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EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
by and among
THE NAMED SELLERS
and
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
and
MIAMI METAL PRODUCTS, INC.
and
INDUSTRIAL MUEBLERA POMPEII de MEXICO, S.A. de C.V.
dated as of November 23, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS..............................................................................1
2. PURCHASE AND SALE OF COMPANY SHARES AND IMP SHARES......................................10
(a) BASIC TRANSACTION..............................................................11
(b) PURCHASE PRICE.................................................................11
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE.......................11
(d) FUNDED INDEBTEDNESS ...........................................................12
(e) EARNOUT........................................................................12
(f) POST-CLOSING COMPANY PURCHASE PRICE ADJUSTMENT.................................16
(g) THE CLOSING....................................................................18
(h) DELIVERIES AT THE CLOSING......................................................18
(i) TRANSFER TAXES.................................................................18
(j) NET CASH PAYMENT TO SELLERS....................................................18
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...........................................19
(a) CAPACITY.......................................................................19
(b) BINDING OBLIGATION.............................................................19
(c) NONCONTRAVENTION...............................................................19
(d) OWNERSHIP OF COMMON STOCK AND IMP STOCK .......................................19
(e) BROKERS' FEES..................................................................20
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE COMPANY AND IMP.......20
(a) ORGANIZATION/POWER AND AUTHORITY TO CONDUCT BUSINESS ..........................20
(b) AUTHORIZATION OF TRANSACTION...................................................20
(c) NONCONTRAVENTION...............................................................20
(d) BROKERS' FEES..................................................................21
(e) CAPITALIZATION.................................................................21
(f) FINANCIAL STATEMENTS...........................................................22
(g) ABSENCE OF CERTAIN DEVELOPMENTS................................................22
(h) UNDISCLOSED LIABILITIES........................................................24
(i) LEGAL COMPLIANCE...............................................................24
(j) COMPANY AND IMP PERMITS........................................................24
(k) TAX MATTERS....................................................................25
(l) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND IMP........................26
(m) TITLE TO TANGIBLE ASSETS OTHER THAN REAL PROPERTY INTERESTS....................27
(n) REAL PROPERTY..................................................................27
(o) INTELLECTUAL PROPERTY..........................................................28
(p) CONTRACTS......................................................................29
(q) POWERS OF ATTORNEY.............................................................29
(r) INSURANCE......................................................................29
(s) LITIGATION.....................................................................29
(t) LABOR RELATIONS................................................................30
(u) EMPLOYEE BENEFITS..............................................................30
(v) ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.......................................32
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(w) CUSTOMERS AND SUPPLIERS........................................................33
(x) INVENTORY......................................................................33
(y) ACCOUNTS RECEIVABLE............................................................33
(z) LIST OF ACCOUNTS...............................................................34
(aa) PRODUCTS LIABILITY.............................................................34
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................34
(a) ORGANIZATION...................................................................34
(b) AUTHORIZATION OF TRANSACTION...................................................34
(c) NONCONTRAVENTION...............................................................34
(d) BROKERS' FEES..................................................................34
(e) ACQUISITION OF SHARES FOR INVESTMENT...........................................35
5. PRE-CLOSING COVENANTS...................................................................35
(a) GENERAL........................................................................35
(b) NOTICES AND CONSENTS...........................................................35
(c) OPERATION OF BUSINESS .........................................................35
(d) PRESERVATION OF BUSINESS ......................................................35
(e) FULL ACCESS ...................................................................36
(f) NOTICE OF DEVELOPMENTS.........................................................36
(g) NO ADDITIONAL REPRESENTATIONS OR WARRANTIES....................................36
6. POST-CLOSING COVENANTS..................................................................36
(a) GENERAL........................................................................36
(b) SECTION 338(h)(10) ELECTION....................................................37
(c) TRANSITION.....................................................................38
(d) LITIGATION SUPPORT.............................................................38
(e) NONCOMPETITION.................................................................38
(f) NON-SOLICITATION...............................................................39
(g) CONFIDENTIALITY................................................................39
7. NO SHOP.................................................................................40
8. CONDITIONS TO OBLIGATION TO CLOSE.......................................................40
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER......................................40
(b) CONDITIONS TO OBLIGATION OF THE SELLERS........................................41
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.................................................42
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................42
(b) INDEMNIFICATION................................................................43
(c) TREATMENT OF INDEMNIFICATION PAYMENTS..........................................46
(d) EXCLUSIVE REMEDY...............................................................46
(e) ASSIGNMENT BY PURCHASER........................................................46
(f) NO CONTRIBUTION FROM COMPANY OR IMP............................................46
10. DISPUTE RESOLUTION......................................................................46
(a) DISPUTE DEFINED................................................................46
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(b) DISPUTE RESOLUTION PROCEDURES..................................................47
(c) PROVISIONAL REMEDIES...........................................................48
(d) TOLLING OF STATUTE OF LIMITATIONS..............................................48
(e) PERFORMANCE TO CONTINUE........................................................48
(f) EXTENSION OF DEADLINES.........................................................48
(g) ENFORCEMENT....................................................................48
(h) COSTS..........................................................................48
11. ADDITIONAL AGREEMENTS...................................................................48
(a) PRODUCT RETURNS................................................................49
(b) SELLERS' GUARANTEE OF ACCOUNTS RECEIVABLE......................................49
(c) VACATION AND HOLIDAY ACCRUAL...................................................50
(d) EPCRA FILINGS..................................................................51
(e) LITIGATION.....................................................................51
12. TERMINATION.............................................................................51
(a) TERMINATION OF AGREEMENT.......................................................51
(b) EFFECT OF TERMINATION..........................................................52
13. WINSLOEW FURNITURE GUARANTY.............................................................52
14. MISCELLANEOUS...........................................................................52
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS........................................52
(b) NO THIRD-PARTY BENEFICIARIES...................................................52
(c) ENTIRE AGREEMENT...............................................................52
(d) SUCCESSION AND ASSIGNMENT......................................................52
(e) COUNTERPARTS...................................................................53
(f) HEADINGS.......................................................................53
(g) NOTICES........................................................................53
(h) GOVERNING LAW; VENUE...........................................................54
(i) AMENDMENTS AND WAIVERS.........................................................54
(j) SEVERABILITY...................................................................55
(k) EXPENSES.......................................................................55
(l) CONSTRUCTION...................................................................55
(m) INCORPORATION OF DISCLOSURE SCHEDULE...........................................55
(n) EQUITABLE REMEDIES.............................................................55
(o) WAIVER OF JURY TRIAL...........................................................56
(p) PREVAILING PARTIES.............................................................56
Exhibit A -- Escrow Agreement
Exhibit B -- Employment Agreement With ▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit C -- Consulting Agreement With ▇▇▇ ▇▇▇▇▇▇
Exhibit D -- Lease Amendment With Nitram Partners, Ltd.
Exhibit E -- Joinder Agreement With ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of November __, 1998,
by and among WINSTON FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation
(the "PURCHASER"), MIAMI METAL PRODUCTS, INC., D/B/A POMPEII FURNITURE
INDUSTRIES, a Florida corporation (the "COMPANY"), INDUSTRIAL MUEBLERA POMPEII
DE MEXICO, S.A. DE C.V., a Mexican corporation ("IMP") and the following selling
shareholders, ▇▇▇ ▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST
AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇
RETAINED ANNUITY TRUST AGREEMENT II, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT
INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT III, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY
TRUST AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇
▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT II, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND
NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT III
(collectively, the "SELLERS" and individually, a "SELLER"). The Purchaser, the
Company, IMP and the Sellers are each referred to in this Agreement as a "PARTY"
and collectively as the "PARTIES". WinsLoew Furniture, Inc. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
are parties to this Agreement solely for the purpose of agreeing to the
provisions set forth above their respective signatures.
The Sellers directly own all of the outstanding capital stock
of the Company. ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ directly own all of the outstanding
capital stock of IMP.
This Agreement contemplates a transaction in which (i) the
Purchaser will purchase from the Sellers, and the Sellers will sell to the
Purchaser, all of the outstanding capital stock of the Company and (ii) the
Purchaser will purchase from ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇, and ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ will sell to the Purchaser, all of the outstanding capital stock of IMP.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCOUNTING FIRM" has the meaning set forth in section 2(e)(vi) below.
"ACCOUNTS RECEIVABLE" means all of the Company's accounts, instruments,
drafts, acceptances and other forms of receivables and all rights earned under
the Company's contracts to sell goods or render services, including, but not
limited to, rights to any letters of credit which back any Account Receivable.
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"ADJUSTED EBITAM" means has the meaning set forth in section 2(e)(iv)
below.
"ADJUSTED EBITAM STATEMENT" has the meaning set forth in section
2(e)(vi) below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
section 1504 of the Code.
"ALLOCATION SCHEDULE" has the meaning set forth in section 6(b)(iv)
below.
"ASSIGNED RECEIVABLES" has the meaning set forth in section 11(b)(ii)
below.
"AUTHORITY" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"AVAILABLE CASH" means all Cash held by the Company as of midnight on
the day before the Closing Date less (i) an amount of Cash necessary to cover
outstanding checks (which are not otherwise stale) which have been mailed or
otherwise delivered by the Company but have not cleared and (ii) the amount
necessary to comply with the provisions of section 8(a)(xiv).
"BUSINESS OF THE COMPANY AND IMP" means the manufacture of high-end
metal-frame furniture for residential and hospitality industries.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CERCLA" has the meaning set forth in section 3B(v)(vi) below.
"CLOSING" has the meaning set forth in section 2(g) below.
"CLOSING BALANCE SHEET" has the meaning set forth in section 2(f)(i)
below.
"CLOSING DATE" has the meaning set forth in section 2(g) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
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"COMPANY COMMON STOCK" means the Class A Common Stock, $.10 par value,
and the Class B Common Stock, $.10 par value, of the Company.
"COMPANY PERMITS" has the meaning set forth in section 3B(j)(i) below.
"COMPANY PRO RATA SHARE" means with respect to any Seller a fractional
multiplier of which the numerator is the number of shares of Company Common
Stock held by such Seller and the denominator is the total number of shares of
Company Common Stock held by all Sellers.
"COMPANY PURCHASE PRICE" has the meaning set forth in section 2(b)(i)
below.
"COMPANY PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
section 2(f)(iii) below.
"COMPANY PURCHASE PRICE ADJUSTMENT ESCROW ACCOUNT" has the meaning set
forth in section 2(c)(ii) below
"COMPANY SHARES" has the meaning set forth in section 2(a) below.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in section 121(b)
below.
"CONFIDENTIAL INFORMATION" means data and information relating to the
Business of the Company and IMP (which does not rise to the level of a Trade
Secret) which is not generally known to their competitors and which (a) derives
economic value, actual or potential, from not being known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information does not include any data or information that has been voluntarily
disclosed to the public by the Company or IMP or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means.
"CONSULTING AGREEMENT" means the Consulting Agreement to be entered
into between the Purchaser and ▇▇▇ ▇▇▇▇▇▇ in the forms of EXHIBIT C hereto.
"DEDUCTIBLE" has the meaning set forth in section 9(b)(i) below.
"DEFENSE COUNSEL" has the meaning set forth in section 9(b)(v) below.
"DEFENSE NOTICE" has the meaning set forth in section 9(b)(v) below.
"DETERMINATION NOTICE" has the meaning set forth in section 2(e)(ii)
below.
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"DISCLOSURE SCHEDULE" means the Disclosure Schedule accompanying this
Agreement.
"DISPUTE" has the meaning set forth in section 10(a) below.
"EARNOUT" has the meaning set forth in section 2(e)(i) below.
"EARNOUT ACTUAL AMOUNT" has the meaning set forth in section
2(e)(vi)(C) below.
"EARNOUT HIGH AMOUNT" has the meaning set forth in section 2(e)(vi)(B)
below.
"EARNOUT LOW AMOUNT" has the meaning set forth in section 2(e)(vi)(A)
below.
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in section 3B(u)
below.
"EMPLOYEE BENEFIT PLAN REPRESENTATIONS AND WARRANTIES" has the meaning
set forth in section 9(a) below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
section 3(1).
"EMPLOYMENT AGREEMENT" means the Employment Agreement to be entered
into between the Purchaser and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ in the form of EXHIBIT B hereto.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means all federal,
state, local, regional and foreign statutes, regulations and ordinances
concerning workplace health and safety and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes.
"ENVIRONMENTAL CLAIM" means any written notice or claim by any Person
or any Authority alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence,
release or threatened release into the environment, of any Material of
Environmental Concern at any location, whether or not owned, leased or operated
by the Company or IMP, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES" has the meaning set
forth in section 9(a) below.
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"EPCRA" has the meaning set forth in section 3B(v)(ii) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" means the Escrow Agreement, in the form of EXHIBIT A
hereto, to be entered into on the Closing Date by the Company, the Sellers, the
Sellers' Representative and the Escrow Agent.
"ESCROW AGENT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW FUND" has the meaning set forth in section 2(c)(ii) below.
"FINAL ADJUSTED EBITAM DETERMINATION DATE" has the meaning set forth in
section 2(e)(vi) below.
"FINAL CLOSING BALANCE SHEET DETERMINATION DATE" has the meaning set
forth in section 2(f)(ii) below.
"FINANCIAL STATEMENTS" has the meaning set forth in section 3B(f)
below.
"FUNDED INDEBTEDNESS" means the aggregate amount (including the current
portions thereof) of all (i) indebtedness for money borrowed from others and
purchase money indebtedness of the Company and IMP, (ii) indebtedness of the
type described in clause (i) above guaranteed, directly or indirectly, in any
manner by the Company or IMP, or in effect guaranteed, directly or indirectly,
in any manner by the Company or IMP, through an agreement, contingent or
otherwise, to supply funds to, or in any other manner invest in, the debtor, or
to purchase indebtedness, or to purchase and pay for property if not delivered
or to pay for services if not performed, primarily for the purpose of enabling
the debtor to make payment of the indebtedness or to assure the owners of the
indebtedness against loss, but excluding endorsements of checks and other
instruments in the ordinary course, (iii) indebtedness of the type described in
clause (i) above secured by any Lien upon property owned by the Company or IMP,
even though neither the Company nor IMP has in any manner become liable for the
payment of such indebtedness and (iv) interest expense accrued but unpaid, and
all prepayment premiums, on or relating to any of such indebtedness.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"▇. ▇▇▇▇▇▇" has the meaning set forth in the preface above.
"GENERAL INDEMNIFICATION ESCROW ACCOUNT" has the meaning set forth in
section 2(c)(ii) below
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"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"IMP" has the meaning set forth in the preface above.
"IMP PERMITS" has the meaning set forth in section 3B(j)(ii) below.
"IMP PRO RATA SHARE" means with respect to ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ a
fractional multiplier of which the numerator is the number of shares of IMP
Stock held by such Person and the denominator is the total number of shares of
IMP Stock held by both ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇.
"IMP PURCHASE PRICE" has the meaning set forth in section 2(b)(ii)
below.
"IMP SHARES" has the meaning set forth in section 2(a) below.
"IMP STOCK" means the Series B Stock of IMP.
"INDEMNIFIED PARTIES" has the meaning set forth in section 9(b)(v)
below.
"INDEMNIFYING PARTIES has the meaning set forth in section 9(b)(v)
below.
"INITIAL PAYMENT" has the meaning set forth in section 2(c)(i) below.
"INTELLECTUAL PROPERTY" means all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all goodwill
associated therewith (including all translations, adaptations, derivations and
combinations of the foregoing); copyrights and copyrightable works;
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including, without limitation, ideas,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, business and marketing plans, and customer and
supplier lists and related information); and computer software (including,
without limitation, data, data bases and documentation).
"IRS" means the Internal Revenue Service.
"INVENTORY" means all of the inventories of the Company and IMP,
including without limitation, raw materials, work in progress, finished goods,
packaging goods and other like items.
"JOINDER AGREEMENT" means the Joinder Agreement to be entered into by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ in the form of EXHIBIT E hereto.
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"KNOWLEDGE" means, with respect to the Sellers (for the Company) and ▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (for IMP), the actual knowledge, after reasonable
investigation, of any of ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇.▇.
▇▇▇▇▇.
"▇. ▇▇▇▇▇▇" has the meaning set forth in the preface above.
"LEASE AMENDMENT" means the First Amendment to Lease Agreement to be
entered into between the Company and Nitram Partners, Ltd. in the form of
EXHIBIT D hereto.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge or other
security interest, whether or not related to the extension of credit or the
borrowing of money.
"LOSS" or "LOSSES" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
or effect that is materially adverse to the business, financial condition or
results of operations of the Company or IMP.
"MATERIAL CONTRACT" means any contract or agreement whether written or
oral to which either the Company or IMP is a party, or by which the Company or
IMP or any of their respective assets is bound, and which (a) relates to Funded
Indebtedness or is a letter of credit, pledge, bond or similar arrangement
running to the account of or for the benefit of the Company or IMP, (b) relates
to the purchase, maintenance or acquisition of, or sale or furnishing of,
materials, supplies, merchandise, machinery, equipment, parts or any other
property or services (excluding any such contract made in the Ordinary Course of
Business and which is expected to be fully performed within 90 days of the date
hereof or which involves revenues or expenditures of less than $50,000), (c) is
a collective bargaining agreement, (d) obligates the Company or IMP not to
compete with any business, or which otherwise restrains or prevents the Company
or IMP from carrying on any lawful business or which restricts the right of the
Company or IMP to use or disclose any information in its possession (excluding
in each case customary restrictive covenants contained in agreements entered
into in the Ordinary Course of Business), (e) relates to (i) employment,
compensation, severance, or consulting between the Company or IMP and any of
their respective officers or directors, or (ii) between the Company or IMP and
any other employees or consultants of the Company or IMP who are entitled to
compensation thereunder in excess of $35,000 per annum, (f) is a lease or
sublease of real property, or a lease, sublease or other title retention
agreement or conditional sales agreement involving annual payments in excess of
$25,000 individually or $100,000 in the aggregate for any machinery, equipment,
vehicle or other tangible personal property (whether the Company or IMP
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is a lessor or lessee), (g) is a contract for capital expenditures or the
acquisition or construction of fixed assets for or in respect of any real
property involving payments to be made after the date hereof in excess of
$50,000, (h) is a contract granting any Person a Lien on any of the assets of
the Company or IMP, in whole or in part (other than Permitted Liens), (i) is a
contract by which the Company or IMP retains any manufacturer's representatives,
broker or other sales agent, distributor or representative or through which the
Company or IMP is appointed or authorized as a sales agent, distributor or
representative, (j) is a joint venture or partnership contract, a limited
liability company operating agreement or an agreement or arrangement with any
Seller, or with any Affiliate of any Seller, (k) is (i) an agreement for the
storage, transportation, treatment and disposal of any materials subject to
regulation under any Environmental Health and Safety Requirements, or (ii) a
contract for storage, transportation or similar services with carriers or
warehousemen (excluding any such contract entered into in the Ordinary Course of
Business and involving aggregate annual expenditures not exceeding $50,000), or
(l) any other agreement (or group of related agreements) the performance of the
executory portion of which involves consideration in excess of $50,000 or which
cannot be terminated by the Company or IMP upon 90 days notice.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products in each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health and Safety
Requirements.
