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Exhibit 2.3
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of May 19, 1995 (this "Agreement"),
by and among The ▇▇▇▇▇▇ Company, a South Dakota corporation ("▇▇▇▇▇▇"); Hanover
Direct, Inc., a Delaware corporation (the "Buyer"); ▇▇▇▇▇ ▇▇▇▇▇▇, President and
a majority shareholder of ▇▇▇▇▇▇, individually and as custodian for other
individuals as set forth on the signatory pages hereof; ▇▇▇▇▇▇ ▇▇▇▇▇▇, also a
shareholder of ▇▇▇▇▇▇ (together with ▇▇▇▇▇ ▇▇▇▇▇▇, both in his individual and
custodial capacities, the "▇▇▇▇▇ ▇▇▇▇▇▇ Group"); ▇▇▇▇▇▇ Holdings, Inc., a
Delaware corporation (the "Company") formed by ▇▇▇▇▇▇; and certain other
individuals who are either signatories hereto or whose custodian is executing on
their behalf (the "Former Stockholders," and together with the members of the
▇▇▇▇▇ ▇▇▇▇▇▇ Group, the "Individuals").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇ engages in the direct marketing of golf equipment,
supplies, apparel and related goods and services through its ▇▇▇▇▇▇'▇ catalog,
and operates four retail stores offering the same or similar goods and services
(the "Stores");
WHEREAS, pursuant to that certain stock redemption agreement dated
April 29, 1995 to which the Former Stockholders and ▇▇▇▇▇▇ are parties (the
"Stock Redemption Agreement") ▇▇▇▇▇▇ has redeemed all the shares of the capital
stock of ▇▇▇▇▇▇ owned by the Former Stockholders (such transactions being
hereinafter referred to collectively as the "Redemption"), in exchange for
certain promissory notes of ▇▇▇▇▇▇ which are currently outstanding (the
"Redemption Notes");
WHEREAS, the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group are the owners, in the
aggregate, of all the outstanding shares of the capital stock of ▇▇▇▇▇▇;
WHEREAS, the Company desires to purchase from the members of the ▇▇▇▇▇
▇▇▇▇▇▇ Group all the outstanding shares of capital stock of ▇▇▇▇▇▇ and in
exchange therefor to issue and sell to the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group, in
the aggregate, 32,500 shares of the Common Stock of the Company, $1.00 par value
(the "Common Stock"), which will represent, in the aggregate, 32.5% of the
issued and outstanding shares of the Common Stock (collectively, the "▇▇▇▇▇
▇▇▇▇▇▇ Group Shares"), all upon the terms and subject to the conditions set
forth in that certain stock purchase agreement to be entered into between the
Company and the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group (the "▇▇▇▇▇ ▇▇▇▇▇▇ Group
Acquisition");
WHEREAS, the Company desires to issue and sell to the Buyer, and the
Buyer desires to acquire from the Company, simultaneously with the ▇▇▇▇▇ ▇▇▇▇▇▇
Group Acquisition, 67,500 shares of the Common Stock, which will represent 67.5%
of the issued and outstanding shares of the Common Stock (collectively, the
"Buyer Shares"), for an aggregate cash purchase price of $1,800,000, all upon
the terms and subject to the conditions set forth in this Agreement (the "Buyer
Acquisition");
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WHEREAS, upon the satisfaction of certain financial goals during the
1995 fiscal year of the Company and ▇▇▇▇▇▇, the Buyer has agreed to make an
additional capital contribution to the Company in an amount determined as set
forth in Section 1.04 below;
WHEREAS, upon consummation of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Acquisition and
the Buyer Acquisition, the Company, ▇▇▇▇▇▇ and the Buyer or a wholly owned
subsidiary of the Buyer will enter into loan agreements substantially in the
forms set forth in Exhibits A and B, with such additions and changes as shall be
agreed upon by the parties (collectively, the "Loan Agreements"), pursuant to
which the Buyer will lend ▇▇▇▇▇▇ the sums of (a) $2,200,000 (the "Subordinated
Term Loan"), and (b) a further $400,000 to be secured by a second mortgage (the
"Second Mortgage") on ▇▇▇▇▇▇'▇ office and warehouse facility in Sioux Falls,
South Dakota (the "Second Mortgage Loan," and collectively with the Subordinated
Term Loan, the "Loans"), all pursuant to the terms and conditions thereof;
WHEREAS, upon the consummation of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Acquisition
and the Buyer Acquisition and the provision of the Loans pursuant to the Loan
Agreements, ▇▇▇▇▇▇ will repay $1,500,000 of its existing indebtedness to First
National Bank of Omaha, N.A. ("FNBO") under the Revolving Loan Agreement dated
March 31, 1993 between ▇▇▇▇▇▇ and FNBO, as amended (the "Revolving Loan
Agreement"), in consideration of the extension of the Loan Termination Date
under the Revolving Loan Agreement to a date no earlier than May 31, 1997, and
will repay $400,000 of its existing indebtedness to Valley Bank ("Valley") under
the Mortgage dated March 15, 1993 between ▇▇▇▇▇▇ and Valley (the "Valley
Mortgage"), in consideration of Valley's release of certain personal guarantees
of ▇▇▇▇▇ ▇▇▇▇▇▇ and of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, a Former Stockholder, outstanding in
favor of Valley and, if required, Valley's consent to the Second Mortgage;
WHEREAS, upon the consummation of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Acquisition
and the Buyer Acquisition and the provision of the Loans pursuant to the Loan
Agreements, ▇▇▇▇▇▇ will also repay to certain Individuals notes payable in the
aggregate amount of $767.878.32 outstanding at December 31, 1994 plus accrued
interest through the Closing Date, and will pay to the respective members of the
▇▇▇▇▇ ▇▇▇▇▇▇ Group outstanding cash dividends, declared but as yet unpaid, in
the aggregate amount of $600,000;
WHEREAS, upon the consummation of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Acquisition
and the Buyer Acquisition,
(a) the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group and the Buyer will
become parties to a stockholders' agreement (the "Stockholders'
Agreement"), and ▇▇▇▇▇ ▇▇▇▇▇▇ and the Company will become parties to a
license agreement relating to new Stores to be developed by ▇▇▇▇▇
▇▇▇▇▇▇ (the "License Agreement");
(b) the Company and the Buyer will enter into a cost sharing
and reimbursement agreement (the "Reimbursement Agreement"), respecting
cost allocations, cost reimbursements and related issues; and
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(c) the Company and each of the Former Stockholders other than
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ will enter into a
warrant agreement respecting those parties' rights to acquire certain
shares of the Company's Common Stock (the "Warrant Agreements");
(d) the Buyer and each of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ will
enter into an indemnification agreement respecting certain potential
liabilities (the "Indemnification Agreements");
such agreements to be substantially in the respective forms set forth in
Exhibits C through G hereto, with such additions and changes as shall be agreed
upon by the respective parties (together with the Loan Agreements, the "Other
Agreements"; the transactions contemplated by the Other Agreements, together
with the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Acquisition and the Buyer Acquisition, being
referred to as the "Transactions");
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises and mutual promises
herein contained, the parties agree as follows:
ARTICLE I
TERMS OF THE BUYER ACQUISITION
SECTION 1.01. SALE AND PURCHASE OF THE BUYER SHARES. On
the Closing Date (as defined in Section 1.05), and simultaneously with the ▇▇▇▇▇
▇▇▇▇▇▇ Group Acquisition, the Company shall issue, sell, transfer and deliver to
the Buyer the Buyer Shares by delivering to the Buyer, against payment therefor
as provided in Section 1.02, certificates for the Buyer Shares together with
funds sufficient for the payment of all transfer taxes, if any.
SECTION 1.02. PURCHASE PRICE. The Buyer Shares shall be sold by
the Company and shall be purchased by the Buyer for an aggregate purchase price
of $1,800,000 (the "Purchase Price"). The Purchase Price shall be paid to the
Company against delivery of the certificates representing the Buyer Shares as
provided in Section 1.01, on the Closing Date, by wire transfer of immediately
available funds to an account designated by the Company at least two business
days before the Closing Date.
SECTION 1.03. CERTAIN EXPENSES. At the Closing (as defined in
Section 1.05), the Company may pay up to 75% of the balance of the fee payable
to Mesirow Financial, Inc. ("Mesirow") pursuant to a certain investment banking
agreement among ▇▇▇▇▇▇, the Individuals and Mesirow, but not more than $56,250.
Except as otherwise set forth below, neither ▇▇▇▇▇▇ nor the Company, however,
shall pay or be liable for or be required to pay any of the following
liabilities, fees or expenses related to the Transactions, all of which shall be
borne and paid for by the Individuals:
(a) fees and expenses, if any, of Mesirow in excess of such
amount, or of any person or entity other than Mesirow retained by the
Company, ▇▇▇▇▇▇
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and/or any Individual for financial services or services as a finder
rendered to any such party in connection with the Transactions;
(b) professional fees of counsel and any accountant or auditor
for the Company, ▇▇▇▇▇▇ or any of the Individuals for services rendered
to any of such parties, or out-of-pocket disbursements and other
expenses of any of such parties or professionals, any of their counsel
or accountants, incurred in connection with the Transactions, including
the expenses of the Company or ▇▇▇▇▇▇ in connection with the
preparation of the Balance Sheet; provided, that the Company shall be
responsible for 80% of the professional fees payable to Lynn, Jackson,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. and to Coopers & ▇▇▇▇▇▇▇, L.L.P. (the "Auditors")
related to the Transactions and the Individuals shall pay the remaining
20% of such fees, such fees being estimated by the parties not to
exceed $85,000 in the aggregate;
(c) documentary stamp taxes or other similar charges, taxes or
expenses incurred by the Company in connection with the transfer of the
Buyer Shares to the Buyer;
(d) any income, capital gains or other taxes incurred by the
Company, ▇▇▇▇▇▇, any Individual, or any other person or entity as a
result of the Redemption or the Transactions; and
(e) any taxes of the Company or ▇▇▇▇▇▇ not reflected in the
Balance Sheet, other than taxes incurred in the ordinary course of
business since the date of the Balance Sheet.
