Exhibit 10.1 - Merger Agreement dated December 30, 1996.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
▇▇▇▇▇▇ INDUSTRIES, INC.,
▇▇▇▇▇▇ ACQUISITION CORPORATION,
▇▇▇▇▇ ▇▇▇▇▇▇
AND
SMART CHOICE HOLDINGS, INC.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TABLE OF CONTENTS
RECITALS
1. THE MERGER 2
1.1 THE MERGER 2
1.2 EFFECTIVENESS OF THE MERGER 2
1.3 EFFECT OF THE MERGER 2
1.4 SURVIVING CORPORATION 3
1.5 STATUS AND CONVERSION OF THE COMPANY'S SHARES AND THE
POTENTIAL SECURITIES 3
1.6 BOOKS AND RECORDS 4
1.7 DEFINITIONS 5
2. COMPANY SHAREHOLDERS' AGREEMENTS 5
2.1 INVESTMENT INTENT AND DISCLOSURE 5
3. ▇▇▇▇▇ ▇▇▇▇▇▇'▇ CONSIDERATION AND OBLIGATIONS 5
3.1 SURRENDER OF WARRANT AND OPTION RIGHTS 5
3.2 NEW EMPLOYMENT AGREEMENT FOR SHAREHOLDERS 5
3.3 ▇▇▇▇▇ ▇▇▇▇▇▇'▇ REGISTRATION RIGHTS 6
3.4 ▇▇▇▇▇ ▇▇▇▇▇▇ GUARANTIES AND INDEMNIFICATION 6
4. FURTHER ASSURANCES 7
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
5.1 TITLE TO THE STOCK 7
5.2 VALID AND BINDING AGREEMENT 7
5.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION 8
5.4 CAPITAL STRUCTURE; STOCK OWNERSHIP 8
5.5 SUBSIDIARIES AND INVESTMENTS 9
5.6 FINANCIAL INFORMATION 9
5.7 NO MATERIAL CHANGES 9
5.8 TAX MATTERS 10
5.9 PERSONAL PROPERTY; LIENS 11
5.10 REAL PROPERTY 12
5.11 ACCOUNTS RECEIVABLE 12
5.12 INVENTORIES 12
5.13 INSURANCE POLICIES 12
5.14 PERMITS AND LICENSES 13
5.15 CONTRACTS AND COMMITMENTS 13
5.16 CUSTOMERS AND SUPPLIERS 14
5.17 LABOR, BENEFIT AND EMPLOYMENT AGREEMENT 14
5.18 NO BREACH OF STATUTE, DECREE OR OTHER INSTRUMENT 15
5.19 COMPLIANCE WITH LAWS 16
5.20 LITIGATION 16
5.21 PATENTS, LICENSES AND TRADEMARKS 17
5.22 TRANSACTIONS WITH AFFILIATES 17
5.23 BANK ACCOUNTS 17
5.24 SCHEDULES INCORPORATED BY REFERENCE 17
5.25 NO CONSENTS 17
5.26 CONDITION OF ASSETS 18
5.27 OTHER INFORMATION 18
6. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ AND MERGER SUBSIDIARY
18
6.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION 18
6.2 AUTHORIZATION OF AGREEMENT 19
6.3 VALID AND BINDING AGREEMENT 19
6.4 NO BREACH OF STATUTE OR CONTRACT 19
6.5 BUSINESS AND FINANCIAL INFORMATION 19
6.6 ▇▇▇▇▇▇ SHARES 20
6.7 INVESTMENT 20
6.8 TAX MATTERS 20
6.9 OTHER INFORMATION 21
7. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE 21
7.1 ACCESS TO INFORMATION 21
7.2 CONDUCT OF BUSINESS IN NORMAL COURSE 22
7.3 PRESERVATION OF BUSINESS AND RELATIONSHIPS 22
7.4 MAINTENANCE OF INSURANCE; ASSETS AND RECORDS 22
7.5 CORPORATE MATTERS 22
7.6 OTHER TRANSACTIONS 23
8. ADDITIONAL AGREEMENTS OF THE PARTIES 24
8.1 CONFIDENTIALITY 24
8.2 DUE DILIGENCE INVESTIGATION 24
8.3 ADDITIONAL AGREEMENTS AND INSTRUMENTS 24
8.4 NON-INTERFERENCE 25
8.5 MANAGEMENT OF THE SURVIVING CORPORATION AND ▇▇▇▇▇▇
FOLLOWING THE CLOSING DATE 25
9. CONDITIONS PRECEDENT TO ▇▇▇▇▇▇'▇ PERFORMANCE 26
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES 26
9.2 PERFORMANCE 26
9.3 CERTIFICATION 26
9.4 RESOLUTIONS 26
9.5 GOOD STANDING CERTIFICATES 26
9.6 ABSENCE OF LITIGATION 26
9.7. CONSENTS 27
9.8 CONDITION OF PROPERTY 27
9.9 NO MATERIAL ADVERSE CHANGE 27
9.10 SATISFACTORY DUE DILIGENCE INVESTIGATION 27
9.11 EXECUTION AND DELIVERY OF EXHIBITS 27
9.12 PROCEEDINGS AND INSTRUMENTS SATISFACTORY 27
9.13 CONSUMMATION OF ACQUISITIONS 27
9.14 INVESTMENT BANKING FAIRNESS OPINION 28
9.15 ▇▇▇▇▇▇▇ BANK OF CENTRAL FLORIDA, N.A.'S CONSENT TO THE
MERGER 28
9.16 EXECUTIVE EMPLOYMENT AGREEMENTS 28
10. CONDITIONS PRECEDENT TO THE COMPANY'S PERFORMANCE 28
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES 28
10.2 PERFORMANCE 28
10.3 CERTIFICATION 28
10.4 RESOLUTIONS 29
10.5 EXECUTION AND DELIVERY OF EXHIBITS 29
10.6 PROCEEDINGS AND INSTRUMENTS SATISFACTORY 29
10.7 PERFORMANCE BY ▇▇▇▇▇ ▇▇▇▇▇▇ 29
10.8 NO MATERIAL ADVERSE CHANGE 29
10.9 APPROVAL OF EMPLOYMENT AGREEMENTS 29
11. CONDITIONS PRECEDENT TO ▇▇▇▇▇ ▇▇▇▇▇▇'▇ PERFORMANCE 29
11.1 DELIVERY OF AGREEMENTS 29
12. CLOSING 29
12.1 PLACE AND DATE OF CLOSING 29
12.2 ACTIONS AT CLOSING 30
13. TERMINATION OF AGREEMENT 30
13.1 GENERAL 30
13.2 EFFECT OF TERMINATION 30
14. INDEMNIFICATION 31
14.1 GENERAL 31
14.2 LIMITATIONS ON CERTAIN INDEMNITY 31
14.3 CLAIMS FOR INDEMNITY 32
14.4 RIGHT TO DEFEND 32
15. POST-CLOSING EVENTS 33
15.1 ACCOUNTING COOPERATION 33
16. COSTS 33
16.1 FINDER'S OR BROKER'S FEES 33
16.2 EXPENSES 33
17. PARTIES 33
17.1 PARTIES IN INTEREST 33
17.2 NOTICES 34
18. MISCELLANEOUS 35
18.1 AMENDMENTS AND MODIFICATIONS 35
18.2 NON-ASSIGNABILITY; BINDING EFFECT 35
18.3 SEVERABILITY 35
18.4 ATTORNEYS' FEES 35
18.5 GOVERNING LAW; JURISDICTION 35
18.6 EFFECT OF HEADINGS 35
18.7 ENTIRE AGREEMENT; WAIVERS 36
18.8 COUNTERPARTS 36
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), entered
into as of this _____ day of ________________, 1996, by and among
▇▇▇▇▇▇ INDUSTRIES, INC., a Florida corporation having offices at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇▇"); 21ECKLER ACQUISITION CORPORATION, a Delaware
corporation having offices at c/o National Corporate Research,
Ltd., ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Merger Subsidiary"); ▇▇▇▇▇ ▇▇▇▇▇▇, an individual residing in
Brevard County at c/o ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇ ▇▇▇▇▇▇"); 21STSMART CHOICE HOLDINGS, INC.,
a Delaware corporation, having offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"); ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, an individual residing in Orange County at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("▇▇▇▇▇▇ ▇▇▇▇▇▇"); and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing
in Pinellas County at c/o ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇ ▇▇▇▇▇▇").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇, one of the largest aftermarket suppliers of
Corvette automobile parts and accessories in the United States,
seeks to expand and diversify its business; and
WHEREAS, the Company has been formed to engage primarily in
the business of the financed sales of new and used motor vehicles
in the Southeastern United States; and
WHEREAS, ▇▇▇▇▇▇, desiring to acquire the Company, has formed
the Merger Subsidiary, a wholly-owned subsidiary of ▇▇▇▇▇▇, which
Merger Subsidiary will statutorily merge with and into the
Company (such merger being referred to herein as the "Merger")
and thereby vest title in all of the outstanding shares of the
Company in the name of ▇▇▇▇▇▇, making the Company a wholly-owned
subsidiary of ▇▇▇▇▇▇ at Closing (as hereinafter defined),
pursuant to and in accordance with the terms and conditions of
this Agreement; and
WHEREAS, ▇▇▇▇▇▇'▇ capital structure is as set forth in
Schedule 6.1, attached hereto and incorporated herein ; and
WHEREAS, the Company's capital structure is as set forth in
Schedule 5.1 and Schedule 5.4, attached hereto and incorporated
herein; and
WHEREAS, the Merger shall constitute an "A" Reorganization
structured as a "reverse subsidiary merger" pursuant to Section
368(a)(2)(E) of the Internal Revenue Code, as amended; and
WHEREAS, the Board of Directors and the stockholders of the
Company, the Board of Directors of ▇▇▇▇▇▇ and the Board of
Directors of the Merger Subsidiary and ▇▇▇▇▇▇, as sole
shareholder of the Merger Subsidiary, have all authorized and
approved the Merger and the consummation of the other
transactions contemplated by this Agreement, all on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein set forth, the parties
hereby covenant and agree as follows:
1. THE MERGER.
1.1 The Merger. At the time of the Closing on the
Closing Date (as hereinafter defined) and in accordance with the
provisions of this Agreement and the applicable provisions of the
corporation laws of the jurisdiction in which the Merger is to
take place (in such instance, "Applicable Law"), the Merger
Subsidiary shall be merged with and into the Company, in
accordance with the terms and conditions of this Agreement and a
certificate of merger in substantially the form of Exhibit A
annexed hereto, subject to such changes as to form (but not
substance) as may be required by Applicable Law, hereinafter
referred to as the "Certificate of Merger". The Company shall be
the surviving corporation of the Merger (the Company, in such
capacity, being hereinafter sometimes referred to as the
"Surviving Corporation"). Thereupon, the separate existence of
the Merger Subsidiary shall cease, and the Company, as the
Surviving Corporation, shall continue its corporate existence
under Applicable Law under its current name, as a wholly-owned
subsidiary of ▇▇▇▇▇▇.