"MEDIATION REQUEST" has the meaning set forth in section 10(b)(ii)
below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in section
3B(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in section
3B(f) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in section
3B(f) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA section 3(37).
"NET WORKING CAPITAL" means the total current assets of the Company
(which current assets may include Cash but which shall not include any prepaid
recruiting expense) MINUS the total current liabilities of the Company (which
current liabilities shall exclude the current portion of any Funded
Indebtedness), in each case determined as of the close of business on the day
before the Closing Date.
"NET WORKING CAPITAL THRESHOLD AMOUNT" has the meaning set forth in
section 2(f)(iii) below.
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"90 AND OVER ACCOUNTS RECEIVABLE" has the meaning set forth in section
11(b)(1) below.
"NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT" has the meaning
set forth in section 2(e)(vi) below.
"NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET" has the meaning set
forth in section 2(f)(ii) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means (i) Liens for Taxes not yet due and payable or
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established, (ii) workers or unemployment
compensation claims and/or Liens arising in the Ordinary Course of business,
(iii) mechanic's, materialman's, supplier's, vendor's, landlord's or similar
Liens arising in the Ordinary Course of Business securing amounts which are not
delinquent, and (iv) purchase money Liens and Liens securing rental payments
under capital lease arrangements.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"POST-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"PRODUCTS LIABILITY REPRESENTATIONS AND WARRANTIES" has the meaning set
forth in section 9(a) below.
"PURCHASER" has the meaning set forth in the preface above.
"REAL PROPERTY" has the meaning set forth in section 3B(n) below.
"RESTRICTED AREA" has the meaning set forth in section 6(e) below.
- 9 -
14
"Section 338(h)(10) ELECTION" has the meaning set forth in section
6(b)(i) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SELLER" or "SELLERS" has the meaning set forth in the preface above.
"SELLERS' REPRESENTATIVE" means ▇. ▇▇▇▇▇▇.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income or profits taxes, premium taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, business license taxes,
occupation taxes, import duties and other governmental charges and assessments),
of any kind whatsoever, including interest, additions to tax and penalties with
respect thereto.
"TAX REPRESENTATIONS AND WARRANTIES" has the meaning set forth in
section 9(a) below.
"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.
"THIRD PARTY CLAIM" has the meaning set forth in section 9(b)(v) below.
"TRADE SECRETS" means information relating to the Company and IMP,
without regard to form, including, but not limited to, technical or nontechnical
data, formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which (a) derives economic value, actual or
potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
"TRANSACTION REPRESENTATIONS AND WARRANTIES" has the meaning set forth
in section 9(a) below.
2. PURCHASE AND SALE OF COMPANY SHARES AND IMP SHARES.
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15
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, (i) the Purchaser agrees to purchase from each of the Sellers,
and each of the Sellers agrees to sell to the Purchaser, free and clear of all
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Liens, claims and demands, all of the shares of Company
Common Stock owned by each of the Sellers as set forth in section 3B(E) OF THE
DISCLOSURE SCHEDUle (thE "COMPAny SHARES") for the consideration specified below
in this section 2 and (ii) the Purchaser agrees to purchase from each of ▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇, and each of ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ agrees to sell to the
Purchaser, free and clear of all restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Liens, claims
and demands, all of the shares of IMP Stock owned by each of ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ as set forth in section 3B(e) OF THE DISCLOSURE SCHEDULE (the "IMP
SHARES") for the consideration specified below in this section 2.
(b) PURCHASE PRICE.
(i) The aggregate purchase price to be paid by the Purchaser
for the all of the Company Shares (the "COMPANY PURCHASE PRICE") shall
be $16,400,000, MINUS (A) the amount of Funded Indebtedness as of the
Closing Date (after giving effect to any reduction of such Funded
Indebtedness on the Closing Date by application of Available Cash) and
MINUS (B) any Company Purchase Price Adjustment made pursuant to
section 2(f) below, PLus (C) any Earnout payments made pursuant to
section 2(e) below. The amount of the Company Purchase Price to be
received by each Seller shall be the Seller's Company Pro Rata Share
thereof.
(ii) The aggregate purchase price to be paid by the Purchaser
for the all of the IMP Shares (the "IMP PURCHASE PRICE") shall be
$50,000. The amount of the IMP Purchase Price to be received by each of
▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ shall be such Person's IMP Pro Rata Share
thereof.
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE. On the
Closing Date, the Purchaser shall make payment of the Company Purchase Price and
the IMP Purchase Price as follows:
(i) To the Sellers, by wire transfer of immediately available
funds, the sum of $13,900,000 [$16,400,000 MINUS (A) the amount of
Funded Indebtedness as of the Closing Date (after giving effect to any
reduction of such Funded Indebtedness on the Closing Date by
application of Available Cash) and (B) $2,500,000 to be deposited as
the Escrow Fund pursuant to section 2(c)(ii) below] (thE "INITIAL
PAYMENt"), to the account designated in writing by the Sellers'
Representative at least two business days prior to the Closing Date.
(ii) To SunTrust Bank, Atlanta, as escrow agent (the "ESCROW
AGENT") pursuant to the terms of the Escrow Agreement, the sum of
$2,500,000 (the "ESCROW FUND"). As provided in the Escrow Agreement,
the Escrow Fund shall be divided into two accounts as
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16
follows: (A) $50,000 thereof shall be held in an account (the "COMPANY
PURCHASE PRICE ADJUSTMENT ESCROW ACCOUNT") to be utilized to fund the
Company Purchase Price Adjustment as described in section 2(f) hereof,
and (B) $2,450,000 thereof shall be held in an account (the "GENERAL
INDEMNIFICATION ESCROW ACCOUNT") to provide indemnification to the
Purchaser as provided in section 9(b) hereof.
(iii) To ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇, by wire transfer of
immediately available funds, the sum of $50,000 to the account
designated in writing by the Sellers' Representative at least two
business days prior to the Closing Date.
(d) FUNDED INDEBTEDNESS. At the Closing, the Purchaser and/or the
Company (as determined by the Purchaser) shall deliver to the holders of Funded
Indebtedness an amount sufficient to repay all Funded Indebtedness outstanding
immediately prior to the Closing (in connection with which the Company shall
apply Available Cash to the reduction of Funded Indebtedness), with the result
that immediately following the Closing there will be no further monetary
obligations of the Company with respect to any Funded Indebtedness outstanding
immediately prior to the Closing. On the Closing Date, the Company will provide
the Purchaser with customary pay-off letters from all holders of Funded
Indebtedness outstanding immediately prior to the Closing, and make arrangements
reasonably satisfactory to the Purchaser for such holders to provide to the
Purchaser recordable form mortgage and lien releases, canceled notes, trademark
and patent assignments and other documents reasonably requested by the Purchaser
simultaneously with the Closing.
(e) EARNOUT.
(i) The Sellers will be entitled to receive a contingent
purchase price payment of up to $1,000,000 (the "EARNOUT") in
accordance with the provisions of this section 2(e). The Earnout shall
be payable with respect to the Company's fiscal year ending December
31, 1998 and the amount of the Earnout payment for such fiscal year
will be equal to two times the amount (if any) by which the Company's
Adjusted EBITAM for such fiscal exceeds $2,200,000; PROVIDED, HOWEVER,
that in no event shall the Earnout amount for such fiscal year be more
than $1,000,000. The amount of the Earnout to be received by each
Seller shall be the Seller's Company Pro Rata Share thereof.
(ii) Within a reasonable time after the conclusion of the
fiscal year ending December 31, 1998, but no later than 30 days
following the end of such fiscal year, the Purchaser shall deliver to
the Sellers' Representative a written notice which shall set forth an
estimate of the amount of the Company's Adjusted EBITAM for such fiscal
year and an estimate of the Earnout (if any) earned and all
calculations made in the determination of such amounts (the
"DETERMINATION NOTICE"). The chief financial officer of the Purchaser
shall
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17
certify the amounts determined and calculations made as set forth in
the Determination Notice are true and correct to the best of his
knowledge and belief.
(iii) The Earnout shall be payable as follows. 75% of the
Earnout (if any) for any such fiscal year will be paid within three
business days of the Sellers' Representative's receipt of the
Determination Notice, by wire transfer of immediately available funds
to an account or accounts designated by the Sellers' Representative in
writing. The remaining Earnout (if any) will be paid upon the final
determination of the Adjusted EBITAM Statement for the fiscal year
ending December 31, 1998 in accordance with this section 2(e), by wire
transfer of immediately available funds to an account or accounts
designated by the Sellers' Representative in writing. If the amount of
the Earnout that is ultimately determined to be payable pursuant to
section 2(e)(vi) is less than the amount paid based upon the
Determination Notice, then the Sellers shall repay the difference
within three business days after such determination.
(iv) For purposes of this Agreement, "ADJUSTED EBITAM" for the
Company's fiscal year ending December 31, 1998 means the unaudited net
income (excluding extraordinary gains or losses) of the Company
(including IMP) for the twelve months ending on the last day of such
fiscal year, PLUS (A) any interest on indebtedness and any financing
and related fees and expenses deducted in determining net income, (B)
all fees or expenses incurred in connection with the transactions
contemplated by this Agreement deducted in determining net income, (C)
income Taxes deducted in determining net income, (D) any amortization
to the extent attributable to the purchase accounting "write-up"
resulting from the transactions contemplated hereby and deducted in
determining net income, (E) management or other fees charged by the
Purchaser and/or its Affiliates and (F) expenses of a non-recurring
nature that may occur subsequent to the Closing Date as mutually agreed
upon by the Purchaser and the Sellers' Representative.
(v) Except as otherwise expressly provided herein, any amount
or calculation to be made in connection with the Earnout shall be
determined or made (A) in accordance with GAAP applied in a manner
consistent with the same accounting principles and methodologies used
in the preparation of the Financial Statements, and (B) using the same
revenue, income and expense recognition policies and practices as have
been used by the Company prior to the Closing.
(vi) Within 90 days following the Closing, the Purchaser at
its expense shall prepare and deliver to the Sellers' Representative a
statement of the actual Adjusted EBITAM of the Company for such fiscal
year (the "ADJUSTED EBITAM STATEMENT"). The chief financial officer of
the Purchaser shall certify the amounts determined and calculations
made as set forth in the Adjusted EBITAM Statement are true and correct
to the best of his knowledge and belief. During the 30 days immediately
following receipt of the Adjusted
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18
EBITAM Statement by the Sellers' Representative, the Sellers'
Representative and his accountants shall be entitled to review the
Adjusted EBITAM Statement and any working papers, trial balances and
similar materials relating to the Adjusted EBITAM Statement prepared by
the Purchaser or its accountants, and the Purchaser shall provide the
Sellers' Representative and his accountants with timely access, during
normal business hours, to the personnel, properties, books and records
of the Company. The Adjusted EBITAM Statement shall become final and
binding upon the parties on the 31st day following delivery thereof
unless the Sellers' Representative gives written notice to the
Purchaser of his disagreement with the Adjusted EBITAM Statement (a
"NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT") prior to such
date. Any Notice of Disagreement With Adjusted EBITAM Statement shall
specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement With Adjusted EBITAM
Statement is received by the Purchaser with respect to the Adjusted
EBITAM Statement, then the Adjusted EBITAM Statement (as revised in
accordance with clause (A) or (B) below), shall become final and
binding upon the Parties on the earlier of (A) the date the Purchaser
and the Sellers' Representative resolve in writing any differences they
have with respect to any matter specified in a Notice of Disagreement
With Adjusted EBITAM Statement, or (B) the date any matters in dispute
are finally resolved in writing by the Accounting Firm in the manner
described below (the date on which the Adjusted EBITAM Statement so
becomes final and binding being hereinafter referred to as the "FINAL
ADJUSTED EBITAM DETERMINATION DATE"). During the 30 days immediately
following the delivery of any Notice of Disagreement With Adjusted
EBITAM Statement, the Purchaser and the Sellers' Representative shall
seek in good faith to resolve in writing any differences which they may
have with respect to any matter specified in such Notice of
Disagreement With Adjusted EBITAM Statement. During such period, the
Sellers' Representative and his accountants shall each have access to
the Company's working papers, trial balances and similar materials
(including the working papers, trial balances and similar materials of
the Company's accountants) prepared in connection with the Purchaser's
preparation of the Adjusted EBITAM Statement. At the end of such 30-day
period, the Sellers' Representative and the Purchaser shall submit to
an independent "Big 6" public accounting firm (the "ACCOUNTING FIRM")
for review and resolution any and all matters which remain in dispute
and which were included in any Notice of Disagreement With Adjusted
EBITAM Statement (it being understood that the Accounting Firm shall
act as an arbitrator to determine, based solely on presentations by the
Purchaser and the Sellers' Representative (and not by independent
review), only those matters which remain in dispute), and the
Accounting Firm shall reach a final, binding resolution of all matters
which remain in dispute, which final resolution shall be (W) in
writing, (X) furnished to the Purchaser and the Sellers' Representative
as soon as practicable after the items in dispute have been referred to
the Accounting Firm, (Y) made in accordance with this Agreement, and
(Z) conclusive and binding upon the Parties to this Agreement and not
subject to collateral attack for any reason. The Adjusted EBITAM
Statement, with any adjustments necessary to reflect the Accounting
Firm's resolution of the
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19
matters in dispute, shall become final and binding on the Parties on
the date the Accounting Firm delivers its final resolution to the
Parties. The Accounting Firm shall be mutually selected by the
Purchaser and the Sellers' Representative, or, if the Purchaser and the
Sellers' Representative cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding the Purchaser's independent public
accountants) willing to act. Each Party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that
the fees and expenses of the Accounting Firm shall be borne as follows:
(A) if the Accounting Firm resolves all of
the remaining objections in favor of the Purchaser (the amount
of the Earnout so determined is referred to herein as the
"EARNOUT LOW AMOUNT"), the Sellers will be responsible for all
of the fees and expenses of the Accounting Firm (PRO RATA
based on each Seller's Company Pro Rata Share);
(B) if the Accounting Firm resolves all of
the remaining objections in favor of the Sellers (the amount
of the Earnout so determined is referred to herein as the
"EARNOUT HIGH AMOUNT"), the Purchaser will be responsible for
all of the fees and expenses of the Accounting Firm; and
(C) if the Accounting Firm resolves some of
the remaining objections in favor of the Purchaser and the
rest of the remaining objections in favor of the Sellers (the
amount of the Earnout so determined is referred to herein as
"EARNOUT ACTUAL AMOUNT"), the Sellers will be responsible for
that fraction of the fees and expenses of the Accounting Firm
(PRO RATA based on each Seller's Company Pro Rata Share) equal
to (i) the difference between the Earnout High Amount and the
Earnout Actual Amount over (ii) the difference between the
Earnout High Amount and the Earnout Low Amount, and the
Purchaser will be responsible for the remainder of the fees
and expenses.
(vii) If the Purchaser has determined that any remaining
Earnout payment is payable with respect to the fiscal year ending
December 31, 1998, the Purchaser shall pay such remaining Earnout
payment when it delivers the Adjusted EBITAM Statement for such fiscal
year (even if the Sellers' Representative disputes the amount of such
Earnout payment as determined by the Purchaser). If the amount of the
Earnout payment is in dispute, and the Earnout payment that is
ultimately determined to be payable pursuant to section 2(e)(vi) is (A)
greater than the amount (if any) paid pursuant to the previous sentence
and section 2(e)(iii), then the Purchaser shall pay the difference
within three business days after such determination, or (B) less than
the amount (if any) paid pursuant to the previous sentence and section
2(e)(iii), then the Sellers shall repay, the difference within three
business days after such determination. Payment of any remaining
Earnout pursuant to clause (A) of this paragraph (vii) shall be
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20
made by the Purchaser to the Sellers by wire transfer of immediately
available funds to the account or accounts designated in writing by the
Sellers' Representative. Payment of any amounts payable to the
Purchaser pursuant to clause (B) of this paragraph (vii) shall be made
by wire transfer of immediately available funds to the account
designated in writing by the Purchaser.
(f) POST-CLOSING COMPANY PURCHASE PRICE ADJUSTMENT.
(i) Within 10 days following the Closing, the Seller's
Representative shall prepare and deliver to the Purchaser (A) a balance
sheet of the Company as of the close of business on the day preceding
the Closing Date (the "CLOSING BALANCE SHEET") and (B) the Seller's
Representative's calculation of the Net Working Capital of the Company
as of such time. The Closing Balance Sheet (including, without
limitation, such calculation of Net Working Capital) shall be prepared
in accordance with GAAP applied in a manner consistent with the same
accounting principles and methodologies used in preparing the Financial
Statements.
(ii) During the 30 days immediately following receipt of the
Closing Balance Sheet by the Purchaser, the Purchaser and its
accountants shall be entitled to review the Closing Balance Sheet and
any working papers, trial balances and similar materials relating to
the Closing Balance Sheet prepared by the Seller's Representative or
his accountants, and the Purchaser and its accountants shall also have
with timely access, during the Company's normal business hours, to the
Company's personnel, properties, books and records to the extent
related to the preparation of the Closing Balance Sheet. The Seller's
Representative shall use reasonable commercial efforts to cause his
accountants to make available to the Purchaser any working papers,
trial balances and similar materials prepared by such accountants in
connection with the preparation of the Closing Balance Sheet; PROVIDED,
HOWEVER, that the Purchaser acknowledges and agrees that such
accountants may require the Purchaser to execute customary undertakings
in connection with such accesection The Closing Balance Sheet and the
calculation of Net Working Capital shall become final and binding upon
the Parties on the 31st day following delivery thereof unless the
Purchaser gives written notice to the Seller of its disagreement with
the Closing Balance Sheet as it affects the calculation of Net Working
Capital (a "NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET") prior
to such date. Any Notice of Disagreement With Closing Balance Sheet
shall specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement With Closing Balance Sheet
is received by the Seller's Representative with respect to the Closing
Balance Sheet, then the Closing Balance Sheet (as revised in accordance
with clause (A) or (B) below), shall become final and binding as to the
calculation of Net Working Capital upon the Parties on the earlier of
(A) the date the Purchaser and the Seller's Representative resolve in
writing any differences they have with respect to any matter specified
in a Notice of Disagreement With Closing Balance Sheet, or
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21
(B) the date any matters in dispute are finally resolved in writing by
the Accounting Firm in the manner described below (the date on which
the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "FINAL CLOSING BALANCE SHEET
DETERMINATION DATE"). During the 30 days immediately following the
delivery of any Notice of Disagreement With Closing Balance Sheet, the
Purchaser and the Seller shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter
specified in such Notice of Disagreement With Closing Balance Sheet.