SECTION 1.04. ADDITIONAL CAPITAL CONTRIBUTION. Provided
certain financial targets are met during the 1995 fiscal year of the Company and
▇▇▇▇▇▇, as set forth below, the Buyer agrees to make an additional capital
contribution (the "Additional Capital Contribution"), the amount (if any) to be
determined as follows:
(a) If 1995 EBIT (as defined in Section 1.04(c) below) shall be
at least equal to $1,200,000 but less than $1,500,000, the Additional
Capital Contribution shall be $700,000;
(b) If 1995 EBIT shall be at least equal to $1,500,000 but less
than $1,800,000, the Additional Capital Contribution shall be
$1,400,000; and
(c) If 1995 EBIT shall equal or exceed $1,800,000, the
Additional Capital Contribution shall be $2,200,000.
(d) For purposes of this Agreement, "1995 EBIT" shall mean the
pro forma earnings before interest and income taxes of the Company and
its subsidiaries for the twelve months ending on or about December 31,
1995, all in accordance with generally accepted accounting principles
consistently applied throughout the periods covered ("GAAP"), but
adjusted to exclude (i) any decrease in expenses for such period
(compared with ▇▇▇▇▇▇'▇ projected 1995 Business Plan, a copy of which
is attached hereto as Exhibit
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H (the "Business Plan")) resulting from the activities of the Buyer and
its subsidiaries during such period on behalf of the Company and its
subsidiaries, (ii) any expenses, profits or losses incurred by the
Company or its subsidiaries in connection with the proposed opening in
Fall 1995 of a new ▇▇▇▇▇▇'▇ retail store and (iii) subject to the
Buyer's reasonable review and approval, any costs incurred by the
Company or ▇▇▇▇▇▇ in connection with the Transactions and not payable
by the Individuals pursuant to Section 1.03 above.
(e) The Additional Capital Contribution, if any, shall be paid
on or before April 30, 1996 (the "Payment Date"). At the Buyer's
option, payment shall be either in cash or as an offset against any
amount owed by ▇▇▇▇▇▇ to the Buyer or any subsidiary of the Buyer and
outstanding on the Payment Date. The parties agree that the making of
the Additional Capital Contribution, if any, by the Buyer shall not
change the relative share ownership of the Buyer and the members of the
▇▇▇▇▇ ▇▇▇▇▇▇ Group.
SECTION 1.05. THE CLOSING. The closing of the Transactions (the
"Closing") shall be held at the offices of Lynn, Jackson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ or at such other place or
places as the parties may agree upon, at 10:00 A.M., local time, on May 19,
1995, or such other time and date as may be mutually approved by the parties in
writing, but not later than May 31, 1995 (the "Closing Date"). At the Closing,
(a) the appropriate parties will execute and deliver the Other
Agreements, and will deliver the instruments and documents required
hereby and thereby;
(b) the Company will purchase from the members of the ▇▇▇▇▇
▇▇▇▇▇▇ Group all the outstanding shares of capital stock of ▇▇▇▇▇▇ and
in exchange therefor will issue and sell the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Shares
to the respective members of such Group;
(c) the Buyer will purchase the Buyer Shares pursuant to this
Agreement and make or cause a subsidiary to make the Loans pursuant to
the Loan Agreements;
(d) ▇▇▇▇▇▇ will make a payment of $1,500,000 to FNBO, in
reduction of principal and accrued interest as agreed upon between
▇▇▇▇▇▇ and FNBO, in consideration of which payment FNBO will execute
and deliver an agreement extending the Loan Termination Date applicable
under the Revolving Loan Agreement to a date not earlier than May 31,
1997 (the "FNBO Extension");
(e) ▇▇▇▇▇▇ will make a payment of $400,000 to Valley, in
reduction of principal and accrued interest on the Valley Mortgage as
agreed upon between ▇▇▇▇▇▇ and Valley, in consideration of which
payment Valley will execute and deliver a release and discharge of each
of the outstanding personal guarantees of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ in favor of Valley (the "Valley Releases"), and ▇▇▇▇▇▇ will
execute and deliver the Second Mortgage to Buyer or its subsidiary;
(f) ▇▇▇▇▇▇ will repay to certain Individuals notes payable
outstanding at December 31, 1994 in the aggregate amount of $767,878.32
plus accrued interest through the Closing Date, as set forth in
Schedule 1.05;
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(g) ▇▇▇▇▇▇ will pay to the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group
outstanding cash dividends in the aggregate amount of $600,000 declared
on April 28, 1995, as set forth in Schedule 1.05; and
(h) ▇▇▇▇▇▇ will pay to the Former Stockholders the amount of
their Redemption Notes outstanding pursuant to the Redemption
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY, ▇▇▇▇▇▇ AND THE INDIVIDUALS
The Company, ▇▇▇▇▇▇, the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group and
the Former Stockholders represent and warrant, jointly and severally (but ▇▇▇▇▇▇
▇▇▇▇▇▇ and the Former Stockholders only to the best of their knowledge), that:
SECTION 2.01. THE COMPANY AND ▇▇▇▇▇▇--ORGANIZATION AND
AUTHORITY. The Company and ▇▇▇▇▇▇ are corporations duly organized and validly
existing and in good standing under the laws of the States of Delaware and South
Dakota, respectively. Set forth in Schedule 2.01 is a list of jurisdictions in
which each of the Company and ▇▇▇▇▇▇ is qualified to do business. Except as set
forth in Schedule 2.01, each of the Company and ▇▇▇▇▇▇ is duly qualified and in
good standing in each jurisdiction in which (i) the nature of the business
conducted by it or the character or location of the properties owned or leased
by it makes such qualification necessary and (ii) failure so to qualify would,
if not remedied, materially impair title to its properties or its rights to
enforce contracts against others or expose it to substantial liability in such
jurisdictions. Each of the Company and ▇▇▇▇▇▇ has all necessary corporate power
and authority to own all of its properties and assets and to carry on its
businesses as now conducted.
SECTION 2.02. COMPANY AND ▇▇▇▇▇▇ CAPITALIZATION. The Company
has an authorized capital of 200,000 shares of Common Stock, $1.00 par value, of
which no shares are issued and outstanding, and no shares are held in the
treasury of the Company. ▇▇▇▇▇▇ has an authorized capital of 500,000 shares of
capital stock, $1.00 par value, of which 14,569 shares are issued and
outstanding, all of which are owned by the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group,
and 30,248 shares are held in the treasury of ▇▇▇▇▇▇, in consequence of the
Redemption, it being ▇▇▇▇▇▇'▇ intent that such treasury shares will be cancelled
on or about the Closing Date. Upon issuance and payment therefor in accordance
with this Agreement, each of the Buyer Shares and the ▇▇▇▇▇ ▇▇▇▇▇▇ Group Shares
will be duly authorized and validly issued, fully paid and non-assessable and
issued by the Company in compliance with all applicable Federal and state
securities laws, rules and regulations. Except for the warrants to be issued
pursuant to the Warrant Agreements, there are no outstanding options, warrants,
convertible securities or other rights to subscribe for or purchase any
securities of the Company or ▇▇▇▇▇▇.
SECTION 2.03. SUBSIDIARIES. There are no corporations with
respect to which the Company beneficially owns, directly or indirectly, in
excess of 50% of the outstanding stock or other equity interests, the holders of
which are entitled to vote for election of a majority of the board of directors
or other governing body (hereinafter such an entity being sometimes referred to
as a "Subsidiary"). On the Closing Date, upon consummation of the ▇▇▇▇▇ ▇▇▇▇▇▇
Group
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Acquisition, ▇▇▇▇▇▇ will become the Company's sole Subsidiary. Set forth in
Schedule 2.03 is a list (including the capitalization thereof) of each
partnership and joint venture agreement or arrangement (the "Joint Ventures") to
which the Company or ▇▇▇▇▇▇ is a party. Also set forth in Schedule 2.03 is a
list of the corporations or entities with respect to which the Company
beneficially owns, directly or indirectly, in excess of 5% of the outstanding
stock or other equity interests, the holders of which are entitled to vote for
election of a majority of the board of directors or other governing body.
SECTION 2.04. FINANCIAL STATEMENTS; NO COMPANY ACTIVITIES OR
OPERATIONS.