1.2 Effectiveness of the Merger. As soon as
practicable upon or after the satisfaction or waiver of the
conditions precedent set forth in Sections 9, 10 and 11 below,of
this Agreement, the Merger Subsidiary and the Company will
execute an appropriate Certificate of Merger, and shall file or
cause to be filed such Certificate of Merger with the Secretary
of State of the jurisdiction in which the Merger Subsidiary and
Company are incorporated; and the subject Merger shall become
effective as of the date set forth in the Certificate of Merger,
and the Closing shall be deemed to occur as of the date set forth
in Section 12 of this Agreement.
1.3 Effect of the Merger. Upon the effectiveness of
the Merger, (a) the Surviving Corporation shall own and possess
all assets and property of every kind and description, and every
interest therein, wherever located, and all rights, privileges,
immunities, powers, franchises and authority of a public as well
as of a private nature, of the Merger Subsidiary and Company (the
"Constituent Corporations"), and all obligations owed to,
belonging to or due to each of the Constituent Corporations, all
of which shall be vested in the Surviving Corporation pursuant to
Applicable Law without further act or deed, and (b) the Surviving
Corporation shall be liable for all claims, liabilities and
obligations of the Constituent Corporations, all of which shall
become and remain the obligations of the Surviving Corporation
pursuant to Applicable Law without further act or deed.
1.4 Surviving Corporation. Upon the effectiveness of
the Merger, the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall be identical to those of the Company
as in effect immediately prior to the effectiveness of such
Merger. The directors and officers of both the Surviving
Corporation and ▇▇▇▇▇▇ shall be modified on or after the Closing
Date in accordance with Section 8.5 hereafter.
1.5 Status and Conversion of the Company's Shares and
the Potential Securities. Upon the effectiveness of the Merger:
(a) Each share of capital stock held by the
Company as treasury stock immediately prior to the effectiveness
of the Merger shall be canceled and extinguished, and no payment
or issuance of any consideration shall be payable or shall be
made in respect thereof;
(b) Each share of common stock of the Merger
Subsidiary outstanding immediately prior to the effectiveness of
the Merger shall be converted into and shall become one (1) share
of common stock of the Surviving Corporation; and
(c) Each share of $.001 par value common stock of
the Company (the "Company Stock") issued and outstanding
immediately prior to the effectiveness of the Merger (excluding
any shares as to which dissenters' appraisal rights have been
validly exercised and perfected and for which cash is payable in
accordance with applicable law) shall be canceled and
extinguished and converted into the right to receive one (1)
share of ▇▇▇▇▇▇ Class A Common Stock, $.01 par value ("▇▇▇▇▇▇
Class A Common"); provided, however that with respect to the
shares of Company Stock held by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the shares of
Company Stock held by ▇▇▇▇▇▇ ▇▇▇▇▇▇ (in lieu of the aforesaid one
for one stock exchange) there shall be delivered one-half of one
(1) share of ▇▇▇▇▇▇ Class B Common Stock, $.01 par value ("▇▇▇▇▇▇
Class B Common") for each such share of Company Stock.
Notwithstanding any other provision in this Agreement ▇▇▇▇▇▇
shall issue nor more than 6,500,000 shares of ▇▇▇▇▇▇ Class A
Common or its equivalent, taking into account the outstanding
shares of Company Stock and options, warrants, subscription
rights, Convertible Securities, Exercisable Securities and all
other agreements by which the Company has agreed to issue shares
of Company capital stock; provided, however, that no options,
warrants or rights to acquire shares of the Company Stock that
vest or are exercisable subsequent to a secondary offering of the
Company's or ▇▇▇▇▇▇'▇ securities shall be taken into account.
▇▇▇▇▇▇ Class A Common and ▇▇▇▇▇▇ Class B Common are hereinafter
collectively sometimes called "▇▇▇▇▇▇ Stock". Such consideration
shall be paid and delivered to the holders of all of the
outstanding Company Stock, upon surrender to the Surviving
Corporation of the certificates representing such shares of
outstanding Company Stock at the time and place of the Closing as
provided in Section 12 belowof this Agreement.
(d) Each share of Company Stock that may be
acquired upon the conversion of the Convertible Securities (as
hereinafter defined), or upon exercise of the Exercisable
Securities (as hereinafter defined) (the Convertible Securities
and the Exercisable Securities hereinafter sometimes referred to
collectively as the "Potential Securities"), whether or not such
Potential Securities are contingent, vested, or issued and
outstanding immediately prior to the effectiveness of the Merger,
shall be modified and converted into a right to receive the same
amount of ▇▇▇▇▇▇ Class A Common as the holders of the number of
shares of Company Stock deliverable upon such conversion or
exercise would have been entitled to receive if such conversion
were to have occurred prior to the Merger in lieu of the Company
Stock, on the same terms and conditions as originally agreed to
between the Company and the holders of such Potential Securities,
pursuant to this Agreement. Such consideration payable upon
conversion or exercise of the Potential Securities shall be
reserved by ▇▇▇▇▇▇ for issuance to the holders of such Potential
Securities in accordance with the terms of such Potential
Securities, provided, however that for each one (1) share of
Company Stock issuable upon conversion or exercise of such
Potential Security the holder thereof shall receive instead and
in lieu thereof one (1) share of ▇▇▇▇▇▇ Class A Common Stock.
The term "Convertible Securities" shall mean the Company's Series
A Convertible Preferred Stock, Series B Convertible Preferred
Stock and the 12% Convertible Debentures identified in Exhibit B
attached hereto (said Exhibit B identifying the holders of the
Convertible Securities and the amount of Company Stock
exercisable therefor). The term "Exercisable Securities" shall
mean the Company's stock options or any warrants, as further
identified in Exhibit C (said Exhibit C identifying the option
and/or warrant holders and the amount of Company Stock
exercisable therefor), attached hereto.
1.6 Books and Records. On the Closing Date, the board
of directors of the Company shall direct its officers to deliver
to ▇▇▇▇▇▇ all of the stock books, records and minute books of the
Company, all financial and accounting books and records of the
Company, all tax returns and records of the Company, and all
supplier, client, customer, sales and other business records of
the Company.
1.7 Definitions.
(a) Wherever used in this Agreement, the term
"Affiliate" means, as respects any person or entity, any other
person or entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common
control with the first person or entity.
2. COMPANY STOCKHOLDERS' AGREEMENTS.
2.1 Investment Intent and Disclosure. Each
shareholder entitled to receive ▇▇▇▇▇▇ Class A Common or ▇▇▇▇▇▇
Class B Common shall be bound by the terms of the Merger to
execute and deliver to ▇▇▇▇▇▇ an Agreement that concerns, among
other things, stockholders' investment intent and acknowledgment
of (i) disclosure made by ▇▇▇▇▇▇ and (ii) transfer restrictions
on the ▇▇▇▇▇▇ Stock. Such agreement shall be in a form mutually
agreeable to the parties and the form shall be attached hereto as
Exhibit D at Closing.
3. ▇▇▇▇▇ ▇▇▇▇▇▇'▇ CONSIDERATION AND OBLIGATIONS.
3.1 Assignment of Warrant and Option Rights. At the
Closing and except as set forth below, ▇▇▇▇▇ ▇▇▇▇▇▇ shall assign
any and all warrants or options of ▇▇▇▇▇▇ that he holds, as
identified in Exhibit E attached hereto, and relinquish any and
all contracts rights related thereto. In exchange for the
assignment of the aforementioned warrants and options, ▇▇▇▇▇
▇▇▇▇▇▇ shall accept the issuance of 5-year options to acquire
100,000 shares of ▇▇▇▇▇▇ Class A Common at $8.75 per share and 5-
year options to acquire 50,000 shares of ▇▇▇▇▇▇ Class A Common at
$10.00 per share (the "▇▇▇▇▇ ▇▇▇▇▇▇ Options") in the form
attached hereto as Exhibit F. Notwithstanding the foregoing,
▇▇▇▇▇ ▇▇▇▇▇▇ shall be entitled to retain the options and warrants
specifically identified in Exhibit G, attached hereto.
3.2 New Employment Agreements for ▇▇▇▇▇ ▇▇▇▇▇▇. Upon
Closing, ▇▇▇▇▇ ▇▇▇▇▇▇'▇ employment agreement with ▇▇▇▇▇▇ shall
be, by mutual consent of ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (as evidenced by
this Agreement), terminated and deemed to be of no further force
and effect. A new employment agreement between ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇ (the "Employment Agreement") shall be executed, in
substantially the same form as Exhibit H attached hereto,
employing ▇▇▇▇▇ ▇▇▇▇▇▇ as the chairman of the business unit that
shall conduct the operations customarily conducted by ▇▇▇▇▇▇
prior to the Merger. Upon execution of this Agreement by ▇▇▇▇▇
▇▇▇▇▇▇, he shall be deemed to have made a knowing and voluntary
waiver of his right to convert any and all of his Class B Stock
to Class A Stock, until such time as there is sufficient Class A
Stock available to permit such a conversion.
3.3 ▇▇▇▇▇ ▇▇▇▇▇▇'▇ Registration Rights. Subject to a
registration rights agreement dated even herewith (the "▇▇▇▇▇
▇▇▇▇▇▇ Registration Agreement"), a true and accurate copy of
which is attached hereto as Exhibit I, ▇▇▇▇▇ ▇▇▇▇▇▇ shall be
permitted to sell, in accordance with all applicable laws or
regulations governing the sale of such securities, up to 100,000
shares of ▇▇▇▇▇▇ Stock in any public offering of ▇▇▇▇▇▇ Stock
following the Merger. Additionally, ▇▇▇▇▇ ▇▇▇▇▇▇, subject to
▇▇▇▇▇ ▇▇▇▇▇▇'▇ Registration Agreement, shall be permitted to sell
an additional 200,000 shares, pursuant to securities laws and
regulations applicable to such securities, in installments of up
to 50,000 shares of the ▇▇▇▇▇▇ Stock during each three (3) month
period thereafter, for a period not to exceed twelve (12) months.
3.4 ▇▇▇▇▇ ▇▇▇▇▇▇ Guaranties and Indemnification.
▇▇▇▇▇ ▇▇▇▇▇▇ currently guarantees, on behalf of ▇▇▇▇▇▇, certain
loans as more particularly identified in Exhibit J attached
hereto (the "Loans"). In consideration for ▇▇▇▇▇ ▇▇▇▇▇▇'▇
guaranties, ▇▇▇▇▇▇ pays to ▇▇▇▇▇ ▇▇▇▇▇▇ a quarterly fee in an
amount equal to two percent (2%) of the outstanding balance of
the Loans in accordance with Section 4 of the employment
agreement between ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ dated May 23, 1995, and
as subsequently amended (the "Guaranty & Employment Agreement"),
a copy of the Guaranty & Employment Agreement is attached hereto
as Exhibit K. Following the Merger, ▇▇▇▇▇▇ and the Surviving
Corporation shall use their best efforts to cause ▇▇▇▇▇ ▇▇▇▇▇▇ to
be released from the liability associated with his guaranty of
the Loans on or before May 30, 1997.