During such period, the Parties and their respective accountants shall
each have access to the Company's working papers, trial balances and
similar materials (including the working papers, trial balances and
similar materials of their respective accountants) prepared in
connection with the preparation of the Closing Balance Sheet. At the
end of such 30-day period, the Seller's Representative and the
Purchaser shall submit to an Accounting Firm for review and resolution
any and all matters which remain in dispute and which were included in
any Notice of Disagreement With Closing Balance Sheet (it being
understood that the Accounting Firm shall act as an arbitrator to
determine, based solely on presentations by the Purchaser and the
Seller's Representative (and not by independent review), only those
matters which remain in dispute), and the Accounting Firm shall reach a
final, binding resolution of all matters which remain in dispute, which
final resolution shall be (w) in writing, (x) furnished to the
Purchaser and the Seller's Representative as soon as practicable after
the items in dispute have been referred to the Accounting Firm, (y)
made in accordance with this Agreement, and (z) conclusive and binding
upon the Parties and not subject to collateral attack for any reason.
The Closing Balance Sheet, with any adjustments necessary to reflect
the Accounting Firm's resolution of the matters in dispute, shall
become final and binding on the Parties on the date the Accounting Firm
delivers its final resolution to the Parties, which shall be no later
than 90 days after the Closing Date. Each Party shall pay its own costs
and expenses incurred in connection with such arbitration, provided
that the fees and expenses of the Accounting Firm shall be borne as
follows:
(A) if the amount of the Net Working Capital
is below the Net Working Capital Threshold Amount after the
resolution of all remaining objections by the Accounting Firm,
the Sellers will be responsible for all of the fees and
expenses of the Accounting Firm (PRO RATA based on each
Seller's Company Pro Rata Share); or
(B) if the amount of the Net Working Capital
is equal to or above the Net Working Capital Threshold Amount
after the resolution of all remaining objections by the
Accounting Firm, the Purchaser will be responsible for all of
the fees and expenses of the Accounting Firm.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this section 2(f), if Net Working Capital is
less than $3,077,000.00 (the "NET WORKING CAPITAL
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22
THRESHOLD AMOUNT"), the Sellers shall pay to the Purchaser the amount
by which the amount of the Net Working Capital is less than such amount
(PRO RATA based on each Seller's Company Pro Rata Share). Any required
adjustment to the Company Purchase Price pursuant to this section 2(f)
shall be referred to as the "COMPANY PURCHASE PRICE ADJUSTMEnt".
(iv) Within 33 days after the receipt by the Purchaser of the
Closing Balance Sheet in accordance with section 2(f)(i) above, the
Sellers' Representative and the Purchaser shall jointly instruct the
Escrow Agent to make the disbursements of Company Purchase Price
Adjustment Escrow Account with respect to any undisputed amounts
constituting a portion of the Company Purchase Price Adjustment. With
respect to any items that are the subject of a Notice of Disagreement
With Closing Balance Sheet, joint disbursement instructions shall be
given to the Escrow Agent within three business days after the Final
Closing Balance Sheet Determination Date.
(g) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Cypen & Cypen, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (or at such other location as
the Parties may agree), commencing at 10:00 a.m. local time on or before March
31, 1999 or such other date as the Sellers' Representative and the Purchaser may
mutually determine (the "CLOSING DATE").
(h) DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Purchaser the various certificates and documents referred to in
section 8(a) below, (ii) the Purchaser will deliver to the Sellers the various
certificates and documents referred to in section 8(b) below, (iii) each of the
Sellers will deliver to the Purchaser stock certificates representing all of his
or her Company Shares, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to the Sellers' Company Shares, free and clear of all
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Liens, claims and demands, (iv) each of ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ will deliver to the Purchaser stock certificates representing all of his
or her IMP Shares, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to the IMP Shares, free and clear of all restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Liens, claims and demands, (v) the Purchaser will deliver to the Sellers
the Initial Payment, (v) the Purchaser will deliver to the Escrow Agent the
Escrow Fund and (vi) the Purchaser will deliver to ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ the
IMP Purchase Price.
(i) TRANSFER TAXES. The Sellers shall be responsible for the payment of
all sales and transfer taxes, if any, which may be payable with respect to the
transactions contemplated by this Agreement.
(j) NET CASH PAYMENT TO SELLERS. Immediately prior to the Closing, the
Sellers will cause the Company to pay to the Sellers in an aggregate amount
equal to the excess (if any) of (i) the
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23
Available Cash less $1.00 MINUS (ii) the Funded Indebtedness as of the Closing
Date (after giving effect to any reduction of such Funded Indebtedness on the
Closing Date by application of Available Cash) .
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers,
severally as to himself or herself only (and not jointly), represents and
warrants (subject to the exceptions set forth in the Disclosure Schedule) to the
Purchaser as follows:
(a) CAPACITY. The Seller has full capacity to execute and deliver this
Agreement and the Escrow Agreement and to perform his or her obligations
hereunder and thereunder.
(b) BINDING OBLIGATION. This Agreement constitutes and the Escrow
Agreement, when executed and delivered, will constitute the valid and legally
binding obligations of the Seller enforceable in accordance with their terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will (i) violate any statute, regulation, rule,
injunction, judgment, order, decree or ruling of any government, governmental
agency or court to which the Seller is subject, or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or require
any notice under any agreement, contract, lease, license or instrument to which
the Seller is a party or by which the Seller is bound or to which any of the
Seller's assets is subject. Except as set forth in section 3A(c) OF THE
DISCLOSURE SCHEDULE, the Sellers are not required to give any notice to, make
any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Sellers to consummate the
transactions contemplated by this Agreement.
(d) OWNERSHIP OF COMPANY COMMON STOCK AND IMP STOCK.
(i) The Seller holds of record and owns beneficially the
number of Company Shares set forth next to the Seller's name in section
3B(e) OF THE DISCLOSURE SCHEDULE and has good title to such Company
Shares, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws),
Liens, claims, and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Company (other than this Agreement). The Seller is
not a party to any voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of the
Company.
(ii) ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ hold of record and own
beneficially the number of IMP Shares set forth next to such Person's
name in section 3B(e) OF THE DISCLOSURE SCHEDULE and
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24
has good title to such IMP Shares, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and state
securities laws), Liens, claims, and demands. Neither ▇. ▇▇▇▇▇▇ or ▇.
▇▇▇▇▇▇ is a party to any option, warrant, purchase right, or other
contract or commitment that could require such Person to sell,
transfer, or otherwise dispose of any capital stock of the IMP (other
than this Agreement). Neither ▇. ▇▇▇▇▇▇ or ▇. ▇▇▇▇▇▇ is a party to any
voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of IMP.
(e) BROKERS' FEES. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser or the
Company (with respect to periods following the Closing) could become liable or
obligated.
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
COMPANY AND IMP. The following representations and warranties made to the
Purchaser with respect to the Company are made by the Sellers jointly and
severally (subject to the exceptions set forth in the Disclosure Schedule) and
the following representations and warranties made to the Purchaser with respect
to IMP are made by ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ jointly and severally (subject to the
exceptions set forth in the Disclosure Schedule):
(a) ORGANIZATION/POWER AND AUTHORITY TO CONDUCT BUSINESS. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of Florida. IMP is a corporation duly organized, validly existing, and
in good standing under the laws of Mexico. Each of the Company and IMP is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. section 3B(A) OF THE
DISCLOSURE SCHEDUle sets forth a list of each jurisdiction in which the Company
and IMP are licensed or qualified to do business as a foreign corporation. Each
of the Company and IMP has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Neither the Company nor IMP has any Subsidiary, and does not own,
directly or indirectly, any capital stock or other equity interests in any
corporation, partnership or other entity.
(b) AUTHORIZATION OF TRANSACTION. Each of the Company and IMP has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligations of the Company and IMP, enforceable in accordance
with its terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which the Company
or IMP is subject or any provision of the charter or bylaws of the Company or
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25
the charter documents of IMP or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which the Company
or IMP is a party or by which either the Company or IMP is bound or to which any
of the assets of either the Company or IMP is subject. Neither the Company nor
IMP is required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Company and IMP to consummate the transactions contemplated by
this Agreement.
(d) BROKERS' FEES. Neither the Company nor IMP has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
(e) CAPITALIZATION.
(i) The Company Common Stock constitutes the Company's only
authorized classes of capital stock. section 3B(e) OF THE DISCLOSURE
SCHEDULE sets forth for the Company (A) the number of shares of
authorized Company Common Stock, (ii) the number of issued and
outstanding shares of Company Common Stock, the names of the holders of
record thereof, and the number of shares held by each such holder, and
(iii) the number of shares of Company Common Stock (if any) held in
treasury. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized, are validly issued, fully paid
and nonassessable and were not issued in violation of the preemptive
rights of any Person or any agreement or law by which the Company at
the time of issuance was bound. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to the
Company, and the Company is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Company to issue, sell, transfer or otherwise dispose of any capital
stock of the Company.
(ii) The IMP Stock constitutes IMP's only authorized classes
of capital stock. section 3B(e) OF THE DISCLOSURE SCHEDULE sets forth
for IMP (A) the number of shares of authorized IMP Stock, (ii) the
number of issued and outstanding shares of IMP Stock, the names of the
holders of record thereof, and the number of shares held by each such
holder, and (iii) the number of shares of IMP Stock (if any) held in
treasury. All of the issued and outstanding shares of capital stock of
IMP have been duly authorized, are validly issued, fully paid and
nonassessable and were not issued in violation of the preemptive rights
of any Person or any agreement or law by which IMP at the time of
issuance was bound. There are no outstanding stock appreciation,
phantom stock or similar rights with respect to IMP, and IMP is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require IMP to issue, sell, transfer or otherwise
dispose of any capital stock of IMP.
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26
(f) FINANCIAL STATEMENTS. Set forth in section 3B(f) OF THE DISCLOSURE
SCHEDULE are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of income and statements
of shareholders equity and cash flows as of and for the fiscal year ended
December 31, 1997 (the "MOST RECENT FISCAL YEAR END") for the Company; and (ii)
unaudited balance sheet and statement of income and statement of cash flows (the
"MOST RECENT FINANCIAL STATEMENTS") as of and for the eight months ended August
31, 1998 (the "MOST RECENT FISCAL MONTH END") for the Company, with all
operations of IMP reflected in the Most Recent Financial Statements. Except as
set forth in section 3B(f) OF THE DISCLOSURE SCHEDULE, the Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly
the financial condition of the Company and IMP as of such dates and the results
of operations of the Company and IMP for such periods; PROVIDED, HOWEVER, that
the Most Recent Financial Statements are subject to normal year-end adjustments
(which will not be material, individually or in the aggregate) and lack
footnotes and other presentation items.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as otherwise contemplated
by this Agreement, since the Most Recent Fiscal Year End, the Company and IMP
have conducted their business only in the Ordinary Course of Business and there
has not been any Material Adverse Change with respect to the Company or IMP.
Without limiting the generality of the foregoing, since that date, neither the
Company nor IMP has:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business;
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional
sale or other title retention agreement with respect to any property or
asset;
(iii) except as set forth in section 3B(g)(iii) OF THE
DISCLOSURE SCHEDULE, sold, assigned, transferred or removed any of its
tangible assets, except for sales of Inventory in the Ordinary Course
of Business;
(iv) sold, assigned or transferred any patents, trademarks or
trade names or any material copyrights, trade secrets or other
intangible assets;
(v) suffered any extraordinary losses or waived any rights of
material value;
(vi) except as set forth in section 3B(g)(vi) OF THE
DISCLOSURE SCHEDULE, made any capital expenditures or commitments
therefor in excess of $25,000 individually or $100,000 in the
aggregate;
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27
(vii) entered into any material agreement, contract, lease or
license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or casualty
loss in excess of $50,000 to its property, whether or not covered by
insurance;
(ix) entered into any agreement with any labor union or
association representing any employee;
(x) made any wage or salary increase or bonus, or increase in
any other direct or indirect compensation, for or to any of its
officers, directors or employees, or otherwise made any material change
in employment terms for any of its directors, officers and employees;
(xi) made any change in its accounting methods, principles or
practices;
(xii) made any increase in or established any bonus,
insurance, deferred compensation, pension, retirement, profit-sharing,
stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards or
the amendment of any existing stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement;
(xiii) except as set forth in section 3B(g)(xiii) OF THE
DISCLOSURE SCHEDULE, made any payment (including any dividends or other
distributions with respect to the Company Common Stock or IMP Stock) to
any Seller or any Affiliate of any Seller (other than compensation
otherwise payable in the Ordinary Course of Business to any Seller
employed by the Company) or forgiven any indebtedness due or owing from
any Seller or any Affiliate of any Seller to the Company or IMP;
(xiv) except as set forth in section 3B(g)(xiv) OF THE
DISCLOSURE SCHEDULE, reclassified, combined, split, subdivided or
redeemed or otherwise repurchased any capital stock of the Company or
IMP, or created, authorized, issued, sold, delivered, pledged or
encumbered any additional capital stock (whether authorized but
unissued or held in treasury) or other securities equivalent to or
exchangeable for capital stock, or granted or otherwise issued any
options, warrants or other rights with respect thereto;
(xv) acquired or agreed to acquire by merging or consolidating
with, or by purchasing any portion of the capital stock, partnership
interests or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or
other business organization or division thereof;
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28
(xvi) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or
extended any credit to, any Person, except (i) short-term investments
pursuant to customary cash management policies, and (ii) advances made
in the Ordinary Course of Business;
(xvii) taken any action which if taken would adversely affect
the eligibility of the Company to be taxed pursuant to the provisions
of Subchapter S of the Code or under any comparable state or local law
for any period prior to the Closing Date;
(xviii) (A) except in the Ordinary Course of Business
liquidated Inventory or accepted product returns, (B) accelerated
receivables, (C) delayed payables, or (D) changed in any material
respect the Company's practices in connection with the payment of
payables in respect of raw materials purchases; or
(xix) committed to do any of the foregoing.
(h) UNDISCLOSED LIABILITIES. Neither the Company nor IMP has any
liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for Taxes), except for (i)
liabilities set forth on the face of the Most Recent Balance Sheet (or in any
notes thereto or to the Financial Statements for the Most Recent Fiscal Year
End), (ii) liabilities under agreements, contracts, leases, licenses and other
arrangements to which either the Company or IMP or any of its respective assets
may be bound, (iii) liabilities reflected on the Disclosure Schedule, and (iv)
liabilities which have arisen in the Ordinary Course of Business since the Most
Recent Fiscal Month End. section 3B(h) OF THE DISCLOSURE SCHEDULE sets forth as
of the Most Recent Fiscal Month End a true and correct listing of the
indebtedness of the Company described in clauses (i), (ii) and (iii) of the
definition of Funded Indebtednesection IMP has no Funded Indebtedness.
(i) LEGAL COMPLIANCE. Each of the Company and IMP is in compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of
federal, state, local and foreign governments (and all agencies thereof), except
where the failure to comply would not have a Material Adverse Effect or prevent
or materially delay the consummation of the transactions contemplated hereby.
Except as set forth in section 3B(i) OF THE DISCLOSURE SCHEDULE, since December
31, 1996, neither the Company nor IMP has received any written communication
from a governmental authority that alleges that either the Company or IMP is not
in compliance with any foreign, federal, state or local laws, rules or
regulations.
(j) COMPANY AND IMP PERMITS.
(i) Except as set forth in section 3B(j) OF THE DISCLOSURE
SCHEDULE, the Company holds all permits, licenses, orders and approvals
of all Authorities necessary for the lawful conduct
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of its business (the "COMPANY PERMITS"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals
that would not have a Material Adverse Effect and copies of all Company
Permits have been furnished to the Purchaser. Except as set forth in
section 3B(j) OF THE DISCLOSURE SCHEDULE, the Company is in compliance
with the terms of the Company Permits and has received no variances or
exemptions with respect thereto.
(ii) IMP holds all permits, licenses, orders and approvals of
all Authorities necessary for the lawful conduct of its business (the
"IMP PERMITS"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals that would not have a
Material Adverse Effect and copies of all IMP Permits have been
furnished to the Purchaser. IMP is in compliance with the terms of the
IMP Permits and has received no variances or exemptions with respect
thereto.
(k) TAX MATTERS.
(i) The Company has elected (with the consent of all of its
shareholders), in compliance with all applicable legal requirements, to
be taxed under Subchapter S of the Code and corresponding provisions
under any applicable state and local laws, and such elections are in
effect for the Company. No action has been taken by the Company or any
shareholder of the Company that may result in the revocation of any
such elections. Except as set forth in section 3B(k)(i) OF THE
DISCLOSURE SCHEDULE, (A) the Company has no "Subchapter C earnings and
profits" as defined in section 1362(d) of the Code and (B) the Company
has no "net unrealized built-in gain" as such term is defined in
section section 1374(d)(1) and 1374(d)(8) of the Code. The Company has
no liability, absolute or contingent, for the payment of any income
Taxes under the Code or under the laws of such states or localities
which afford tax treatment similar to that under Subchapter S of the
Code. The Company has filed all Tax Returns required to be filed by it
(taking into account any extensions of due dates). The Company has paid
all Taxes required to be paid by it (without regard to whether a Tax
Return is required), except Taxes for which an adequate reserve has
been established on the Most Recent Financial Statements.
