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PREFERRED STOCK PURCHASE AGREEMENT
BY AND BETWEEN
GENESIS TECHNOLOGIES, INC.
AND
BRITANNIA INVESTMENT CORPORATION
DATED AS OF DECEMBER 29, 1997
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TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF THE PREFERRED SHARES ..................... 1
1.01 Closing ..................................................... 1
1.02. Issuance, Sale and Delivery of the Preferred Shares ......... 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE MANAGEMENT STOCKHOLDERS ............................................. 2
2.01. Organization, Good Standing, Qualifications and Power ....... 2
2.02. Authorization of Agreements, Etc. ........................... 3
2.03. Validity .................................................... 3
2.04. Authorized Capital Stock .................................... 3
2.05. Financial Statements and Projections ........................ 4
2.06. Transactions With Affiliates ................................ 4
2.07. Loans and Advances .......................................... 5
2.08. Assumptions, Guaranties, Etc., of Indebtedness of
Other Persons ............................................. 5
2.09. Certain Payments ............................................ 5
2.10. No Undisclosed Liabilities .................................. 5
2.11. Absence of Certain Changes .................................. 5
2.12. Events Subsequent to September 30, 1997 ..................... 5
2.13. Books and Records ........................................... 6
2.14. Litigation; Compliance with Laws ............................ 6
2.15. Governmental Approvals ...................................... 7
2.16. Licenses; Permits ........................................... 7
2.17. Tax Matters ................................................. 7
2.18. Assets ...................................................... 8
2.19 Intellectual Property ....................................... 8
2.20. Corporate Name .............................................. 10
2.21. Proprietary Information of Third Parties .................... 10
2.22. Officers and Directors; Management Stockholders ............. 10
2.23. Employee and Labor Relations ................................ 11
2.24. Employee Benefits Matters ................................... 11
2.25. Document List ............................................... 14
2.26. Insurance Policies .......................................... 15
2.27. Environmental Matters ....................................... 15
2.28. Disclosure .................................................. 16
2.29. Brokers or Finders .......................................... 16
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ........... 16
ARTICLE IV CONDITIONS TO THE CLOSING ................................. 17
4.01. Conditions to the Obligations of the Purchaser .............. 17
4.02 Conditions to the Obligations of the Company and the Parent . 20
ARTICLE V COVENANTS OF THE COMPANY .................................. 20
5.01. Financial Information and Inspection Rights ................. 20
5.02. Financial Covenants ......................................... 22
5.03. Reserve for Conversion Shares ............................... 23
5.04. Corporate Existence ......................................... 22
5.05. Properties, Business, Insurance ............................. 23
5.06. Expenses of Directors ....................................... 23
5.07. Boards of Directors ......................................... 23
5.08. Compensation ................................................ 23
5.09. Bylaws ...................................................... 23
5.10. Compliance with Laws ........................................ 23
5.11. Keeping of Records and Books of Account ..................... 23
5.12. Subsidiaries ................................................ 24
5.13. Restrictive Agreements Prohibited ........................... 24
5.14. Use of Proceeds ............................................. 24
5.15. Negative Covenants .......................................... 24
5.16. Option to Acquire Additional Shares of Common Stock ......... 24
ARTICLE VI EVENTS OF NONCOMPLIANCE; EVENTS OF DEFAULT ................ 25
6.01. Events of Noncompliance; Events of Default .................. 25
6.02. Special Board Rights ........................................ 27
ARTICLE VII MISCELLANEOUS ............................................. 27
7.01. Fees and Expenses ........................................... 27
7.02. Survival of Agreements ...................................... 27
7.03. Parties in Interest ......................................... 28
7.04. Notices ..................................................... 28
7.05. Governing Law ............................................... 29
7.06. Entire Agreement ............................................ 29
7.07. Counterparts ................................................ 29
7.08. Amendments .................................................. 29
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7.09. Severability ................................................ 29
7.10. Titles and Subtitles ........................................ 29
7.11. Recitals .................................................... 29
7.12. Pronouns .................................................... 30
7.13. Waiver of Jury Trial ........................................ 30
EXHIBITS
A Form of Amended and Restated Certificate of Incorporation of
the Company
B Form of Amendment to the Bylaws of the Company
C Form of Stockholders' Agreement
D List of Stockholders of the Company Before the Purchase of the
Preferred Shares
E Financial Statements of the Company
SCHEDULE
II The Disclosure Schedule
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THIS PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of December 29, 1997, by and between Genesis Technologies, Inc.,
a Delaware corporation (the "COMPANY") and Britannia Investment Corporation, a
Delaware corporation (the "PURCHASER").
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase (the "PURCHASE") from the Company, an
aggregate of 5,000 shares (the "PREFERRED SHARES") of its authorized but
unissued preferred stock designated Convertible Preferred Stock, $100.00 par
value per share (the "PREFERRED Stock"), pursuant to the terms and subject to
the conditions set forth in this Agreement;
WHEREAS, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇ are officers,
directors, and significant stockholders of the Company (the "MANAGEMENT
STOCKHOLDERS") and are joining this Agreement for the purpose making and
confirming certain representations and warranties set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE PREFERRED SHARES
SECTION 1.01. Closing. The closing of the transactions contemplated
hereunder (the "CLOSING") and the sale of the Preferred Shares shall take place
at the offices of Piper & Marbury L.L.P., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 A.M., Baltimore time, on December ___, 1997, or at such
other location, date and time as may be agreed to by the Purchaser and the
Company (such date and time being hereinafter called, the "CLOSING DATE").
SECTION 1.02. Issuance, Sale and Delivery of the Preferred Shares.
(a) Subject to the terms and conditions of this Agreement, the
Company agrees to issue and sell to the Purchaser and, subject to and in
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Purchaser hereby agrees to purchase from the Company, the
Preferred Shares at the purchase price of One Hundred Dollars ($100.00) per
share. On the Closing Date, the Company shall issue and deliver to the Purchaser
a certificate in definitive form, registered in the name of the Purchaser,
evidencing the Preferred Shares to be issued and sold to the Purchaser
hereunder.
(b) As payment in full for the Preferred Shares being
purchased by the Purchaser hereunder, and against delivery thereof as aforesaid,
on the Closing Date, the Purchaser shall deliver to the Company, by wire
transfer to a bank account designated in writing by the Company, immediately
available funds in the aggregate purchase price amount of $500,000 less the Note
Payoff Amount (the "AGGREGATE PURCHASE PRICE"). The "NOTE PAYOFF AMOUNT" means
the principal sum, together with all interest and costs due and owing to Polk
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Audio, Inc., the Purchaser's parent company ("POLK"), as of the Closing Date
pursuant to that certain Promissory Note executed by the Company and dated
December 2, 1997 (the "NOTE").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MANAGEMENT STOCKHOLDERS
Each of the Company and, as applicable, the Management Stockholders,
hereby, jointly and severally, represents and warrants to the Purchaser that,
except as set forth in the Disclosure Schedule attached hereto as Schedule II
(which Disclosure Schedule makes explicit reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty as to which such exception
shall apply) ("SCHEDULE II"):
SECTION 2.01. Organization, Good Standing, Qualifications and Power.
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, is
engaged primarily in the business of manufacturing and distributing audio
equipment (the "BUSINESS"), and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification. The
Company has the requisite corporate power and authority to (i) own and hold its
properties and to carry on its business as conducted and as currently proposed
to be conducted; (ii) adopt and file, with the office of the Secretary of State
of the State of Delaware, the Amended and Restated Certificate of Incorporation,
substantially in the form as attached hereto as Exhibit A (the "AMENDED
CHARTER"), to the Company's Certificate of Incorporation (the "CHARTER"); (iii)
adopt the First Amendment to the Company's Bylaws, substantially in the form as
attached hereto as Exhibit B (the "AMENDED BYLAWS"); (iv) execute and deliver
this Agreement and the Stockholders' Agreement of even date herewith by and
among the Purchaser, the Company, and Management Stockholders, substantially in
the form as attached hereto as Exhibit C (the "STOCKHOLDERS' AGREEMENT"); (v)
issue, sell and deliver the Preferred Shares and the shares of Common Stock of
the Company, $0.01 par value per share (the "COMMON STOCK"), issuable upon
conversion of the Preferred Shares (the "CONVERSION SHARES"); and (vi) carry out
and perform the provisions of this Agreement and the Stockholders' Agreement.
(b) The Company does not have any subsidiaries. Additionally,
the Company (i) does not own of record or beneficially, directly or indirectly,
(A) any shares of capital stock or securities convertible into capital stock of
any other corporation or (B) any participating interest in any partnership,
joint venture or other non-corporate business enterprise, and (ii) does not
control, directly or indirectly, any other entity.
SECTION 2.02. Authorization of Agreements, Etc.