(a) Until such time as ▇▇▇▇▇ ▇▇▇▇▇▇ is no longer
a guarantor of or is no longer contractually bound to guarantee
any of the indebtedness due pursuant to the Loans, ▇▇▇▇▇▇ and the
Surviving Corporation shall jointly and severally indemnify and
hold harmless ▇▇▇▇▇ ▇▇▇▇▇▇, his successors, and assigns against
any losses, claims, damages or liabilities (the "Claims") to
which ▇▇▇▇▇ ▇▇▇▇▇▇ may become subject, insofar as such Claims (or
actions in respect thereof) arise out of or are based upon ▇▇▇▇▇
▇▇▇▇▇▇'▇ guaranties of the Loans.
4. FURTHER ASSURANCES.
From time to time from and after the Closing, the
parties shall execute and deliver, or cause to be executed and
delivered, any and all such further agreements, certificates and
other instruments, and shall take or cause to be taken any and
all such further action, as any of the parties may reasonably
deem necessary or desirable in order to carry out the intent and
purposes of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, jointly
and severally, hereby represent and warrant to the best of their
knowledge to ▇▇▇▇▇▇ as follows (and with respect to the
representations and warranties contained in Sections 5.3, 5.6
through 5.25, such representations and warranties respecting the
Company shall be deemed to be representations and warranties as
to the Company and its subsidiaries and each of the companies
described in Schedule 5.5 (collectively, the "Target Companies");
provided, however, that as to the Target Companies, any and all
representations and warranties are based solely on and expressly
limited to those representations, warranties, schedules and
exhibits attached to or contained in the respective purchase
agreements between the Company and each of the Target Companies):
5.1 Title to the Stock. The stockholders of the
Company have good, valid and marketable title to the Company
Stock issued and outstanding, and all of such Company Stock has
been duly authorized and validly issued and is fully paid and non-
assessable, and is (and on the Closing Date will be) free and
clear of all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or
federal securities laws). All issued and outstanding shares of
capital stock of the Company are owned of record and beneficially
as set forth on Schedule 5.1 annexed hereto.
5.2 Valid and Binding Agreement.
(a) The execution, delivery and performance of
this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by the Company have been duly
and validly authorized by the Board of Directors and the
stockholders of the Company, and the Company has the full legal
right, power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the
extent limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally, and except that
the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which
enforcement is sought.
(b) The execution and delivery by the Company of
this Agreement and the performance by the Company of its
obligations hereunder will not violate any provision of law, any
order of any Court or other agency of government, the Certificate
of Incorporation, Bylaws or other governing document of the
Company, or any judgment, award, decree, indenture, agreement,
permit or other instrument to which the Company is a party, or by
which the Company or its assets or properties are bound or
affected, 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, permit or other instrument, or result
in a creation or imposition of any lien, charge, security
interest or encumbrance of any nature whatsoever upon the Company
or its assets.
5.3 Organization, Good Standing and Qualification.
The Company: (a) is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation; (b) has all necessary corporate power and
authority to carry on its business and to own, lease and operate
its properties; and (c) except as and to the extent set forth in
Schedule 5.3 annexed hereto, is qualified to do business as a
foreign corporation in each foreign jurisdiction where such
qualification is required by law. True and complete copies of
the Certificate of Incorporation and By-Laws of the Company
(including all amendments thereto), and a correct and complete
list of the officers and directors of the Company, are annexed
hereto as part of Schedule 5.3.
5.4 Capital Structure; Stock Ownership.
(a) The authorized capital stock of the Company
is as set forth in its Certificate of Incorporation (as amended)
contained in Schedule 5.3. The record and beneficial owners of
the Company Stock are as set forth in Schedule 5.1 and no other
shares of capital stock of the Company are issued or outstanding.
(b) There are no outstanding subscriptions,
options, rights, warrants, convertible securities or other
agreements or calls, demands or commitments, except as set forth
in Schedule 5.4, obligating the Company to issue, transfer or
purchase any shares of its capital stock, or obligating any
stockholder to transfer any shares of Company Stock owned by such
stockholder. No shares of capital stock of the Company are
reserved for issuance pursuant to stock options, warrants,
agreements or other rights to purchase capital stock, except as
set forth in Schedule 5.4.
5.5 Subsidiaries and Investments. The Company does
not own, directly or indirectly, any stock or other equity
securities of any corporation or entity, or has any direct or
indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the
business conducted by the Company, except as contained in
Schedule 5.5.
5.6 Financial Information. Schedule 5.6 annexed
hereto contains: (i) certain financial information pertaining to
the Company and, each of the Target Companies and the Company
subsidiaries; (ii) a list of the outstanding principal balance of
and approximate accrued interest on all indebtedness including
without limitation accounts payable and loans and/or notes
payable of the Company as of November 30, 1996; (iii) a list of
all obligations of the Company to any of the stockholders of the
Company and/or any of their respective Affiliates on the date
hereof; (iv) a list of all obligations of the Company guaranteed
by any of the stockholders of the Company on the date hereof, and
the terms of such guaranties; and (v) a list reflecting the
nature and amount of all obligations owed to the Company on the
date hereof by any of the stockholders of the Company and/or any
of their respective Affiliates. The information and material set
forth in Schedule 5.6 is true, correct and complete and when
taken as an entirety fairly presents, in all material respects
the financial condition and results of operation therein set
forth.
5.7 No Material Changes. Except as and to the extent
depicted in Schedule 5.7 annexed hereto (which Schedule may make
reference to any other Schedule hereto), since November 30, 1996,
the business of the Company has continued to be operated only in
the ordinary course, and there has not been:
(a) Any material change in the financial
condition, operations or business of the Company from that
depicted in Schedule 5.6, or any material transaction or
commitment effected or entered into outside of the normal course
of the Company's business nor inconsistent with the Company's
past practice ;
(b) Any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting
the business, operations, assets, properties, financial condition
or prospects of the Company;
(c) Any declaration, setting aside or payment of
any dividend or other distribution with respect to the Company
Stock, any other payment of any kind by the Company to any of the
stockholders of the Company or any of their respective Affiliates
outside of the ordinary course of business nor inconsistent with
the Company's past practice, any forgiveness of any debt or
obligation owed to the Company by any of the stockholders of the
Company or any of their respective Affiliates, or any direct or
indirect redemption, purchase or other acquisition by the Company
of any capital stock of the Company; or
(d) Any other event or condition arising from or
out of the operation of the Company which has or may materially
and adversely affect the business, financial condition, results
of operations or prospects of the Company.
5.8 Tax Matters.
(a) Tax Returns and Audits.
(i) Except as and to the extent disclosed in
Schedule 5.8 annexed hereto: (i)on the date hereof and on the
Closing Date, all federal, state and local tax returns and tax
reports required to be filed by the Company on or before the date
of this Agreement or the Closing Date, as the case may be, have
been and will have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such returns
and reports are required to be filed; (ii) all federal, state and
local income, franchise, sales, use, property, excise and other
taxes (including interest and penalties and including estimated
tax installments where required to be filed and paid) due from or
with respect to the Company as of the date hereof and as of the
Closing Date have been and will have been fully paid, and
appropriate accruals shall have been made on the Company's books
for taxes not yet due and payable; (iii) as of the Closing Date,
all taxes and other assessments and levies which the Company is
required by law to withhold or to collect on or before the
Closing Date will have been duly withheld and collected, and will
have been paid over to the proper governmental authorities to the
extent due and payable on or before the Closing Date; and (iv)
there are no outstanding or pending claims, deficiencies or
assessments for taxes, interest or penalties with respect to any
taxable period of the Company. At and after the Closing Date,
the Company will not have any liability for any federal, state or
local income tax with respect to any taxable period ending on or
before the Closing Date, except as and to the extent disclosed in
Schedule 5.8. Discretionary decisions made by ▇▇▇▇▇▇ and its
management with respect to filing or amending any tax returns of
the Company concerning periods ended on or prior to the Closing
Date, which decisions are not required under applicable law and
which decisions result in additional liability to the Company
other than as disclosed in this Agreement or the Schedules
annexed hereto, shall not result in any breach of representations
and warranties contained in this Section 5.8(a).
(ii) There are no audits deficiencies,
claims, actions, suits, proceedings or investigations pending
with respect to any federal, state or local tax returns of the
Company, and no waivers of statutes of limitations have been
given or requested with respect to any tax years or tax filings
of the Company.
(iii) The Company has not executed or
entered into (and, prior to the Closing, will not execute or
enter into) with the Internal Revenue Service or any other taxing
authority (A) any agreement or other document extending or having
the effect of extending the period for assessments or collection
of any taxes for which the Company would be liable or (B) a
closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any predecessor
provision thereof or any similar provision of foreign, state or
local tax law that relates to the assets or operations of the
Company.
(iv) The Company is not a party to any
agreement, contract or arrangement that would result, by reason
of the consummation of any of the transactions contemplated
herein, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of
the Code.
(b) Subchapter S Status. Neither the Company nor
any of its stockholders, with respect to the Company, have
applied for qualification as an "S Corporation" as such term is
defined in the Code and regulations promulgated thereunder.
5.9 Personal Property; Liens. The Company has and
owns good and marketable title to all of its personal property,
free and clear of all liens, pledges, claims, security interests
and encumbrances whatsoever, except for the following (all of
which are sometimes referred to as "Permitted Liens"): (a) liens
securing the Company's indebtedness for money borrowed as
reflected in Schedule 5.6, or pursuant to the security agreements
listed in Schedule 5.9 annexed hereto; (b) liens securing the
deferred purchase price of machinery, equipment, vehicles and/or
other fixed assets, as indicated on Schedule 5.9; (c) liens for
current taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings, each of which
is listed in Schedule 5.9; and (d) liens, pledges, claims,
security interests, encumbrances, mortgages, conditions or
restrictions which are not, individually or in the aggregate,
material in character or amount and do not interfere with the use
made or presently proposed to be made of any such property. All
leases of personal property of the Company are valid and binding
in accordance with their respective terms and there is not under
any of such leases any existing default, or any condition, event
or act which with notice or lapse of time or both would
constitute such a default, nor would consummation of the
transactions contemplated hereby result in a default or any such
condition, event or act.
5.10 Real Property.
(a) The Company does not own or have any interest
of any kind (whether ownership, lease or otherwise) in any real
property except to the extent of the Company's leasehold interest
under the lease for its business premises, and true and complete
copies of all real property leases (including all amendments
thereto) to which the Company is a party in any capacity are
annexed hereto as Schedule 5.10 (the "Leases").