(ii) All Income Tax Returns and all material Other Tax Returns
required to be filed with respect to the business and assets of IMP
have been duly and timely (within any applicable extension periods)
filed with the appropriate Authorities in all jurisdictions in which
such Returns are required to be filed. IMP has paid all Taxes required
to be paid by it (without regard to whether a Tax Return is required),
except Taxes for which an adequate reserve has been established on the
Most Recent Financial Statements.
(iii) No Tax Return of either the Company or IMP is under
audit or examination by any taxing Authority and, since January 1,
1988, no written notice of such an audit or examination has been
received by either the Company or IMP. Since January 1, 1988, each
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30
deficiency resulting from any audit or examination relating to Taxes by
any taxing authority has been paid, except for deficiencies being
contested in good faith. Since January 1, 1988, the federal income Tax
Returns of the Company have not been examined by and settled with the
Internal Revenue Service and the Tax Returns of IMP have not been
examined by and settled with the applicable Mexican Authorities.
(iv) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection
of any Taxes for either the Company or IMP.
(v) Neither the Company nor IMP is a party to or bound by any
tax sharing agreement, tax indemnity obligation or similar agreement
with respect to Taxes (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any taxing
Authority).
(vi) Neither the Company nor IMP will be required to include
in a taxable period ending after the Closing Date taxable income
attributable to income that accrued in a prior taxable period but was
not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash
method of accounting or section 481 of the Code with respect to a
change in method of accounting occurring before the Closing Date or
comparable provisions of state, local or foreign tax law.
(vii) Neither the Company nor IMP has filed a consent pursuant
to or agreed to the application of section 341(f) of the Code or any
comparable provision of foreign tax law..
(viii) Neither the Company nor IMP has, during the five-year
period ending on the Closing Date, been a personal holding company
within the meaning of section 541 of the Code or any comparable
provision of foreign tax law.
(ix) Neither the Company nor IMP has ever filed or been
included in any combined or consolidated tax return with any other
person or been a member of an Affiliated Group filing a consolidated
federal or foreign income Tax Return.
(l) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND IMP. Except as
set forth under section 3B(l) OF THE DISCLOSURE SCHEDULE and except for normal
advances to employees consistent with past practice, payment of compensation for
employment to employees consistent with past practice, and participation in
Employee Benefit Plans by employees, since January 1, 1996 neither the Company
nor IMP has purchased, acquired or leased any property or services from, or
sold, transferred or leased any property or services to, or loaned or advanced
any money to, or borrowed any money from, or entered into or been subject to any
management, consulting or similar agreement with (i)
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31
any officer, director or shareholder of the Company or IMP, or (ii) any of their
respective Affiliates. Except as set forth under section 3B(l) OF THE DISCLOSURE
SCHEDULE, no Affiliate of either the Company or IMP is indebted to the Company
or IMP for money borrowed or other loans or advances, and neither the Company
nor IMP is indebted to any such Affiliate for money borrowed or other loans or
advances.
(m) TITLE TO TANGIBLE ASSETS OTHER THAN REAL PROPERTY INTERESTS. Each
of the Company and IMP has good and valid title to, or a valid leasehold
interest in, all the tangible assets (other than real property or interests in
real property) used or useful in the conduct of its respective business, except
Inventory sold since the date hereof in the Ordinary Course of Business, free
and clear of any Liens other than Permitted Liens. The machinery and equipment
used regularly in the conduct of the Company's and IMP's business are in
reasonable operating condition and repair (subject to normal wear and tear), and
are suitable for the purposes for which they are presently used. Except for
interests and rights in property pursuant to any lease, license or other
agreement described in section 3B(p) OF THE DISCLOSURE SCHEDULE or pursuant to
any lease, license or other agreement not required to be described in section
3B(p) OF THE DISCLOSURE SCHEDULE and except for property supplied by any
customer or supplier in connection with the purchase or sale of products or
services from or to such customer or supplier in the Ordinary Course of
Business, there is no tangible personal property owned by any third party which
is used by the Company or IMP in the operation of its respective business
section 3B(m) OF THE DISCLOSURE SCHEDULE lists all machinery, equipment,
vehicles, furniture and other tangible personal property of any kind and
description (other than Inventory) owned or leased by the Company and IMP.
(n) REAL PROPERTY.
(i) Neither the Company nor IMP owns any real property.
section 3B(n) of the DISCLOSURE SCHEDULE sets forth a list of all real
property leased, subleased or otherwise occupied by the Company and
IMP, indicating the nature of its interest therein and setting forth a
brief description of the buildings and improvements located thereon
(collectively, the "REAL PROPERTY"). Each of the Company and IMP has
valid leasehold interests in all leases of Real Property which it
leases or purports to lease, free and clear of any Liens, other than
Permitted Liens. There are no pending condemnation, expropriation,
eminent domain or similar proceedings affecting all or any portion of
such Real Property and, to the Knowledge of the Sellers (with respect
to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), no
such proceedings are contemplated.
(ii) Each of the Company and IMP enjoys peaceful and
undisturbed possession under all of such Real Property leases under
which it is operating. All of such leases are valid, subsisting and in
full force and effect, no notice of termination has been received by
either the Company or IMP with respect thereto, and there are no
existing defaults, or events which with the passage of time or the
giving of notice, or both, would constitute defaults by
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32
either the Company or IMP or, to the Knowledge of the Sellers (with
respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to
IMP), by any other party thereto, except for defaults which could not
reasonably be expected to have a Material Adverse Effect.
(iii) The Real Property is in compliance with the Americans
With Disabilities Act or the comparable provision of foreign law.
(o) INTELLECTUAL PROPERTY.
(i) Section 3B(o)(i) OF THE DISCLOSURE SCHEDULE identifies
each patent, pending patent application or registered Intellectual
Property owned or used by the Company and IMP, and each material
written license agreement (excluding off-the-shelf software license
agreements) pursuant to which the Company or IMP has granted to any
third party, or received from any third party a grant of, any rights in
any of the Intellectual Property owned or used by the Company or IMP.
Each of the Company and IMP owns, or possesses adequate and enforceable
licenses or rights (free of Liens other than Permitted Liens) to use
all Intellectual Property and any other material intellectual property
rights (including, without limitation, patents, pending patent
applications, inventions, drawings, trade secrets, know-how and
confidential information) currently used by the Company and IMP, or
necessary to permit the Company and IMP to conduct its business as now
conducted.
(ii) Except as set forth on section 3B(o)(i) OF THE DISCLOSURE
SCHEDULE, with respect to each item identified in section 3B(o)(i) of
the Disclosure Schedule:
(A) each of the Company and IMP possesses all right,
title and interest, free and clear of any Lien (other than
Permitted Liens), license or other restriction;
(B) such item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing,
investigation, written claim or written demand is pending or,
to the Knowledge of the Sellers (with respect to the Company)
and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), is
threatened which challenges the legality, validity,
enforceability, use or ownership of the item;
(D) neither the Company nor IMP, nor, to the
Knowledge of the Sellers (with respect to the Company) and ▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), any other party to
any license agreement is in breach or default and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or
acceleration thereunder;
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33
(E) to the Knowledge of the Sellers (with respect to
the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to
IMP), no party to any license agreement has repudiated any
material provision thereof;
(F) no claims are pending or, to the Knowledge of the
Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ (with respect to IMP), threatened that the Company is
infringing on or otherwise violating the rights of any person
with regard to any such item; and
(G) to the Knowledge of the Sellers (with respect to
the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to
IMP), no person is infringing on or otherwise violating any
right of the Company or IMP with respect to such item.
(p) CONTRACTS. Section 3B(p) OF THE DISCLOSURE SCHEDULE lists the
Material Contracts to which each of the Company and IMP is a party. The Sellers
have made available to the Purchaser a correct and complete copy of each
Material Contract listed in section 3B(p) OF THE DISCLOSURE SCHEDULE. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) neither the Company nor, to the
Knowledge of the Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ (with respect to IMP), any other party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any provision of the agreement.
(q) POWERS OF ATTORNEY. Except as set forth in section 3B(q) OF THE
DISCLOSURE SCHEDULE, there are no outstanding powers of attorney executed on
behalf of either the Company or IMP.
(r) INSURANCE. Section 3B(r) OF THE DISCLOSURE SCHEDULE describes each
insurance policy maintained by the Company and IMP and the Company has delivered
to the Purchaser correct and complete copies of all such policies. All of such
insurance policies are in full force and effect and, to the Knowledge of the
Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect
to IMP), neither the Company nor IMP is in default with respect to its
obligations under any of such insurance policies. Such policies are sufficient
for compliance with all requirements of law and Material Contracts to which
either the Company or IMP is a party. Since the respective dates of such
policies, no notice of cancellation or non-renewal with respect to any such
policy has been received by either the Company or IMP. section 3B(r) OF THE
DISCLOSURE SCHEDULE sets forth a list of all pending claims with respect to all
such policies and the loss runs for all such policies for the last three years.
(s) LITIGATION. Section 3B(s) OF THE DISCLOSURE SCHEDULE sets forth
each instance in which either the Company or IMP (i) is subject to any
outstanding injunction, judgment, order, decree or ruling or (ii) is a party or,
to the Knowledge of the Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and
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34
▇. ▇▇▇▇▇▇ (with respect to IMP), is threatened to be made a party, to any
action, suit, proceeding, hearing or investigation of, in or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
(t) LABOR RELATIONS. Neither the Company nor IMP is and has ever been a
party to a collective bargaining agreement. Except as set forth under section
3B(t) OF THE DISCLOSURE SCHEDULE, (i) since January 1, 1996 neither the Company
nor IMP has been involved in or, to the Knowledge of the Sellers (with respect
to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), threatened
with any strike, slowdown or work stoppage, (ii)since January 1, 1996 neither
the Company nor IMP has been involved in or, to the Knowledge of the Sellers
(with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP),
threatened with any unfair labor practice charge, arbitration, suit or
administrative proceeding relating to labor matters involving its employees,
(iii) there are no actions, proceedings or claims pending or, to the Knowledge
of the Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with
respect to IMP), threatened against either the Company or IMP under any laws
relating to employment, including any provisions thereof relating to wages,
hours, collective bargaining, withholding or the payment of social security or
other Taxes and (iv) the Company has complied with the provisions of the
Immigration Reform and Control Act of 1986 with respect to all of its employees
hired after November 6, 1986 by verifying their employment eligibility and
having them complete Form I-9.
(u) EMPLOYEE BENEFITS. Section 3B(u) OF THE DISCLOSURE SCHEDULE sets
forth (a) all of the current Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and all other material employee benefit, fringe benefit plans and
programs maintained or contributed to by the Company and IMP with respect to
current or former employees of the Company and IMP (the "EMPLOYEE BENEFIT
PLANS").
(i) With respect to each Employee Benefit Plan:
(A) each such Employee Benefit Plan (and each related
trust, insurance contract or fund) complies in form and, to
the Knowledge of the Sellers (with respect to the Company) and
▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), in operation
with the applicable requirements of ERISA and the Code or the
comparable provisions of foreign law;
(B) all contributions (including all employer
contributions and employee salary reduction contributions, if
any) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan, and
there are no accumulated funding deficiencies with respect to
any such Employee Pension Benefit Plan;
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35
(C) each such Employee Benefit Plan which is an
Employee Pension Benefit Plan has received a favorable
determination letter from the IRS as to its qualification
under section 401(a) of the Code or the comparable provision
of foreign law;
(D) no "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the Code)
has occurred with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan (or its related
trust) which could subject the Company or any officer,
director or employee of the Company, to any Tax or penalty
imposed under section 4975 of the Code or liability under
section 406 of ERISA;
(E) the Company has delivered to the Purchaser
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts
and other funding arrangements which implement each such
Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been completely or partially
terminated or has been the subject of a "reportable event" (as
defined in section 4043 of ERISA) as to which notices would be
required to be filed with the PBGC. To the Knowledge of the
Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇.
▇▇▇▇▇▇ (with respect to IMP), no proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than a
Multiemployer Plan) has been instituted;
(G) the Company has not incurred any liability to the
PBGC (except for required premium payments, if any), or
otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan; and
(H) no action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or, to the
Knowledge of the Sellers (with respect to the Company) and ▇.
▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), threatened.
(ii) The Company does not contribute to any Multiemployer Plan
or have any liability (including withdrawal liability) under any
Multiemployer Plan.
(iii) Neither the Company nor IMP has any obligation to
provide health or other welfare benefits to former, retired or
terminated employees, except as specifically required under section
4980B of the Code or comparable provision of foreign law. With respect
to all of its
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36
past and present employees, each of the Company and IMP has complied in
all material respects with the notice and continuation requirements of
Part 6 of Subtitle B of Title I of ERISA and of section 4980B of the
Code or comparable provision of foreign law.
(v) ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as disclosed in
section 3B(v) OF The DISCLOSURE SCHEDULE:
(i) Neither the Company nor IMP has disposed of or released
any substance, arranged for the disposal of any substance, knowingly
exposed any employee or other individual to any substance or condition,
or owned or operated its businesses or any property or facility so as
to give rise to any liability or corrective or remedial obligation of
either the Company or IMP under any Environmental, Health and Safety
Requirement.
(ii) Each of the Company and IMP is in compliance with all
Environmental Health and Safety Requirements, including, but not
limited to, the Emergency Planning and Community Right-to-Know Act
("EPCRA"), 42 U.S.C. section 11001 et seq., and neither the Company nor
IMP has, since December 31, 1995, received any written communication
from any Authority that alleges that either the Company or IMP is not
in such compliance.
(iii) There is no Environmental Claim of which either the
Company or IMP has received written notice or, to the Knowledge of the
Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with
respect to IMP), threatened or recently filed against either the
Company or IMP, nor, to the Knowledge of the Sellers (with respect to
the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), is
there any Environmental Claim against any Person whose liability for
any Environmental Claim either the Company or IMP has retained or
assumed contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment or fluids
are present on any of the Real Property.
(v) There are no Liens arising under any Environmental, Health
and Safety Requirement on any of the Real Property arising as a result
of any actions taken or omitted to be taken by either the Company or
IMP and, to the Knowledge of the Sellers (with respect to the Company)
and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), no actions have been
taken by any Authority with respect to any of the Real Property to
impose an environmental Lien with respect to the Real Property as a
result of any such actions.
(vi) No real property presently or, to the Knowledge of the
Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with
respect to IMP), heretofore owned or operated by either the Company or
IMP is currently listed on the National Priorities List or the
Comprehensive Environmental Response, Compensation and Liability
Information
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37
System, both promulgated under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any analogous state or foreign list.
(vii) To the Knowledge of the Sellers (with respect to the
Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), no off-site
location at which either the Company or IMP has disposed or arranged
for the disposal of any waste is listed on the National Priorities List
or on any analogous state list.
(w) CUSTOMERS AND SUPPLIERS. section 3B(w) OF THE DISCLOSURE SCHEDULE
contains a complete and accurate list of the names and addresses of the 10
largest (by volume) customers and suppliers of each of the Company and IMP for
the fiscal years ended December 31, 1997 and December 31, 1996. Each of the
Company and IMP maintains satisfactory relations with each of such customers and
suppliers and since the Most Recent Fiscal Month End no event has occurred that
would materially adversely affect either the Company's or IMP's relations with
such customers and suppliers. Since the Most Recent Fiscal Month End, (i) no
customer which accounted for more than 5% of either the Company's or IMP's
aggregate sales revenues during the last twelve months has canceled, terminated
(or, to the Knowledge of the Sellers (with respect to the Company) and ▇. ▇▇▇▇▇▇
and ▇. ▇▇▇▇▇▇ (with respect to IMP), made any threat to either the Company or
IMP to cancel or terminate), or materially decreased its usage of either the
Company's or IMP's services or products, and (ii) no supplier, or any group of
suppliers, which accounted for more than 5% of the aggregate supplies purchased
by either the Company or IMP during the last twelve months, has canceled,
terminated or, to the Knowledge of the Sellers (with respect to the Company) and
▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), made any threat to either the
Company or IMP to cancel or otherwise terminate, or to materially decrease the
provision of services or supplies to either the Company or IMP.
(x) INVENTORY. The Inventory of the Company and IMP consists in all
material respects of items usable and saleable in the Ordinary Course of
Business in the Company's present product lines. Except as set forth in section
3B(f) OF THE DISCLOSURE SCHEDULE, the Inventory of the Company and IMP is valued
at the lower of cost (on a first-in-first-out basis) or market in accordance
with GAAP on a basis consistent with all prior periods of the Company and IMP
since the fiscal year ended December 31, 1996.
(y) ACCOUNTS RECEIVABLE. All of the Accounts Receivable of each of the
Company and IMP are properly reflected on its books and records and arose from
bona fide transactions in the Ordinary Course of Businesection The reserve for
bad debts set forth on the Most Recent Balance Sheet has been determined in
accordance with GAAP on a basis consistent with prior periods. None of such
Accounts Receivable is or will be at the Closing Date subject to any
counterclaim or set off, other than routine claims for the return of defective
or non-conforming merchandise.
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38
(z) LIST OF ACCOUNTS. section 3B(z) OF THE DISCLOSURE SCHEDULE sets
forth a list of all bank and securities accounts, and all safe deposit boxes,
maintained by each of the Company and IMP and a listing of the persons
authorized to draw thereon or make withdrawals therefrom or, in the case of safe
deposit boxes, with access thereto.
(aa) PRODUCTS LIABILITY. To the Knowledge of the Sellers (with respect
to the Company) and ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ (with respect to IMP), except for
routine warranty claims for the return of defective or non-conforming
merchandise and except as set forth in section 3B(aa) OF THE DISCLOSURE
SCHEDULE, there exist no claims against either the Company or IMP for injury to
persons or property suffered by any person as a result of the sale of any
product by the Company or IMP, including, but not limited to, claims arising out
of the defective or unsafe nature of the products sold by either the Company or
IMP. section 3B(aa) OF THE DISCLOSURE SCHEDULE sets forth a true and correct
list and brief description of all product liability claims that have been filed
against the Company and IMP since January 1, 1996.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants (subject to the exceptions set forth in the Disclosure
Schedule) to the Sellers, the Company and IMP as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Alabama.
(b) AUTHORIZATION OF TRANSACTION. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which the Purchaser
is subject or any provision of its charter or bylaws or other organizational
document, as the case may be, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which the
Purchaser is a party or by which it is bound or to which any of its assets is
subject. The Purchaser is not required give any notice to, make any filing with,
or obtain any authorization, consent or approval of any government or
governmental agency in order for it to consummate the transactions contemplated
by this Agreement.