(a) Each of the (i) execution and delivery by the Company of
this Agreement and the Stockholders' Agreement, (ii) performance of all
obligations of the Company hereunder
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and thereunder, (iii) adoption and filing of the Amended Charter, (iv) issuance,
sale and delivery of the Preferred Shares, and (v) reservation, issuance and
delivery of the Conversion Shares upon the conversion of the Preferred Shares,
has been duly authorized by all requisite corporate action on the part of the
Company, its officers, directors and stockholders, and has not and will not
violate any provision of applicable law, any order of any court or other agency
of government, the Amended Charter, or the Bylaws of the Company, as amended
(the "BYLAWS"), or any provision of any indenture, agreement or other instrument
to which the Company or any of its properties or assets is bound, or conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever (a "LIEN"), upon any of the properties or
assets of the Company.
(b) The Preferred Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration herein
expressed, will be duly and validly issued, fully paid and nonassessable shares
of the Preferred Stock with no personal liability attaching to the ownership
thereof and will be free and clear of all Liens imposed by or through the
Company, except as set forth herein, in the Amended Charter or in the
Stockholders' Agreement. The Conversion Shares have been duly and validly
reserved for issuance upon conversion of the Preferred Shares. Upon conversion
of the Preferred Shares, the Conversion Shares will be duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, with no personal
liability attaching to the ownership thereof and will be free and clear of all
Liens imposed by or through the Company, except as set forth herein, in the
Amended Charter or in the Stockholders' Agreement. Neither the issuance, sale or
delivery of the Preferred Shares nor the issuance or delivery of the Conversion
Shares is subject to any preemptive right of stockholders of the Company or to
any right of first refusal or other right in favor of any person.
SECTION 2.03. Validity. Each of this Agreement and the Stockholders'
Agreement has been duly executed and delivered by the Company and, assuming the
execution and delivery of them by the other parties thereto, constitutes the
legal, valid and binding obligations of the Company, enforceable in accordance
with its respective terms, except as its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, or other laws affecting the
enforcement of creditors' rights generally, or by general equitable principles.
SECTION 2.04. Authorized Capital Stock. Immediately before the filing
of the Amended Charter with the Secretary of State of the State of Delaware, the
authorized capital stock of the Company consisted of 1,000 shares of common
stock, par value $0.00 per share. Notwithstanding said authorized capital, 8004
shares of Common Stock were issued and held by the persons and entities set
forth on Exhibit D, in the amounts set forth opposite their respective names.
Immediately after the Closing, (i) the authorized capital stock of the Company
shall consist of 35,000 shares of Common Stock and 25,000 shares of Preferred
Stock; (ii) the designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company as set forth in the Amended Charter will be valid,
binding and enforceable and in accordance with all applicable laws; (iii) other
than 8,004 shares of the Common Stock and 5,000 shares of Preferred Stock
acquired by the Purchaser, no shares of capital stock of the Company will be
issued and outstanding; and (iv) except for the Conversion Shares and for shares
of Common Stock to be issued pursuant to
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Section 5.16 below, no shares of Common Stock or other capital stock of the
Company will be reserved for possible future issuance. Except pursuant to the
terms of the Amended Charter, this Agreement, and the Stockholders' Agreement,
(I) there is no commitment by the Company to issue shares, subscriptions,
warrants, options, convertible securities or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset; (II) the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity or debt securities or any interest
therein or to pay any dividend or make any other distribution in respect
thereof; and (III) there are no voting trusts or agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company.
SECTION 2.05. Financial Statements and Projections. Attached hereto as
Exhibit E are the audited balance sheet of the Company as at December 31, 1996
and the related audited statements of income and retained earnings and cash
flows for the fiscal year then ended, together with a report thereon of Martin,
Vejvoda, ▇▇▇▇▇ and Associates Incorporated, independent certified public
auditors for the Company (collectively, the "AUDITED FINANCIAL STATEMENTS"), and
the unaudited balance sheet of the Company as at December 31, 1995 and September
30, 1997 (the "UNAUDITED BALANCE SHEETS"), and the related unaudited statements
of income and retained earnings and cash flows for the fiscal year ended
September 30, 1997 (together with the Unaudited Balance Sheets, the "UNAUDITED
FINANCIAL STATEMENTS") (the Audited Financial Statements and the Unaudited
Financial Statements are collectively, the "FINANCIAL STATEMENTS"). The
Financial Statements, including the notes thereto, (i) fairly present the
financial position and results of operations of the Company as at the respective
dates of and for the periods referred to therein, and (ii) were prepared in
accordance with United States generally acceptable accounting principles,
consistently applied ("GAAP"), except that the Unaudited Financial Statements
are subject to normal year-end adjustments and the absence of certain footnote
disclosures. No financial statements of any person or entity are required by
GAAP to be consolidated with those of the Company.
SECTION 2.06. Transactions With Affiliates. Except for the ▇▇▇▇▇▇ Loan
and the Leasehold Transactions (as those terms are defined below), no director,
officer, employee or stockholder of the Company or member of the family of any
such person (each, an "AFFILIATED PERSON"), or any corporation, partnership,
trust or other entity of which any Affiliated Person serves as an officer,
director, trustee, partner or holds more than five percent (5.0%) of the
outstanding capital stock or other ownership interests (each, an "AFFILIATED
ENTITY") (collectively, the Affiliated Persons and Affiliated Entities are the
"AFFILIATES"), is presently or contemplated to be a party to any transaction
with the Company, including any contract, agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to any such Affiliated
Person or Affiliated Entity.
SECTION 2.07. Loans and Advances; Amounts Owed. Except as disclosed in
the Financial Statements and except for a loan that ▇▇▇▇▇▇ ▇▇▇▇▇▇ made to the
Company in the original principal amount of $125,000, as evidenced by that
certain Promissory Note dated December 1, 1997, a copy of which has been given
to the Preferred Stockholder (the "▇▇▇▇▇▇ LOAN"), the Company does not have any
outstanding loans or advances to any person and is not
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obligated to make any such loans or advances, except, in each case, for advances
to employees thereof in respect of reasonable reimbursable business expenses
anticipated to be incurred by them in connection with their performance of
services thereto. The Company is now, or shall be within 5 days after Closing,
current with respect to all amounts due and owing on all debts, accounts
payable, and leases in connection with the Business.
SECTION 2.08. Assumptions, Guaranties, Etc., of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on any indebtedness of any person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss).
SECTION 2.09. Certain Payments. None of the Company nor any director,
officer, agent or employee thereof or any other person or entity associated with
or acting for or on behalf of the Company has directly or indirectly (a) made
any contribution, gift, bribe, rebate, payoff, influence payment, kickback or
other payment to any person or entity, private or public, regardless of form,
whether in money, property or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured, or
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company, or (b) established or maintained any fund or
asset that has not been recorded on the books and records of the Company.
SECTION 2.10. No Undisclosed Liabilities. The Company has no material
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) except for liabilities or
obligations reflected in the Unaudited Balance Sheet and current liabilities
incurred in the ordinary course of business.
SECTION 2.11. Absence of Certain Changes. Since September 30, 1997, the
Business has been conducted in the ordinary course of business consistent with
past practices and there has not been any material adverse change in the assets,
financial position or results of operations of the Business that has not been
disclosed in writing to the Purchaser.
SECTION 2.12. Events Subsequent to September 30, 1997. Since September
30, 1997:
(a) Except for: (i) those matters that do not have a material
adverse affect on the Company, (ii) those matters that have previously been
disclosed in writing to the Purchaser, and (iii) certain amendments to and
exercises of rights under real property leases to which the Company and an
Affiliated Entity, ▇▇▇▇▇ Enterprises LLC, are parties, as further described in
the Disclosure Schedule (the "LEASEHOLD Transactions"),
(b) the Company has not: (i) issued any stock, bond or other
corporate security, (ii) borrowed any amount or incurred or become subject to
any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business and except the Note, (iii) discharged or satisfied any Lien or incurred
or paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Unaudited Balance Sheet and current liabilities
incurred since such date
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in the ordinary course of business, (iv) declared or made any payment or
distribution to stockholders or purchased or redeemed any share of its capital
stock or other security, (v) mortgaged, pledged or subjected to Lien any of its
assets, tangible or intangible, other than Liens of current real property taxes
not yet due and payable, (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any debt or claim,
(vii) sold, assigned, transferred or granted any exclusive license with respect
to any patent, trademark, service ▇▇▇▇, trade name, copyright, trade secret or
other intangible asset, (viii) suffered any loss of property not covered
substantially by insurance or waived any right of substantial value whether or
not in the ordinary course of business, (ix) made any change in officer
compensation, (x) made any change in the manner of business or operations, (xi)
made any change in its accounting practices, (xii) entered into any transaction
except in the ordinary course of business or as otherwise contemplated hereby,
(xiii) entered into any commitment (contingent or otherwise) to do any of the
foregoing or (xiv) engaged in any transaction with any Affiliated Person or with
any Affiliated Entity.
SECTION 2.13. Books and Records. The accounting records of the Company
are complete and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of controls.
The minute books, stock record books, and other records of the Company, all of
which have been made available to the Purchaser and its agents, are
substantially complete and correct.
SECTION 2.14. Litigation; Compliance with Laws.