(b) The Company (and, to the best of the
Company's knowledge, the landlord thereunder) is presently in
compliance with all of its obligations under the Leases, and the
premises leased thereunder are in good condition (reasonable wear
and tear excepted), are adequate for the operation of the
Company's business as presently conducted, and a default,
termination, or modification of currently effective payment or
other terms thereunder will not be effected as a result of
consummation of the Merger and the transactions contemplated by
this Agreement. The Company has not received any notice of any
violation of any applicable zoning or building regulation,
ordinance or other law, order, regulation or requirement with
respect to the property subject to the Leases. All buildings
used in the operations of the Company substantially conform with
all applicable ordinances, codes, regulations and requirements,
and no law presently in effect or condition precludes or
restricts continuation of the present use of such properties.
5.11 Accounts Receivable. All accounts receivable
shown in Schedule 5.6, and all accounts receivable thereafter
created or acquired by the Company prior to the Closing Date (the
"Accounts"), have arisen or will arise in the ordinary course of
the Company's business. To the best knowledge of the Company,
there is not any dispute as to the validity or collectibility of
such accounts receivable, except to the extent adequately
reserved for and set forth in Schedule 5.6 hereto and none of
such accounts receivables have been assigned or pledged, except
to the extent set forth in Schedule 5.11, to any other person,
firm or corporation or is subject to any right of set-off in
respect of any obligations of the Company.
5.12 Inventories. All inventories shown on the
financial statements set forth in Schedule 5.6, and all
inventories thereafter created or acquired by the Company prior
to the Closing Date, consist of items which are of a quality and
quantity which are useable in the ordinary course of the
Company's business.
5.13 Insurance Policies. Schedule 5.13 annexed hereto
contains a true and correct schedule of all insurance coverage
held by the Company concerning its business and properties; and
except as set forth on Schedule 5.13 such coverage insures all of
the Company's assets for the full replacement cost thereof (net
of reasonable deductibles), and are adequate for the normal
operation of the Company's businesses. All premiums with respect
to such policies covering all periods up to and including the
date of this Agreement have been paid, and will be paid on and as
of the Closing Date, and no notice of cancellation or termination
has been received with respect to any such policy. All such
policies are in full force and effect.
5.14 Permits and Licenses. Except as set forth in
Schedule 5.14 annexed hereto, the Company possesses all required
permits, licenses and/or franchises, from whatever governmental
authorities or agencies (domestic and/or foreign) requiring the
same and having jurisdiction over the Company, necessary in order
to operate its business in the manner presently conducted, all of
which permits, licenses and/or franchises are valid, current and
in full force and effect; No proceeding is pending or, to the
knowledge of the Company, threatened to revoke or limit any of
such permits, licenses or franchises; and none of such permits,
licenses or franchises will be voided, revoked or terminated, or
voidable, revocable or terminable, upon and by reason of the
Merger and consummation of the transaction contemplated by this
Agreement.
5.15 Contracts and Commitments.
(a) Schedule 5.15 annexed hereto lists all
material contracts, leases, commitments, indentures and other
agreements to which any Company is a party (collectively,
"Material Contracts"), except that Schedule 5.15 need not list
any such agreement that is listed on any other Schedule hereto,
or was entered into in the ordinary course of the business of the
Company and that, in any case: (i) is for the purchase of
supplies or other inventory items in the ordinary course of
business; (ii) is related to the purchase or lease of any capital
asset involving aggregate payments of less than $25,000.00 per
annum; or (iii) may be terminated without penalty, premium or
liability by the subject Company on not more than thirty (30)
days' prior written notice.
(b) To the best of the Company's knowledge,
except as set forth in Schedule 5.15: (i) all Material Contracts
are in full force and effect; (ii) the Company has not received
any written notice that any Material Contract is in material
breach or default or is now subject to any condition or event
which has occurred and which, after notice or lapse of time or
both, would constitute a material default by any party under any
such Material Contract; and (iii) none of the Material Contracts
will be voided, revoked or terminated, or voidable, revocable or
terminable, upon and by reason of the Merger and the consummation
of the transactions contemplated by this Agreement.
(c) To the best of the Company's knowledge, no
purchase commitment by the Company is in excess of the normal,
ordinary and usual requirements of the business of the Company.
(d) Except for the Leases and otherwise as set
forth in Schedule 5.15, the Company does not have any outstanding
contracts or commitments that are not cancelable by the Company
without penalty, premium or liability (for severance or
otherwise) on less than thirty (30) days' prior written notice.
(e) There is no outstanding power of attorney
granted by the Company to any person, firm or corporation for any
purpose whatsoever.
5.16 Customers and Suppliers. The Company has not
received any written notice of any existing, announced or
anticipated changes in the policies of any material suppliers or
referral sources which will materially, adversely affect the
business presently being conducted by the Company. The Company
has not lost or been notified that it will lose, and no customer
has notified the Company that it would, in the event of the
consummation of the transactions contemplated by this Agreement,
lose, any customer (or any group of related customers) that
accounted for more than $25,000 of the aggregate revenues of the
Company for its last full fiscal year or the interim period from
the date of its last full fiscal year through November 30, 1996.
5.17 Labor, Benefit and Employment Agreement.
(a) Except as set forth in Schedule 5.17 annexed
hereto, the Company is not a party to (i) any collective
bargaining agreement or other labor agreement, or (ii) any
agreement with respect to the employment or compensation of any
non-hourly and/or non-union employee(s) which is not terminable
without penalty by the Company on not more than thirty (30) days'
prior written notice.
(b) No union is now certified or, to the best of
the Company's knowledge, claims to be certified as a collective
bargaining agent to represent any employees of the Company, and
there are no labor disputes existing or, to the best of the
Company's knowledge, threatened, involving strikes, slowdowns,
work stoppages, job actions or lockouts of any employees of the
Company. No labor organization or group of employees of the
Company has made a pending demand for recognition, and there are
no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge
of the Company, threatened to be brought or filed with the
National Labor Relations Board or any other labor relations
tribunal.
(c) There are no unfair labor practice charges or
petitions for election pending or being litigated before the
National Labor Relations Board or any other federal or state
labor commission relating to any employees of any Company. The
Company has not received any written notice of any actual or
alleged violation of any law, regulation, order or contract term
affecting the collective bargaining rights of employees, equal
opportunity in employment, or employee health, safety, welfare,
or wages and hours, nor is the Company aware that any such
violation is threatened to be brought or filed.
(d) With respect to any "multi-employer plan" (as
defined in Section 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) to which the Company
has at any time been required to make contributions, the Company
has not, at any time on or after April 29, 1980, suffered or
caused any "complete withdrawal" or "partial withdrawal" (as such
terms are respectively defined in Sections 4203 and 4205 of
ERISA) therefrom on its part.
(e) Except as disclosed in Schedule 5.17, the
Company does not maintain, or have any liabilities or obligations
of any kind with respect to, any bonus, deferred compensation,
pension, profit sharing, retirement or other such benefit plan,
and does not have any potential or contingent liability in
respect of any actions or transactions relating to any such plan
other than to make contributions thereto if, as and when due in
respect of periods subsequent to the date hereof. Without
limitation of the foregoing, (i) the Company has made all
required contributions to or in respect of any and all such
benefit plans, (ii) no "accumulated funding deficiency" (as
defined in Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code")) has been incurred in respect of any of such
benefit plans, and the present value of all vested accrued
benefits thereunder does not, on the date hereof, exceed the
assets of any such plan allocable to the vested accrued benefits
thereunder, (iii) there has been no "prohibited transaction" (as
defined in Section 4975 of the Code) with respect to any such
plan, and no transaction which could give rise to any tax or
penalty under Section 4975 of the Code or Section 502 of ERISA,
and (iv) there has been no "reportable event" (within the meaning
of Section 4043(b) of ERISA) with respect to any such plan. All
of such plans which constitute, are intended to constitute, or
have been treated by the Company as "employee pension benefit
plans" or other plans within Section 3 of ERISA have been
determined by the Internal Revenue Service to be "qualified"
under Section 401(a) of the Code, and have been administered and
are in compliance with ERISA and the Code; and, except such as
might arise by reason of the occurrence of the Merger, the
Company has no knowledge of any state of facts, conditions or
occurrences such as would impair the "qualified" status of any of
such plans.
(f) Except for the group insurance programs and
any other insurance listed in Schedule 5.17, the Company does not
maintain any medical, health, life or other employee benefit
insurance programs or any welfare plans (within the meaning of
Section 3(1) of ERISA) for the benefit of any current or former
employees, and, except as required by statute or governmental
regulation, the Company does not have any liability, fixed or
contingent, for health or medical benefits to any former
employee.
5.18 No Breach of Statute, Decree or Other Instrument.
Except as set forth in Schedule 5.18 annexed hereto: (i) neither
the execution and delivery of this Agreement by the Company, nor
the performance of or compliance with the terms and provisions of
this Agreement on the part of the Company, will violate or
conflict with any term of the Certificate of Incorporation or
By-Laws of the Company or any statute, law, rule or regulation of
any governmental authority affecting the existing business of the
Company, or will at the Closing Date conflict with, result in a
breach of, or constitute a default under, any of the terms,
conditions or provisions of any judgment, order, award,
injunction, decree, contract, lease, agreement, indenture or
other instrument to which the Company is a party or by which the
Company is bound; (ii) no consent, authorization or approval of
or filing with any governmental authority or agency, or any third
party, will be required on the part of the Company in connection
with the consummation of the transactions contemplated hereby;
and (iii) the Company will not be required, whether by law,
regulation or administrative practice, to reapply for or refile
to obtain any of the licenses, permits or other authorizations
presently held by the Company and required for the operation of
its business as conducted on the date hereof.
5.19 Compliance with Laws.
(a) The Company is, and has been at all times
subsequent to its incorporation, in compliance with all domestic,
foreign, federal, state, local and municipal laws and ordinances
and governmental rules and regulations, and all requirements of
insurance carriers, applicable to its business, affairs,
properties or assets.
(b) Neither the Company, nor to the best of the
Company's knowledge, any of the Company's directors, officers or
employees, has received any written notice of default or
violation, nor is the Company, or to the best of the Company's
knowledge, any of the Company's directors, officers or employees,
in default or violation, with respect to any judgment, order,
writ, injunction, decree, demand or assessment issued by any
court or any federal, state, local, municipal or other
governmental agency, board, commission, bureau, instrumentality
or department, domestic or foreign, relating to any aspect of the
Company's business, affairs, properties or assets. Neither the
Company, nor to the best of the Company's knowledge, any of the
Company's directors, officers or employees, has received written
notice of, been charged with, or is under investigation with
respect to, any violation of any provision of any federal, state,
local, municipal or other law or administrative rule or
regulation, domestic or foreign, relating to any aspect of the
Company's business, affairs, properties or assets, which
violation would have a material adverse effect on the business,
financial condition, results of operations or prospects of the
Company.