(d) BROKERS' FEES. Except for any transaction fees payable to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ & Associates (all of which fees will be paid at or prior to the
Closing), the Purchaser does not have any
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39
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Sellers or the Company (prior to the Closing) could become liable or
obligated.
(e) ACQUISITION OF SHARES FOR INVESTMENT. The Company Shares and the
IMP Shares to be purchased by the Purchaser pursuant to this Agreement are being
acquired for investment only and not with a view to any public distribution
thereof, and the Purchaser will not offer to sell or otherwise dispose of such
Shares so acquired by it in violation of any of the registration requirements of
the Securities Act or any comparable state laws.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in section 8 below).
(b) NOTICES AND CONSENTS. Each of the Parties will give any notices to,
make any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents and approvals of governments and governmental agencies
in connection with consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the Parties
will file any Notification and Report Forms and related material that such Party
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, will use commercially reasonable efforts to obtain a waiver from the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper or advisable in connection therewith.
(c) OPERATION OF BUSINESS. Neither the Company nor IMP will engage
in any practice, take any action, or enter into any transaction of the sort
described in section 3B(g) above. In addition, each of the Company and IMP will
continue to conduct its business in the Ordinary Course of Business and will not
(i) except in the Ordinary Course of Business liquidate Inventory or accept
product returns, (ii) accelerate receivables, (iii) delay payables, or (iv)
change in any material respect either the Company's ir IMP's practices in
connection with the payment of payables in respect of raw materials purchases.
(d) PRESERVATION OF BUSINESS. Each of the Company and IMP will use
commercially reasonable efforts to maintain its business and properties,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers and employees.
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40
(e) FULL ACCESS. Each of the Company and IMP will permit
representatives of the Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company and IMP, to the premises, properties, personnel, books, records
(including tax records), contracts and documents of or pertaining to the Company
and IMP. The Purchaser reaffirms its obligations under the Confidentiality
Agreement.
(f) NOTICE OF DEVELOPMENTS. Each Party will promptly give notice to the
other Party(ies) of its, his or her discovery of any material adverse
development which, had such development been in existence on the date hereof,
would constitute a breach of the representations and warranties contained in
section section 3A and 3B (in the case of a Seller) or section 4 (in the case of
the Purchaser). No disclosure by any Party pursuant to this section 5(f) shall
be deemed to amend or supplement the Disclosure Schedules or to prevent or cure
any misrepresentation or breach of warranty.
(g) NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. The Purchaser
acknowledges that none of the Sellers, the Company, IMP, nor any other Person
has made any representation or warranty, express or implied, as to the accuracy
or completeness of any information regarding the Company, IMP or any Seller,
except as expressly set forth in this Agreement or the Disclosure Schedule, and
the Purchaser further agrees that none of the Sellers, the Company, IMP nor any
other Person will have or be subject to any liability to the Purchaser or any
other Person resulting from the distribution to the Purchaser, or the
Purchaser's use of, any such information. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN SECTION 3A and 3B, NONE OF THE SELLERS, THE
COMPANY OR IMP MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW
OR IN EQUITY, IN RESPECT OF THE SELLERS, THE COMPANY OR IMP OR ANY OF THE
ASSETS, LIABILITIES OR OPERATIONS OF THE COMPANY OR IMP, AND THE SELLERS, THE
COMPANY AND IMP EXPRESSLY DISCLAIM ANY SUCH REPRESENTATION OR WARRANTY.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party; PROVIDED,
HOWEVER, that the taking of any action necessary to execute or deliver to the
Purchaser any stock powers and such other instruments of transfer as may be
necessary to transfer ownership of the Shares by any Seller shall be borne by
such Seller.
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41
(b) Section 338(h)(10) ELECTION.
(i) The Sellers will join with the Purchaser in making an
election under section 338(h)(10) of the Code and Treasury Regulations
section 1.338(h)(10)-1(d) (and any corresponding elections under any
applicable state and local Laws)(collectively, a "section 338(h)(10)
ELECTION") with respect to the purchase and sale of the Company Shares
from the Sellers hereunder. The Sellers will pay any tax attributable
to the making of the section 338(h)(10) Election (including, without
limitation, any tax arising as the result of the recognition of any
built-in gain pursuant to the provisions of section 1374 of the Code
and any Tax arising as the result of the "recapture" of previously
deducted items) and the Sellers, jointly and severally, will indemnify
the Purchaser and the Company from and against any Losses arising out
of any failure to pay such tax.
(ii) The Sellers will be responsible for preparing and filing
all income or franchise Tax Returns of the Company and IMP relating to
Pre-Closing Tax Periods. The Purchaser will be responsible for
preparing and filing all income and franchise Tax Returns of the
Company and IMP relating to periods other than Pre-Closing Tax Periods.
After the Closing has occurred, the Purchaser will cause the Company
and IMP to provide, or cause to be provided, to the Sellers, without
charge, any information that may reasonably be requested by the Sellers
in connection with the preparation of any such Tax Returns relating to
Pre- Closing Tax Periods. The Sellers will allow the Purchaser an
opportunity to review and comment on such Tax Returns (including any
amended Returns). The Sellers will take no positions on the Tax Returns
of the Company or IMP that relate to Pre-Closing Tax Periods that would
adversely affect the Company or IMP after the Closing Date. The
Purchaser will take no positions on the Tax Returns of the Company or
IMP that relate to Post-Closing Tax Periods that would adversely affect
the Sellers after the Closing Date for any Pre-Closing Tax Periods. The
income of the Company will be apportioned to the period up to the
Closing Date and the period from and after the Closing Date in
accordance with the provisions of section 1362(e)(6)(i) of the Code by
closing the books of the Company as of the close of business on the
last calendar day immediately preceding the Closing Date.
(iii) Section 6(b)(iii) OF THE DISCLOSURE SCHEDULE sets forth
an allocation of the estimated "Modified Adjusted Deemed Sales Price",
as defined in Treasury Regulations section 1.338(h)(10)-(f), among the
assets of the Company (the "ALLOCATION SCHEDULE"). Promptly (but in no
event later than 30 days following the Purchaser's receipt of the
Closing Balance Sheet) after the Closing Date, the Sellers and the
Purchaser shall exchange completed and executed copies of IRS Form
8023-A (or other applicable form), required schedules thereto, and any
similar forms required by any state or local Tax Authority. If any
changes are required to these forms as a result of information which is
first available after the Closing Date, the Sellers and the Purchaser
will in good faith use commercially reasonable efforts to promptly
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42
agree on such changes. The Sellers and the Purchaser each agree to file
all Tax Returns in accordance with the Allocation Schedule.
(c) TRANSITION. None of the Sellers, the Company or IMP will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of the Company
or IMP from maintaining the same business relationships with the Company and IMP
after the Closing as it maintained with the Company and IMP prior to the
Closing.
(d) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company or IMP, each of the Parties will cooperate
with the contesting or defending Party and its, his or her counsel in the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (except in connection with any dispute among the Parties,
including any dispute relating to a Notice of Disagreement With Adjusted EBITAM
Statement), and except to the extent that the contesting or defending party is
entitled to indemnification therefor under this Agreement).
(e) NONCOMPETITION. In order to induce the Purchaser to enter into this
Agreement, each Seller and ▇▇▇▇▇ ▇▇▇▇▇▇ (severally and not jointly) expressly
covenants and agrees that for a period of five years from and after the Closing
Date, such Person will not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the Purchaser), whether as
an employee, officer, director, partner, agent, security holder, consultant or
otherwise, that directly or indirectly is engaged in the Business of the Company
in all markets in which the Company and IMP currently sell their products (the
"RESTRICTED AREA"). The Sellers and ▇▇▇▇▇ ▇▇▇▇▇▇ agree that the covenant
provided for in this section 6(e) is reasonable and necessary in terms of time,
activity and territory to protect the Purchaser's interest as a buyer of the
Company Common Stock and IMP Stock and in protecting the Company's and IMP's
Trade Secrets. The Sellers and ▇▇▇▇▇ ▇▇▇▇▇▇ further acknowledge and agree that
such covenants are reasonable and necessary in terms of time, area and line of
business to protect the Purchaser's other legitimate business interests, which
include its interests in protecting the Company's and IMP's (i) valuable
confidential business information, (ii) substantial relationships with customers
throughout the Restricted Area and (iii) customer goodwill associated with the
Company's and IMP's ongoing businesection The Sellers and ▇▇▇▇▇ ▇▇▇▇▇▇ expressly
authorize the enforcement of the covenants provided for in this section 6(e) by
(A) the Purchaser and its Subsidiaries, (B) the Purchaser's permitted assigns
and (C) any successors to the Company's and IMP's businesection To the extent
that the covenant provided for in this section 6(e) may later be deemed by a
court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration
- 38 -
43
or scope of the provision, and to add or delete specific words or phrases to or
from the provision. The provision as modified shall then be enforced.
(f) NON-SOLICITATION. In order to induce the Purchaser to enter into
this Agreement, each Seller and ▇▇▇▇▇ ▇▇▇▇▇▇ (severally and not jointly)
expressly covenants and agrees that for a period of five years from and after
the Closing Date, such Person will not, directly or indirectly, solicit for
employment or employ (or attempt to solicit for employment or employ), for
himself, herself or itself or on behalf of any sole proprietorship, partnership,
corporation, limited liability company or business or any other Person (other
than the Purchaser), any employee of the Company or IMP or encourage any such
employee to leave his or her employment with the Company or IMP. To the extent
that the covenant provided for in this section 6(f) may later be deemed by a
court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision. The provision as modified shall then be enforced.
(g) CONFIDENTIALITY. In order to induce the Purchaser to enter into
this Agreement, each Seller and ▇▇▇▇▇ ▇▇▇▇▇▇ (severally and not jointly)
expressly covenants and agrees that from and after the Closing Date, such Person
will not, directly or indirectly, for himself, herself or itself or on behalf of
any sole proprietorship, partnership, corporation, limited liability company or
business or any other Person (other than the Purchaser) disclose, divulge,
furnish or make accessible to anyone (other than the Company, IMP or any of
their respective Affiliates or representatives) any Confidential Information or
Trade Secrets, or in any way use any Confidential Information or Trade Secrets
in the conduct of any business; PROVIDED, HOWEVER, that nothing in this section
6(g) will prohibit the disclosure of any Confidential Information or Trade
Secrets (i) which is required to be disclosed by a Seller or ▇▇▇▇▇ ▇▇▇▇▇▇ or any
such other Person in connection with any court action or any proceeding before
any Authority, (ii) in connection with the enforcement of any of the respective
rights of a Seller or ▇▇▇▇▇ ▇▇▇▇▇▇ hereunder, or (iii) in connection with the
defense by a Seller or ▇▇▇▇▇ ▇▇▇▇▇▇, of any claim asserted against him or it
hereunder; PROVIDED, HOWEVER, that in the case of a disclosure contemplated by
clause (i), no disclosure shall be made until such Person shall give notice to
the Company of the intention to disclose such Confidential Information or Trade
Secrets so that the Company may contest the need for disclosure, and such Person
will cooperate (and will cause his or her Affiliates and their respective
representatives to cooperate) with the Purchaser in connection with any such
proceeding. Notwithstanding any provision of this Agreement which may be to the
contrary (x) the foregoing provisions restricting the use of Confidential
Information shall survive the Closing for a period of seven years, and (y) the
foregoing provisions restricting the use of Trade Secrets shall survive the
Closing for so long as permitted by the Florida Uniform Trade Secrets Act,
Chapter 688, Florida Statutes.
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44
7. NO SHOP. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, each of the Company
and IMP shall not, and the Sellers shall cause the Company and IMP and their
respective officers, directors, employees and other agents not to, directly or
indirectly, take any action to solicit, initiate or encourage any offer or
proposal or indication of interest in a merger, consolidation or other business
combination involving any equity interest in, or a substantial portion of the
assets of the Company or IMP, other than in connection with the transactions
contemplated by this Agreement. The Company, IMP and the Sellers shall
immediately advise the Purchaser of the terms of any written offer, proposal or
indication of interest that they, the Company or IMP receive or otherwise become
aware of.
8. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3A
and section 3B above that are qualified as to their materiality shall
be true and correct and any such representations and warranties that
are not so qualified shall be true and correct in all material respects
at and as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement);
(ii) the Sellers, the Company and IMP shall have performed and
complied with all of their respective covenants hereunder in all
material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) each of the Sellers (or the Sellers' Representative
acting on their behalf) shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
sections 8(a)(i) and (ii), as they pertain to such Seller, have
been satisfied in all respects;
(v) the Sellers shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
sections 8(a)(i) and (ii) have been satisfied in all respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or
otherwise been terminated;
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45
(vii) all of the directors and officers of the Company and IMP
designated by the Purchaser prior to the Closing shall have delivered
duly signed resignations effective at the time of the Closing (or the
Sellers, the Company or IMP shall have taken such other action as is
necessary to ensure that such persons are not directors or officers of
the Company or IMP at the time of the Closing);
(viii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed and delivered to
the Purchaser the Employment Agreement;
(ix) ▇. ▇▇▇▇▇▇ shall have executed and delivered to the
Purchaser the Consulting Agreement;
(x) Nitram Partners, Ltd. shall have executed and delivered to
the Purchaser the Lease Amendment;
(xi) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ shall have
executed and delivered to the Purchaser the Joinder Agreement;
(xii) the Purchaser shall have completed its due diligence
review of the Company and IMP (including, without limitation, a
financial, legal, commercial and environmental review of the Company
and IMP) and the results thereof shall be satisfactory to the Purchaser
in its absolute discretion;
(xiii) there shall be no payables or receivables between the
Sellers and the Company or IMP or between Affiliates of the Sellers and
the Company or IMP, other than lease payments and intercompany payments
between the Company and IMP;
(xiv) the Company will have Net Working Capital of at least
the Net Working Capital Threshold Amount; and
(xv) the Sellers shall have corrected the building code
violations referenced in section 12(a)(v).
The Purchaser may waive any condition specified in this section 8(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
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46
(i) the representations and warranties set forth in section 4
above shall be true and correct in all material respects at and as of
the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement);
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) the Purchaser shall have delivered to the Sellers'
Representative a certificate to the effect that each of the conditions
specified above in sections 8(b)(i) and (ii) has been satisfied
in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or
otherwise been terminated;
(vi) the Purchaser shall have executed and delivered to the
Sellers' Representative the Employment Agreement;
(vii) the Purchaser shall have executed and delivered to the
Sellers' Representative the Consulting Agreement; and
(x) the Company shall have executed and delivered to the
Sellers' Representative the Lease Amendment.
The Sellers' Representative may waive any condition specified in this section
8(b) if he executes a writing so stating at or prior to the Closing.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Sellers contained in section 3A and contained in section
3B(b), (d) and (e) (collectively, THE "TRANSACTION REPRESENTATIONS AND
WARRANTIES"), the representations and warranties of the Sellers contained in
section 3B(k) (thE "TAX REPRESENTATIONS AND WARRANTIES"), the representations
and warranties of the Sellers contained in section 3B(u) (thE "EMPLOYEE BENEFIT
PLAN REPRESENTATIONS AND WARRANTIES"), the representations and warranties of the
Sellers contained in section 3B(v) (the "ENVIRONMENTAL REPRESENTATIONS AND
WARRANTIES"), the representations and warranties of the Sellers contained in
section 3B(aa) (the "PRODUCTS LIABILITY REPRESENTATIONS AND WARRANTIES") and the
representations and
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47
warranties of the Purchaser contained in section 4 shall survive the Closing and
continue in full force and effect for the statute of limitations applicable
thereto. The representations and warranties of the Sellers contained in section
3B (other than the Transaction Representations and Warranties, the Tax
Representations and Warranties, the Employee Benefit Plan Representations and
Warranties, the Environmental Representations and Warranties and the Products
Liability Representations and Warranties) shall survive the Closing and continue
in full force and effect until the two year anniversary of the Closing Date. Any
claim for which any Party shall have given proper notice in accordance with the
terms of this Agreement (and the Escrow Agreement) on or prior to the expiration
of the applicable survival period shall survive until such claim is resolved
pursuant to the terms of this Agreement or the Escrow Agreement. To preserve any
claim for breach of any such representation or warranty, the Party claiming a
breach shall be obligated to notify the Party claimed to be in breach (except
that where the Party claimed to be in breach is the Company or IMP, notice shall
be given to the Sellers' Representative) in writing of any such breach, or facts
that can reasonably be expected to give rise to such breach, before termination
of the applicable survival period in respect of such representation or warranty;
otherwise, such Party's claim for breach shall be forever barred.
(b) INDEMNIFICATION.
(i) Pursuant to the terms of the Escrow Agreement and subject
to section 9(a) above and the conditions set forth in this section
9(b), subsequent to the Closing Date the Sellers shall indemnify,
defend and hold harmless the Company and IMP (as assignee of the
Purchaser pursuant to section 9(e) hereof) from, against and in respect
of any Losses which the Purchaser, the Company or IMP shall suffer,
sustain or become subject to by virtue of or which arise out of, or
result from, any breach of the covenants, representations and
warranties of the Sellers set forth in this Agreement (other than the
Transaction Representations and Warranties, the Tax Representations and
Warranties, the Employee Benefit Plan Representations and Warranties,
the Environmental Representations and Warranties and the Products
Liability Representations and Warranties); PROVIDED, HOWEVER, that: (A)
the Company's and IMP's right to indemnification with respect to such
breaches under this section 9(b)(i) shall be satisfied only by recourse
to the funds deposited and remaining in the General Indemnification
Escrow Account, and none of the Sellers shall have any personal
liability to the Company or IMP with respect to any such breach, and
(B) the Company and IMP shall not be entitled to indemnification with
respect to any Losses under this section 9(b)(i) until all such Losses
exceed, in the aggregate, $150,000 (the "DEDUCTIBLE"), in which case
the Company and IMP shall be entitled to indemnification only to the
extent such Losses exceed $150,000. Notwithstanding anything to the
contrary contained in this section 9(b)(i), any breach of the
representations and warranties of the Sellers contained in section
3B(x) shall not be subject to the Deductible.