(a) ▇▇▇▇▇▇ has furnished the Buyer with copies, certified by
the chief financial officer of ▇▇▇▇▇▇, of the audited financial
statements of ▇▇▇▇▇▇ for each of the two fiscal years ended December
31, 1993 and 1992, including in each case a balance sheet, the related
statements of income and of changes in financial position for the
period then ended, the accompanying notes and the reports thereon of
the Auditors, all such reports being unqualified. ▇▇▇▇▇▇ has also
furnished the Buyer with copies, certified by the chief financial
officer of ▇▇▇▇▇▇, of the unaudited financial statements of ▇▇▇▇▇▇ for
the fiscal year ended December 31, 1994, including a balance sheet, the
related statements of income and of changes in financial position for
the period then ended. The unaudited balance sheet of ▇▇▇▇▇▇ as of
December 31, 1994, a copy of which is attached hereto as Exhibit I, is
herein referred to as the "Balance Sheet." All such financial
statements (i) are correct and complete and have been prepared in
accordance with the books and records of ▇▇▇▇▇▇, (ii) have been
prepared in accordance with GAAP, (iii) reflect and provide adequate
reserves in respect of all known liabilities of ▇▇▇▇▇▇ in accordance
with GAAP, including all known contingent liabilities as of their
respective dates and (iv) present fairly the financial condition of
▇▇▇▇▇▇ at such dates and the results of its operations for the periods
then ended.
(b) The Company was formed on May 12, 1995 and except as
referred to in, or contemplated by, this Agreement, the Company has not
engaged in any activities or incurred any liabilities.
SECTION 2.05. REAL PROPERTY. (a) Except as identified and
described in Schedule 2.05, ▇▇▇▇▇▇ does not own, have legal or equitable title
in, or have a leasehold interest in any real property.
(b) ▇▇▇▇▇▇ has good and marketable title in fee simple to the
land described as owned by ▇▇▇▇▇▇ in Part A of Schedule 2.05 (the "Owned
Realty") and to all plants, buildings and improvements thereon, free and clear
of any mortgage, lien, claim, charge, exception, imperfection of title,
easement, or encumbrance (collectively "Encumbrances"), except for those
Encumbrances (i) which are described in Part A of Schedule 2.05, (ii) which
relate to imperfections of title or easements with respect to the properties
identified in Part B of Schedule 2.05, or (iii) which, individually or in the
aggregate, are not material in character, amount or extent and do not materially
adversely affect the title to, or the present use of, the property subject
thereto or affected thereby or otherwise materially impair the business
operations of
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▇▇▇▇▇▇. True and complete copies of (i) all mortgages, pledge agreements and
similar documents and agreements relating to the Owned Realty and all loan
agreements and other instruments of indebtedness secured thereby or relating
thereto (collectively, the "Mortgages") and (ii) all deeds, title insurance
policies and surveys relating to ▇▇▇▇▇▇'▇ ownership of such Owned Realty, as the
same may exist, have been delivered to the Buyer.
(c) ▇▇▇▇▇▇ has a valid leasehold interest in the real property
described as leased by ▇▇▇▇▇▇ in Part C of Schedule 2.05 (the "Leased Realty").
True and complete copies of all leases, agreements and instruments (the
"Leases") respecting the Leased Realty have been delivered to the Buyer.
(d) With respect to the Leases and Mortgages referred to in
Schedule 2.05, no default or event of default on the part of ▇▇▇▇▇▇ as lessee or
mortgagor or, to the knowledge of the Individuals or any officer of ▇▇▇▇▇▇, no
default or event of default on the part of the lessor or mortgagee, under the
provisions of any of said Leases or Mortgages, and no event which with the
giving of notice or passage of time, or both, would constitute such default or
event of default on the part of ▇▇▇▇▇▇ or, to the knowledge of any Individual or
any officer of ▇▇▇▇▇▇, on the part of any such lessor or mortgagee, has occurred
and is continuing unremedied or unwaived.
(e) The buildings and improvements owned or leased by ▇▇▇▇▇▇,
and the operation or maintenance thereof as now operated and maintained, do not
(i) contravene any zoning or building law or ordinance or administrative
regulation or (ii) violate any restrictive covenant or any provision of
Federal, state or local law, the effect of which materially interferes with or
prevents the continued use of such properties for the purposes for which they
are now being used, or would materially affect the value thereof. All of the
plants, buildings and structures owned or leased by ▇▇▇▇▇▇ are in good operating
condition and in a state of reasonable maintenance and repair to the extent
necessary for the efficient operation of the business of ▇▇▇▇▇▇.
(f) Except as set forth in Schedule 2.05 there exists no
pending or, to the knowledge of the Individuals or any officer of ▇▇▇▇▇▇,
threatened condemnation, eminent domain or similar proceeding with respect to,
or which could affect, any Owned Realty, Leased Realty or buildings or
improvements thereon by the Company or ▇▇▇▇▇▇.
SECTION 2.06. PERSONAL PROPERTY; ACCOUNTS RECEIVABLE.
(a) Except as set forth in Schedule 2.06, ▇▇▇▇▇▇ has good and
marketable title to all personal property reflected in the Balance Sheet and all
personal property acquired by ▇▇▇▇▇▇ since the date of the Balance Sheet (except
such personal property as has been disposed of in the ordinary course of the
business of ▇▇▇▇▇▇), free and clear of any Encumbrance, except for those, if
any, which in the aggregate are not material and which do not materially affect
the continued use of such personal property or the continued operation of the
business of ▇▇▇▇▇▇ as now conducted.
(b) Except for items disposed of in the ordinary course of
business since the date of the Balance Sheet, all machinery, tools, equipment
and other tangible assets (i) reflected
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in the Balance Sheet (other than inventories), (ii) leased by ▇▇▇▇▇▇ or (iii)
acquired by ▇▇▇▇▇▇ since the date of the Balance Sheet, currently are used,
useable by or useful to ▇▇▇▇▇▇ in the ordinary course of its business and in the
manufacture of its products, and are in good operating condition and in a state
of reasonable maintenance and repair.
(c) The inventories reflected in the Balance Sheet were on
the date thereof in good condition; such inventories, and any inventories
acquired by ▇▇▇▇▇▇ after the date of the Balance Sheet to the extent not sold or
otherwise disposed of in the ordinary course of business, are in good condition,
are used, useable by or useful to ▇▇▇▇▇▇ in the ordinary course of its business
and in the manufacture of its products, and, except as set forth in Schedule
2.06, are not in excess of reasonable requirements for the next six months.
Except as set forth in such Schedule, no material item of inventory reflected in
the Balance Sheet was valued in excess of the lower of cost (on a first-in,
first-out basis) or market value. The finished goods produced by ▇▇▇▇▇▇ conform
to customary trade standards for marketable goods.
(d) Except as indicated in the Balance Sheet or in Schedule
2.06, the accounts receivable reflected on the Balance Sheet, or acquired by
▇▇▇▇▇▇ after the date of the Balance Sheet, have been collected or are (or will
be) collectible within 120 days following the Closing Date in amounts not less
than the aggregate amount recorded on the Balance Sheet, in the case of
receivables reflected in the Balance Sheet, or not less than the aggregate
amount recorded on the books of ▇▇▇▇▇▇, in the case of receivables acquired
after the date of the Balance Sheet. Any payment on the accounts receivable made
by any obligor thereon shall be applied first to the accounts receivable of such
obligor outstanding for the longest period of time, unless such obligor shall
have directed that the payment be applied to a specific receivable.
SECTION 2.07. PERSONNEL; ETC. (a) Set forth in Schedule 2.07 is
a correct and complete list of:
(i) all contracts or agreements with directors, officers or
employees, or consulting agreements, to which ▇▇▇▇▇▇ is a party or is
subject, provided that no such contracts or agreements need be listed
in Schedule 2.07 if all such contracts and agreements, in the
aggregate, involve a sum not in excess of $2,000; and provided further,
that oral agreements entered into in the ordinary course of ▇▇▇▇▇▇'▇
business with employees respecting their employment by ▇▇▇▇▇▇ on an
at-will basis at an annual salary of less than $30,000 need not be
listed;
(ii) all group insurance programs in effect for employees of
▇▇▇▇▇▇;
(iii) the officers of ▇▇▇▇▇▇ specifying their respective
office;
(iv) the directors of ▇▇▇▇▇▇;
(v) the name of each bank with which the Company or ▇▇▇▇▇▇
has an account or safe deposit box, the identifying numbers or symbols
thereof and the name of each person authorized to draw thereon or to
have access thereto; and
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(vi) the name of each person, if any, holding tax or other
powers of attorney from the Company or ▇▇▇▇▇▇ and a summary statement
of the terms thereof.
(b) ▇▇▇▇▇▇ is not in default under any agreement or
contract listed in Schedule 2.07, and all such agreements and contracts are
legally valid and binding on ▇▇▇▇▇▇ and are in full force and effect.
(c) A list of (i) all employees and consultants of ▇▇▇▇▇▇,
including the title or job classification of each such person, and (ii) the
names, positions and current salary rates of the 25 highest-paid employees of
▇▇▇▇▇▇ has been provided to the Buyer.
SECTION 2.08. ERISA.
(a) Set forth in Schedule 2.08 is a correct and complete
list of each employee benefit plan within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended and the rules and
regulations issued thereunder (collectively "ERISA") and other profit-sharing,
deferred compensation, bonus, stock option, stock purchase and employee benefit
plans or arrangements maintained or contributed to by or on behalf of ▇▇▇▇▇▇
with respect to employees of ▇▇▇▇▇▇ at any time on or after September 2, 1974,
or to which ▇▇▇▇▇▇ contributes or is required to contribute for its employees
(collectively, the "Plans"). Each Plan (a "Tax-Qualified Plan") intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") is identified as a Tax-Qualified Plan in such Schedule 2.08 and is
so qualified.