(a) Except for a lawsuit currently pending in Eagle County, CO
state court involving an amount in dispute of no more than $5,500, there is no
(i) action, suit, claim, proceeding or investigation pending or threatened
against or affecting the Company, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise or (iii) governmental inquiry pending or threatened
against or affecting the Company, and, to the best knowledge of the Company,
there is no basis for any of the foregoing. The Company is not in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by the Company pending or threatened against
others.
(b) To the best knowledge of the Company, the Company has
complied in all material respects with all laws, rules, regulations and orders
which are applicable to its business, operations, properties, assets, products
and services, including, without limitation, those promulgated by the federal,
state and local governmental agencies, domestic or foreign, that regulate the
sale of electronic manufactures, and the Company has all necessary permits,
licenses and other authorizations, including environmental, required to conduct
its business as conducted and as proposed to be conducted. To the best knowledge
of the Company, there is no existing or proposed law, rule, regulation or order,
whether Federal, state, or local, domestic or foreign, which would prohibit or
restrict the Company from, or otherwise materially adversely affect the
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Company in, conducting the Business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business.
SECTION 2.15. Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Article III hereof,
no registration or filing with, or consent or approval of or other action by,
any Federal, state or other governmental agency or instrumentality is or will be
necessary for (a) the valid execution, delivery and performance by the Company
of this Agreement or the Stockholders' Agreement, (b) the issuance, sale and
delivery of the Preferred Shares and, (c) upon conversion of the Preferred
Shares, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to Federal and state securities laws (all of which filings have
been or, with respect to those filings which may be duly made after the Closing
will be, made by or on behalf of the Company) in connection with the sale of the
Preferred Shares and the Conversion Shares, (ii) with respect to the
Stockholders' Agreement, the registration of the shares covered thereby with the
Securities and Exchange Commission (the "COMMISSION") and filings pursuant to
Federal and state securities laws, and (iii) the filing of the Amended Charter
with the office of the Secretary of State of the State of Delaware.
SECTION 2.16. Licenses; Permits. All licenses, permits or authorities
of the Company are validly held by the Company; the Company and has complied
with all requirements in connection therewith and the same will not be subject
to suspension, modification or revocation as a result of this Agreement or the
consummation of the transactions contemplated hereby. All licenses, permits and
authorities issued or granted by foreign, local, state or federal government
authorities or agencies which are necessary for the conduct of the Business and
which are held in the name of any employee, officer, director, shareholder,
agent or otherwise of the Company shall be deemed included under this warranty.
SECTION 2.17. Tax Matters.
(a) The Company has filed (or has had filed on its behalf) or
will file (or will have filed on its behalf) when due all federal, state, local
and foreign income tax returns and reports in all requisite jurisdictions for
all years and periods ended on or before the Closing Date. For purposes of this
Agreement, "TAXES" or "TAX" means all income, capital gains, gross income, gross
receipts, transfer, value added, sales, use, service, ad valorem, franchise,
profits, capital stock, license, withholding, payroll, employment, social
security, unemployment compensation, utility, excise, production, severance,
stamp, occupation, premium, real or personal property, alternative minimum,
environmental, or windfall profit taxes, customs, duties, or other taxes, fees,
assessments, levies, imposts or charges of any kind whatsoever imposed by any
governmental authority (a "TAXING AUTHORITY") responsible for the imposition of
any such Tax (domestic or foreign) together with any interest and any penalties,
additions to tax, or additional amounts imposed by any Taxing Authority.
(b) There are no claims or investigations by any Taxing
Authority pending or threatened against the Company; the Company has not
received any notice of any threatened claims or investigations by any Taxing
Authority; and, with respect to any Tax return filed by the
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Company, there has been no waiver of any applicable statute of limitations or
extension of the time for the assessment of any Tax.
(c) The Company has provided the Purchaser with copies of all
separate federal, state, local and foreign Tax returns filed by the Company for
each of its taxable years for the three years immediately preceding the Closing.
(d) There exist no tax sharing agreements between the Company
and any Subsidiary.
SECTION 2.18. Assets.
(a) Assets Other than Real Property. The Company has good and
valid title to all of its assets. All of the tangible personal property of the
Company has been maintained in accordance with generally accepted industry
practice and is, in all material respects, in good operating condition and
repair, ordinary wear and tear excepted. All leased personal property is, in all
material respects, in the condition required of such property by the terms of
the lease applicable thereto during the term of the lease and upon the
expiration thereof.
(b) Title to Real Property.
(i) The Company does not own any real property or interests in
real property other than the leasehold interests granted pursuant to
written leases, copies of which have previously been delivered to the
Purchaser.
(ii) The Company has not granted and is not subject to any
options to purchase, or rights of first refusal, with respect to any
real property.
(iii) All of the Company's leases of real and personal
property are in full force and effect and have not been modified or
amended, and the Company is not in default in any respect thereunder.
SECTION 2.19. Intellectual Property.
(a) Set forth in Schedule II hereto is a true and complete
list of:
(i) all patents held by the Company or any Affiliate and used
in or relating to the Business, and all reissues, divisions,
continuations, continuations in part and extensions thereof and all
pending patent applications by the Company or any Affiliate relating to
the Business, including, for each such patent, the serial or patent
number, country, grant date and title;
(ii) all trademarks, service marks, trade names, trademark or
service ▇▇▇▇ license agreements, logos, trade styles, and other sources
of business identifiers of the Business (collectively, the "MARKS"),
including (A) for each such registered ▇▇▇▇, or for each such ▇▇▇▇ for
which registration has been applied, a copy of the application, the
serial number or registration number, the dates of filing and
registration, and the date and
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nature of any subsequent filings, the filing jurisdiction, and the
international class(es), and (B) for all other Marks, a description of
the ▇▇▇▇, the medium and jurisdiction of use, and a description of the
goods and services in connection with which such ▇▇▇▇ has, is, or will
be, used.
(iii) all registered copyrights in all works of the Company
the Parent and any Affiliate pending applications for registration
thereby of copyrights used in or relating to the Business, including
for each such registered copyright, the registration number, country
and registration and expiration date; and
(iv) all licenses and other contracts to which the Company and
any Affiliate, or any person affiliated with any of the foregoing, is a
party (either as licenser, licensee, sublicensor or sublicensee) and
which affects the validity of or right to use the patents, Marks,
copyrights (or registrations or applications therefor), trade secrets
or other proprietary information used in or relating to the Business
(the intellectual property described in subsections (i) through (iv)
hereof is collectively hereinafter called, the "INTELLECTUAL
PROPERTY").
(b) The Company has good, valid, subsisting, unexpired and
enforceable title to, or otherwise possesses adequate rights to use, all
Intellectual Property listed in Schedule II hereto. All filings that are
necessary to maintain, perfect, and protect the Company's rights in and to the
Intellectual Property have been and shall be made in a timely fashion
(including, without limitation, the filing of a "Section 15 Affidavit" under the
Federal trademark laws regarding the incontestability of the ▇▇▇▇ "Genesis"; if
such Section 15 Affidavit has not been filed with the Patent and Trademark
Office, the Company hereby covenants and represents that it will file such
Affidavit within sixty (60) days after Closing). No other intellectual property
is necessary to permit the Company to conduct the Business. No governmental
authority has rendered any holding, decision or judgment that would limit,
cancel or question the validity of any of the Intellectual Property.
(c) To the best knowledge of the Company, no assets,
properties or rights transferred hereunder or used in the Business have
infringed upon any patent, trademark, service ▇▇▇▇, trade name, copyright, or
other intellectual property, or misappropriated or misused any invention, trade
secret or other proprietary information entitled to legal protection, and the
use of the aforesaid by the Company, or any Affiliate in a manner consistent
with the manner in which the aforesaid are being used thereby, will not
constitute an infringement, misappropriation or misuse of any patent, trademark,
service ▇▇▇▇, trade name, copyright, invention, trade secret, proprietary
information, nondisclosure or other rights of any third party. No person or
entity has asserted any claim regarding the use of, or challenging or
questioning the right of the Company, or any Affiliate or its respective title
in, any Intellectual Property, or challenging or questioning the validity or
effectiveness of any license, contract or commitment relating thereto, and the
Company knows of no valid basis for any such claim. There exists no legal
opinion of counsel to the Company, or any affiliate thereof (or request
therefor) or a legal opinion delivered to the Company, or any affiliate thereof
that the Business as conducted or contemplated infringes or is likely to
infringe any patent, trademark, service ▇▇▇▇ copyright, trade name, invention,
trade secret or other proprietary information or property rights of any other
person.
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14
SECTION 2.20. Corporate Name. To the best knowledge of the Company, no
person, firm or corporation or other business association is presently
authorized by the Company to use the name "Genesis" in connection with the
manufacture or sale of audio speakers.