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48
(ii) Subject to section 9(a) above and the conditions set
forth in this section 9(b), subsequent to the Closing Date the Sellers
shall indemnify, defend and hold harmless the Company and IMP (as
assignee of the Purchaser pursuant to section 9(e) hereof) from,
against and in respect of any Losses which Purchaser, the Company or
IMP shall suffer, sustain or become subject to by virtue of or which
arise out of, or result from, any breach of any of the Transaction
Representations and Warranties, the Tax Representations and Warranties,
the Employee Benefit Plan Representations and Warranties, the
Environmental Representations and Warranties or the Products Liability
Representations and Warranties; PROVIDED, HOWEVER, that no Seller shall
be obligated to indemnify the Purchaser for an amount in excess of its,
his or her Company Pro Rata Share or IMP Pro Rata Share, whichever is
applicable, of any such Losses. The Company's and IMP's right to
indemnification with respect to breaches of Transaction Representations
and Warranties, Tax Representations and Warranties, Employee Benefit
Plan Representations and Warranties, Environmental Representations and
Warranties or Products Liability Representations and Warranties under
this section 9(b)(ii) shall not be subject to the Deductible and shall
be satisfied first by recourse to the funds deposited and remaining in
the General Indemnification Escrow Account; PROVIDED, HOWEVER, that to
the extent Losses for which the Purchaser is entitled to
indemnification under section 9(b)(i), together with amounts paid from
the General Indemnification Escrow Account pursuant to this section
9(b)(ii) exceed $2,450,000, the Sellers shall pay the Purchaser the
deficiency within 10 days of the Purchaser's request. In no event shall
the Company or IMP be entitled to indemnification for any Losses with
respect to the breach of any Employee Benefit Plan Representations and
Warranties and the Products Liability Representations and Warranties to
the extent that the sum of (x) all such Losses, and (y) the amount of
all disbursements made to the Company and IMP from the General
Indemnification Escrow Account exceeds, in the aggregate, $5,000,000.
In no event shall the Company or IMP be entitled to indemnification for
any Losses with respect to the breach of any Tax Representations and
Warranties or Environmental Representations and Warranties to the
extent that the sum of (x) all such Losses, (y) the amount of all
disbursements made to the Company and IMP from the General
Indemnification Escrow Account and (z) the amount of any Losses paid
for a breach of any Employee Benefit Plan Representations and
Warranties and the Products Liability Representations and Warranties,
exceeds in the aggregate, the Company Purchase Price and the IMP
Purchase Price. There shall be no limit on the amount of any Losses for
which the Company or IMP is entitled to indemnification for the breach
of any Transaction Representations and Warranties.
(iii) Subject to section 9(a) above and the conditions set
forth in this section 9(b), subsequent to the Closing Date (A) the
Purchaser shall indemnify, defend and hold harmless each Seller and his
or her estate, heirs, personal representatives or successors from,
against and in respect of any Losses which any such Person shall
suffer, sustain or become subject to by virtue of or which arise out
of, or result from, any breach by the Purchaser of its covenants,
representations and warranties set forth in this Agreement, and (B) the
Company and IMP
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49
shall indemnify, defend and hold harmless each Seller and his or her
estate, heirs, personal representatives or successors from, against and
in respect of, any Losses which any such Person shall suffer, sustain
or become subject to by virtue of or which arise out of, or result
from, any breach by the Company or IMP of any of its covenants herein
which are to be performed after the Closing.
(iv) Promptly after the assertion by any third party of any
claim, demand or notice (a "THIRD PARTY CLAIM") against any Person or
Persons entitled to indemnification under this section 9(b) (the
"INDEMNIFIED PARTIES") that results or may result in the incurrence by
such Indemnified Parties of any Losses for which such Indemnified
Parties would be entitled to indemnification pursuant to this
Agreement, such Indemnified Parties shall promptly notify the parties
from whom such indemnification could be sought (the "INDEMNIFYING
PARTIES") of such Third Party Claim. In the case of claims for which
indemnification may be sought against the General Indemnification
Escrow Account, notice shall be given to the Sellers and to the
Sellers' Representative, and the Sellers and the Sellers'
Representative shall be considered the Indemnifying Parties solely for
the purpose of defending any such Third Party Claim as provided herein.
Thereupon, the Indemnifying Parties shall have the right, upon written
notice (the "DEFENSE NOTICE") to the Indemnified Parties within 30 days
after receipt by the Indemnifying Parties of notice of the Third Party
Claim (or sooner if such claim so requires) to conduct, at their own
expense, the defense against the Third Party Claim in their own names
or, if necessary, in the names of the Indemnified Parties. The Defense
Notice shall specify the counsel the Indemnifying Parties shall appoint
to defend such Third Party Claim (the "DEFENSE COUNSEL") and the
Indemnified Parties shall have the right to approve the Defense
Counsel, which approval shall not be unreasonably withheld. In the
event the Indemnified Parties and the Indemnifying Parties cannot agree
on such counsel within 10 days after the Defense Notice is given, then
the Indemnifying Parties shall propose an alternate Defense Counsel,
which shall be subject again to the Indemnified Parties' approval which
approval shall not be unreasonably withheld. Any Indemnified Party
shall have the right to employ separate counsel in any such Third Party
Claim and/or to participate in the defense thereof, but the fees and
expenses of such counsel shall not be included as part of any Losses
incurred by the Indemnified Party unless (A) the Indemnifying Parties
shall have failed to give the Defense Notice within the prescribed
period, (B) such Indemnified Party shall have received an opinion of
counsel, reasonably acceptable to the Indemnifying Parties, to the
effect that the interests of the Indemnified Party and the Indemnifying
Parties with respect to the Third Party Claim are sufficiently adverse
to prohibit the representation by the same counsel of both parties
under applicable ethical rules, or (C) the employment of such counsel
at the expense of the Indemnifying Parties has been specifically
authorized by the Indemnifying Parties. The party or parties conducting
the defense of any Third Party Claim shall keep the other parties
apprised of all significant developments and shall not enter into any
settlement, compromise or consent to judgment with respect to such
Third Party Claim
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50
unless the Company and the Sellers' Representative consent, such
consent not to be unreasonably withheld.
(v) Notwithstanding any other provisions contained herein, the
costs of enforcement of the Escrow Agreement by the Purchaser, the
Company, IMP or any Seller shall not constitute Losses hereunder.
Rather, such costs and expenses shall be paid in accordance with the
terms of the Escrow Agreement.
(c) TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnification payments
under this section 9 shall be deemed adjustments to the Company Purchase Price
or the IMP Purchase Price, whichever is applicable.
(d) EXCLUSIVE REMEDY. The Parties acknowledge and agree that the
foregoing indemnification provisions in this section 9 shall be the exclusive
remedy of the Purchaser, the Company, IMP and the Sellers with respect to
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the Purchaser, the Company, IMP and the Sellers hereby waive any
statutory, equitable or common law rights or remedies relating to any
environmental, health and safety matters, including, without limitation, any
such matters arising under any Environmental, Health and Safety Requirements,
CERCLA, or any analogous state law.
(e) ASSIGNMENT BY PURCHASER. Provided that the Closing shall occur, the
Purchaser hereby assigns and transfers to the Company and IMP, effective as of
the Closing, all benefits and rights of the Purchaser pursuant to section 6 and
section 9 hereof.
(f) NO CONTRIBUTION FROM COMPANY OR IMP. Each Seller hereby waives any
rights to seek or obtain indemnification or contribution from the Company or IMP
for Losses pursuant to section 9(b) or the Escrow Agreement as a result of any
breach by the Company or IMP of any representation, warranty or covenant (other
than covenants to be performed by the Company and IMP after the Closing)
contained in this Agreement.
10. DISPUTE RESOLUTION.
(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE" shall (i)
mean any dispute or disagreement among the Parties concerning the interpretation
of this Agreement, the validity of this Agreement, any breach or alleged breach
by any party under this Agreement or any other matter relating in any way to
this Agreement, and (ii) exclude (A) any dispute or disagreement between the
Company and the Sellers concerning the determination of the Earnout, which shall
be resolved pursuant to the provisions of section 2(e)(iv) of this Agreement and
(B) any dispute or disagreement between the Company and the Sellers concerning
the determination of the Net Working Capital which shall be resolved pursuant to
the provisions of Section 2(f)(ii) of this Agreement.
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(b) DISPUTE RESOLUTION PROCEDURES.
(i) If a Dispute arises, the Parties shall follow the
procedures specified in this section 10. The Parties shall promptly
attempt to resolve any Dispute by negotiations between themselves.
Either the Purchaser or the Sellers' Representative may give the other
Party written notice of any Dispute not resolved in the normal course
of businesection The Purchaser and the Sellers' Representative shall
meet at a mutually acceptable time and place within 15 calendar days
after delivery of such notice, and thereafter as often as they
reasonably deem necessary, to exchange relevant information and to
attempt to resolve the Dispute. If the Dispute has not been resolved by
the Parties within 30 calendar days of the disputing Party's notice, or
if the Parties fail to meet within such 15 calendar days, either the
Purchaser or the Sellers' Representative may initiate mediation as
provided in section 10(b)(ii) of this Agreement. If a negotiator
intends to be accompanied at a meeting by legal counsel, the other
negotiator shall be given at least three business days' notice of such
intention and may also be accompanied by legal counsel.
(ii) If the Dispute is not resolved by negotiations pursuant
to section 10(b)(i), the Purchaser and the Sellers' Representative
shall attempt in good faith to resolve any such Dispute by nonbinding
mediation. Either the Purchaser or the Sellers' Representative may
initiate a nonbinding mediation proceeding by a request in writing to
the other Party or Parties (the "MEDIATION REQUEST"), and all disputing
Parties will then be obligated to engage in a mediation. The proceeding
will be conducted in accordance with the then current procedures for
mediation under Chapter 44 of the Florida Statutes and Rules 1.700-730
of the Florida Rules of Civil Procedure:
(A) if the Parties have not agreed within 30 calendar
days of the Mediation Request on the selection of a mediator
willing to serve, the court, upon the request of either the
Purchaser or the Sellers' Representative, shall appoint a
certified mediator selected by rotation or by such other court
procedures as provided in Chapter 44 of the Florida Statutes
and Rules 1.700-730 of the Florida Rules of Civil Procedure;
and
(B) efforts to reach a settlement will continue until
the conclusion of the proceedings, which shall be deemed to
occur upon the earliest of the date that: (i) a written
settlement is reached, or (ii) the mediator concludes and
informs the Parties in writing that further efforts would not
be useful, or (iii) the Purchaser and the Sellers'
Representative agree in writing that an impasse has been
reached, or (iv) a period of 60 calendar days has passed since
the Mediation Request and none of the events specified in the
foregoing clauses (i) (ii) or (iii) has occurred. No party may
withdraw before the conclusion of the proceeding.
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52
(iii) If a Dispute is not resolved by negotiation pursuant to
section 10(b)(i) of this Agreement or by mediation pursuant to section
10(b)(ii) of this Agreement within 100 calendar days after initiation
of the negotiation process pursuant to section 10(b)(i), such Dispute
and any other claims arising out of or relating to this Agreement may
be heard, adjudicated and determined in an action or proceeding filed
in any state or federal court specified in section 12(h).
(c) PROVISIONAL REMEDIES. At any time during the procedures specified
in sections 10(b)(i) and 10(b)(ii) of this Agreement, a Party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the Parties will continue to participate in good faith
in the procedures specified in sections 10(b)(i) and 10(b)(ii).
(d) TOLLING STATUTE OF LIMITATIONS. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in sections 10(b)(i) and 10(b)(ii) of this Agreement
are pending. The Parties will take such action, if any, as is required to
effectuate such tolling.
(e) PERFORMANCE TO CONTINUE. Each Party shall continue to perform its,
his or her obligations under this Agreement pending final resolution of any
Dispute.
(f) EXTENSION OF DEADLINES. All deadlines specified in this section 10
may be extended by mutual agreement among the Parties.
(g) ENFORCEMENT. The Parties regard the obligations in this section 10
to constitute an essential provision of this Agreement and one that is legally
binding on them. In case of a violation of the obligations in this section 10 by
any Party hereto, any other Party or Parties may bring an action to seek
enforcement of such obligations in any state or federal court specified in
section 12(h).
(h) COSTS. The Parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
10(b)(i) and 10(ii) of this Agreement. In addition, the fees and expenses of the
mediator in connection with the application of the provisions of section
10(b)(ii) of this Agreement shall be borne 50% by the Purchaser and 50% by the
Sellers (PRO RATA based on each Seller's Company Pro Rata Share).
11. ADDITIONAL AGREEMENTS. The Parties agree that any claim for payment
pursuant to sections 11(b) and 11(c) must be made by the Purchaser on or before
June 30, 1999 and to preserve any claim for payment thereunder, the Purchaser
shall be obligated to notify the Seller in writing of any claim, together with
supporting documentation, on or before June 30, 1999, otherwise, the Purchaser's
claim under sections 11(b) and 11(c) shall be forever barred. The Parties agree
that there shall be no time limit on any claim for payment pursuant to sections
11(a), 11(d) and 11(e). The Parties further agree that any payments required to
be made pursuant to sections 11(a), 11(b), 11(c), 11(d) and 11(e) shall
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53
not be subject to the Deductible and may be made from funds deposited in the
Escrow Account; PROVIDED, HOWEVER, that to the extent Losses for which the
Purchaser is entitled to indemnification under section 9(b)(i), together with
amounts paid from the Escrow Account pursuant to sections 11(a), 11(b),
11(c), 11(d) and 11(e) exceed $2,450,000, the Sellers shall pay the Purchaser
the deficiency within 30 days of the Purchaser's request (PRO RATA based on each
Seller's Company Pro Rata Share).
(a) PRODUCT RETURNS. Notwithstanding anything set forth in section
3B(aa) OF THE DISCLOSURE SCHEDULE, in the event (i) customers of the Company or
IMP return within the applicable warranty period any defective or non-conforming
merchandise sold prior to Closing, (ii) the Company or IMP is required to
provide any customers with a credit against their accounts receivable within the
applicable warranty period as a result of the receipt of defective or
non-conforming merchandise sold prior to Closing or (iii) any product liability
claims are brought with respect to merchandise sold prior to Closing which are
not covered by insurance, the Sellers shall be required to pay the Purchaser
(PRO RATA based on each Seller's Company Pro Rata Share) the amount of the
credits, the amount of the uninsured product liability claims and the sum of (A)
the difference between the original sales price of the returned merchandise and
the resale price thereof, (B) re-work costs and shipping costs, and (C) the cost
of any returned merchandise which was sold prior to Closing and which is not
resold by the Company, within 30 days of the Purchaser's request, provided that
(1) the Purchaser causes the Company to use its best efforts to resell the
returned merchandise in the Ordinary Course of Business and (2) any Dispute
regarding payment is first resolved pursuant to section 10 of this Agreement.
(b) SELLERS' GUARANTEE OF ACCOUNTS RECEIVABLE.
(i) With respect to accounts receivable on the Closing Balance
Sheet which as of the Closing are 90 days or over from the invoice date
thereof (the "90 AND OVER ACCOUNTS RECEIVABLE"), the Sellers guarantee
the collectibility of the 90 and Over Accounts Receivable in full minus
any remaining reserve for bad debts included in the Closing Balance
Sheet.
(ii) The Purchaser agrees to use efforts consistent with the
Company's past custom and practice to cause the Company to collect all
90 and Over Accounts Receivable, but shall not be obligated to resort
to litigation. Any sums payable by account debtors on account of any
accounts receivable of such account debtors shall be credited to the
earliest invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor. Subject to the
foregoing, to the extent any 90 and Over Accounts Receivable existing
at the Closing are unpaid for a period of 60 days after the Closing,
the Purchaser shall send written notice to the Sellers' Representative
indicating the specific account debtors, the amount of the unpaid
invoices representing 90 and Over Accounts Receivable to each such
account debtor and the total of all such unpaid 90 and Over Accounts
Receivable. The Sellers shall pay the Purchaser the amount of all such
unpaid 90
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54
and Over Accounts Receivable minus any remaining reserve for bad debts
included in the Closing Balance Sheet (PRO RATA based on each Seller's
Company Pro Rata Share) within 30 days of the receipt of any notice
pursuant to this section 11(b)(ii) on the condition that the Purchaser
shall simultaneously cause the Company to assign such unpaid 90 and
Over Accounts Receivable (the "ASSIGNED RECEIVABLES") to the Sellers'
Representative. Such assignment shall include the right to ▇▇▇ as an
assignee of the Company. In the event that after such assignment the
Company receives any payment on the Assigned Receivables, the Purchaser
shall cause the Company to promptly remit such amount to the Sellers'
Representative. Thereafter, the Sellers' Representative, as owner of
the Assigned Receivables, may take any action the Sellers'
Representative deems necessary to collect the Assigned Receivables and
any collections shall be the property of the Sellers The Purchaser
agrees to cooperate and shall cause the Company to cooperate with the
Sellers' Representative in any action the Sellers' Representative
wishes to take to collect the Assigned Receivables consistent with the
Company's past custom and practice . In the event the Purchaser does
not want to assign any Account Receivable to the Sellers'
Representative because it does not want the Sellers' Representative to
initiate collection action thereon, the Sellers shall be relieved of
any liability under this section 11(b) with respect to such 90 and Over
Accounts Receivable.
(iii) In the event any 90 and Over Accounts Receivable is
subject to a valid dispute by the account debtor and/or the Purchaser
wishes to grant a discount on any 90 and Over Accounts Receivable, the
Purchaser shall send written notice or notices to the Sellers'
Representative indicating the specific account debtors and the amount
of the dispute or discount. The Purchaser shall consult with the
Sellers' Representative with respect to the resolution of any dispute
and/or the amount of any discount and shall not settle any such dispute
or grant any discount without the consent of the Sellers'
Representative, which consent shall not be unreasonably withheld. Where
consent is given to the settlement of any dispute and/or the granting
of any discount, the Sellers shall pay the Purchaser the difference
between the original amount of the 90 and Over Accounts Receivable and
the amount actually received by the Purchaser after settlement or
discount, with payment to be made within 30 days after the settlement
or granting of the discount. Where consent is withheld by the Sellers'
Representative, the Purchaser may either assign the 90 and Over
Accounts Receivable, or settle the dispute or grant the discount at its
own expense and the Sellers shall be relieved of any liability under
this section 11(b) with respect to such 90 and Over Accounts
Receivable.
(c) VACATION AND HOLIDAY ACCRUAL. To the extent the accrual on the
Company's Closing Balance Sheet for vacation and holidays is less than the
amount which should have properly been accrued in accordance with GAAP, the
Sellers shall pay the Purchaser the deficiency within 30 days of the Purchaser's
request (PRO RATA based on each Seller's Company Pro Rata Share).