(c) Schedule 5.19 sets forth the date(s) of the
last known audits or inspections (if any) of the Company
conducted by or on behalf of the Environmental Protection Agency,
the Occupational Safety and Health Administration, and any other
governmental and/or quasi-governmental agency (federal, state
and/or local).
5.20 Litigation. Except as disclosed in Schedule 5.20
annexed hereto, there is no suit, action, arbitration, or legal,
administrative or other proceeding, or governmental investigation
pending, or to the best knowledge of the Company, threatened, by
or against the Company or any of its assets or properties. The
Company is not aware of any state of facts, events, conditions or
occurrences which might properly constitute grounds for or the
basis of any suit, action, arbitration, proceeding or
investigation against or with respect to the Company.
5.21 Patents, Licenses and Trademarks. Schedule 5.21
annexed hereto correctly sets forth a list and brief description
of the nature and ownership of: (a) all patents, patent
applications, copyright registrations and applications,
registered trade names, and trademark registrations and
applications, both domestic and foreign, which are presently
owned, filed or held by the Company or any of the Company's
directors, officers, stockholders or employees and which in any
way relate to or are used in the business of the Company; (b) all
licenses, both domestic and foreign, which are owned or
controlled by the Company and/or any of the Company's directors,
officers, stockholders or employees and which in any way relate
to or are used in the business of the Company; and (c) all
franchises, licenses and/or similar arrangements granted to the
Company by others and/or to others by the Company. None of the
patents, patent applications, copyright registrations or
applications, registered trade names, trademark registrations or
applications, franchises, licenses or other arrangements set
forth or required to be set forth in Schedule 5.21 is subject to
any pending challenge known to the Company.
5.22 Transactions with Affiliates. Except as set forth
on Schedule 5.22, no material asset employed in the business of
the Company is owned by, leased from or leased to any of the
stockholders of the Company, any of their respective Affiliates,
members of their families or any partnership, corporation or
trust for their benefit, or any other officer, director or
employee of the Company or any Affiliate of the Company. Except
as set forth on Schedule 5.22, no director, officer or
shareholder of the Company, or any of their respective
Affiliates, owns, directly or indirectly, or has an ownership
interest in (i) any business (corporate or otherwise) which is a
party to any business arrangements or relationships of any kind
with the Company, or (ii) any business (corporate or otherwise)
which conducts the same business as, or business similar to, the
business conducted by the Company.
5.23 Bank Accounts. Annexed hereto as Schedule 5.23
is a correct and complete list of all bank accounts and safe
deposit boxes maintained by or on behalf of the Company, with
indication of all persons having signatory, access or other
authority with respect thereto.
5.24 Schedules Incorporated by Reference. The making
of any recitation in any Schedule hereto shall be deemed to
constitute a representation and warranty that such recitation is
an accurate statement and disclosure of the information required
by the corresponding Section(s) of this Agreement, as, to the
extent, and subject to the qualifications and limitations, set
forth in such corresponding Section(s).
5.25 No Consents. No consents to the transaction
contemplated in this Agreement are required other than as set
forth in Schedule 5.25, which, in the absence of such consents,
will result in a default under any leases or contracts (including
without limitation loan agreements or other debt instruments) to
which the Company is a party, or will result in an acceleration
of any obligations of the Company.
5.26 Condition of Assets. All tangible personal
property, fixtures, machinery and equipment comprising the assets
of the Company are (i) in a reasonable state of repair (ordinary
wear and tear excepted) and operating condition and are suitable
for the purposes for which they are being used and (ii)
substantially conform with all applicable ordinances, codes,
regulations and requirements, including without limitation, all
applicable ordinances, codes, regulations and requirements
relating to the environment or occupational safety, and no law
presently in effect or condition precludes or materially
restricts continuation of the present use of such properties.
5.27 Other Information. None of the information
furnished by the Company in this Agreement, the Exhibits hereto,
the Schedules identified herein, or in any certificate or other
document to be executed or delivered pursuant hereto by the
Company at or prior to the Closing Date, is, or on the Closing
Date will be, false or misleading or contains, or on the Closing
Date will contain, any misstatement of material fact, or omits,
or on the Closing Date will omit, to state any material fact
required to be stated in order to make the statements therein not
misleading in light of the circumstances under which they were
made.
6. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ AND MERGER
SUBSIDIARY.
▇▇▇▇▇▇ and Merger Subsidiary hereby represent and
warrant to the Company and each of its stockholders, as intended
third party beneficiaries hereunder, as follows:
6.1 Organization, Good Standing and Qualification.
(a) ▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Florida, with all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder, and
to consummate the transactions contemplated hereby. ▇▇▇▇▇▇'▇
capital structure, including all issued and outstanding shares of
▇▇▇▇▇▇ Stock, any options, warrants, subscriptions, rights,
convertible securities or other agreements or call, demands or
commitments is as set forth in Schedule 6.1. There are no other
securities or rights to acquire securities of ▇▇▇▇▇▇ except as
set forth on Schedule 6.1.
(b) The Merger Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws
of the state of Delaware, with all necessary power and authority
to consummate the Merger with the Company as contemplated hereby.
The Merger Subsidiary is a wholly-owned subsidiary of ▇▇▇▇▇▇, and
will have no material assets or liabilities at the time of the
Closing.
6.2 Authorization of Agreement. The execution,
delivery and performance of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby by
▇▇▇▇▇▇ have been duly and validly authorized by the Board of
Directors of ▇▇▇▇▇▇; and ▇▇▇▇▇▇ has (and, at the time of the
Closing, the Merger Subsidiary will have) the full legal right,
power and authority to execute and deliver this Agreement, to
perform their respective obligations hereunder, and to consummate
the transactions contemplated hereby. No further corporate
authorization is necessary on the part of ▇▇▇▇▇▇ or Merger
Subsidiary to consummate the transactions contemplated hereby.
6.3 Valid and Binding Agreement. This Agreement, when
executed and delivered by ▇▇▇▇▇▇, constitutes and will constitute
the legal, valid and binding obligations of ▇▇▇▇▇▇, enforceable
against ▇▇▇▇▇▇ in accordance with its respective terms, except to
the extent limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally, and except that
the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which
enforcement is sought.
6.4 No Breach of Statute or Contract. Neither the
execution and delivery of this Agreement by ▇▇▇▇▇▇ and Merger
Subsidiary, nor compliance with the terms and provisions of this
Agreement on the part of ▇▇▇▇▇▇ or Merger Subsidiary, will:
(a) violate any statute or regulation of any governmental
authority, domestic or foreign, affecting ▇▇▇▇▇▇ or Merger
Subsidiary; (b) require the issuance of any authorization,
license, consent or approval of any federal or state governmental
agency; or (c) conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order,
injunction, decree, note, indenture, loan agreement or other
agreement or instrument to which ▇▇▇▇▇▇ or Merger Subsidiary is a
party, or by which ▇▇▇▇▇▇ or Merger Subsidiary is bound, or
constitute a default thereunder.
6.5 Business and Financial Information. The financial
statements and other information contained in the most recent
prospectus, annual report, quarterly report and current report on
Form 8-K of ▇▇▇▇▇▇ as filed with the Securities and Exchange
Commission (the "SEC") are correct and complete in all material
respects, as of their respective dates and as amended through the
date hereof and the financial statements included therein present
fairly the consolidated financial position of ▇▇▇▇▇▇, as of their
respective dates and as amended through the date hereof, in
conformity with generally accepted accounting principles
consistently applied (subject, in the case of unaudited
statements, to the absence of footnote disclosures and to
customary fiscal year-end audit adjustments which will not,
individually or in the aggregate, be material to the consolidated
financial condition of ▇▇▇▇▇▇ and its subsidiaries). Since the
date of the last of such reports, there has been no material
adverse change in the financial condition or operations of ▇▇▇▇▇▇
from that reflected in the financial statements included in such
reports, except as set forth on Schedule 6.5 hereto.
6.6 ▇▇▇▇▇▇ Shares. When transferred or issued to the
stockholders of the Company or the holders of the Potential
Securities pursuant to Section 2 above, all the ▇▇▇▇▇▇ Shares
delivered to the stockholders shall be duly authorized, validly
issued and fully paid and non-assessable, and free and clear of
all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any
restrictions which may be created by operation of state or
federal securities laws).
6.7 Investment. ▇▇▇▇▇▇ will be acquiring ownership of
the outstanding capital stock of the Surviving Corporation for
its own account, for investment purposes only, and not with a
view to the resale or distribution thereof.
6.8 Tax Matters.
(a) Tax Returns and Audits.
(i) Except as and to the extent disclosed in
Schedule 6.8 annexed hereto: (i)on the date hereof and on the
Closing Date, all federal, state and local tax returns and tax
reports required to be filed by ▇▇▇▇▇▇ on or before the date of
this Agreement or the Closing Date, as the case may be, have been
and will have been timely filed with the appropriate governmental
agencies in all jurisdictions in which such returns and reports
are required to be filed; (ii) all federal, state and local
income, franchise, sales, use, property, excise and other taxes
(including interest and penalties and including estimated tax
installments where required to be filed and paid) due from or
with respect to the ▇▇▇▇▇▇ as of the date hereof and as of the
Closing Date have been and will have been fully paid, and
appropriate accruals shall have been made on the ▇▇▇▇▇▇'▇ books
for taxes not yet due and payable; (iii) as of the Closing Date,
all taxes and other assessments and levies which the ▇▇▇▇▇▇ is
required by law to withhold or to collect on or before the
Closing Date will have been duly withheld and collected, and will
have been paid over to the proper governmental authorities to the
extent due and payable on or before the Closing Date; and (iv)
there are no outstanding or pending claims, deficiencies or
assessments for taxes, interest or penalties with respect to any
taxable period of ▇▇▇▇▇▇. At and after the Closing Date, ▇▇▇▇▇▇
will not have any liability for any federal, state or local
income tax with respect to any taxable period ending on or before
the Closing Date, except as and to the extent disclosed in
Schedule 6.8.
(ii) There are no audits deficiencies,
claims, actions, suits, proceedings or investigations pending
with respect to any federal, state or local tax returns of
▇▇▇▇▇▇, and no waivers of statutes of limitations have been given
or requested with respect to any tax years or tax filings of
▇▇▇▇▇▇.
(iii)▇▇▇▇▇▇ has not executed or entered into
(and, prior to the Closing, will not execute or enter into) with
the Internal Revenue Service or any other taxing authority (A)
any agreement or other document extending or having the effect of
extending the period for assessments or collection of any taxes
for which ▇▇▇▇▇▇ would be liable or (B) a closing agreement
pursuant to Section 7121 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any predecessor provision thereof or any
similar provision of foreign, state or local tax law that relates
to the assets or operations of ▇▇▇▇▇▇.