(b) ▇▇▇▇▇▇ has heretofore delivered to the Buyer true and
correct copies of the following:
(i) each Plan listed in Schedule 2.08 and all amendments
thereto to the date hereof;
(ii) each trust agreement and annuity contract (or any other
funding instruments) pertaining to any Plan, including all amendments
to such documents to the date hereof;
(iii) the most recent determination letter issued by the
Internal Revenue Service (the "IRS") with respect to each of the
Tax-Qualified Plans;
(iv) the three most recent actuarial valuation reports for
each Plan for which an actuarial valuation report is required to be
prepared; and
(v) the two most recent Annual Reports (IRS Forms 5500
series), including Schedules A and B and plan audits, if applicable,
required to be filed with respect to each Plan.
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(c) Each Plan is legally valid and binding and, except for
Plans listed in Schedule 2.08 as having been terminated, shall be maintained in
full force and effect through the Closing Date. The status of each Plan is set
forth in Schedule 2.08, including (i) the amount of ▇▇▇▇▇▇'▇ contribution to
such Plan for each of the past three fiscal years and the plan year in which the
Closing Date occurs, (ii) the amount of any liability of ▇▇▇▇▇▇ for payments or
contributions past due with respect to such Plan as of the last day of its most
recent plan year and as of the end of any subsequent month ending prior to the
Closing Date, and the date any such amounts were paid, (iii) any contribution to
such Plan in a form other than in cash and (iv) whether such Plan has been
terminated. Except as set forth in Schedule 2.08, neither the Company nor ▇▇▇▇▇▇
has any obligations or liabilities with respect to any Plan or liabilities
relating to any Plan under any collective bargaining agreement to which it is a
party or by which it is bound.
(d) Each Tax-Qualified Plan and any related trust agreements or
annuity contracts (and any other funding instruments) currently comply, and have
complied in the past, both as to form and operation, including compliance with
all reporting and disclosure requirements, with the provisions of ERISA and the
Code, as well as the provisions of any applicable collective bargaining
agreement. The IRS has issued a favorable determination letter with respect to
the qualification under Sections 401(a) and 501(a) of the Code of each
Tax-Qualified Plan and related trust, if any, and has not taken any action to
revoke such letters. In addition, all necessary governmental approvals for the
Tax-Qualified Plans have been obtained.
(e) With respect to each Tax-Qualified Plan that is subject to
Title I, Subtitle B, Part 3 of ERISA (a "Pension Plan"), Schedule 2.08 sets
forth as of the last day of the plan year (i) the actuarial present value (based
upon the same actuarial assumptions as those heretofore used for funding
purposes) of all vested and nonvested accrued benefits (whether on account of
retirement, termination, death, or disability) under such Pension Plan (computed
on the basis of an ongoing plan and without any assumption that nonvested
accrued benefits have become nonforfeitable), (ii) if such Pension Plan uses a
benefit accrual formula having reference to final earnings, the actuarial
present value of the benefits under such Pension Plan as calculated in (i), but
based upon projected earnings increases of five percent per annum, (iii) the
actuarial present value (based upon the same actuarial assumptions, other than
turnover assumptions, as those heretofore used for funding purposes) of vested
benefits under such Pension Plan (computed on the basis of an ongoing plan),
(iv) the net fair market value of the assets held to fund such Pension Plan and
(v) the funding method used in connection with such Pension Plan.
(f) With respect to all Pension Plans, except as set forth in
Schedule 2.08, (i) ▇▇▇▇▇▇ has paid all premiums (and interest charges and
penalties for late payment, if applicable) due the Pension Benefit Guaranty
Corporation ("PBGC") with respect to each plan year thereof for which such
premiums are required; (ii) on and after September 2, 1974, there has been no
"reportable event" (as defined in Section 4043(b) of ERISA and the regulations
of the PBGC under that Section) subject to Title IV of ERISA; (iii) no liability
to the PBGC has been incurred by the Company, ▇▇▇▇▇▇ or any corporation or other
trade or business under common control with the Company or ▇▇▇▇▇▇ (as determined
under Section 414(b) and (c) of the Code) ("Common Control Entity") on account
of any termination subject to Title IV of ERISA; (iv) on
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and after September 2, 1974, no filing has been made by the Company or ▇▇▇▇▇▇ or
any Common Control Entity with the PBGC, and no proceeding has been commenced by
the PBGC, to termination any Pension Plan subject to Title IV of ERISA
maintained, or wholly or partially funded, by the Company or ▇▇▇▇▇▇ or any
Common Control Entity; (v) neither the Company nor ▇▇▇▇▇▇ nor any Common Control
Entity has (A) ceased operations at a facility so as to become subject to the
provisions of Section 4062(f) of ERISA, (B) withdrawn as a substantial employer
so as to become subject to the provisions of Section 4063 of ERISA, (C) ceased
making contributions on or before the Closing Date so as to become subject to
Section 4064(a) of ERISA to which the Company or ▇▇▇▇▇▇ or any Common Control
Entity made contributions during the five years prior to the Closing Date, or
(D) made a complete or partial withdrawal from a "Multiemployer Plan" (as
defined in Section 3(37) of ERISA) so as to incur withdrawal liability as
defined in Section 4201 of ERISA (without regard to a subsequent reduction or
waiver of such liability under Sections 4207 or 4208 of ERISA); and (vi) future
compliance with the requirements of ERISA as in effect on the Closing Date or
any collective bargaining agreements to which the Company or ▇▇▇▇▇▇ is a party
will not result in any increase in the rate of benefit accrual.
(g) In addition, with respect to all Plans, except as set forth
in Schedule 2.08, (i) other than routine claims for benefits, there are no
material actions, suits or claims pending or threatened against any Plan or the
fiduciaries thereof, or against the assets of any Plan and (ii) on and after
January 1, 1975, neither the Company nor ▇▇▇▇▇▇ nor, to the knowledge of the
Individuals, any plan fiduciary of any Plan has engaged in any prohibited
transaction within the meaning of Title I of ERISA or Section 4975 of the Code
and no imposition of excise tax penalties has occurred with respect thereto.
SECTION 2.09. COMPLIANCE WITH LAW; PERMITS.
(a) Except as set forth in Schedule 2.09, the Company and
▇▇▇▇▇▇ have complied with all applicable statutes, regulations, orders and
restrictions of the United States of America, all states, possessions and
municipalities thereof, and all agencies and instrumentalities of the foregoing,
the failure to comply with which could result in any liability, penalty or
disability material to the conduct of the business of the Company or ▇▇▇▇▇▇ or
the ownership or operation by ▇▇▇▇▇▇ of its properties.
(b) Except as set forth in Schedule 2.09, the operations,
practices, policies and procedures of the Company, ▇▇▇▇▇▇ and their employees
have been conducted and will be conducted in compliance with, and have not and
will not give rise to any loss, liability, damage, costs or expenses under, all
applicable Federal, state and local laws, orders, regulations, directives and
restrictions concerning protection of the environment, the disposal of
hazardous, toxic or industrial chemicals, substances or wastes and health and
safety, including the following statutes and all orders, rules, regulations,
directives and restrictions issued thereunder or promulgated in connection
therewith:
(i) the Clean Air Act, as amended;
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(ii) the Federal Water Pollution Control Act, as amended;
(iii) the Resource Conservation and Recovery Act of 1976, as
amended;
(iv) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended;
(v) the Toxic Substances Control Act, as amended;
(vi) the Surface Mining Control and Reclamation Act of
1977, as amended;
(vii) the Mine Safety and Health Act of 1977, as amended;
(viii) the Occupational Safety and Health Act, as amended
("OSHA"); and
(ix) any applicable state or local environmental statutes,
including, without limitation, those of the states of
Illinois, Minnesota and South Dakota.
(c) Except as set forth in Schedule 2.09, ▇▇▇▇▇▇ has all
permits, licenses, authorizations and bonds necessary to the conduct of its
business operations as presently conducted (collectively, the "Permits"). All
such Permits are listed in Schedule 2.09 and, except as noted in Schedule 2.09,
are currently valid and in full force and effect, and there are no material
violations or breaches of or exceptions to any such Permits.
(d) Except as set forth in Schedule 2.09, there are, under
applicable Federal, state and local laws, orders, regulations, directives and
restrictions concerning protection of the environment and health and safety, no
outstanding notices of violations or consent orders to which the Company or
▇▇▇▇▇▇, or any of its or their properties, are subject or may become subject.
▇▇▇▇▇▇ has set aside adequate capital reserves to fund all pending and
threatened notices of violations, all as reflected on the Balance Sheet.
(e) ▇▇▇▇▇▇ has furnished the Buyer with (i) copies of all
reports or other documents in ▇▇▇▇▇▇'▇ files concerning ▇▇▇▇▇▇ or its employees
made by ▇▇▇▇▇▇ during the past five years (A) pursuant to Title VII of the Civil
Rights Act of 1964, as amended, (B) pursuant to OSHA, (C) pursuant to workers'
compensation statutes, and (D) pursuant to the National Labor Relations Act, as
amended, and copies or complete and accurate summaries of all notices, orders or
other documents or correspondence notifying or indicating to ▇▇▇▇▇▇ that any of
its buildings or improvements or the operation or maintenance thereof as now
maintained and operated contravene any zoning or building law or ordinance or
other administrative regulation or violate any restrictive covenant or any
provision of Federal, state or local law.
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SECTION 2.10. LITIGATION.