SECTION 2.21. Proprietary Information of Third Parties. To the best
knowledge of the Company, no third party has claimed or has reason to claim that
any person now or previously employed or engaged as a consultant by the Company
has (a) violated or may be violating any of the terms or conditions of his
employment, non-competition or non-disclosure agreement with such third party,
(b) disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or
violated any confidential relationship which such person may have had with such
third party in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of the Company or (c) interfered or may be interfering in the
employment relationship between such third party and any of its present or
former employees. No third party has requested information from the Company
which reasonably suggests that such a claim might be contemplated. To the best
knowledge of the Company, neither the execution nor the delivery of this
Agreement, nor the carrying on of the Business by any officer, director or key
employee of the Company will conflict with or result in a breach of the terms,
conditions provisions of or constitute a default under any contract, covenant or
instrument under which any such person is obligated.
SECTION 2.22. Officers and Directors; Management Stockholders.
(a) Except for a written employment agreement with ▇▇▇▇
▇▇▇▇▇▇▇▇, a copy of which shall be delivered to the Purchaser before Closing,
and except as provided herein, there exist no oral or written employment
agreements by and between the Company and any of its employees.
(b) A complete list of all directors, officers, and management
personnel of the Company has been provided to the Purchaser.
(c) Together with the Company, each of the Management
Stockholders represents and warrants that:
(i) During the past 10 years, none of the
directors or officers of the Company has been arrested or convicted of any
material crime, nor has any of them been bankrupt or a director or officer of a
bankrupt company;
(ii) Each of the Management Stockholders
currently lives or maintains a residence in the Eagle County, Colorado area, and
will continue to maintain such residence for as long as the Purchaser owns any
Preferred Shares;
(iii) Each of the Management Stockholders shall
not sell, assign, transfer, or otherwise dispose of any of the shares of Common
Stock owned by such Management Stockholder without the prior written consent of
the Purchaser and as further provided in the Stockholders' Agreement;
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15
(iv) Each of the Management Stockholders
currently devotes and will, for as long as the Purchaser owns any Preferred
Shares, continue to devote his full time efforts and attention to the Business;
(v) Without the prior written consent of the
Purchaser, for as long as the Purchaser owns any Preferred Shares, the base
salary of each of the Management Stockholders will only be raised subject to the
approval of the Board of Directors and the Board of Directors will not raise the
base salary of any of the Management Stockholders more than ten percent (10%)
above the level of any immediately preceding fiscal year.
(d) Each of the Management Stockholders covenants that he,
either directly or indirectly, for himself, or through, on behalf of, or in
conjunction with any person or entity:
(i) shall not divert or attempt to divert any
business or customer to any competitor of the Company or of Polk, by direct or
indirect inducement or otherwise, or do or perform directly or indirectly, any
other act injurious or prejudicial to the good will associated with the Marks,
the Business, or Polk's business; and
(ii) shall not employ or seek to employ any
person who is at that time employed by Company or by Polk or by any subsidiary
or other affiliate of either of them, or otherwise directly or indirectly induce
such person to leave his or her employment; and
(iii) shall not either directly or indirectly, for
himself or through, on behalf of, or in conjunction with any other person or
entity, own, maintain, operate, engage in, or have any interest in any business
which business is the same as or similar to the Business or to the business of
Polk (a "COMPETING BUSINESS"); and shall not, either directly or indirectly, for
himself, or through, on behalf of, or in conjunction with any other person or
entity, own, maintain, operate, engage in, or have any interest in any Competing
Business, which Competing Business is, or intended to be, located anywhere in
the world.
The foregoing restrictive covenants shall remain the obligation of, and be
binding upon, each of the Management Stockholders (i) for as long as there shall
be any shares of Preferred Stock outstanding or, (ii) if the Preferred
Stockholder shall have exercised its option (the PURCHASE OPTION") to acquire
substantially all of the assets of the Company pursuant to Section 10 of the
Stockholders' Agreement (as defined below) during the term of the earnout (the
"EARNOUT TERM") provided, however, if the employment of a Management Stockholder
is involuntarily terminated during the Earnout Term, the restrictive covenants
shall only be binding upon him if the Company elects, in its sole discretion, to
pay such Management Stockholder the sum of $8,000 per month for a period of time
no longer than the expiration of the Payout Term. It is understood and agreed
that if the Preferred Stockholder chooses to exercise the Purchase Option, the
Preferred Stockholder shall, upon the closing thereunder, cause the Company to
enter into reasonable employment agreements with the Management Stockholders,
which employment agreements shall (i) be for a term no longer than the Earnout
Term; and (ii) provide reasonable protections against abusive discharge.
SECTION 2.23. Employee and Labor Relations.
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16
(a) There is no labor strike, dispute, slowdown or work
stoppage or lockout actually pending or threatened, against or affecting the
Company; during the past three years, there has not been any such action against
the Business;
(b) no union organizational campaign is in progress with
respect to the employees of the Company and no question concerning
representation exists respecting such employees;
(c) to the best knowledge of the Company, the Company is in
compliance in all material respects with all applicable laws, rules and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, and is not engaged in any unlawful labor
practice;
(d) there is no unfair labor practice charge or complaint
against the Company pending or threatened before the National Labor Relations
Board;
(e) to the best knowledge of the Company, there is no
grievance that would have a material adverse effect on the Company pending or
threatened;
(f) no charges with respect to or relating to the Company are
pending before the Equal Employment Opportunity Commission or any state or local
agency, domestic or foreign, responsible for the prevention of unlawful
employment practices; and
(g) the Company has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation with respect to or relating to
the Company and no such investigation is in progress.
SECTION 2.24. Employee Benefits Matters.
(a) Schedule II contains a complete and accurate list of all
Employee Benefit Plans (as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and any other
employee benefit arrangements or payroll practices, including, without
limitation, employment agreements, severance agreements, board of directors and
executive compensation arrangements, incentive programs or arrangements, sick
leave, severance pay policies, plant closing benefits, salary continuation for
disability, consulting or other compensation arrangements, workers'
compensation, retirement, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs, any plans providing benefits or payments in the event of a
change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the assets of the Company, maintained by
the Company or to which the Company has contributed or is or was obligated to
make payments, in each case with respect to any employees (or, if the Company
has any existing liability, former employees) of the Company (hereinafter, the
"EMPLOYEE BENEFIT PLANS"). All Employee Benefit Plans which constitute Employee
Pension Benefit Plans (as defined in Section 3(2) of ERISA)(hereinafter, the
"EMPLOYEE PENSION PLANS") are separately listed in Schedule II hereto, and those
Employee Pension Plans which are intended to qualify under Section 401 of the
Code are clearly identified as such. The Company does not
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and has never maintained or participated in, and has no liability with respect
to, any Employee Benefit Plan which is: (i) subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code or Section 302 of ERISA,
(ii) a "MULTI-EMPLOYER PLAN" (as defined in Section 3(37) of ERISA), or (iii) a
funded vacation pay plan. No amount is due or owing from the Company (A) on
account of a multi-employer plan or on account of any withdrawal therefrom or
(B) on account of a plan otherwise subject to Title IV of ERISA or on account of
any withdrawal therefrom. Other than as contained in the written employment
agreements listed in Schedule II, no management employee of the Company nor any
fiduciary with respect to the Employee Benefit Plans has issued or distributed
any written communication to any present or former employees of the Company
regarding the transactions contemplated by this Agreement or any effect the
transactions would have on any Employee Benefit Plan or other employee-related
practice, policy, or arrangement.
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(b) Except as set forth in Schedule II hereto:
(i) the Employee Pension Plans which are intended to qualify
under Section 401 of the Code are so qualified and the trusts
maintained pursuant thereto are exempt from federal income taxation
under Section 501 of the Code, and nothing has occurred with respect to
the operation of such plans which could cause the loss of such
qualification or exemption or the imposition of any material liability,
lien, penalty, or tax under ERISA or the Code;
(ii) true, correct and complete copies of the following
documents, with respect to each of the Employee Benefit Plans will be
provided by the Company to the Purchaser when available: (A) all plan
documents, including trust agreements, insurance policies and service
agreements and amendments thereto, (B) the most recent Forms 5500 and
any financial statements attached thereto and those for the prior three
years, (C) the last Internal Revenue Service determination letter, (D)
summary plan descriptions, (E) the most recent actuarial report and
those for the prior three years (if applicable), and (F) written
descriptions of all non-written agreements relating to any such plan;
(iii) there are no material pending claims or lawsuits which
have been asserted or instituted by or against the Employee Benefit
Plans, against the assets of any of the trusts under such plans or by
or against the plan sponsor, plan administrator, or any fiduciary of
the Employee Benefit Plans (other than routine benefit claims) nor does
the Company or the Parent have knowledge of facts which could form the
basis for any such claim or lawsuit;
(iv) the Employee Benefit Plans have been maintained in all
material respects in accordance with their plan documents, if required
under ERISA, and with all provisions of the Code and ERISA (including
rules and regulations thereunder and including the reporting and
disclosure requirements thereof) and other applicable law. Neither the
Company, the Parent nor any "party in interest" or "disqualified
person" with respect to the Employee Benefits Plans has engaged in a
"prohibited transaction" within the meaning of Section 4975 of the Code
or Title I, Part 4 of ERISA;
(v) none of the Employee Benefit Plans contains any provisions
which would prohibit the transactions contemplated by this Agreement or
which would give rise to any severance, termination or other payments
or liabilities as a result of the transactions contemplated by this
Agreement;
(vi) no Employee Benefit Plan which constitutes an Employee
Welfare Benefit Plan (as defined in Section 3(1) of ERISA) (hereafter
"WELFARE PLAN") provides benefits to former employees or their
beneficiaries other than in order to avoid excise taxes under Section
4980B of the Code and Title I, Part 6 of ERISA;
(vii) the Company has at all times complied in all material
respects with the notification and coverage continuation requirements
under Code Section 4980B and Title 1, Part 6 of ERISA, if required by
ERISA to do so;
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(viii) each of the Employee Benefit Plans may be terminated or
amended by the Company, at any time upon no more than 60 days notice,
and the Company has made no agreements or arrangements which limit its
rights to terminate or amend any Employee Benefit Plan; and
(ix) the Company has no liability (whether actual, contingent,
with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan maintained by any trade or business, whether or
not incorporated, under common control of the Company or the Parent
within the meaning of Section 414(b), (c), (m) or (o) of the Code (an
"ERISA AFFILIATE").