(iv) ▇▇▇▇▇▇ is not a party to any agreement,
contract or arrangement that would result, by reason of the
consummation of any of the transactions contemplated herein,
separately or in the aggregate, in the payment of any "excess
parachute payment" within the meaning of Section 280G of the
Code.
(b) Subchapter S Status. Neither ▇▇▇▇▇▇ nor any
of its shareholders, with respect to ▇▇▇▇▇▇, have applied for
the Code and regulations promulgated thereunder.
6.9 Other Information. None of the information
furnished by ▇▇▇▇▇▇ in this Agreement, the Exhibits hereto, the
Schedules identified herein, or in any certificate or other
document to be executed or delivered pursuant hereto by ▇▇▇▇▇▇ at
or prior to the Closing Date, is, or on the Closing Date will be,
false or misleading or contains, or on the Closing Date will
contain, any misstatement of material fact, or omits, or on the
Closing Date will omit, to state any material fact required to be
stated in order to make the statements therein not misleading in
light of the circumstances under which they were made.
7. THE COMPANY'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Company covenants and agrees that, from the date
hereof until the Closing Date:
7.1 Access to Information. The Company shall permit
▇▇▇▇▇▇ and its counsel, accountants and other representatives, to
have reasonable access during normal business hours to all
properties, books, accounts, records, contracts, documents and
information relating to the Company, and, to the extent the
Company is legally able, to each of the Target Companies. ▇▇▇▇▇▇
and its representatives shall also be permitted to freely consult
with the Company's counsel concerning the business of the
Company.
7.2 Conduct of Business in Normal Course. The Company
shall carry on its business activities in substantially the same
manner as heretofore conducted, and shall not make or institute
any unusual or novel methods of service, sale, purchase, lease,
management, accounting or operation that will vary materially
from those methods used by the Company as of the date hereof,
without in each instance obtaining the prior written consent of
▇▇▇▇▇▇.
7.3 Preservation of Business and Relationships. The
Company shall: (i) without making or incurring any unusual
commitments or expenditures, use its best efforts to preserve its
business organization intact and to preserve its present
relationships with referral sources, clients, customers,
suppliers and others having business relationships with it.
7.4 Maintenance of Insurance; Assets and Records. The
Company shall: (i) continue to carry its existing insurance, to
the extent obtainable upon reasonable terms, (ii) maintain all
its assets and properties in good repair, order and condition,
reasonable wear and tear excepted, and (iii) maintain its books
of account and records in the usual, regular and ordinary manner,
on a basis consistent with past practice, and use its best
efforts to comply with all laws applicable to it and perform all
its material obligations without default.
7.5 Corporate Matters. The Company shall not, without
the prior written consent of ▇▇▇▇▇▇:
(a) amend its Certificate of Incorporation or By--
Laws;
(b) issue any shares of its capital stock;
(c) except as otherwise set forth in Schedule
7.5(c) issue or create any warrants, obligations, subscriptions,
options, convertible securities or other commitments under which
any additional shares of its capital stock might be directly or
indirectly issued;
(d) amend, cancel or modify any Material Contract
or enter into any material new agreement, commitment or
transaction except, in each instance, in the ordinary course of
business;
(e) except as otherwise set forth in Schedule
7.5(e) pay, grant or authorize any salary increases or bonuses
except in the ordinary course of business and consistent with
past practice, or enter into any employment, consulting or
management agreements;
(f) modify in any material respect any material
agreement to which it is a party or by which it may be bound,
except in the ordinary course of business;
(g) make any material change in its management
personnel;
(h) except pursuant to commitments in effect on
the date hereof (to the extent disclosed in this Agreement or in
any Schedule hereto), make any capital expenditure(s) or
commitment(s), whether by means of purchase, lease or otherwise,
or any operating lease commitment(s), in excess of $25,000.00 in
the aggregate;
(i) sell, assign or dispose of any capital
asset(s) with a net book value in excess of $25,000.00 as to any
one item;
(j) materially change its method of collection of
accounts or notes receivable, accelerate or slow its payment of
accounts payable, or prepay any of its obligations or
liabilities, other than prepayments to take advantage of trade
discounts not otherwise inconsistent with or in excess of
historical prepayment practices;
(k) declare, pay, set aside or make any
dividend(s) or other distribution(s) of cash or other property,
redeem any outstanding shares of its capital stock, or pur
purchase any outstanding shares of capital stock
of or equity interest in any other corporation or entity;
(l) incur any liability or indebtedness except,
in each instance, in the ordinary course of business;
(m) subject any of its assets or properties to
any further liens or encumbrances, other than Permitted Liens;
(n) forgive any liability or indebtedness owed to
it by any of the stockholders of the Company or any of their
respective Affiliates; or
(o) agree to do, or take any action in further
ance of, any of the foregoing.
7.6 Other Transactions. The Company shall not enter
into any transaction or make any agreement or commitment, or
permit any event to occur, which would result in any of the
representations, warranties or covenants of the Company contained
in this Agreement not being true and correct at and as of the
time immediately after the occurrence of such transaction or
event.
8. ADDITIONAL AGREEMENTS OF THE PARTIES.
8.1 Confidentiality. Notwithstanding anything to the
contrary contained in this Agreement, and subject only to any
disclosure requirements which may be imposed upon ▇▇▇▇▇▇ under
applicable state or federal securities or antitrust laws, it is
expressly understood and agreed by ▇▇▇▇▇▇, the Company, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ that (a) this Agreement,
the Schedules and Exhibits hereto, and the conversations,
negotiations and transactions relating hereto and/or contemplated
hereby, and (b) all financial information, business records and
other non-public information concerning the Company or ▇▇▇▇▇▇
which any of the parties or their respective representatives has
received or may hereafter receive, shall be maintained in the
strictest confidence by the parties and their respective
representatives, and shall not be disclosed to any person that is
not associated or affiliated with any of the parties and involved
in the transactions contemplated hereby, without the prior
written approval of the Company or ▇▇▇▇▇▇, as applicable. The
parties hereto shall use their best efforts to avoid disclosure
of any of the foregoing or undue disruption of any of the
business operations or personnel of the Company or ▇▇▇▇▇▇. In
the event that the transactions contemplated hereby shall not be
consummated for any reason, each of the parties covenants and
agrees that neither it nor its representatives shall retain any
documents, lists or other writings which they may have received
or obtained in connection herewith or any documents incorporating
any of the information contained in any of the same (all of
which, and all copies thereof in the possession or control of
themselves or their representatives, shall be returned to the
original source of the material at issue). The parties hereto
shall be responsible for any damages sustained by reason of their
respective breaches of this Section 8.1, and this Section 8.1 may
be enforced by injunctive relief.
8.2 Due Diligence Investigation. At all times prior to
the Closing Date, ▇▇▇▇▇▇ and its representatives shall be
permitted to conduct during normal business hours a full and
complete due diligence investigation of the assets, business,
properties, financial condition and prospects of the Company,
and, to the extent legally permitted, of the Target Companies,
the results of which due diligence investigation shall be
satisfactory to ▇▇▇▇▇▇. The Company shall, and shall cause the
principal executive officers, legal and financial
representatives, agents and employees of the Company, and, to the
extent legally permitted, of the Target Companies to, fully
cooperate to enable ▇▇▇▇▇▇ and its representatives to conduct a
full due diligence investigation of the Company, including
interviews with personnel and/or contacts with suppliers or
customers.
8.3 Additional Agreements and Instruments. On or
before the Closing Date, the Company, ▇▇▇▇▇▇ and the Merger
Subsidiary (as appropriate) shall execute, deliver and file the
Certificate of Merger and all exhibits, agreements, certificates,
instruments and other documents, not inconsistent with the
provisions of this Agreement, which, in the opinion of counsel to
▇▇▇▇▇▇, shall reasonably be required to be executed, delivered
and filed in order to consummate the Merger and the other
transactions contemplated by this Agreement.
8.4 Non-Interference. None of the parties shall cause
to occur any act, event or condition which would cause any of
their respective representations and warranties made in this
Agreement to be or become untrue or incorrect in any material
respect as of the Closing Date, or would interfere with,
frustrate or render unreasonably expensive the satisfaction by
the other party or parties of any of the conditions precedent set
forth in Sections 9,10 and 11 below.
8.5 Management of the Surviving Corporation and ▇▇▇▇▇▇
following the Closing Date.
(a) At the Closing, the Company shall deliver to
▇▇▇▇▇▇ a written statement from the Company designating three (3)
individuals to serve as directors of ▇▇▇▇▇▇ subsequent to the
Closing (the "Designated Directors") and identifying those
individuals who shall serve as officers of ▇▇▇▇▇▇ subsequent to
the Closing (the "Designated Officers"). Simultaneously
therewith, ▇▇▇▇▇▇ shall deliver to the Company (i) resignations
of the officers and directors of ▇▇▇▇▇▇ set forth on Exhibit L,
attached hereto, and (ii) a resolution electing as directors of
▇▇▇▇▇▇ the Designated Directors and appointing as officers of
▇▇▇▇▇▇ the Designated Officers. The parties acknowledge and
agree that the board of directors of ▇▇▇▇▇▇ immediately following
the Closing Date shall consist of not more than six (6)
individuals, each with a term that shall expire upon the next
annual meeting of ▇▇▇▇▇▇. Three of such directors shall be the
Designated Directors. Within thirty (30) days following the
Closing, the six (6) ▇▇▇▇▇▇ directors shall meet and elect a
seventh (7th) director. In the event a Designated Director
cannot complete their term, then the remaining Designated
Directors may appoint a successor to finish such term. At the
first annual meeting of the shareholders of ▇▇▇▇▇▇ following the
Closing, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall vote their shares
in favor of the election of the three ▇▇▇▇▇▇ directors that
served as directors of ▇▇▇▇▇▇ immediately prior to the election
of the Designated Directors.
(b) ▇▇▇▇▇▇ shall cause those executive officers
of ▇▇▇▇▇▇ identified and set forth in the attached Exhibit L to
resign from their positions with ▇▇▇▇▇▇ effective upon the
Closing Date. Such resignations and separations shall be on
terms and conditions mutually agreeable to both the Company and
▇▇▇▇▇▇.
9. CONDITIONS PRECEDENT TO ▇▇▇▇▇▇'▇ PERFORMANCE.
The obligations of ▇▇▇▇▇▇ to consummate the
transactions contemplated by this Agreement are further subject
to the satisfaction, at or before the Closing Date, of all the
following conditions, any one or more of which may be waived in
writing by ▇▇▇▇▇▇:
9.1 Accuracy of Representations and Warranties. All
representations and warranties made by the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ in this Agreement, in any Schedule(s) or
Exhibits hereto, and/or in any written statement delivered to
▇▇▇▇▇▇ under this Agreement shall be true and correct in all
material respects, to the best of their knowledge, on and as of
the Closing Date as though such representations and warranties
were made on and as of that date.