(a) Except as set forth in Schedule 2.10 there is no (i)
action, suit, claim, proceeding or investigation pending or, to the knowledge of
the Individuals or any Austad officer, threatened against or affecting the
Company or ▇▇▇▇▇▇ or its or their assets or properties, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign which
is individually for an amount in excess of $1,000, (ii) arbitration proceedings
relating to the Company or ▇▇▇▇▇▇ or their respective assets or properties or
(iii) governmental inquiries pending or, to the knowledge of the Individuals or
any Austad officer, threatened relating to or involving the Company, ▇▇▇▇▇▇,
their respective assets, the properties or business of ▇▇▇▇▇▇, or the
Transactions (including inquiries as to the qualification of the Company or
▇▇▇▇▇▇ to hold or receive any Permit).
(b) Except as set forth in Schedule 2.10, neither the Company
nor ▇▇▇▇▇▇ has received any opinion or memorandum or legal advice or notice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business. Neither the
Company nor ▇▇▇▇▇▇ is in default with respect to any order, writ, injunction or
decree known to or served upon the Company or ▇▇▇▇▇▇ of any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no pending
action or suit brought by the Company or ▇▇▇▇▇▇ against others. Neither the
Individuals nor any Austad officer knows of any violation of the Federal or
state antitrust laws by the Company or ▇▇▇▇▇▇; there has not been any claim
received by the Company or ▇▇▇▇▇▇ of violation of the Federal or state antitrust
laws by the Company or ▇▇▇▇▇▇, and, so far as is known to the Individuals or any
Austad officer, no basis for any such claim exists.
SECTION 2.11. INTELLECTUAL PROPERTY. Set forth in Schedule 2.11 is a
list and brief description or identification of (i) all patents, patent rights,
patent applications, trademarks, trademark applications, trade names and
copyrights licensed to, applied for, used by, owned by, or registered in the
name of, the Company or ▇▇▇▇▇▇, or in which the Company or ▇▇▇▇▇▇ has any
rights, and (ii) all manufacturing methods or processes, designs, technical
data, product development data, research data, know-how, secret processes,
market reports, consumer investigations, product surveys, distribution methods
and customer lists and trade secrets, computer and electronic data processing
programs and software processes and other proprietary and intellectual property,
rights and interests that ▇▇▇▇▇▇ uses and believes are not within the general
knowledge of the industry and in each case a brief description of the nature of
such rights (the assets described in clauses (i) and (ii), collectively,
hereinafter are referred to as "Intellectual Property"). Except as set forth in
Schedule 2.11, ▇▇▇▇▇▇ is not a licensor in respect of any Intellectual Property.
▇▇▇▇▇▇ owns or possesses adequate licenses or other rights to use all
Intellectual Property necessary to permit ▇▇▇▇▇▇ to conduct its business as now
operated. No claim is pending or, to the knowledge of any Individual or any
officer of ▇▇▇▇▇▇, threatened to the effect that the present or past operations
of ▇▇▇▇▇▇ infringe upon or conflict with the asserted rights of any other person
in respect of any Intellectual Property, and except only as set forth in
Schedule 2.11 no claim is pending or threatened to the effect that any of such
Intellectual
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Property is invalid or unenforceable. No contract, agreement or understanding
with any party exists which would impede or prevent the continued use by ▇▇▇▇▇▇
of the entire right, title and interest of ▇▇▇▇▇▇ in and to the Intellectual
Property.
SECTION 2.12. MATERIAL CONTRACTS. ▇▇▇▇▇▇ has delivered to the
Buyer true copies of all written contracts, obligations and commitments of the
Company and ▇▇▇▇▇▇ now in effect to which the Company or ▇▇▇▇▇▇ is a party or by
which it or its property may be bound, under which the total obligation of the
Company or ▇▇▇▇▇▇ is in excess of $5,000 (other than purchase orders by ▇▇▇▇▇▇
which have been entered into in the ordinary course of business), all of which
are described or otherwise referred to in Schedule 2.12 (the "Material
Contracts"). No default, alleged default or anticipatory breach exists on the
part of the Company or ▇▇▇▇▇▇ or, to the knowledge of the Individuals or any
Austad officer, on the part of any other party, under any Material Contract, and
there are no material agreements of the parties relating to such Material
Contracts which have not been disclosed to the Buyer. Neither the Company nor
▇▇▇▇▇▇ is a party to any written or oral contract which could materially
adversely affect the business of the Company or ▇▇▇▇▇▇. Except as set forth in
Schedule 2.12, neither the Company nor ▇▇▇▇▇▇ is a party to any written or oral:
(a) contract not made in the ordinary course of business, other
than this Agreement and the Other Agreements;
(b) employment or consulting contract which is not terminable
without cost or other liability to the Company, ▇▇▇▇▇▇ or any successor
thereof, upon notice of 30 days or less, other than those listed in
Schedule 2.07;
(c) contract or collective bargaining agreement with any labor
union other than those listed in Schedule 2.13;
(d) bonus, pension, profit-sharing, retirement, stock purchase,
stock option, incentive compensation, hospitalization, insurance or
similar plan, contract or understanding providing for employee benefits
other than those listed in Schedule 2.08;
(e) lease with respect to any property, real or personal,
whether as lessor or lessee other than those listed in Schedule 2.05 or
2.06;
(f) contract for the purchase of real property, equipment or
fixed assets which involve in the aggregate more than $5,000;
(g) contract for the future purchase of materials, supplies or
inventory (i) which is in excess of the requirements of the business of
▇▇▇▇▇▇ now booked or the requirements of ▇▇▇▇▇▇ for its normal
operating inventories, or (ii) which is not terminable without cost or
liability to the Company or ▇▇▇▇▇▇, or any successor thereof, upon
notice of 30 days or less except for those purchase orders described in
Schedule 2.12;
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(h) contract for the sale of goods (i) involving more than
$5,000 or (ii) which is not terminable without cost or liability to the
Company or ▇▇▇▇▇▇, or any successor thereof, upon notice of 30 days or
less;
(i) contract for the performance of services for or by the
Company or ▇▇▇▇▇▇ which is not terminable without cost or liability to
the Company or ▇▇▇▇▇▇, or any successor thereof, upon notice of 30 days
or less;
(j) insurance contract other than those listed in Schedule
2.17;
(k) contract continuing for a period of more than three months
from its date, which is not terminable by the Company or ▇▇▇▇▇▇ without
cost or liability to the Company or ▇▇▇▇▇▇, or any successor thereof,
upon notice of 30 days or less;
(l) manufacturers' representative, sales agency, dealer or
advertising contract which is not terminable on notice without cost or
other liability to the Company or ▇▇▇▇▇▇;
(m) agreement or indenture for the borrowing or lending of
money;
(n) agreement or indenture for the mortgaging or pledging of,
or otherwise placing a lien or security interest on, any assets of the
Company or ▇▇▇▇▇▇;
(o) option, warrant or other contract for the issuance of any
debt or equity security, or the conversion of any obligation,
instrument or security, into debt or equity securities of the Company
or ▇▇▇▇▇▇ other than those contemplated in connection with the
Transactions;
(p) guaranty of any obligation for borrowed money or otherwise,
excluding endorsements made for collection;
(q) settlement agreement of any administrative or judicial
proceedings within the past five years; or
(r) agreement under which the Company or ▇▇▇▇▇▇ has advanced or
agreed to advance moneys in excess of $500 to any one individual or
$1,000 in the aggregate.
SECTION 2.13. LABOR AND EMPLOYMENT MATTERS. Except as disclosed
in Schedule 2.13, neither the Company nor ▇▇▇▇▇▇ is a party to any collective
bargaining agreement with any labor organization. There is not pending, or to
the knowledge of the Company or ▇▇▇▇▇▇ threatened, any labor dispute, strike or
work stoppage involving the employees of ▇▇▇▇▇▇. Except as indicated in Schedule
2.13, none of the key employees of ▇▇▇▇▇▇ has terminated or
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indicated an intention or plan to terminate his or her employment with ▇▇▇▇▇▇ or
had such employment terminated.