(d) Except as disclosed in Schedule II hereto, the Company has
not prepaid or prefunded any Welfare Plan through a trust, and is not aware of
any reserve, premium stabilization or similar account that may be held by an
insurer under a policy relating to any Welfare Plan.
SECTION 2.25. Document List.
(a) Except as has been previously been delivered or disclosed
in writing to the Purchaser, the Company is not a party to or bound by any
written or oral (i) contract not made in the ordinary course of business,
including, without limitation, any "side agreements" with any individual or
entity in which the Company or its management has agreed to take any action
beyond the obligations contained in written agreements executed by the Company;
(ii) collective bargaining agreement or other contract with any labor union;
(iii) bonus, deferred compensation, profit sharing, pension, retirement, stock
option, stock purchase, hospitalization, insurance or other plan or arrangement
providing for employee benefits to present or former officers, directors or
employees; (iv) dealers', manufacturers' representatives' or distributors'
agreement which is not terminable by it without cost or liability to it or its
successors on 60 days' notice or less; (v) contract requiring capital
expenditures (excluding capital expenditures for which the Company shall be
substantially reimbursed in accordance with the terms of an insurance policy
held thereby) in excess of Twenty-Five Thousand Dollars ($25,000.00); (vi)
contract for the sale of goods or the rendering of services continuing for a
period of more than 30 days from the date of this Agreement, except such
contracts entered into in the ordinary course of business consistent with past
practices; (vii) contract for the purchase of supplies, materials or services
for delivery over a period of more than 30 days from the date of this Agreement,
except such contracts entered into in the ordinary course of business consistent
with past practices; (viii) covenant not to compete; (ix) contract or agreement
of any kind continuing for a period of more than one year from the date of this
Agreement; (x) agreement or contract under which the Company has borrowed or
loaned any money or issued any note, bond, indenture or other evidence of
indebtedness or directly or indirectly guaranteed (including, without
limitation, through so-called take-or-pay or keep well agreements and also any
inter-company loan between the Company and any Subsidiary) indebtedness,
liabilities or obligations of others (other than endorsements for the purpose of
collection in the ordinary course of business consistent with past practices);
(xi) mortgage, pledge, security agreement, deed of trust or other document
granting a Lien (including, but not limited to, liens upon properties acquired
under conditional sales, capital leases or other title retention or security
devices); or (xii) any other agreement, contract, lease,
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license, commitment or instrument to which the Company is a party or by or to
which it or any of its assets or business is bound or subject which individual
agreement has an aggregate future liability in excess of Fifty Thousand Dollars
($50,000.00).
(b) The Company and each other party thereto have performed
all the obligations required to be performed by them under each agreement,
contract, lease, license, commitment or instrument to which it is a party
(collectively, the "CONTRACTS") to date. The Company (i) has not received any
notice of default and is not in default, in any respect (with due notice or
lapse of time or both) under any Contract now in effect to which it is a party
or by which either it or its respective property may be bound; (ii) has no
present expectation or intention of not fully performing all of its obligations
under each such Contract in all respects, and (iii) has no knowledge of any
breach and has not received any written notice of any anticipated breach by the
other party to any contract or commitment to which it is a party.
(c) The Company has previously delivered to the Purchaser
copies of all Contracts relating to any indebtedness of the Company to any
lender in an amount in excess of Ten Thousand Dollars ($10,000.00), including,
without limitation, the Contract relating to the Company's existing credit
facility with ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services (the "SENIOR LENDER").
SECTION 2.26. Insurance Policies. The Company maintains policies of
fire and casualty, extended coverage, public and product liability and other
forms of insurance in such amounts, with such deductibles and against such risks
and losses as are reasonable for the Business and the Company's assets and will
continue such insurance in effect after the Closing Date.
SECTION 2.27. Environmental Matters. The Company has not released,
emitted, buried or otherwise disposed of Regulated Substances (as hereinafter
defined) on any of the Properties (as hereinafter defined) in violation of any
Environmental Law (as hereinafter defined). To the best knowledge of the
Company, no one else has released, emitted, buried or otherwise disposed of
Regulated Substances on any of the Properties. To the best knowledge of the
Company, the Company has complied with all Environmental Laws relating to its
operations or the Properties. The Company has not received any notice, demand,
suit or information request pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any comparable state law,
nor does it have knowledge of any other party's receipt of same relating to any
of the Properties. The Company has not received written notice that any of the
Properties is listed on any regulatory list of contaminated properties,
including but not limited to the National Priorities List promulgated pursuant
to CERCLA or any federal, state or local counterpart. To the best knowledge of
the Company, the Company has no any existing or potential liability under any
Environmental Laws. To the best knowledge of Company, no environmental
approvals, clearances or consents are required under applicable law from any
governmental entity or authority in order for the Purchaser to purchase the
Preferred Shares hereunder or for the Company to continue its business after the
Closing Date in a manner consistent with the present operations of the Business.
To the best knowledge of Company, neither the Company is not required to have,
nor does it have, any permits or approvals issued under any Environmental Law.
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As used in this Environmental Matters Section: (i) "ENVIRONMENTAL LAW"
means any statute, regulation, rule, code, common law, order or judgment of any
applicable federal, state, local or foreign jurisdiction relating to pollution,
hazardous substances, hazardous wastes, petroleum or otherwise relating to
protection of the environment, natural resources or human health, including, by
way of example and not by way of limitation, the Clean Air Act, the Clean Water
Act, CERCLA, the Resource Conservation Recovery Act ("RCRA"), the Toxic
Substances Control Act ("TSCA"), and the Emergency Planning and Community
Right-to-Know Act, all as currently amended; (ii) "REGULATED SUBSTANCES" means
any substance regulated under Environmental Laws, including but not limited to
hazardous waste, as defined pursuant to RCRA, hazardous substances, as defined
pursuant to CERCLA, toxic substances as defined under TSCA, hazardous materials,
as defined under the Hazardous Materials Transportation Act, petroleum and its
fractions, ACM's and PCB's; (iii) the "COMPANY" includes any predecessors or
affiliates; and (iv) the "PROPERTIES" means any real property or facility
currently owned, leased or operated by the Company or previously owned, leased
or operated by the Company or any predecessors thereof (including, without
limitation, any corporations, partnerships or joint ventures previously
affiliated with the Company ).
SECTION 2.28. Disclosure. The representations and warranties contained
in this Article II and in Schedule II are true, complete and correct in all
material respects, and no such representation or warranty contains any untrue
statement of material fact or omits to state any material fact necessary to make
the statements made not misleading. There is no material fact which the Company
has not disclosed to the Purchaser which will or could materially and adversely
affect the business, prospects, financial condition, operations, property or
affairs of the Company.
SECTION 2.29. Brokers or Finders. The Company is not liable,
contingently or otherwise, for the payment of brokerage or finders' fees or
agents' commissions or other similar payments in connection with this Agreement
or the transactions contemplated hereby and has no knowledge of any such fee due
or owing in connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as of the Closing
Date that it:
(a) is an "accredited investor" within the meaning of Rule 501
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "SECURITIES ACT"), and was not organized for the
specific purpose of acquiring the Preferred Shares;
(b) has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of his or its investment in
the Company and he or it is able financially to bear the risks thereof;
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(c) has had an opportunity (i) to ask questions of, and
receive answers from, the Company relating to all aspects of the transactions
contemplated by this Agreement and the Stockholders' Agreement (including,
without limitation, the accounting practices, the compensation of the employees
and officers, the tax returns and the operations of the Company), (ii) to obtain
such additional information necessary to make an informed investment decision
hereunder, and has reviewed, among other things, the copies of the Contracts and
documents that the Company has delivered in connection with this Agreement;
(d) is acquiring the Preferred Shares for its own account for
the purpose of investment and not with a view to or for resale in connection
with any distribution thereof;
(e) understands that (i) the Preferred Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) or Section 3(b) thereof or Rule 506 promulgated thereunder; (ii)
the Preferred Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration; (iii) the Securities will bear a legend to such effect; (iv) the
Preferred Shares are subject to the restrictions set forth in the Stockholders'
Agreement; and (v) the Company will make a notation on its transfer books to
such effect;
(f) has taken all corporate action on its part necessary to
authorize the execution, delivery and performance of this Agreement and the
Stockholders' Agreement and the consummation of the transactions contemplated
hereby and thereby;
(g) this Agreement and the Stockholder's Agreement have been
duly executed and delivered by the Purchaser and, assuming the execution and
delivery of them by the Company, constitute its legal, valid and binding
obligation, enforceable in accordance with its terms, except as its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or other laws affecting the enforcement of creditors' rights
generally, or by general equitable principles; and
(h) the execution and delivery of this Agreement and the
Stockholders' Agreement will not violate any provision of applicable law, any
order of any court or other agency of government, the Certificate of
Incorporation, or the Bylaws of the Purchaser, or any provision of any
indenture, agreement or other instrument to which the Purchaser or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Purchaser.