9.2 Performance. The Company shall have performed,
satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by them on or before the Closing Date.
9.3 Certification. ▇▇▇▇▇▇ shall have received a
certificate, dated the Closing Date, signed by an officer of the
Company, and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ certifying, in such
detail as ▇▇▇▇▇▇ and its counsel may reasonably request, that the
conditions specified in Sections 9.1 and 9.2 above have been
fulfilled.
9.4 Resolutions. ▇▇▇▇▇▇ shall have received certified
resolutions of the Board of Directors and the stockholders of the
Company, in form reasonably satisfactory to counsel for ▇▇▇▇▇▇,
authorizing the Company's execution, delivery and performance of
this Agreement and the Merger, and all actions to be taken by the
Company hereunder (including resolutions which elect such persons
as officers and directors of the Company).
9.5 Good Standing Certificates. The Company shall
have delivered to ▇▇▇▇▇▇ a certificate or telegram issued by the
Secretary of State of the jurisdiction of incorporation of the
Company, evidencing the good standing of the Company in its
jurisdiction of incorporation as of a date not more than ten (10)
calendar days prior to the Closing Date.
9.6 Absence of Litigation. No action, suit or
proceeding by or before any court or any governmental body or
authority, against the Company, the Target Companies, ▇▇▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇ or pertaining to the transactions
contemplated by this Agreement or their consummation, shall have
been instituted on or before the Closing Date, which action, suit
or proceeding would, if determined adversely, have a material
adverse effect on the business, financial condition, operations
or prospects of the Company, or impair the ability of any of the
stockholders of the Company to deliver in the Merger all of their
common stock of the Company free and clear of all pledges, liens,
claims, charges, options, calls, encumbrances, restrictions and
assessments whatsoever.
9.7. Consents. All necessary disclosures to and
agreements and consents of (a) any parties to any Material
Contracts and/or any licensing authorities which are material to
the Company's business, (including all outstanding indebtedness
and leases) and (b) any governmental authorities or agencies to
the extent required in connection with the transactions
contemplated by this Agreement, shall have been obtained, shall
be in such form as shall be satisfactory to ▇▇▇▇▇▇ and true and
complete copies thereof shall be delivered to ▇▇▇▇▇▇ on or before
the Closing Date.
9.8 Condition of Property. Between the date of this
Agreement and the Closing Date, assets of the Company having an
aggregate fair market value of $25,000.00 or more shall not have
been lost, destroyed or irreparably damaged by fire, flood,
explosion, theft or any other cause, unless covered by insurance.
9.9 No Material Adverse Change. On the Closing Date,
there shall not have occurred any event or condition materially
and adversely affecting the financial condition, results of
operations or business prospects of the Company from those
reflected in the financial statements set forth in Schedule 5.6.
9.10 Satisfactory Due Diligence Investigation.
3.13 Satisfactory Audit and Due DiligenceEckler, in its sole and
absolute discretion, shall be satisfied with the results of its
due diligence investigation. of, without limitation, the Company,
the Target Companies, and the business and financial condition of
the Company and the Target Companies.
9.11 Execution and Delivery of Exhibits. On or before
the Closing Date, the Company shall have executed and delivered
to the Merger Subsidiary the appropriate Certificate of Merger
and the executed Employment Agreement. All Exhibits and Schedules
shall have been completed and delivered to ▇▇▇▇▇▇.
9.12 Proceedings and Instruments Satisfactory. All
proceedings, corporate or other, to be taken in connection with
the transactions contemplated by this Agreement, and all
documents incidental thereto, shall be reasonably satisfactory in
form and substance to ▇▇▇▇▇▇ and its counsel. The Company shall
have submitted to ▇▇▇▇▇▇ or its representatives for examination
the originals or true and correct copies of all records and
documents relating to the business and affairs of the Company
which ▇▇▇▇▇▇ may have requested in connection with said
transactions.
9.13 Consummation of Acquisitions. ▇▇▇▇▇▇ shall be
satisfied, in its reasonable discretion, that the Company shall
have the ability to close upon and consummate all of the
acquisitions identified in Schedule 9.13, attached hereto,
provided, that, the Company may substitute and close one or more
new transactions of substantially equivalent economic value and
content for any acquisition identified on Schedule 9.13. In the
event of such a substitution, ▇▇▇▇▇▇ may seek a supplement to the
fairness opinion to be provided by its investment banker pursuant
to Section 9.14 hereinafter, opining that, taking into
consideration such substitution, the transaction from a financial
point-of-view is still fair to its shareholders. The Company
shall reimburse ▇▇▇▇▇▇ for any reasonable expenses incurred by
▇▇▇▇▇▇ in securing the services of an investment banker to render
the supplement to the fairness opinion.
9.14 Investment Banking Fairness Opinion. ▇▇▇▇▇▇ shall
solicit from its investment bankers and shall have received from
such investment bankers an opinion satisfactory to ▇▇▇▇▇▇ as to
the fairness of the transaction from a financial point-of-view to
its shareholders. The Company shall reimburse ▇▇▇▇▇▇ for any
reasonable expenses incurred by ▇▇▇▇▇▇ in securing the services
of an investment banker to render the fairness opinion.
9.15 ▇▇▇▇▇▇▇ Bank of Central Florida, N.A.'s Consent to
the Merger. ▇▇▇▇▇▇ shall solicit and shall have received the
consent of ▇▇▇▇▇▇▇ Bank of Central Florida, N.A. as to the
consummation of the Merger set forth herein.
9.16 Executive Employment Agreements. The Company
shall have entered into employment agreements satisfactory to
▇▇▇▇▇▇ and the Company with the executives identified on Schedule
9.16.
10. CONDITIONS PRECEDENT TO THE COMPANY'S PERFORMANCE.
The obligations of the Company to consummate the Merger
and the transactions contemplated by this Agreement are further
subject to the satisfaction, at or before the Closing Date, of
all of the following conditions, any one or more of which may be
waived in writing by the Company:
10.1 Accuracy of Representations and Warranties. All
representations and warranties made by ▇▇▇▇▇▇ in this Agreement
and/or in any written statement delivered by ▇▇▇▇▇▇ under this
Agreement shall be true and correct in all material respects on
and as of the Closing Date as though such representations and
warranties were made on and as of that date.
10.2 Performance. ▇▇▇▇▇▇ shall have performed,
satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by ▇▇▇▇▇▇ on or before the Closing Date.
10.3 Certification. The Company shall have received a
certificate, dated the Closing Date, signed by an officer of
▇▇▇▇▇▇ certifying, in such detail as the Company and its counsel
may reasonably request, that the conditions specified in Sections
10.1 and 10.2 above have been fulfilled.
10.4 Resolutions. The Company shall have received
certified resolutions of the Board of Directors of ▇▇▇▇▇▇ and the
Merger Subsidiary and certified resolutions of ▇▇▇▇▇▇ as
shareholder of Merger Subsidiary, in form reasonably satisfactory
to counsel for the Company, authorizing the Merger and ▇▇▇▇▇▇'▇
execution, delivery and performance of this Agreement and all
actions to be taken by ▇▇▇▇▇▇ and the Merger Subsidiary
hereunder.
10.5 Execution and Delivery of Exhibits. The Merger
Subsidiary shall have executed and delivered to the Company the
Certificate of Merger. All Exhibits and Schedules shall have
been completed and delivered to the Company.
10.6 Proceedings and Instruments Satisfactory. All
proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incidental
thereto, shall be reasonably satisfactory in form and substance
to the Company and its counsel.
10.7 Performance by ▇▇▇▇▇ ▇▇▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
shall have executed and delivered to the Company an original
Employment Agreement as set forth hereinabove.
10.8 No Material Adverse Change. On the Closing Date,
there shall not have occurred any event or condition materially
and adversely affecting the financial condition, results of
operations or business prospects of ▇▇▇▇▇▇ from those reflected
in ▇▇▇▇▇▇'▇ most recent Post Effective Amendment No. 2 to
▇▇▇▇▇▇'▇ Registration Statement on Form SB-2, quarterly report
and other current reports filed with the SEC.
10.9 Approval of Employment Agreements. The Company
shall have approved, in writing, on or before the Closing Date,
any employment agreements executed by ▇▇▇▇▇▇ from the date of
execution of the letter of intent (October 28, 1996).
11. CONDITIONS PRECEDENT TO ▇▇▇▇▇ ▇▇▇▇▇▇'▇ PERFORMANCE.
11.1 Delivery of Agreements. The Company shall have
executed and delivered to ▇▇▇▇▇ ▇▇▇▇▇▇ an original Employment
Agreement and ▇▇▇▇▇ ▇▇▇▇▇▇ Option Agreement.
12. CLOSING.
12.1 Place and Date of Closing. Unless this Agreement
shall be terminated pursuant to Section 13 below, the
consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, or such other location as is agreed to between the
parties, at a time mutually agreeable to the parties, or on such
date as may be reasonably required to accommodate a satisfaction
of the conditions precedent to Closing hereunder (the date of the
Closing being referred to in this Agreement as the "Closing
Date").
12.2 Actions at Closing. On the Closing Date,
simultaneous with the Closing, the parties shall file or cause to
be filed Certificate of Merger with the Secretary of State of the
applicable jurisdiction. At the Closing, the parties shall make
all payments and deliveries stated in this Agreement to be made
at the Closing and/or on or prior to the Closing Date.
13. TERMINATION OF AGREEMENT.
13.1 General. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time
prior to the Closing: (a) by ▇▇▇▇▇▇ if it is not satisfied, in
its sole and absolute discretion, with the results of its due
diligence investigation; (b) by the mutual written consent of
▇▇▇▇▇▇, the Company, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇; (cc) by ▇▇▇▇▇▇, or by the Company, if: (i) a material
breach shall exist with respect to the written representations
and warranties made by the other party or parties, as the case
may be, (ii) the other party or parties, as the case may be,
shall take any action prohibited by this Agreement, if such
actions shall or may have a material adverse effect on the
Company or on ▇▇▇▇▇▇, and/or the transactions contemplated
hereby, (iii) the other party or parties, as the case may be,
shall not have furnished, upon reasonable notice therefor, such
certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto
as it or they shall have agreed to furnish, and it is reasonably
unlikely that the other party or parties will be able to furnish
such item(s) prior to the Outside Closing Date specified below,
or (iv) any consent of any third party to the transactions
contemplated hereby (whether or not the necessity of which is
disclosed herein or in any Schedule hereto) is reasonably
necessary to prevent a default under any outstanding material
obligation of any party hereto and such consent is not obtainable
without material cost or penalty (unless the party or parties not
seeking to terminate this Agreement agrees or agree to pay such
cost or penalty); or (d) by ▇▇▇▇▇▇ or by the Company, at any time
on or after _________________December 30, 1996 (the "Outside
Closing Date"), if the transactions contemplated hereby shall not
have been consummated prior thereto, and the party directing
termination shall not then be in breach or default of any
obligations imposed upon such party by this Agreement.