SECTION 2.14. CONDUCT OF BUSINESS. Except as set forth
in Schedule 2.14, since the date of the Balance Sheet, the Company has not
conducted any business, and ▇▇▇▇▇▇ has conducted its business in the ordinary
course, has maintained its assets and property in at least such order and
condition as is necessary to continue so to conduct its business, and neither
the Company nor ▇▇▇▇▇▇ has:
(a) incurred any material obligation or liability (absolute,
accrued, contingent or otherwise), except in connection with the
Transactions or the Redemption or, in the case of ▇▇▇▇▇▇, in the
ordinary course of ▇▇▇▇▇▇'▇ business;
(b) discharged or satisfied any lien or encumbrance, or paid or
satisfied any obligation or liability (absolute, accrued, contingent or
otherwise) except, in the case of ▇▇▇▇▇▇, for (i) liabilities shown or
reflected on the Balance Sheet or (ii) liabilities incurred since the
date of the Balance Sheet in the ordinary course of business;
(c) increased or established any reserve for taxes or other
liability on its books or otherwise provided therefor, except as may
have been required in accordance with GAAP due to the operations or
income of ▇▇▇▇▇▇ since the date of the Balance Sheet;
(d) mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of the assets, properties or business of the
Company or ▇▇▇▇▇▇;
(e) sold, assigned or transferred any asset, property or
business or cancelled any debt or claim or waived any right, except, in
the case of ▇▇▇▇▇▇, in the ordinary course of ▇▇▇▇▇▇'▇ business, and
except for that Owned Realty located at ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and identified in Part A of Schedule 2.05, such
property being sold by ▇▇▇▇▇▇ under the terms previously disclosed to
the Buyer;
(f) sold, assigned, transferred or permitted to lapse any
rights with respect to any Intellectual Property or other intangible
asset;
(g) granted any general or uniform increase in the rates of pay
of employees of ▇▇▇▇▇▇ or any increase in salary payable or to become
payable to any officer employee, consultant or agent of ▇▇▇▇▇▇, or
changed or increased the compensation payable to any officer,
employee, consultant or agent of ▇▇▇▇▇▇ for any period before or
after the date of the Balance Sheet, or by means of any bonus or
pension plan, contract or other commitment increased the compensation
of any officer, employee, consultant or agent of ▇▇▇▇▇▇, or, in the
case of the Company,
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engaged any employee, consultant or agent except in connection with the
Transactions;
(h) made or authorized any capital expenditures for additions
to the plant or equipment of ▇▇▇▇▇▇ in excess of $5,000 in the
aggregate except as may have been involved in connection with ordinary
repair, maintenance and replacement and minor plant equipment
additions;
(i) made any loan or payment to any stockholder, or declared,
set aside or paid to any stockholder any dividend or other distribution
in respect of its capital stock, or redeemed or purchased any of its
capital stock, or agreed to take any such action except as contemplated
by the Transactions;
(j) issued, sold or transferred, or agreed to issue, sell or
transfer, any stock, bond, debenture or other corporate security of the
Company or ▇▇▇▇▇▇, whether newly issued or held in treasury, except as
contemplated by the Redemption or the Transactions;
(k) except as contemplated by the Redemption or the
Transactions, entered into any material transaction, in the case of the
Company, or any material transaction other than in the ordinary course
of business of ▇▇▇▇▇▇, in the case of ▇▇▇▇▇▇;
(l) experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting its
properties, assets or business, or experienced any other material
adverse change in its financial condition, assets, liabilities or
business;
(m) experienced any material change in the assets, liabilities,
business, condition (financial or otherwise) from that disclosed on the
Balance Sheet; or
(n) taken any action which would have the effect of terminating
any Permit.
SECTION 2.15. TAX MATTERS.
(a) ▇▇▇▇▇▇ has filed all tax returns required to be filed by it
under the laws of the United States of America, the State of South Dakota and
each state or other jurisdiction in which its business activities (i) require
qualification, as specified in Schedule 2.01, or (ii) could result in the
imposition of liability for the payment of any taxes, as specified in Schedule
2.15. ▇▇▇▇▇▇ has paid or set up an adequate reserve in respect of all taxes for
the periods covered by such returns, as well as all other taxes, assessments and
governmental charges which have become due or payable, including all taxes which
▇▇▇▇▇▇ is obligated to withhold from amounts owing to employees, creditors and
third parties. Such reserves include reserves for all tax liabilities of ▇▇▇▇▇▇
in all jurisdictions in which ▇▇▇▇▇▇ has business activities requiring
qualification as specified in Schedule 2.01. ▇▇▇▇▇▇ has set up as provisions for
taxes in the
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Balance Sheet amounts sufficient for all accrued and unpaid Federal, foreign,
state, county and local taxes of ▇▇▇▇▇▇, whether or not disputed, including any
interest and penalties in connection therewith, for all fiscal periods ending on
or before the date of the Balance Sheet.
(b) ▇▇▇▇▇▇'▇ Federal income tax returns have never been
examined by the United States Internal Revenue Service and no such examinations
are in progress, nor has ▇▇▇▇▇▇ been notified of an impending audit. There have
been no state tax examinations of ▇▇▇▇▇▇ except as set forth in Schedule 2.15
and no such examinations are in progress, nor has ▇▇▇▇▇▇ been notified of an
impending audit. Any deficiencies proposed as a result of any examination set
forth in Schedule 2.15 have been paid or finally settled and no issue has been
raised in any such examinations which, by application of similar principles,
reasonably can be expected to result in the assertion of a deficiency for any
other year not so examined. The results of any settlements and any necessary
adjustments in taxes resulting therefrom are either set forth in Schedule 2.15
or set forth in the financial statements referred to in Section 2.04 above.
Neither ▇▇▇▇▇▇ nor any Individual is aware of any fact which would constitute
grounds for any further tax liability with respect to any years. No agreements
or waivers have been made by or on behalf of ▇▇▇▇▇▇ for the extension of time
for the assessment of any tax or for any applicable statute of limitations.
(c) Except for taxes for the payment of which an adequate
reserve has been established on the Balance Sheet, there are no tax liens,
whether imposed by any Federal, foreign, state or local taxing authority,
outstanding against any of the assets, properties or business of ▇▇▇▇▇▇.
For purposes of this Section 2.15, the term "▇▇▇▇▇▇" shall include the Company.
SECTION 2.16. ABSENCE OF UNDISCLOSED LIABILITIES. The Company
and ▇▇▇▇▇▇ have no indebtedness or liabilities of any character whatsoever,
whether or not accrued and whether or not fixed or contingent, which exceed
$5,000 individually or $25,000 in the aggregate, except, in the case of ▇▇▇▇▇▇,
for (i) liabilities reflected in the Balance Sheet, (ii) liabilities incurred in
the ordinary course of business of ▇▇▇▇▇▇ subsequent to the date of the Balance
Sheet, none of which has been or is materially adverse to the assets, properties
or business of ▇▇▇▇▇▇ and, in the case of ▇▇▇▇▇▇ and the Company, (iii)
liabilities incurred in connection with performance of this Agreement.
SECTION 2.17. INSURANCE. All policies of insurance,
together with the premiums currently paid thereon, covering the plant,
machinery, equipment and inventory used in the business of ▇▇▇▇▇▇, or providing
for business interruption, general liability, personal and product liability
coverage, are described in Schedule 2.17. Such policies adequately cover all
risks reasonably and prudently foreseeable in the operation and conduct of the
assets, properties, business, operations, products and services of the Company
and ▇▇▇▇▇▇ as the same are presently owned or conducted. All such policies will
be outstanding and in full force and effect at the Closing Date, subject to the
provisions of Section 4.04 below. Except as set forth in Schedule 2.17, there
are no claims, actions, suits or proceedings arising out of or based upon any of
such policies of insurance, and, so far as is known to the Individuals or any
Austad officer, no basis
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for any such claim, action, suit or proceeding exists. There are no notices of
any pending or threatened terminations or substantial premium increases with
respect to any of such policies and ▇▇▇▇▇▇ is in compliance with all conditions
contained therein.
SECTION 2.18. TRANSACTIONS WITH AFFILIATES. Except as set forth
in Schedule 2.18, there are no outstanding notes payable to or accounts
receivable from, or advances by the Company or ▇▇▇▇▇▇ to, and the Company and
▇▇▇▇▇▇ are not otherwise creditors of, any officer, employee, subsidiary or
affiliate of the Company or ▇▇▇▇▇▇.
SECTION 2.19. SUPPLIERS. Except as set forth in Schedule 2.19,
▇▇▇▇▇▇ is not aware of any loss or threatened loss of any key supplier of
▇▇▇▇▇▇. For purposes of this Section, the term "key supplier" means any supplier
of ▇▇▇▇▇▇ the loss of which might materially adversely affect its business.
SECTION 2.20. CORPORATE NAME. Set forth in Schedule 2.20 is a
correct and complete list of all locations in which the corporate name "The
▇▇▇▇▇▇ Company," or any variation thereof, is currently used by the Company or
▇▇▇▇▇▇ or any of their affiliates. ▇▇▇▇▇▇ or one of its affiliates has the full
legal right to so use such name and variations in each of such jurisdictions.
Neither the Individuals, ▇▇▇▇▇▇, nor any affiliate thereof knows, or has reason
to know, of any actual or threatened claim by any third party with respect to
the use of such name or of any actual or proposed use of the name "The ▇▇▇▇▇▇
Company," or any variation thereof, by any third party in conflict with the use
thereof by the Company or ▇▇▇▇▇▇. The use by the Company and ▇▇▇▇▇▇ of the name
"The ▇▇▇▇▇▇ Company" and the variations thereof used by them does not, to the
knowledge of the Individuals, ▇▇▇▇▇▇ and the Company, infringe upon the rights
of any third party, and neither the Company nor any Individual nor any affiliate
or associate of either has granted any third party any right to use such name or
any variation thereof.
SECTION 2.21. INDIVIDUALS' AUTHORITY. Each Individual has all
necessary power and, as of the Closing Date, will be duly authorized to perform
his or her obligations under this Agreement and the other documents, agreements
and certificates executed and delivered by each in connection with the
Transactions. Those Individuals signing as a custodian for any other Individual
are, as of the date hereof, duly authorized to execute this Agreement on behalf
of such other Individual and have provided to the Buyer documentation
satisfactory in form and substance evidencing such authority.
SECTION 2.22. BINDING OBLIGATION; CONSENTS. The execution and
delivery of this Agreement by the Individuals, the Company and ▇▇▇▇▇▇ do not,
and the consummation of the Transactions will not, violate any provision of the
certificate of incorporation or by-laws of the Company or ▇▇▇▇▇▇ or violate any
provision of, or result in a breach of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under, any mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree, to which any Individual or the Company or ▇▇▇▇▇▇ is a
party, or to which any Individual or the Company or ▇▇▇▇▇▇ is, or the assets,
properties or business of any Individual or the Company or ▇▇▇▇▇▇ are, subject.