ARTICLE IV
CONDITIONS TO THE CLOSING
SECTION 4.01. Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by this
Agreement are subject to the fulfillment or written waiver, on or before the
Closing Date, of each of the following conditions:
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(a) Amended Charter and Amended Bylaws.
(i) The Company shall have adopted and filed
with the office of the Secretary of State of the State of Delaware and such
office shall have accepted for filing, on or before the Closing Date, the
Amended Charter, substantially in the form attached hereto as Exhibit A, which
Amended Charter shall contain the designations, rights and preferences of the
Preferred Shares.
(ii) The Company shall have adopted the Amended
Bylaws substantially in the form attached hereto as Exhibit B.
(b) Performance. The Company shall have performed and
complied, in all material respects, with all agreements, obligations and
conditions contained herein that are required by it to be performed or complied
with on or before the Closing Date and all of the representations and warranties
of the Company and the Parent shall be true and correct in all respects.
(c) The Stockholders' Agreement. Each of the Company and the
Management Stockholders shall have executed and delivered the Stockholders'
Agreement to the Purchaser.
(d) [Intentionally Deleted]
(e) The Preferred Stock. The Company shall have delivered to
the Purchaser a stock certificate in definitive form representing Five Thousand
(5,000) shares of Preferred Stock.
(f) [Intentionally Deleted]
(g) Key Man Insurance. The Company shall have obtained, or
hereby covenants and represent that it will obtain within sixty (60) days after
Closing, key-man life insurance policies on each of the Management Stockholders
with the Company named as the policyholder and beneficiary thereof (the "KEY MAN
POLICIES"), each in the amount of One Hundred Fifty Thousand Dollars ($150,000).
(h) No Actions. No preliminary or permanent injunction or
other order, decree or ruling issued by any court of competent jurisdiction nor
any statute, rule, regulation or order entered, promulgated or enacted by any
governmental, regulatory or administrative agency or authority shall be pending,
threatened or in effect that would prevent the consummation of the transactions
contemplated hereby.
(i) Approvals. The Company shall have obtained all consents or
approvals required to be obtained in order to consummate the transactions
contemplated hereby.
(j) All Proceedings to be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchaser and its counsel, and the Purchaser and its
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they reasonably may request.
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(k) Opinions. The Purchaser shall have received from ▇▇▇▇ &
Associates, P.C., counsel to the Company, an opinion dated as of the Closing
Date, in form acceptable to the Purchaser.
(l) Fees and Expenses. The Company, at or prior to the
Closing, shall have paid the fees and expenses set forth in Section 7.01 hereof.
(m) Supporting Documents. The Purchaser and its counsel shall
have received copies of the following documents:
(i) (A) the Amended Charter together with copies of
all other documents filed by the Company with the office of the
Secretary of State of the State of Delaware, certified as of a recent
date by the Secretary of State of the State of Delaware; (B) a
certificate of the Secretary of State of the State of Delaware, dated
as of a recent date, as to the due incorporation and good standing of
the Company; and (C) a certificate as to the authority of the Company
to transact business issued by the Secretary of State of each such
jurisdiction, or comparable legal authority in each foreign
jurisdiction, in which the Company conducts the Business;
(ii) a certificate of the Secretary of the Company
dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the Amended Charter and the Bylaws of the
Company as in effect on the Closing Date; (B) that attached thereto is
a true and complete copy of all resolutions adopted by the Board of
Directors (the "BOARD") and the stockholders of the Company authorizing
the execution, delivery and performance of this Agreement and the
Stockholders' Agreement, the filing of the Amended Charter with the
Secretary of State of the State of Delaware, the issuance and delivery
of the shares of Preferred Stock and the reservation of the Conversion
Shares, and that all such resolutions are in full force and effect and
are all the resolutions adopted in connection with the transactions
contemplated by this Agreement and the Stockholders' Agreement; and (C)
to the incumbency and specimen signature of each officer of the Company
executing this Agreement, the Stockholders' Agreement, the certificates
representing the Preferred Stock, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency of the officer signing the certificate
referred to herein;
(iii) a certificate signed by the President of the
Company, dated as of the Closing Date, affirming that all of the
conditions set forth in this Section 4.01 have been satisfied at or
prior to the Closing, with the exception of 4.01 (f), if applicable,
but affirming that such condition shall be satisfied within the time
period set forth therein;
(iv) such additional supporting documents and other
information with respect to the operations and affairs of the Company
as the Purchaser or its counsel reasonably may request.
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SECTION 4.02. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment or written waiver, on or before the
Closing Date, of each of the following conditions:
(a) Stockholders' Agreement. The Purchaser shall have executed
and delivered the Stockholders' Agreement to the Company.
(b) Purchase by The Purchaser. The Purchaser shall have
consummated the Purchase in accordance with the terms of this Agreement.
(c) Representations and Warranties to be True and Correct. The
representations and warranties of the Purchaser contained in Article III hereof
shall be true, complete and correct.
ARTICLE V
COVENANTS OF THE COMPANY
For so long as any shares of the Preferred Stock or any Conversion
Shares are outstanding and until
(a) The successful completion by the Company of a firm
commitment underwritten initial public offering of the Common Stock pursuant to
an effective registration statement on Form S-1 (or its equivalent) under the
Securities Act in which (x) the per share price of shares of Common Stock
offered for sale to the public equals or exceeds Four Hundred Dollars ($400.00)
per share (as adjusted for any stock splits in anticipation of the public
offering), and (y) the net proceeds to the Company are not less than Fifteen
Million Dollars ($15,000,000) (an "IPO"); or
(b) The Redemption Date immediately following the delivery of
the Redemption Notice (as such terms are defined under the Amended Charter); or
(c) The delivery of a Put Notice (as defined in the
Stockholders' Agreement), the Company covenants and agrees with the Purchaser
that:
SECTION 5.01. Financial Information and Inspection Rights. The Company
shall furnish to the Purchaser:
(a) within 90 days after the end of each fiscal year, an
audited balance sheet and related statements of income, cash flows and
stockholders' equity, showing the financial condition of the Company for the
fiscal year then ended, prepared in accordance with GAAP and certified by a
reputable accounting firm selected by the Board and acceptable to the Purchaser;
(b) within 30 days after the end of each calendar month,
internal management statements, including a management summary of operations and
all related financial data as prepared by and for the Company's management;
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(c) within 45 days after the end of each month of each fiscal
quarter (i) a balance sheet and related statements of income, cash flows and
stockholders' equity, showing the financial condition of the Company, unaudited
but prepared in accordance with GAAP and certified by the Chief Financial
Officer of the Company, or the principal accounting officer thereof if no Chief
Financial Officer has been elected and duly qualified, as being fairly stated in
all material respects when considered in relation to the financial statements of
the Company, such balance sheet to be as of the end of such month and such
statements of income, cash flows and stockholders' equity to be for such month
and for the period from the beginning of the fiscal year to the end of such
month (with comparisons to the budget for such period), in each case with
comparative statements for the prior fiscal year and (ii) a report detailing
sales prospects and the amount and age of the accounts payable and accounts
receivable of the Company;
(d) before the end of each fiscal year, capital and operating
expense budgets, cash flow projections and income and loss projections for the
Company in respect of the next three fiscal years thereof, all itemized in
reasonable detail and, promptly after preparation, any revisions to any of the
foregoing;
(e) at the time of delivery of each annual financial statement
pursuant to Section 5.01(a) hereof, a certificate executed by the President and
the Chief Financial Officer of the Company, or the principal accounting officer
thereof if no Chief Financial Officer has been elected and duly qualified,
stating that such officers have reviewed this Agreement, the Amended Charter,
and the Stockholders' Agreement and have no knowledge of any default by the
Company in the performance or observance of any of the provisions of this
Agreement, the Amended Charter, the Stockholders' Agreement, or any other
material agreement of the Company, or, if such officers have such knowledge,
specifying such default and the nature thereof;
(f) promptly (but in no event later than 30 days) following
receipt by the Company, each audit response letter disclosing pending or
threatened litigation or unasserted claims or assessments considered to be
probable of assertion and any accountant's management letter and other written
report submitted to the Company by its independent auditors in connection with
an annual or interim audit of the books thereof;
(g) within 30 days of receipt by the Company of notice of all
material (that is, involving an amount in excess of $5,000) actions, suits,
claims and proceedings;
(h) promptly (but in no event later than 30 days) upon
sending, making available or filing the same, all press releases, reports and
financial statements that the Company sends or makes available to its
stockholders or directors or files with the Commission, the Internal Revenue
Service or any foreign tax authority, or any other governmental agency, whether
federal or state, domestic or foreign;
(i) promptly, from time to time, such other information
regarding the Business, prospects, financial condition, operations, property or
affairs of the Company as the Purchaser reasonably may request;
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(j) permit the Purchaser, or any authorized representative
thereof, to visit and inspect the properties of the Company, including its
corporate and financial records, and to discuss its business and finances with
its officers, all at such reasonable times as may be requested by the Purchaser.