13.2 Effect of Termination. In the event of
termination of this Agreement pursuant to this Section 13, prompt
written notice shall be given by the terminating party to the
other party, and no party to this Agreement shall have any
further liability to the other (i) except as provided in Section
8.1 above or Section 16, below, or (ii) except arising out of a
breach by such party of this Agreement prior to the termination
thereof.
14. INDEMNIFICATION.
14.1 General.
(a) The Company shall defend, indemnify and hold
harmless the Surviving Corporation and ▇▇▇▇▇▇ from, against and
in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, fines and reasonable attorneys'
fees, that the Surviving Corporation and/or ▇▇▇▇▇▇ may incur,
sustain or suffer including without limitation any audit costs
incurred by an Internal Revenue Service audit of the Company
and/or any of the Target Companies which results in a tax
deficiency for the tax year(s) audited ("Losses") as a result of
any breach of, or failure by the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇
▇▇▇▇▇▇ to perform, any of the representations, warranties,
covenants or agreements of the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇
▇▇▇▇▇▇ contained in this Agreement or in any Schedule(s)
furnished by or on behalf of the Company under this Agreement.
(b) The Surviving Corporation and ▇▇▇▇▇▇ shall
jointly and severally defend, indemnify and hold harmless the
stockholders of the Company and the holders of the Potential
Securities (collectively the "Holders") from, against and in
respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees,
that such Holders may incur, sustain or suffer as a result of any
breach of, or failure by ▇▇▇▇▇▇ to perform, any of the
representations, warranties, covenants or agreements of ▇▇▇▇▇▇
contained in this Agreement.
14.2 Limitations on Certain Indemnity.
(a) As used in this Section 14.2, "Losses" shall
mean and refer to, collectively, Losses as defined in Section
14.1(a) above.
(b) The Surviving Corporation and ▇▇▇▇▇▇ shall be
entitled to indemnification by the Company, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇, jointly and severally, for Losses referenced under
Section 14.1(a), and the Company and the Holders shall be
entitled to indemnification by the Surviving Corporation and
▇▇▇▇▇▇, jointly and severally, for losses referenced under
Section 14.1(b), only in respect of claims for which notice of
claim shall have been given on or before the third anniversary of
the Closing Date, or, with respect to Losses relating to a breach
of any warranties under Section 5.8 above, the expiration of the
final statute of limitations for those tax returns covered by the
warranties under Section 5.8 above; provided, however, that no
party shall be entitled to indemnification in the event that the
subject claim for indemnification relates to a third-party claim
and the prospective indemnified party (as the case may be)
delayed giving notice thereof to such an extent as to cause
material prejudice to the defense of such third-party claim.
14.3 Claims for Indemnity. Whenever a claim shall
arise for which any party shall be entitled to indemnification
hereunder, the indemnified party shall notify the indemnifying
party in writing within thirty (30) days of the indemnified
party's first receipt of notice of, or the indemnified party's
obtaining actual knowledge of, such claim, and in any event
within such shorter period as may be necessary for the
indemnifying party or parties to take appropriate action to
resist such claim. Such notice shall specify all facts known to
the indemnified party giving rise to such indemnity rights and
shall estimate (to the extent reasonably possible) the amount of
potential liability arising therefrom. If the indemnifying party
shall be duly notified of such dispute, the parties shall attempt
to settle and compromise the same or may agree to submit the same
to American Arbitration Association arbitration in Orlando,
Florida or, if unable or unwilling to do any of the foregoing,
such dispute shall be settled by appropriate litigation, and any
rights of indemnification established by reason of such
settlement, compromise, arbitration or litigation shall promptly
thereafter be satisfied by those indemnifying parties obligated
to make indemnification hereunder in such amount as shall be
necessary to satisfy all applicable Losses determined in
accordance with such settlement and compromise, or by final
nonappealable order or judgment of the applicable judicial or
arbitration panel. Losses which take the form of litigation or
arbitration costs and expenses (including reasonable attorneys'
fees) which are not incurred in connection with an action or
demand by a third party against the indemnified party or any of
its Affiliates, shall not be paid on an ongoing basis as
incurred, but rather all such costs and expenses incurred by the
prevailing party in any such action shall be paid by the other
party thereto.
14.4 Right to Defend. If the facts giving rise to any
claim for indemnification shall involve any actual or threatened
action or demand by any third party against the indemnified party
or any of its Affiliates, the indemnifying party or parties shall
be entitled (without prejudice to the indemnified party's right
to participate at its own expense through counsel of its own
choosing), at their expense and through a single counsel of their
own choosing, to defend or prosecute such claim in the name of
the indemnifying party or parties, or any of them, or if
necessary, in the name of the indemnified party. All Losses
which take the form of claims for litigation costs and expenses
(including reasonable attorneys' fees) shall be paid to the
indemnified party in cash on an ongoing basis as incurred. In any
event, the indemnified party shall give the indemnifying party
advance written notice of any proposed compromise or settlement
of any such claim. If the remedy sought in any such action or
demand is solely money damages, the indemnifying party shall have
thirty (30) days after receipt of such notice of settlement to
object to the proposed compromise or settlement, and if it does
so object, the indemnifying party shall be required to undertake,
conduct and control, through counsel of its own choosing and at
its sole expense, the settlement or defense thereof, and the
indemnified party shall cooperate with the indemnifying party in
connection therewith.
15. POST-CLOSING EVENTS.
In addition to the post-Closing covenants set forth in
Section 4 above, the parties hereby further agree that, from and
after the Closing:
15.1 Accounting Cooperation. The Company shall cause
the accountants heretofore retained by the Company to cooperate
with ▇▇▇▇▇▇'▇ accountants in connection with ongoing audit work
relating to periods prior to the Closing Date, as required by
applicable federal and state securities laws, and other
reasonable requirements. Such cooperation shall include, without
limitation, providing such assurances, comfort letters and access
to work papers as may reasonably be requested by ▇▇▇▇▇▇ and its
accountants.
16. COSTS.
16.1 Finder's or Broker's Fees. ▇▇▇▇▇▇ (on the one
hand) and the Company (on the other hand) represents and warrants
that neither they nor any of their respective Affiliates have
dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and no broker or
other person is entitled to any commission or finder's fee in
connection with any of these transactions. The Company shall
reimburse ▇▇▇▇▇▇ for any reasonable expenses incurred by ▇▇▇▇▇▇
in securing the services of an investment banker to render a
fairness opinion.
16.2 Expenses. Each party to this Agreement shall be
responsible for its own costs and fees incurred in connection
with the negotiation and preparation of this Agreement and
exhibits referenced herein, and the consummation of the
transactions contemplated hereby. Except as otherwise provided
herein, ▇▇▇▇▇▇, shall pay all closing expenses; provided, that
all professional fees and costs for the negotiation and review of
this Agreement and for preparation of closing schedules and
financial statements, that are incurred by and on behalf of the
Company shall be borne by the Company.
17. PARTIES.
17.1 Parties in Interest. Nothing in this Agreement,
whether expressed or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons
other than the parties to it and their respective heirs,
executors, administrators, personal representatives, successors
and permitted assigns, nor is anything in this Agreement intended
to relieve or discharge the obligations or liability of any third
persons to any party to this Agreement, nor shall any provision
give any third persons any right of subrogation or action over or
against any party to this Agreement.
17.2 Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing and
shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be
given, or on the day after the date sent by recognized overnight
courier service with all charges prepaid, or (ii) three (3) days
after being deposited in the United States mail if sent by first
class mail, registered or certified, postage prepaid, and
properly addressed as follows:
(a) If to ▇▇▇▇▇▇ the Merger Subsidiary or
▇▇▇▇▇ ▇▇▇▇▇▇:
▇▇▇▇▇▇ Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇, Vice President Finance
with a copy to:
Smith, MacKinnon, Greeley,
Bowdoin & ▇▇▇▇▇▇▇, P.A.
Citrus Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) If to the Company:
Smart Choice Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ Traurig
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address as either party shall have specified by
notice in writing given to the other party.
18. MISCELLANEOUS.
18.1 Amendments and Modifications. No amendment or
modification of this Agreement or any Exhibit or Schedule hereto
shall be valid unless made in writing and signed by the party to
be charged therewith.
18.2 Non-Assignability; Binding Effect. Other than
the assignment of rights by ▇▇▇▇▇▇ to the Merger Subsidiary as
and to the extent contemplated by Section 1 above, neither this
Agreement, nor any of the rights or obligations of the parties
hereunder, shall be assignable by any party hereto without the
prior written consent of all other parties hereto. Otherwise,
this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors
and permitted assigns.
18.3 Severability. In the event that any provision or
any portion of any provision of this Agreement shall be held
invalid, illegal or unenforceable under applicable law, the
remainder of this Agreement shall remain valid and enforceable,
unless such invalidity, illegality or unenforceability
substantially diminishes the rights and obligations, taken as a
whole, of any party hereunder.
18.4 Attorneys' Fees. In the event of suit to enforce
the terms of this Agreement, the prevailing party shall be
entitled to collect from the non-prevailing party reasonable
attorneys' fees, costs and expenses (including those incurred
through all trial, appellate and post-judgment collection
proceedings).
18.5 Governing Law; Jurisdiction. Except to the extent
that Applicable Law shall govern with respect to the Merger, this
Agreement shall be construed and interpreted and the rights
granted herein governed in accordance with the laws of the State
of Delaware applicable to contracts made and to be performed
wholly within such State.
18.6 Effect of Headings. The Section headings used in
this Agreement and the titles of the Schedules hereto are
included for purposes of convenience only, and shall not affect
the construction or interpretation of any of the provisions
hereof or of the information set forth in such Schedules.
18.7 Entire Agreement; Waivers. This Agreement
constitutes the entire agreement between the parties pertaining
to the subject matter hereof, and supersedes all prior agreements
or understandings as to such subject matter. No party hereto has
made any representation or warranty or given any covenant to the
other except as set forth in this Agreement and the Schedules and
Exhibits hereto. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any
other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
18.8 Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
[Balance of page intentionally left blank]
IN WITNESS WHEREOF, the parties have executed this Agreement
on and as of the date first set forth above.
▇▇▇▇▇▇ INDUSTRIES, INC.
By:___________________________
Name:_________________________
Its: President
▇▇▇▇▇▇ ACQUISITION CORPORATION
By:_____________________________
Name:___________________________
Its: President
SMART CHOICE HOLDINGS, INC.
By:___________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Executive Vice President
▇▇▇▇▇ ▇▇▇▇▇▇:
______________________________
▇▇▇▇▇ ▇▇▇▇▇▇, Individually
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Individually
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
______________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Individually