Each of this Agreement and the respective Warrant Agreement is a valid and
binding agreement of the Individuals, enforceable against the respective
Individuals in
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accordance with its terms; the Stockholders' Agreement is a valid and binding
agreement of the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group, enforceable against each
member in accordance with its terms; the License Agreement is a valid and
binding agreement of the Company and ▇▇▇▇▇ ▇▇▇▇▇▇, enforceable against such
parties in accordance with its terms; each of the Loan Agreements is a valid and
binding agreement of ▇▇▇▇▇▇, enforceable against it in accordance with its
terms; each of the Indemnification Agreements is a valid and binding agreement
of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, as applicable, enforceable against each of
them in accordance with its terms; and each of this Agreement and the
Reimbursement Agreement is a valid and binding agreement of the Company and
▇▇▇▇▇▇, enforceable against such parties in accordance with its terms. All
authorizations, approvals and consents necessary for the execution and delivery
(a) by the Individuals, of this Agreement and the respective Warrant Agreements,
(b) by the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group, of the Stockholders' Agreement,
(c) by the Company and ▇▇▇▇▇ ▇▇▇▇▇▇, of the License Agreement, (d) by ▇▇▇▇▇
▇▇▇▇▇▇, of his Indemnification Agreement, (e) by ▇▇▇▇▇▇, of the Loan Agreements,
(f) by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of his Indemnification Agreement, and (g) by the Company
and ▇▇▇▇▇▇, of this Agreement and the Reimbursement Agreement, have been given
or made. Except as set forth in Schedule 2.22 or otherwise referred to herein,
no consent, action, approval or authorization of, or registration, declaration
or filing with, any governmental department, commission, agency or other
instrumentality having jurisdiction over the Individuals or the Company or
▇▇▇▇▇▇ is required to be obtained by any of them to authorize their execution,
delivery or performance of this Agreement or the Other Agreements to which they
are party.
SECTION 2.23. THE BUYER SHARES. On the Closing Date, all stock
transfer or other taxes and charges (other than income taxes) which are required
to be paid in connection with the issue, sale and transfer of the Buyer Shares
to the Buyer hereunder will have been fully paid by the Individuals and all laws
imposing such taxes or charges will have been fully complied with in respect of
the Buyer Shares by the Individuals and the Company.
SECTION 2.24. CUSTOMER LISTS. The disks, cartridges and tapes
containing customer lists and data of ▇▇▇▇▇▇ (the "Customer Lists") contain a
true, correct and complete list of the customers who have actually purchased
merchandise from ▇▇▇▇▇▇ by year of last purchase and the approximate number of
catalogs mailed, reported on an annual basis for the periods of time that such
information is reported. The Customer Lists are the only customer lists which
exist and such lists are deposited with Acxiom Corporation and with no other
vendors. At least 10 days prior to the Closing, ▇▇▇▇▇▇ shall authorize this
vendor to make the Customer Lists available to the Buyer and its representatives
as they may reasonably request.
SECTION 2.25. CUSTOMS. All goods imported into the United
States or any other country by ▇▇▇▇▇▇ (the "Imported Goods") have been properly
valued and classified in accordance with applicable tariff laws, rules and
regulations and all proper duties, tariffs or excise taxes have been paid with
respect to the Imported Goods, no penalties have been assessed, asserted or
claimed with respect to any Imported Goods, and no written inquiries relating
thereto have been received by the Company, ▇▇▇▇▇▇ or any Individual. All
Imported Goods have been properly marked as to country of origin, content and
material. ▇▇▇▇▇▇ has filed with the U.S. Customs Service all required buying
agency agreements, as applicable, with respect to Imported
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Goods. Except as set forth in Schedule 2.25, ▇▇▇▇▇▇ has not delivered to any
agents, suppliers or vendors any tools, equipment, molds, additional products or
other assistance (collectively, the "Assists") which would be considered a
dutiable assist. Schedule 2.25 sets forth a true, complete and correct list of
all Assists.
SECTION 2.26. DISCLOSURE; REPRESENTATIONS AND WARRANTIES. The
Individuals, the Company and ▇▇▇▇▇▇ have made full, true and complete responses
to all the Buyer's requests for information, documents, contracts and records.
Neither this Agreement nor any statement, certificate, writing or document
furnished to the Buyer in connection with this Agreement by any Individual or by
the Company or ▇▇▇▇▇▇ contains, as of the dates of such documents, any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained therein not misleading. Except as set forth in this
Agreement or in a Schedule hereto, no fact (other than circumstances or events
which are common knowledge or normal business risks) with respect to the
Company's and ▇▇▇▇▇▇'▇ business, operations or condition is known to any
Individual or the Company or ▇▇▇▇▇▇ which materially and adversely affects the
business, operations or condition of the Company or ▇▇▇▇▇▇ or any of their
respective assets or properties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants that:
SECTION 3.01. ORGANIZATION AND AUTHORITY. The Buyer is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware. The Buyer has the corporate power to execute, deliver
and perform this Agreement and the other documents, agreements and certificates
executed and delivered by it in connection herewith and therewith. The Buyer has
taken all action required by law, its certificate of incorporation, its by-laws
or otherwise to authorize the execution and delivery of this Agreement, the Loan
Agreements, the Stockholders' Agreement, the Warrant Agreements, the License
Agreement, the Reimbursement Agreement and the Indemnification Agreements and
the documents, agreements and certificates executed and delivered by the Buyer
in connection herewith and therewith. The execution and delivery of this
Agreement and the Stockholders' Agreement, the Warrant Agreements, the License
Agreement, the Loan Agreements, the Reimbursement Agreement and the
Indemnification Agreements by the Buyer (or, in the case of the Loan Agreements,
by a subsidiary of the Buyer), do not, and the consummation of the transactions
contemplated hereby and thereby will not, violate any provision of the
certificate of incorporation or by-laws of the Buyer, or any provision of any
agreement, instrument, order, judgment or decree to which the Buyer is a party
or by which it is bound.
SECTION 3.02. BINDING OBLIGATION; CONSENTS. The execution and
delivery of this Agreement by the Buyer does not, and the consummation of the
Transactions will not, violate any provision of the certificate of incorporation
or by-laws of the Buyer or violate any provision of, or result in a breach of
any of the terms or provisions of, or result in the acceleration of any
obligation under, or constitute a default under, any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree, to which
the Buyer is a party or to which its assets,
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properties or business are subject. Each of this Agreement, the Stockholders'
Agreement, the Reimbursement Agreement, the Indemnification Agreements and the
License Agreement (as to Article IX only) is a valid and binding agreement of
the Buyer, enforceable against the Buyer in accordance with its terms, or, in
the case of the Loan Agreements and the Second Mortgage, a valid and binding
agreement of the Buyer's subsidiary, enforceable against such party in
accordance with its terms. All authorizations, approvals and consents necessary
for the execution and delivery by the Buyer of this Agreement, the
Stockholders' Agreement, the Reimbursement Agreement, the Indemnification
Agreements and the License Agreement (as to Article IX only), or, in the case
of the Loan Agreements and the Second Mortgage, the Buyer's subsidiary, have
been given or made. Except as set forth in Schedule 3.02 or otherwise referred
to herein, no consent, action, approval or authorization of, or registration,
declaration or filing with, any governmental department, commission, agency or
other instrumentality having jurisdiction over the Buyer or any subsidiary is
required to be obtained by any of them to authorize their execution, delivery
or performance of this Agreement or the Other Agreements to which they are
party.
SECTION 3.03. ACQUISITION OF BUYER SHARES. The Buyer is
purchasing the Buyer Shares for its own account for investment only and not
with a present view to, or for sale in connection with, any distribution of the
Buyer Shares.
SECTION 3.04. LITIGATION; CONSENTS.
(a) The Buyer knows of no pending or threatened action,
suit, proceeding or investigation before any court or governmental body, or by
any governmental agency to restrain or prevent the performance of the
Transactions or which might affect the right of the Buyer to own the Buyer
Shares.
(b) Except as otherwise referred to herein, no consent,
action, approval or authorization of, or registration, declaration or filing
with, any governmental department, commission, agency or other instrumentality
having jurisdiction over the Buyer is required to be obtained by the Buyer to
authorize the execution, delivery and performance by the Buyer of this
Agreement or the Other Agreements or their respective terms.
SECTION 3.05. DISCLOSURE; REPRESENTATIONS AND WARRANTIES.
The Buyer has made full, true and complete responses to all requests for
information, documents, contracts and records. Neither this Agreement nor any
statement, certificate, writing or document furnished to the Company, ▇▇▇▇▇▇ or
any Individual in connection with this Agreement by the Buyer contains, as of
the dates of such documents, any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained therein not
misleading.
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ARTICLE IV
COVENANTS OF THE COMPANY, ▇▇▇▇▇▇ AND THE BUYER
SECTION 4.01. MAINTAIN BUYER SHARES. Before the Closing
Date, neither the Company nor ▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇▇▇▇▇▇ will, without the consent
of the Buyer, (a) issue, sell or otherwise transfer any of the Buyer Shares or
(b) incur or permit to exist any lien, charge or encumbrance on any of the
Buyer Shares.
SECTION 4.02. APPROVALS; CONSENTS. The Company and/or
▇▇▇▇▇▇ will obtain or cause to be obtained all consents, approvals and
authorizations required by law, statute, rule, regulation, contract or
agreement to be obtained by the Company or ▇▇▇▇▇▇ in connection with the
consummation of the sale and transfer by the Company to the Buyer of the Buyer
Shares and the transactions contemplated hereby, all such consents, approvals
and authorizations being set forth in the attached Schedule 4.02.