The Purchaser or representative thereof shall maintain the confidentiality of
all information acquired by it in exercising such rights and shall execute a
written non-disclosure agreement if requested by the Company in form reasonably
acceptable thereto;
(k) within 10 days after receipt thereof, provide the
Purchaser with a copy of any notification relating to the default by the Company
under any loan agreement, lease or material contract; and
(l) within 30 days after the end of each fiscal quarter, a
certificate executed by the President of the Company stating that no default has
occurred under this Agreement or the Stockholders' Agreement with respect to the
Company's obligations and duties hereunder and thereunder; and
(m) upon the request of the Purchaser, the Company shall
promptly supply to the Purchaser or its prospective transferees all information
regarding the Company that is required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.
SECTION 5.02. Financial Covenants. The Company shall comply with all
financial covenants, including, without limitation, financial performance
ratios, set forth or required with respect to all Contracts, including, without
limitation, all Contracts with the Senior Lender.
SECTION 5.03. Reserve for Conversion Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock as shall be sufficient to permit the conversion of the Preferred
Shares. If at any time the number of authorized but unissued shares of the
Common Stock shall not be sufficient to permit conversion of the Preferred
Shares or otherwise to comply with the terms of this Agreement, the Company will
forthwith take such corporate action as may be necessary to increase its
authorized but unissued shares of the Common Stock to such number of shares as
shall be sufficient for such purposes. The Company will obtain any
authorization, consent, approval or other action by or make any filing with any
court or administrative body that may be required under applicable Federal or
state securities laws in connection with the issuance of shares of the Common
Stock upon conversion of the Preferred Shares.
SECTION 5.04. Corporate Existence. Except as contemplated hereunder,
the Company shall maintain its corporate existence, rights and franchises in
full force and effect.
SECTION 5.05. Properties, Business, Insurance. The Company shall
maintain, as to its properties and businesses, with financially sound and
reputable insurers, insurance against such casualties and contingencies and of
such types and in such amounts as is customary for companies similarly situated,
which insurance shall be deemed by the Company to be sufficient, including,
without limitation, Federal Flood Insurance if any of the Company's offices or
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operations are located in a designated Federal Flood Area. The Company shall not
cause or permit any assignment or change in the loss payees (other than to the
Company and its Senior Lender) of such policies and shall not borrow against any
such policy. The Company shall pay all premiums and take whatever action is
necessary to maintain the Key Man Policies in effect for as long as the
Purchaser owns any shares of the Preferred Shares. The Company shall add the
name of the Purchaser as a notice party to the Key Man Policies and shall
request the issuer of such policies to provide the Purchaser with at least 10
days' notice before such policy is terminated for failure to pay premiums or
otherwise or assigned or before any change is made in the beneficiary thereof.
The Company shall annually supply the Purchaser with a list of all required
insurance policies.
SECTION 5.06. Expenses of Directors. The Company shall promptly
reimburse in full each director of the Company who is not an employee of the
Company for all of his reasonable out-of-pocket expenses incurred in attending
each meeting of the Board or any committee thereof.
SECTION 5.07. Board of Directors. The Company shall hold meetings of
its Board of Directors at least once every three months. Except as set forth in
Section 6.02 below, the Board of Directors of the Company shall consist of four
members, one of whom shall be nominated and elected by the holders of the
majority of the shares of the Preferred Stock then issued and outstanding
(including the holders of the Conversion Shares, if any), voting or consenting
to such action separately as a class (the "MAJORITY INTEREST"), either in
writing or by vote at any annual meeting or any special meeting called for the
purpose (the "PREFERRED DIRECTOR"). ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ initially shall serve as
the Preferred Director.
SECTION 5.08. Compensation. The Company shall pay to its officers
compensation as determined by the Board and pursuant to the provisions of
Section 2.22 hereof.
SECTION 5.09. Bylaws. The Company shall at all times maintain
provisions in its Bylaws and/or its Amended Charter indemnifying all directors
against liability and absolving all directors from liability to the Company and
its stockholders to the maximum extent permitted under the laws of the State of
Delaware.
SECTION 5.10. Compliance with Laws. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
materially adversely affect their respective businesses or condition, financial
or otherwise.
SECTION 5.11. Keeping of Records and Books of Account. The Company
shall keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP, reflecting all financial transactions thereof
and in which, for each fiscal year, all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
SECTION 5.12. Subsidiaries. The Company shall not permit any Subsidiary
to take any action which would violate any of the covenants contained herein.
The Company shall not sell or otherwise transfer any shares of its Subsidiaries
to any third party.
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SECTION 5.13. Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by its terms restricts the performance
thereby of this Agreement, the Amended Charter or the Stockholders' Agreement,
as applicable.
SECTION 5.14. Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares to expand the Business and for working capital
purposes.
SECTION 5.15. Negative Covenants. Without the prior written consent of
the holders of the Majority Interest, the Company shall not:
(a) With the exception of the Leasehold Transactions, enter
into any transaction: (i) with any of its directors or officers, (ii) with any
holder of more than ten percent (10.0%) of the outstanding capital stock of any
class or series of capital stock issued thereby, or (iii) with any member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or member of the family of any such person, is
a director, officer, trustee, partner, members or holder of more than five
percent (5.0%) of the outstanding capital stock thereof, except for transactions
which are no less favorable to the Company than could be obtained from an
independent third party in an arm's-length transaction and which is approved by
the Majority Interest. The Company may enter into employment contracts with its
employees in the ordinary course of business which contain reasonable terms
(including, without limitation, compensation terms) substantially in accordance
with industry custom and practice;
(b) Issue or sell any capital stock, options or convertible
debt, or issue or grant any stock appreciation rights or other rights in or to
stock, or redeem any of these, except as contemplated herein, provided that the
Purchaser's consent shall not be unreasonably withheld, conditioned or delayed;
(c) Enter into any loan agreements or other borrowing
arrangements, or incur any funded indebtedness, excluding customer financing in
the ordinary course of business, or increase borrowings under any senior debt
facility which would require annual payments in excess of one hundred thousand
dollars ($100,000), or which do not expressly permit (without obligation) the
Purchaser to cure any default with fifteen (15) days notice of such default
thereunder;
(d) Alter its corporate structure or establish or purchase any
subsidiary, or invest in any Affiliate;
(e) Make any cash or other dividend distributions to any
stockholder (except for the Preferred Dividends);
(f) Sell or otherwise dispose of any of its assets, except in
the ordinary course of its business;
(g) Merge or consolidate with another corporation or entity or
dissolve or otherwise liquidate;
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(h) Expend funds in excess of $200,000.00 per annum for
capital improvements;
(i) Change the location or nature of its business operations,
or invest any funds in any concern or entity not strictly related to the
Business;
(j) Enter into any agreements, including, without limitation,
leases, that are not in the ordinary course of its business if such require
annual payments in excess of $50,000;
SECTION 5.16. Option to Acquire Additional Shares of Common Stock. In
addition to any Conversion Rights that the Purchaser has under the Amended
Charter, the Company hereby grants to the Purchaser the option (the "COMMON
STOCK OPTION") to purchase that number of shares of the Common Stock of the
Company which, after the issuance of such shares of Common Stock, and together
with the shares of Common Stock standing in the name of Polk, will equal Twenty
and Twenty-Six One Hundredths Percent (20.26%) of the outstanding shares of
Common Stock of the Company on a fully diluted basis. The term of the Common
Stock Option shall last for as long as there are any shares of Common or
Preferred Stock standing in the name of the Purchaser or Polk. The exercise
price per share of Common Stock shall be equal to the per-share par value of the
Common Stock.
