified the information contained in such certificates or the
Transaction Documents.
As used herein, "to our knowledge" means the conscious awareness
(without any independent investigation) of facts or other information by any
lawyer in our Firm actively involved in the negotiation of the transactions
described herein. The term "to our knowledge" specifically excludes all factual
matters that would be known to us by constructive, implied or imputed knowledge.
Based upon the foregoing and subject to the qualifications hereinafter
set forth, we are of the opinion that:
1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and Buyer has all requisite power
and authority to own its assets and to carry on its business.
▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
December 31, 2002
Page 3
2. Buyer has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents; the
execution and delivery of the Transaction Documents and the other agreements,
documents and instruments contemplated thereby to be executed and delivered by
Buyer and the consummation of the transactions contemplated by the Transaction
Documents have been duly authorized and approved by the Board of Directors of
Buyer. The Transaction Documents have been duly and validly executed and
delivered by Buyer and constitute valid and binding obligations of Buyer,
enforceable in accordance with their respective terms. BBA has all requisite
corporate power and authority to execute, deliver and perform its obligations
under the Buell Agreement; the execution and delivery of the Buell Agreement and
the performance by BBA of its obligations thereunder have been duly authorized
and approved by the Board of Directors of BBA. The Buell Agreement has been duly
and validly executed and delivered by BBA and constitutes a valid and binding
obligation of BBA, enforceable in accordance with its terms.
3. The execution and delivery of the Transaction Documents by the Buyer
does not, and consummation by Buyer of the transactions contemplated by the
Transaction Documents will not conflict with any provision of the Articles of
Incorporation or Bylaws of Buyer. The execution and delivery of the Buell
Agreement by BBA does not, and the performance by BBA of it obligations
thereunder will not conflict with any provision of the Articles of Incorporation
or Bylaws of BBA.
4. To our knowledge, Buyer is not a party to, and the business and
assets of Buyer are not the subject of or affected by, any pending or threatened
suit, claim, action or litigation by or with any party or any administrative,
arbitration or other governmental proceeding, investigation or inquiry, which,
if determined adversely to Buyer, would prevent the consummation of any of the
transactions contemplated by the Transaction Documents, nor, to our knowledge,
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitration outstanding against Buyer which, insofar as reasonably can
be foreseen, could prevent the consummation of any of the transactions
contemplated by the Transaction Documents.
The opinions contained herein are subject to the following limitations
and qualifications:
(a) The validity, binding effect and enforceability of, and
the rights and remedies set forth in and the effect of, the Transaction
Documents may be limited by and subject to (1) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights and remedies of creditors; (2) the effect of
general principles of equity, whether applied by a court of law or
equity; (3) the possible unenforceability of provisions requiring
indemnification for, or providing exculpation, release, or exemption
from liability for, action or inaction, to the extent such action or
▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
December 31, 2002
Page 4
inaction involves negligence or willful misconduct or to the extent
otherwise contrary to public policy; (4) the possible unenforceability
of provisions that waivers or consents by a party may not be given
effect unless in writing or in compliance with particular requirements
or that a person's course of dealing, course of performance, or the
like or failure or delay in taking action may not constitute a waiver
of related rights or provisions or that one or more waivers may not
under certain circumstances constitute a waiver of other matters of the
same kind; (5) the effect of a course of dealing, course of
performance, or the like, that would modify the terms of an agreement
or the respective rights or obligations of the parties under an
agreement; (6) the possible unenforceability of provisions that
enumerated remedies are not exclusive or that a party has the right to
pursue multiple remedies without regard to other remedies elected or
that all remedies are cumulative; and (7) the possible unenforceability
of provisions permitting the exercise, under certain circumstances, of
rights without notice or without providing opportunity to cure failures
to perform.
(b) We have assumed the enforceability of the Transaction
Documents against Buell and the enforceability of the Agreement against
BBA.
We are members only of the Bar of the State of Texas, and we express no
opinion as to any questions of law other than with respect to laws of the State
of Texas and federal laws in effect on the date hereof, and no opinion is
expressed herein as to any other matters governed by the laws of any other
jurisdiction.
The opinions contained herein are limited to those matters expressly
covered by numbered Paragraphs 1 through 4 above; no opinion is to be implied in
respect of any other matter. The opinions set forth in numbered Paragraphs 1
through 4 are as of the date hereof and we disclaim any undertaking to update
this letter or otherwise advise you as to any changes of law or fact which may
hereafter be brought to our attention.
This letter and the opinions contained herein are furnished by us as
counsel to the Buyer in connection with the transactions described above and are
solely for the benefit of ▇▇▇▇▇▇ ▇▇▇▇▇ and her legal counsel and accountants and
are not to be made available to or relied upon in any manner by any other
person, firm, or entity or for any other purpose without our prior written
consent.
▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
December 31, 2002
Page 5
Very truly yours,
▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