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55
(d) EPCRA FILINGS. Notwithstanding the disclosures made by the Sellers
in section 3B(v) of THE DISCLOSURE SCHEDULE, the Sellers shall be responsible
for and shall pay the Purchaser (PRO RATA based on each Seller's Company Pro
Rata Share) the full amount of all Losses resulting from any failure to comply
with EPCRA.
(e) LITIGATION. Notwithstanding the disclosures made by the Sellers in
section 3B(S) OF The DISCLOSURE SCHEDULE, the Sellers shall be responsible for
and shall pay the Purchaser (PRO RATA based on each Seller's Company Pro Rata
Share) the full amount of all Losses resulting the matters described in section
3B(s) OF THE DISCLOSURE SCHEDULE. Such litigation shall be considered to be a
"Third Party Claim" and shall be handled in accordance with the provisions of
section 9(b)(iv) of this Agreement.
12. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and the Sellers' Representative may
terminate this Agreement by mutual written consent at any time prior to
the Closing;
(ii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Representative at any time prior to the
Closing in the event the Company has within the previous 10 business
days given the Purchaser any notice pursuant to section 5(f) above;
(iii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Representative at any time prior to the
Closing (A) in the event that the Sellers, the Company or IMP have
breached any representation, warranty or covenant contained in this
Agreement (other than the representations and warranties in section
3B(f)-(aa) above) in any material respect, the Purchaser has notified
the Sellers' Representative of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B)
if the Closing shall not have occurred on or before June 30, 1999, by
reason of the failure of any condition precedent under section 8(a)
hereof (unless the failure results primarily from the Purchaser
breaching any representation, warranty or covenant contained in the
Agreement); and
(iv) the Sellers' Representative may terminate this Agreement
by giving written notice to the Purchaser at any time prior to the
Closing (A) in the event the Purchaser has breached any material
representation, warranty or covenant contained in this Agreement in any
material respect, the Sellers' Representative has notified the
Purchaser of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before June 30, 1999, by reason of the
failure of any condition precedent under section 8(b) hereof (unless
the failure results primarily from the
- 51 -
56
Sellers, the Company or IMP breaching any representation, warranty or
covenant contained in this Agreement).
(v) On or before February 1, 1999, the Sellers' Representative
will notify the Purchaser by giving written notice of what is required
to correct any code violations with respect to the Real Property
subject to the Lease Amendment, the estimated time period to make such
corrections and the Sellers' willingness to make such corrections. If
the Sellers' Representative fails to give such notice, the Purchaser
shall have the right to terminate this Agreement. If such notice is
given and states that the Sellers are not willing to make such
corrections, then the Sellers may terminate this Agreement, subject to
the payment to the Purchaser of $22,500, representing one-half of the
filing fees required to be paid under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. If the
Sellers are willing to make such corrections and the estimated date for
completion thereof is after March 31, 1999, the Purchaser shall have
the right to terminate this Agreement.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to section 12(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); PROVIDED, HOWEVER, that
the confidentiality provisions contained in the confidentiality agreement
between WinsLoew Furniture, Inc. and the Company, dated May 28, 1998, executed
in connection with the transaction (the "CONFIDENTIALITY AGREEMENT") shall
survive the termination of this Agreement.
13. WINSLOEW FURNITURE GUARANTY. WinsLoew Furniture, Inc., a Florida
corporation, agrees to guaranty all obligations of the Purchaser under this
Agreement.
14. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Parties.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, other than the Confidentiality Agreement, which shall remain in full
force and effect.
- 52 -
57
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; PROVIDED, HOWEVER, that, unless expressly prohibited
hereunder, the Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder and (iii) after the Closing is
effected, any or all of the rights and interests of Purchaser hereunder (A) may
be assigned to any purchaser of substantially all of the assets of Purchaser,
(B) may be assigned as a matter of law to the surviving entity in any merger of
the Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing financing
to the Purchaser in connection with the transactions contemplated hereby, or to
any assignee or assignees of any such lender, lenders or agent (it being
understood that in any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Sellers, the Sellers' Representative or ▇▇▇▇▇ ▇▇▇▇▇▇, or if
to the Company or IMP (prior to the Closing):
▇▇▇ ▇▇▇▇▇▇
Bristol Towers Apartments
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to (which shall not constitute notice to the Sellers, the
Sellers' Representative or the Company):
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Cypen & Cypen
P.O. Box 402099
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- ▇▇ -
▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, PA
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser or WinsLoew Furniture Company, Inc., or if to the
Company or IMP (after the Closing):
▇▇▇▇▇ ▇▇▇▇▇▇
WinsLoew Furniture, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida. The Parties agree
that any and all actions arising under or in respect of this Agreement shall be
litigated in any federal or state court of competent jurisdiction located in the
County of Miami-Dade, State of Florida. By execution and delivery of this
Agreement, each Party irrevocably submits to the personal and exclusive
jurisdiction of such courts for itself or himself, and in respect of its or his
property with respect to such action. Each Party agrees that venue would be
proper in any of such courts, and hereby waives any objection that any such
court is an improper or inconvenient forum for the resolution of any such
action.
- 54 -
59
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser, the Sellers, the Company and IMP. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Except as otherwise provided in this Agreement, each of
the Parties will bear his, her or its own costs and expenses (including legal
and investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
neither the Company nor IMP has borne and will not bear any of the costs and
expenses of the Sellers (including any of their legal and investment advisory
fees and expenses) in connection with this Agreement or any of the transactions
contemplated hereby to the extent that any of the same shall remain unpaid at
the time of the Closing. Except as provided in section 12(a)(v), the Purchaser
shall bear all filing fees required to be paid under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
specification of any dollar amount in the representations and warranties or
otherwise in this Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of the materiality of
such amounts or items, nor shall the same be used in any dispute or controversy
between the parties to determine whether any obligation, item or matter (whether
or not described herein or included in any schedule) is or is not material for
purposes of this Agreement.
(m) INCORPORATION OF DISCLOSURE SCHEDULE. The Disclosure Schedule
identified in this Agreement is incorporated herein by reference and made a part
hereof.
(n) EQUITABLE REMEDIES. Each of the Sellers and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
acknowledges and agrees that the Purchaser would not have an adequate remedy at
law in the event any of the provisions of section 6(e), section 6(f) and section
6(g) of this Agreement are not performed in accordance with their specific terms
or are breached. Accordingly, each of Each of the Sellers and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
agrees that the Purchaser shall be entitled to an injunction or injunctions to
prevent breaches of section 6(e), section 6(f) and section 6(g) of this
Agreement and to enforce specifically the terms and provisions thereof in any
action instituted in any court of competent jurisdiction, in addition to any
other remedies which may be available to it.
- 55-
60
(o) WAIVER OF JURY TRIAL. EACH PARTY HERETO, WINSLOEW FURNITURE, INC.
AND ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
(p) PREVAILING PARTIES. Except as otherwise expressly provided to the
contrary in this Agreement, in the event of any litigation with regard to this
Agreement, the prevailing Party or Parties shall be entitled to receive from the
nonprevailing Party or Parties and the nonprevailing Party or Parties shall pay
all reasonable costs, fees (including reasonable trial and appellate attorneys'
fees) and expenses of the prevailing Party or Parties.
SIGNATURES APPEAR ON FOLLOWING PAGE
- 56 -
61
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
MIAMI METAL PRODUCTS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
INDUSTRIAL MUEBLERA POMPEII de MEXICO,
S.A. de C.V.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
SELLERS:
▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement I
- 57 -
62
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement II
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement III
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement I
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement II
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not individually
of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained Annuity Trust
Agreement III
SELLERS' REPRESENTATIVE:
▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇ ▇▇▇▇▇▇
By its execution hereof, WinsLoew Furniture,
Inc. agrees to the provisions of Sections 13 and
14 of this Agreement.
WINSLOEW FURNITURE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
- 58 -
63
By his execution hereof, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ agrees
to the provisions of Sections 6(e), 6(f), 6(g),
and 14 of this Agreement.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
- 59 -
64
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement is made and entered
into as of the 1st day of July, 1999, by and among WINSTON FURNITURE COMPANY OF
ALABAMA, INC., an Alabama corporation (the "PURCHASER"), MIAMI METAL PRODUCTS,
INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida corporation (the "COMPANY"),
INDUSTRIAL MUEBLERA POMPEII DE MEXICO, S.A. DE C.V., a Mexican corporation
("IMP") and the following selling shareholders, ▇▇▇ ▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇
▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇
▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT
INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT II, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST
AGREEMENT III, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇
▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT
INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT II, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED
ANNUITY TRUST AGREEMENT III (collectively, the "SELLERS" and individually, a
"SELLER").
PRELIMINARY STATEMENTS:
A. Purchaser, the Company, IMP and Sellers entered into a Stock
Purchase Agreement dated November 23, 1998 (the "STOCK PURCHASE AGREEMENT").
B. Purchaser, the Company, IMP and Sellers desire to amend the Stock
Purchase Agreement in accordance with the terms and provisions contained in this
First Amendment.
C. Capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Stock Purchase Agreement.
AGREEMENT:
In consideration of the premises and the mutual promises and conditions
contained herein, the parties hereto agree as follows:
1. AMENDMENT TO SECTION 2(g). The Closing Date is hereby amended to
such date as the Sellers' Representative and the Purchaser may mutually
determine, but no later than August 17, 1999.
2. AMENDMENT TO SECTION 11. The date for the Purchaser to submit a
claim for payment pursuant to ss.ss.11(b) and 11(c) of the Stock Purchase
Agreement is hereby amended to change the date from June 30, 1999 to 90 days
following the Closing Date.
3. AMENDMENT TO SECTIONS 12(a)(iii) AND (iv). The right of each of the
Purchaser and the Sellers' Representative to terminate the Stock Purchase
Agreement if the Closing shall
2
65
not have occurred on or before June 30, 1999 is hereby amended to change the
date from June 30, 1999 to October 31, 1999.
4. LEASE AMENDMENT. Exhibit D attached hereto is hereby substituted for
EXHIBIT D attached to the Stock Purchase Agreement.
5. EXECUTION IN COUNTERPARTS; FAX SIGNATURES. For the convenience of
the parties hereto, this Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument, without necessity of
production of the others. Signatures may be exchanged by facsimile transmission,
with original signatures to follow. Each party to this Amendment agrees that
he/she/it will be bound by his/her/its own facsimile signature and that
he/she/it accepts the facsimile signature of the other parties to this
Amendment.
6. RATIFICATION. The remaining provisions of the Stock Purchase
Agreement are hereby ratified and affirmed.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
MIAMI METAL PRODUCTS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇ - Chairman
-------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
INDUSTRIAL MUEBLERA POMPEII de
MEXICO, S.A. de C.V.
By: /s/ ▇▇▇ ▇▇▇▇▇▇ - Chairman
-------------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
3
66
SELLERS:
/s/ ▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement I
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement II
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement III
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement I
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement II
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement III
4
67
SECOND AMENDMENT TO
STOCK PURCHASE AGREEMENT
This Second Amendment to Stock Purchase Agreement is made and entered
into as of the 30th day of July, 1999, by and among WINSTON FURNITURE COMPANY OF
ALABAMA, INC., an Alabama corporation (the "PURCHASER"), MIAMI METAL PRODUCTS,
INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida corporation (the "COMPANY"),
INDUSTRIAL MUEBLERA POMPEII DE MEXICO, S.A. DE C.V., a Mexican corporation
("IMP") and the following selling shareholders, ▇▇▇ ▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇
▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇
▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT
INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT II, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST
AGREEMENT III, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇
▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT
INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED ANNUITY TRUST AGREEMENT II, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, TRUSTEE AND NOT INDIVIDUALLY OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ RETAINED
ANNUITY TRUST AGREEMENT III (collectively, the "SELLERS" and individually, a
"SELLER").
PRELIMINARY STATEMENTS:
A. Purchaser, the Company, IMP and Sellers entered into a Stock
Purchase Agreement dated November 23, 1998, as amended by First Amendment to
Stock Purchase Agreement dated July 1, 1999 (collectively, the "STOCK PURCHASE
AGREEMENT").
B. Purchaser, the Company, IMP and Sellers desire to amend the Stock
Purchase Agreement in accordance with the terms and provisions contained in this
Second Amendment.
C. Capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Stock Purchase Agreement.
AGREEMENT:
In consideration of the premises and the mutual promises and conditions
contained herein, the parties hereto agree as follows:
7. AMENDMENT TO SECTION 1.
7.1. ADDITIONAL DEFINED TERMS. The following defined terms are
added to ss.1 of the Stock Purchase Agreement:
"ARCHITECT" has the meaning set forth in ss.2(g)(v) below.
"BUILDING IMPROVEMENTS" has the meaning set forth in ss.2(g)(i) below.
"BUILDING IMPROVEMENTS ESCROW ACCOUNT" has the meaning set forth in
ss.2(c)(ii) below.
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"DISBURSEMENT ACTUAL AMOUNT" has the meaning set forth in
ss.2(g)(v)(C) below.
"DISBURSEMENT HIGH AMOUNT" has the meaning set forth in ss.2(g)(v)(B)
below.
"DISBURSEMENT LOW AMOUNT" has the meaning set forth in ss.2(g)(v)(A)
below.
"ENVIRONMENTAL INDEMNIFICATION" has the meaning set forth in ss.9(a)
below.
"FOREIGN QUALIFICATION INDEMNIFICATION" has the meaning set forth in
ss.9(a) below.
"IRS AUDIT INDEMNIFICATION" has the meaning set forth in ss.9(a) below.
"LITIGATION INDEMNIFICATION" has the meaning set forth in ss.9(a)
below.
"NOTICE OF DISAGREEMENT WITH DISBURSEMENT REQUEST" has the meaning set
forth in ss.2(g)(v) below.
"UNRESTRICTED REPRESENTATIONS, WARRANTIES AND COVENANTS" has the
meaning set forth in ss.9(b)(ii) below.
7.2. AMENDMENT OF DEFINED TERMS. The following defined terms
are hereby amended in their entirety and restated as follows:
"ACCOUNTING FIRM" has the meaning set forth in ss.2(f)(ii) below.
"CLOSING" has the meaning set forth in ss.2(h) below.
"CLOSING DATE" has the meaning set forth in ss.2(h) below.
DELETION OF DEFINED TERMS. The following defined terms are deleted from
Section 1 of the Stock Purchase Agreement: "ADJUSTED EBITAM", "ADJUSTED EBITAM
STATEMENT", "DETERMINATION NOTICE", "EARNOUT", "EARNOUT ACTUAL AMOUNT", "EARNOUT
HIGH AMOUNT", "EARNOUT LOW AMOUNT", "FINAL ADJUSTED EBITAM DETERMINATION DATE"
and "NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT".
8. AMENDMENT TO SS.SS.2(b) AND (c). ss.ss.2(b) and (c) of the Stock
Purchase Agreement are hereby amended in their entirety and restated as follows:
"(b) PURCHASE PRICE.
(i) The aggregate purchase price to be paid by the
Purchaser for the all of the Company Shares (the "COMPANY
PURCHASE PRICE") shall be $17,400,000, MINUS (A) the amount of
Funded Indebtedness as of the Closing Date (after giving
effect to any reduction of such Funded Indebtedness on the
Closing Date by application of Available Cash) and MINUS (B)
any Company Purchase Price Adjustment made pursuant to ss.2(f)
below. The amount of the Company Purchase Price to be received
by each Seller shall be the Seller's Company Pro Rata Share
thereof.
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(ii) The aggregate purchase price to be paid by the
Purchaser for the all of the IMP Shares (the "IMP PURCHASE
PRICE") shall be $50,000. The amount of the IMP Purchase Price
to be received by each of ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇ shall be
such Person's IMP Pro Rata Share thereof.
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE.
On the Closing Date, the Purchaser shall make payment of the Company
Purchase Price and the IMP Purchase Price as follows:
(i) To the Sellers, by wire transfer of immediately
available funds, the sum of $12,400,000 [$17,400,000 MINUS (A)
the amount of Funded Indebtedness as of the Closing Date
(after giving effect to any reduction of such Funded
Indebtedness on the Closing Date by application of Available
Cash) and (B) $5,000,000 to be deposited as the Escrow Fund
pursuant to ss.2(c)(ii) below] (the "INITIAL PAYMENt"), to the
account designated in writing by the Sellers' Representative
at least two business days prior to the Closing Date.
(ii) To SunTrust Bank, Atlanta, as escrow agent (the
"ESCROW AGENT") pursuant to the terms of the Escrow Agreement,
the sum of $5,000,000 (the "ESCROW FUND"). As provided in the
Escrow Agreement, the Escrow Fund shall be divided into three
accounts as follows: (A) $50,000 thereof shall be held in an
account (the "COMPANY PURCHASE PRICE ADJUSTMENT ESCROW
ACCOUNT") to be utilized to fund the Company Purchase Price
Adjustment as described in ss.2(f) hereof, (B) $2,450,000
thereof shall be held in an account (the "GENERAL
INDEMNIFICATION ESCROW ACCOUNT") to provide indemnification to
the Purchaser as provided in ss.9(b) hereof and (C) $2,500,000
thereof (required to be deposited by ▇. ▇▇▇▇▇▇ pursuant to the
provisions of ss.2(g)) shall be held in an account (the
"BUILDING IMPROVEMENTS ESCROW ACCOUNT") to provide for the
costs to make the improvements to the Real Property required
by the City of Miami to correct certain building code
violations as provided in ss.2(g) hereof.
(iii) To ▇. ▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇, by wire transfer of
immediately available funds, the sum of $50,000 to the account
designated in writing by the Sellers' Representative at least
two business days prior to the Closing Date."
9. AMENDMENT OF SS.2(e). ss.2(e) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(e) ss.2(e) is intentionally omitted from the Agreement."
10. AMENDMENT TO SS.2(f)(ii). The eighth sentence of ss.2(f)(ii) of the
Stock Purchase Agreement is hereby amended in its entirety and restated as
follows:
"At the end of such 30-day period, the Seller's Representative and the
Purchaser shall submit to an independent "Big 6" public accounting firm
(the "ACCOUNTING FIRM") for review and resolution any and all matters
which remain in dispute and which were included in any Notice of
Disagreement With Closing Balance Sheet (it being understood
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that the Accounting Firm shall act as an arbitrator to determine, based
solely on presentations by the Purchaser and the Seller's
Representative (and not by independent review), only those matters
which remain in dispute), and the Accounting Firm shall reach a final,
binding resolution of all matters which remain in dispute, which final
resolution shall be (w) in writing, (x) furnished to the Purchaser and
the Seller's Representative as soon as practicable after the items in
dispute have been referred to the Accounting Firm, (y) made in
accordance with this Agreement, and (z) conclusive and binding upon the
Parties and not subject to collateral attack for any reason."