ARTICLE VI
EVENTS OF NONCOMPLIANCE; EVENTS OF DEFAULT
SECTION 6.01. Events of Noncompliance; Events of Default. For so long
as any Preferred Shares shall remain outstanding, if any of the following events
shall occur and be continuing (each, an "EVENT OF NONCOMPLIANCE"):
(a) The Company shall fail to effect the redemption of the
Preferred Shares within 90 calendar days of the period stated in accordance with
the provisions of the Amended Charter; or
(b) The Company shall default in the performance of any other
covenant or provision of this Agreement, the Amended Charter or the
Stockholders' Agreement and the default continues uncured for a period of thirty
(30) days after notice thereof; or
(c) Any representation or warranty made by the Company in this
Agreement or in any certificate, instrument or written statement contemplated by
or made or delivered pursuant to or in connection with this Agreement shall
prove to have been incorrect when made or as of the Closing Date and continues
uncured for a period of 30 days after notice thereof; or
(d) The Company shall fail to repay any indebtedness, whether
pursuant to any permitted senior indebtedness or any indebtedness other than
such permitted senior indebtedness, for borrowed money owing thereby (the
"DEBT"), or any interest or premium thereon, when due (or, if permitted by the
terms of the relevant document, within any applicable grace period), whether
such Debt shall become due by scheduled maturity, by required
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prepayment, by demand or otherwise, or shall receive notice of an event of
default or a notice of noncompliance from the holder of the Debt, or the Company
shall be in default under any other Contracts and such defaults is not cured
within any applicable grace periods; or
(e) The Company shall be involved in financial difficulties as
evidenced by (i) its admitting in writing its inability to pay its debts
generally as they become due; (ii) its commencement of a voluntary case under
Title 11 of the United States Bankruptcy Code as from time to time in effect (or
its foreign equivalent), or by its authorizing, by appropriate proceedings of
its Board of Directors or other governing body, the commencement of such a
voluntary case; (iii) its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to controvert
timely the material allegations of any such petition; (iv) the entry of an order
for relief in any involuntary case commenced under said Title 11, which order is
not dismissed within 60 days; (v) its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) the entry of an order by a court of competent jurisdiction (A) finding it
to be bankrupt or insolvent, (B) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (C) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property, which order is not dismissed within 60
days; or (vii) its making an assignment for the benefit of, or entering into a
composition with, its creditors, or appointing or consenting to the appointment
of a receiver or other custodian for all or a substantial part of its property;
or
(f) Any material, final judgment (not subject to further
appeal) is rendered against the Company or its properties;
(g) Any representation, warranty or other statement made in
any certificate, instrument or written statement contemplated by, or made or
delivered pursuant to, or in connection with this Agreement by any officer,
director or stockholder of the Company shall prove to have been incorrect when
made or as of the Closing Date in any material respect or any covenant or
provision made therein shall be in material default and the default continues
uncured for a period of 60 days after notice thereof; or
(h) Any payment required to be made hereunder or pursuant to
the Stockholders' Agreement by the Company shall not be made when due and such
amount remains unpaid for a period of 30 days; or
(i) The Company shall fail to make a Put Payment (as such term
is defined in the Stockholder's Agreement) or a payment of the Redemption Price
on a Payment Date (as such terms are defined in the Amended Charter); or
(j) Any of the Management Stockholders shall no longer be
employed by the Company (other than by reason of death or permanent disability),
or does not reasonably devote
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his full time efforts and attention to the Business, or breaches any other
warranty contained in Section 2.22; or
(k) There has been a change in control of the Company such
that any of the Management Stockholders is no longer a director or such that the
holders of the Shares of Common Stock who are currently entitled to elect a
majority of the directors are not able to continue to do so after such change in
control;
then, and in any such event, the holders of the Majority Interest, by notice to
the Company, may declare an event of default (an "EVENT OF DEFAULT").
SECTION 6.02. Special Board Rights. For so long as any Preferred Shares
or Conversion Shares are outstanding, in addition to and without limiting any of
the provisions of Section 6.01 hereof and the rights and remedies available to
the Purchaser and any holder of any shares of the Preferred Stock, upon the
declaration of an Event of Default and upon the request of the holders of the
Majority Interest, until the Event of Noncompliance which gave rise to the
default is cured or waived by a vote of the holders of the Majority Interest,
the holders of the Majority Interest, voting together as a separate class of
stock in accordance with the terms of the Amended Charter, shall be entitled,
notwithstanding any other provisions of the Amended Charter, and shall have the
sole power to elect three (3) directors (in addition to the one (1) Preferred
Director), or such greater or lesser number as shall equal one-half of the
number of directors of the Company plus one rounded to the next highest full
integer. The directors elected pursuant to the preceding sentence shall serve
until the Event of Noncompliance is cured or waived as aforesaid, after which
time the directors removed may be reelected to the Board and the provisions of
the Amended Charter relating to the election of directors of the Company in
situations not constituting an Event of Noncompliance shall once again apply.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Fees and Expenses. At or prior to the Closing, the
Company shall pay (a) the reasonable fees and disbursements of Piper & Marbury
L.L.P., special counsel to the Purchaser, in connection with the preparation of
this Agreement, the Amended Charter, the Stockholders' Agreement, and the
transactions otherwise contemplated hereby and thereby, such fees and expenses
not to exceed Ten Thousand Dollars ($10,000.00) in the aggregate; and (b) all
other Closing costs and recording fees in connection with the transactions
contemplated hereby, if any.
SECTION 7.02. Survival of Agreements. All covenants, agreements,
representations and warranties made herein, in the Stockholders' Agreement or in
any certificate or instrument delivered to the Purchaser pursuant to or in
connection with this Agreement or the Stockholders' Agreement shall survive the
execution and delivery of this Agreement, the Stockholders' Agreement, the
issuance, sale and delivery of the Preferred Shares, and the issuance and
delivery of the Conversion Shares, and all statements contained in any
certificate or other instrument delivered by the Company hereunder or thereunder
or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company.
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SECTION 7.03. Parties in Interest. All representations, warranties,
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
Without limiting the generality of the foregoing, all representations, covenants
and agreements benefiting the Purchaser shall inure to the benefit of any and
all subsequent holders from time to time of the Preferred Shares or Conversion
Shares.
SECTION 7.04. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
by overnight express mail, mailed by certified or registered mail, return
receipt requested, or by facsimile (if followed by certified or registered mail,
return receipt requested) addressed as follows:
(a) If to the Company:
Genesis Technologies, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ Industrial Center
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇ & Associates, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Purchaser:
Britannia Investment Corporation
c/o Polk Audio, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
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Piper & Marbury L.L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. Any action requiring consent
or approval by the Majority Interest shall be effected by the delivery of
written notice to the Secretary of the Company from the holders of the Majority
Interest in accordance with the provisions of this Section 7.04.
SECTION 7.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware, without
giving effect to its conflicts of laws provisions. The parties hereto agree and
acknowledge that each party has retained counsel in connection with the
negotiation and preparation of this Agreement and the Stockholders' Agreement,
and that any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the foregoing agreements or any amendment, schedule or exhibits thereto.
SECTION 7.06. Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, together with the Stockholders' Agreement, constitutes the
sole and entire agreement of the parties hereto and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
incorporated herein by reference in their entirety. Notwithstanding the
foregoing, the liquidated damages provisions set forth in Subsection 8.2 of that
certain letter of intent dated December 2, 1997, between the Company and the
Purchaser, shall survive the execution hereof.
SECTION 7.07. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
SECTION 7.08. Amendments. This Agreement may not be amended or
modified, and no provisions hereof may be waived, without the written consent of
the Company and the holders of the Majority Interest.
SECTION 7.09. Severability. Each provision of this Agreement shall be
treated as a separate and independent clause, and the unenforceability of any
one clause shall in no way impair the enforceability of any of the other clauses
herein. If one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity, subject or
otherwise so as to be unenforceable at law, such provision or provisions shall
be construed by the appropriate judicial body by limiting or reducing it or
them, so as to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear.
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SECTION 7.10. Titles and Subtitles. The titles and subtitles used in
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.
SECTION 7.11. Recitals. The Recitals hereto are specifically made a
part of this Agreement and are incorporated herein by reference.
SECTION 7.12. Pronouns. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
SECTION 7.13. Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES
ALL RIGHT TO TRIAL BY JURY OF ALL CLAIMS OF ANY KIND ARISING FROM OR RELATING TO
THIS AGREEMENT. EACH SUCH PARTY ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL
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RIGHT AND THAT IT MAKES THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER
CONSULTATION WITH COUNSEL OF ITS CHOICE. EACH SUCH PARTY AGREES THAT ALL SUCH
CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION, AND
NOT A JURY, AND ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL PART
OF THE CONSIDERATION FOR THE TRANSACTIONS CONTEMPLATED HEREBY.
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37
IN WITNESS WHEREOF, each of the parties to this Agreement has executed,
or has caused its duly elected and qualified officer to execute, this Agreement
as of the day and year first above written.
ATTEST/WITNESS: BRITANNIA INVESTMENT CORPORATION
____________________________ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (SEAL)
_______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
GENESIS TECHNOLOGIES, INC.
____________________________ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (SEAL)
_______________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: CEO
MANAGEMENT STOCKHOLDERS
____________________________ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
____________________________ /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇
___________________________ /s/ ▇▇▇▇ Shifter
_______________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇
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