11. AMENDMENT TO SS.2(g). The following new provision is hereby added
to the Stock Purchase Agreement and designated as ss.2(g) and ss.ss.2(g), (h),
(i) and (j) to the Stock Purchase Agreement are hereby redesignated as
ss.ss.2(h), (i), (j) and (k).
"(g) BUILDING IMPROVEMENTS.
(i) ▇. ▇▇▇▇▇▇ on behalf of Nitram Partners, Ltd.
agrees to be responsible for and to pay all costs associated
with the improvements to the Real Property required by the
City of Miami to correct certain building code violations,
currently estimated to cost $2,500,000 (the "BUILDING
IMPROVEMENTS") and, pursuant to the provisions of ss.2(c)(ii),
will deposit $2,500,000 with the Escrow Agent to be held in
the Building Improvements Escrow Account and disbursed in
accordance with the provisions of this ss.2(g); PROVIDED,
HOWEVEr, in the event the amount of the Building Improvements
set forth in the final quotations and/or construction contract
therefor exceeds $2,500,000, ▇. ▇▇▇▇▇▇ agrees to deposit the
difference in the Building Improvements Escrow Account within
five business days of his receipt of the final quotations
and/or construction contract; PROVIDED, FURTHER, in the event
the amount of the Building Improvements set forth in the final
quotations and/or construction contract therefor is less than
$2,500,000, the Purchaser agrees to instruct the Escrow Agent,
jointly with ▇. ▇▇▇▇▇▇, to make a disbursement of an amount
equal to the difference between $2,500,000 and the amount of
the Building Improvements set forth in the final quotations
and/or construction contract.
(ii) ▇. ▇▇▇▇▇▇ warrants that the Building
Improvements to be made and the operations of the Company
thereunder as currently conducted will be in compliance with
all applicable statutes, laws, ordinances, rules, orders and
regulations of federal, state, local and foreign governments
(and all agencies thereof), including, but not limited to, all
Environmental, Health and Safety Requirements.
(iii) The agreements and warranties of ▇. ▇▇▇▇▇▇ set
forth in this ss.2(g) shall survive the Closing and continue
in full force and effect for the statute of limitations
applicable thereto.
(iv) Funds in the Building Improvements Escrow
Account shall be disbursed as follows. Within five business
days after the receipt by the Purchaser of a disbursement
request from ▇. ▇▇▇▇▇▇ to disburse funds from the Building
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Improvements Escrow Account, accompanied by the written
approval of the disbursement request by the project's
construction manager, engineer or architect certifying that
the work to be paid for has been satisfactorily completed, the
Sellers' Representative and the Purchaser shall jointly
instruct the Escrow Agent to make a disbursement of the
applicable portion of Building Improvements Escrow Account
with respect to any undisputed amounts of the disbursement
request. With respect to any items that are the subject of a
Notice of Disagreement With Disbursement Request, joint
disbursement instructions shall be given to the Escrow Agent
within three business days after the resolution thereof in
accordance with the provisions of ss.2(g)(v) below.
(v) Each disbursement request shall become final and
binding upon the Purchaser on the 5th business day following
delivery thereof unless the Purchaser gives written notice to
the Sellers' Representative of its disagreement with a
disbursement request (a "NOTICE OF DISAGREEMENT WITH
DISBURSEMENT REQUEST") prior to such date. Any Notice of
Disagreement With Disbursement Request shall specify in
reasonable detail the nature of any disagreement so asserted.
If a timely Notice of Disagreement With Disbursement Request
is received by the Sellers' Representative with respect to a
disbursement request, then such Disbursement Request (as
revised in accordance with clause (A) or (B) below), shall
become final and binding upon the Parties on the earlier of
(A) the date the Purchaser and the Sellers' Representative
resolve in writing any differences they have with respect to
any matter specified in a Notice of Disagreement With
Disbursement Request, or (B) the date any matters in dispute
are finally resolved in writing by the Architect in the manner
described below. During the 15 days immediately following the
delivery of any Notice of Disagreement With Disbursement
Request, the Purchaser and the Sellers' Representative shall
seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such
Notice of Disagreement With Disbursement Request. At the end
of such 15-day period, the Sellers' Representative and the
Purchaser shall submit to an independent architect mutually
selected by the Sellers' Representative and the Purchaser (the
"ARCHITECT") for review and resolution any and all matters
which remain in dispute and which were included in any Notice
of Disagreement With Disbursement Request (it being understood
that the Architect shall act as an arbitrator to determine,
based solely on presentations by the Purchaser and the
Sellers' Representative (and not by independent review), only
those matters which remain in dispute), and the Architect
shall reach a final, binding resolution of all matters which
remain in dispute, which final resolution shall be (w) in
writing, (x) furnished to the Purchaser and the Sellers'
Representative as soon as practicable after the items in
dispute have been referred to the Architect, (y) made in
accordance with this Agreement, and (z) conclusive and binding
upon the Parties and not subject to collateral attack for any
reason. Each of Purchaser and ▇. ▇▇▇▇▇▇ shall pay its/his own
costs and expenses incurred in connection with such
arbitration, provided that the fees and expenses of the
Architect shall be borne as follows:
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(A) if the Architect resolves all of the remaining
objections in favor of the Purchaser, ▇. ▇▇▇▇▇▇ (the amount of
the disbursement so determined is referred to herein as the
"DISBURSEMENT LOW AMOUNT") will be responsible for all of the
fees and expenses of the Architect;
(B) if the Architect resolves all of the remaining
objections in favor of ▇. ▇▇▇▇▇▇ (the amount of the
disbursement so determined is referred to herein as the
"DISBURSEMENT HIGH AMOUNT"), the Purchaser will be responsible
for all of the fees and expenses of the Architect; and
(C) if the Architect resolves some of the remaining
objections in favor of the Purchaser and the rest of the
remaining objections in favor of ▇. ▇▇▇▇▇▇ (the amount of the
disbursement so determined is referred to herein as the
"DISBURSEMENT ACTUAL AMOUNT"), ▇. ▇▇▇▇▇▇ will be responsible
for that fraction of the fees and expenses of the Accounting
Firm equal to (i) the difference between the Disbursement High
Amount and the Disbursement Actual Amount over (ii) the
difference between the Disbursement High Amount and the
Disbursement Low Amount, and the Purchaser will be responsible
for the remainder of the fees and expenses.
12. AMENDMENT TO SS.3B(f). ss.3B(f) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(f) FINANCIAL STATEMENTS. Set forth in SS.3B(f) OF THE
DISCLOSURE SCHEDUle are the following financial statements
(collectively the "FINANCIAL STATEMENTS"): (i) audited balance sheets
and statements of income and statements of shareholders equity and cash
flows as of and for the fiscal year ended December 31, 1998 (the "MOST
RECENT FISCAL YEAR END") for the Company; and (ii) unaudited balance
sheet and statement of income and statement of cash flows (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the five months ended May
31, 1999 (the "MOST RECENT FISCAL MONTH END") for the Company, with all
operations of IMP reflected in the Most Recent Financial Statements.
Except as set forth in SS.3B(f) OF THE DISCLOSURE SCHEDULE, the
Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of
the Company and IMP as of such dates and the results of operations of
the Company and IMP for such periods; PROVIDED, HOWEVER, that the Most
Recent Financial Statements are subject to normal year-end adjustments
(which will not be material, individually or in the aggregate) and lack
footnotes and other presentation items."
13. AMENDMENT TO SS. 9(a). ss. 9(a) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The following
representations and warranties of the Sellers and the Purchaser and the
following indemnification matters shall survive the Closing and
continue in full force and effect for the statute of limitations
applicable thereto:
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(i) the representations and warranties of the Sellers
contained in ss.3A and contained in ss.3B(b), (d) and (e)
(collectively, the "TRANSACTION REPRESENTATIONS AND WARRANTIES");
(ii) the representations and warranties of the Sellers
contained in ss.3B(k) (the "TAX REPRESENTATIONS AND WARRANTIES");
(iii) the representations and warranties of the Sellers
contained in ss.3B(u) (the "EMPLOYEE BENEFIT PLAN REPRESENTATIONS AND
WARRANTIES");
(iv) the representations and warranties of the Sellers
contained in ss.3B(v) (the "ENVIRONMENTAL REPRESENTATIONS AND
WARRANTIES");
(v) the representations and warranties of the Sellers
contained in ss.3B(aa) (the "PRODUCTS LIABILITY REPRESENTATIONS AND
WARRANTIES");
(vi) the representations and warranties of the Purchaser
contained in ss.4;
(vii) (A) the failure of the Company, prior to Closing, to
comply with the reporting requirements of EPCRA and any other similar
or identical state or local reporting requirements prior to Closing and
(B) the existence, prior to Closing, of hazardous waste at the Real
Property and the disposal by the Company, prior to Closing, of
hazardous waste without a hazardous waste identification number (the
"ENVIRONMENTAL INDEMNIFICATION");
(viii) the failure of the Company to qualify as a foreign
corporation in Nevada and North Carolina, including, but not limited
to, the costs of making all requisite filings to qualify the Company
and pay Taxes in such states (the "FOREIGN QUALIFICATION
INDEMNIFICATION");
(ix) the IRS audit of the Company's tax return for the year
ended December 31, 1997 disclosed on SS.3B(i) OF THE DISCLOSURE
SCHEDUle (thE "IRS AUDIT INDEMNIFICATIOn"); and
(x) the litigation disclosed on SS.3B(s) OF THE DISCLOSURE
SCHEDUle (the "LITIGATION INDEMNIFICATION").
The remaining representations and warranties of the Sellers contained in ss.3B
(other than the Transaction Representations and Warranties, the Tax
Representations and Warranties, the Employee Benefit Plan Representations and
Warranties, the Environmental Representations and Warranties and the Products
Liability Representations and Warranties) shall survive the Closing and continue
in full force and effect until the two year anniversary of the Closing Date. Any
claim for which any Party shall have given proper notice in accordance with the
terms of this Agreement (and the Escrow Agreement) on or prior to the expiration
of the applicable survival period shall survive until such claim is resolved
pursuant to the terms of this Agreement or the Escrow Agreement. To preserve any
claim for breach of any such representation or warranty or indemnification
matter, the Party claiming a breach shall be obligated to notify the Party
claimed
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to be in breach (except that where the Party claimed to be in breach is
the Company or IMP, notice shall be given to the Sellers'
Representative) in writing of any such breach, or facts that can
reasonably be expected to give rise to such breach, before termination
of the applicable survival period in respect of such representation or
warranty; otherwise, such Party's claim for breach shall be forever
barred."
14. AMENDMENT TO SS.SS.9(b)(i) AND (ii). ss.ss.9(b)(i) and (ii) of the
Stock Purchase Agreement are hereby amended in their entirety and restated as
follows:
"(i) Pursuant to the terms of the Escrow Agreement and subject
to ss.9(a) above and the conditions set forth in this ss.9(b),
subsequent to the Closing Date the Sellers shall indemnify, defend and
hold harmless the Company and IMP (as assignee of the Purchaser
pursuant to ss.9(e) hereof) from, against and in respect of any Losses
which the Purchaser, the Company or IMP shall suffer, sustain or become
subject to by virtue of or which arise out of, or result from, any
breach of the covenants, representations and warranties of the Sellers
set forth in this Agreement (other than the Transaction Representations
and Warranties, the Tax Representations and Warranties, the Employee
Benefit Plan Representations and Warranties, the Environmental
Representations and Warranties, the Products Liability Representations
and Warranties, the Environmental Indemnification, the Foreign
Qualification Indemnification, the IRS Audit Indemnification and the
Litigation Indemnification, all of which shall be governed by the
provisions of ss.9(b)(ii)); PROVIDED, HOWEVER, that: (A) the Company's
and IMP's right to indemnification with respect to such breaches under
this ss.9(b)(i) shall be satisfied only by recourse to the funds
deposited and remaining in the General Indemnification Escrow Account,
and none of the Sellers shall have any personal liability to the
Company or IMP with respect to any such breach, and (B) the Company and
IMP shall not be entitled to indemnification with respect to any Losses
under this ss.9(b)(i) until all such Losses exceed, in the aggregate,
$150,000 (the "DEDUCTIBLE"), in which case the Company and IMP shall be
entitled to indemnification only to the extent such Losses exceed
$150,000. Notwithstanding anything to the contrary contained in this
ss.9(b)(i), any breach of the representations and warranties of the
Sellers contained in ss.3B(x) shall not be subject to the Deductible.
(ii) Subject to ss.9(a) above and the conditions set forth in
this ss.9(b), subsequent to the Closing Date the Sellers shall
indemnify, defend and hold harmless the Company and IMP (as assignee of
the Purchaser pursuant to ss.9(e) hereof) from, against and in respect
of any Losses which Purchaser, the Company or IMP shall suffer, sustain
or become subject to by virtue of or which arise out of, or result from
the following (sometimes hereinafter collectively referred to as the
"UNRESTRICTED REPRESENTATIONS, WARRANTIES AND COVENANTS"):
(A) any breach of any of the Transaction Representations and
Warranties, the Tax Representations and Warranties, the Employee
Benefit Plan Representations and Warranties, the Environmental
Representations and Warranties or the Products Liability
Representations and Warranties; and
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(B) the Environmental Indemnification, the Foreign
Qualification Indemnification, the IRS Audit Indemnification and the
Litigation Indemnification.
PROVIDED, HOWEVER, that no Seller shall be obligated to indemnify the Purchaser
for an amount in excess of its, his or her Company Pro Rata Share or IMP Pro
Rata Share, whichever is applicable, of any Losses arising from the Unrestricted
Representations, Warranties and Covenants. The Company's and IMP's right to
indemnification with respect to breaches of the Unrestricted Representations,
Warranties and Covenants under this ss.9(b)(ii) shall not be subject to the
Deductible and shall be satisfied first by recourse to the funds deposited and
remaining in the General Indemnification Escrow Account; PROVIDED, FURTHER, that
to the extent Losses for which the Purchaser is entitled to indemnification
under ss.9(b)(i), together with amounts paid from the General Indemnification
Escrow Account pursuant to this ss.9(b)(ii) exceed $2,450,000, the Sellers shall
pay the Purchaser the deficiency within 10 days of the Purchaser's request. The
Parties agree that the following limits shall apply with respect to the Sellers
indemnification obligations under this ss.9(b)(ii):
(X) In no event shall the Company or IMP be entitled to
indemnification for any Losses with respect to the breach of any
Employee Benefit Plan Representations and Warranties and the Products
Liability Representations and Warranties and the Foreign Qualification
Indemnification to the extent that the sum of (x) all such Losses, and
(y) the amount of all disbursements made to the Company and IMP from
the General Indemnification Escrow Account exceeds, in the aggregate,
$5,000,000;
(Y) In no event shall the Company or IMP be entitled to
indemnification for any Losses with respect to the breach of any Tax
Representations and Warranties, Environmental Representations and
Warranties, the Environmental Indemnification, the IRS Audit
Indemnification and the Litigation Indemnification to the extent that
the sum of (1) all such Losses, (2) the amount of all disbursements
made to the Company and IMP from the General Indemnification Escrow
Account and (3) the amount of any Losses paid for a breach of any
Employee Benefit Plan Representations and Warranties, the Products
Liability Representations and Warranties and the Foreign Qualification
Indemnification, exceeds in the aggregate, the Company Purchase Price
and the IMP Purchase Price; and
(Z) There shall be no limit on the amount of any Losses for
which the Company or IMP is entitled to indemnification for the breach
of any Transaction Representations and Warranties."
15. AMENDMENT TO SECTION 10(a). Section 10(a) of the Stock Purchase
Agreement is hereby amended in its entirety and restated as follows:
"(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE"
shall (i) mean any dispute or disagreement among the Parties concerning
the interpretation of this Agreement, the validity of this Agreement,
any breach or alleged breach by any party under this Agreement or any
other matter relating in any way to this Agreement, and (ii) exclude
any dispute or disagreement between the Company and the Sellers
concerning the determination of the Net Working Capital which shall be
resolved pursuant to the provisions of Section 2(f)(ii) of this
Agreement."
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16. ESCROW AGREEMENT. Exhibit A attached hereto is hereby substituted
for EXHIBIT A attached to the Stock Purchase Agreement.
17. AMENDMENT TO DISCLOSURE SCHEDULES. The following Disclosure
Schedules attached hereto are hereby substituted for the Disclosure Schedules
attached to the Stock Purchase Agreement:
ss.3B(a) of the Disclosure Schedule
ss.3B(f) of the Disclosure Schedule
ss.3B(g) of the Disclosure Schedule
ss.3B(i) of the Disclosure Schedule
ss.3B(j) of the Disclosure Schedule
ss.3B(l) of the Disclosure Schedule
ss.3B(m) of the Disclosure Schedule
ss.3B(n) of the Disclosure Schedule
ss.3B(o)(i) of the Disclosure Schedule
ss.3B(p) of the Disclosure Schedule
ss.3B(r) of the Disclosure Schedule
ss.3B(s) of the Disclosure Schedule
ss.3B(u) of the Disclosure Schedule
ss.3B(v) of the Disclosure Schedule
ss.3B(z) of the Disclosure Schedule
ss.3B(aa) of the Disclosure Schedule
ss.6(b)(iii) of the Disclosure Schedule
18. EXECUTION IN COUNTERPARTS; FAX SIGNATURES. For the convenience of
the parties hereto, this Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument, without necessity of
production of the others. Signatures may be exchanged by facsimile transmission,
with original signatures to follow. Each party to this Amendment agrees that
he/she/it will be bound by his/her/its own facsimile signature and that
he/she/it accepts the facsimile signature of the other parties to this
Amendment.
19. RATIFICATION. The remaining provisions of the Stock Purchase
Agreement are hereby ratified and affirmed.
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IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, President
MIAMI METAL PRODUCTS, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
INDUSTRIAL MUEBLERA POMPEII de
MEXICO, S.A. de C.V.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇ ▇▇▇▇▇▇, Chairman
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SELLERS:
/s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement I
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement II
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement III
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement I
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement II
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee and not
individually of the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Retained
Annuity Trust Agreement III
12