SECTION 4.03. MAINTAIN COMPANY BUSINESS.
(a) From the date hereof to and including the Closing
Date, the Company, ▇▇▇▇▇▇ and the Individuals will use their best efforts to
preserve the business organization of the Company and ▇▇▇▇▇▇ intact, to keep
available to the Buyer the services of the incorporator of the Company and the
present officers and employees of ▇▇▇▇▇▇, and to preserve for the Buyer the
good will of the suppliers, customers and others having business relations with
▇▇▇▇▇▇.
(b) From the date hereof to and including the Closing
Date, the Company, ▇▇▇▇▇▇ and the Individuals will use their best efforts to
cause ▇▇▇▇▇▇ to continue the operation of its business in the ordinary course,
and to cause the Company and/or ▇▇▇▇▇▇, as the case may be, to maintain their
respective real property and other assets, properties and rights in at least as
good order and condition as exists on the date hereof, and will not permit the
Company or ▇▇▇▇▇▇ to:
(i) encumber any of its assets, properties or right or
enter into any transaction or make any contract or commitment relating
to its assets, properties or business, except in the ordinary course
of business;
(ii) enter into any employment contract which is not
terminable without cost or other liability to the Company or ▇▇▇▇▇▇,
or any successor thereof, except for normal severance arrangements and
accrued vacation pay, upon notice of 30 days or less;
(iii) without the Buyer's consent, enter into any contract
or agreement (x) which cannot be performed within three months or less
or (y) which involves the expenditure of over $50,000;
(iv) reclassify or change in any manner its outstanding
shares of capital stock or issue or sell any shares of its capital
stock or other securities, or redeem or otherwise acquire, or enter
into any contract or commitment to redeem or
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otherwise acquire, any shares of capital stock of the Company or
▇▇▇▇▇▇ other than as set forth in Schedule 2.12 hereof;
(v) make any declaration, payment or distribution of a
dividend or any other payment to any stockholder other than as set
forth in Schedule 2.12 hereof;
(vi) transfer any assets of the Company or ▇▇▇▇▇▇ to any
stockholder;
(vii) make any payment or distribution to any trustee under
any bonus, pension, profit sharing or retirement plan or incur any
obligation to make any such payment or contribution which is not in
accordance with the Company's or ▇▇▇▇▇▇'▇ usual past practice, or make
any payment or contribution or incur any obligation pursuant to or in
respect of any other plan, contract or arrangement providing for any
bonus, incentive compensation, pension, deferred compensation,
retirement payment, profit sharing contribution or any other employee
benefit, which is not in accordance with the Company's or ▇▇▇▇▇▇'▇
usual past practice;
(viii) extend credit in excess of $10,000 to any customer
who was not a customer before the date of this Agreement, or depart
from the normal and customary trade, discount and credit policies of
the Company or ▇▇▇▇▇▇;
(ix) guarantee the obligation of any person, firm or
corporation, except by the endorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
(x) take any action of the character described in Section
2.14 (Conduct of Business) which would have been required to be
disclosed pursuant thereto had such action been taken after the date
of the Balance Sheet and before the date of this Agreement;
(xi) purchase or sell any securities for investment;
(xii) amend either its charter or by-laws;
(xiii) make any changes in any of its methods of accounting
or in any of its accounting practices; or
(xiv) change the banking or safety deposit arrangements of
the Company or ▇▇▇▇▇▇ (except as contemplated by the Transactions).
SECTION 4.04. INSURANCE. At any time before the Closing
Date, ▇▇▇▇▇▇ will add, if possible, new coverage or increase the coverage on,
or otherwise amend, any of the insurance policies described in Schedule 2.17,
the extent of such added or increased coverage or the nature of such amendment
being a matter solely in the discretion of the Buyer.
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SECTION 4.05. NON-COMPETE.
(a) The Former Stockholders agree that from and after the
Closing Date, they will not use the name "▇▇▇▇▇▇" or any confusingly
similar name or any other Intellectual Property in connection with any
business related to the business of the Company, ▇▇▇▇▇▇ or any of
their Subsidiaries.
(b) ▇▇▇▇▇ ▇▇▇▇▇▇ agrees that he will not use any
Intellectual Property, his name, likeness or voicemail announcements
in connection with any business related to the business of the
Company, ▇▇▇▇▇▇ or any of their Subsidiaries except as permitted by
the License Agreement.
(c) For a period of one year following the Closing Date,
no Individual shall, directly or indirectly, in association with or as
a stockholder, director, officer, consultant, employee, member or
otherwise of or through any person, firm, corporation, partnership,
association or other entity, engage in or conduct any enterprise or
business anywhere in the world which distributes, designs,
manufactures, markets, sells or otherwise deals in products or
services of the type manufactured or sold by the Company, ▇▇▇▇▇▇, any
of their Subsidiaries or Joint Ventures or competitive with the
business of the Company, ▇▇▇▇▇▇, any of their Subsidiaries or the
Joint Ventures or their successors as such business is currently being
conducted by the Company, ▇▇▇▇▇▇, any of their Subsidiaries or the
Joint Ventures on the date hereof except as may be otherwise provided
for by the Stockholders' Agreement or the License Agreement; provided,
however, that an investment in not more than five percent in the
aggregate of the total capital of any such competitive enterprise
whose stock is listed on a national securities exchange shall not be
deemed a violation of this Section; and provided further, that (i) in
the case of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the applicable period shall be two years
following the Closing Date, and (ii) in the case of the members of the
▇▇▇▇▇ ▇▇▇▇▇▇ Group, the provisions of the Stockholders' Agreement and
the License Agreement (as applicable) and not this Section 4.05(c)
shall apply.
SECTION 4.06. NOTICE OF BREACH. The Company will
immediately give notice to the Buyer of the occurrence of any event or the
failure of any event to occur that results in a breach of any representation or
warranty hereunder by the Company, ▇▇▇▇▇▇ or any Subsidiary or a failure by the
Company, ▇▇▇▇▇▇ or any Subsidiary to comply with any covenant, condition or
agreement contained herein.
SECTION 4.07. UNIFORM COMMERCIAL CODE SEARCHES. ▇▇▇▇▇▇
shall, at its own expense, conduct, or cause to be conducted, a search in each
state and county in which either the Company or ▇▇▇▇▇▇ conducts its business or
maintains any assets or properties for financing statements filed in such
states and counties under the applicable provisions of the Uniform Commercial
Code. Not later than 10 days prior to the Closing Date, ▇▇▇▇▇▇ shall deliver a
list, certified as true and complete by an officer of ▇▇▇▇▇▇, of all financing
statements or other liens recorded in such jurisdictions and a description of
the property and assets encumbered thereby. ▇▇▇▇▇▇ shall, prior to the Closing
Date, (i) remove or cause to be removed all such liens and
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encumbrances except those permitted encumbrances set forth in Schedule
2.06, (ii) file or cause to be filed in such jurisdictions a release
of such lien or encumbrance and (iii) deliver to the Buyer evidence
satisfactory in form and substance to the Buyer of compliance by
▇▇▇▇▇▇ with the provisions of this Section.
SECTION 4.08. AUDITED FINANCIAL STATEMENTS. Before the
Closing Date, ▇▇▇▇▇▇ shall deliver to the Buyer audited financial statements of
▇▇▇▇▇▇ for the fiscal year ended December 31, 1994, including a balance sheet,
the related statements of income and of changes in financial position for the
period then ended, the accompanying notes and reports of the Auditors, the only
qualification of which shall relate to the effect of the current status of
▇▇▇▇▇▇'▇ indebtedness to FNBO on ▇▇▇▇▇▇'▇ ability to continue as a going
concern.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.01. ACCESS. The Individuals, the Company and
▇▇▇▇▇▇ will (a) supply the Buyer with all information necessary or beneficial
for the carrying out of the Transactions and will permit the Buyer and its
accounting, legal and other representatives to complete, to its satisfaction, a
review of the assets (including, without limitation, the Intellectual
Property), liabilities, business, operations and prospects of the Company and
▇▇▇▇▇▇, (b) provide such assistance in connection with the Transactions as is
reasonably requested and (c) will give the Buyer and its representatives and
lenders access at all reasonable times to all things related to the assets,
liabilities, business, operations and prospects of the Company and ▇▇▇▇▇▇ and,
as the same may relate to the Company and ▇▇▇▇▇▇, the Individuals. The Buyer
will provide the Individuals with information reasonably required for their
review of the Other Agreements.
SECTION 5.02. RETURN OF INFORMATION. In the event that the
parties are unable to consummate the Transactions, each party will, if
requested by another party, promptly return all records and information
concerning the Company or ▇▇▇▇▇▇, the Individuals, the Buyer and their
subsidiaries and affiliates (as the case may be) in such party's possession.
SECTION 5.03. CONFIDENTIALITY. Each party will treat as
confidential all confidential information concerning the Company, ▇▇▇▇▇▇, the
Individuals, the Buyer and their subsidiaries and affiliates disclosed to such
party and which does not become generally available to third parties without
fault of the receiving party, unless disclosure thereof is required by law. In
the event that the parties are unable to consummate the Transactions, no party
shall at any time thereafter disclose to third parties, or use, directly or
indirectly, for its own benefit, any such information, written or oral, about
the business or affairs of the other parties hereto.
SECTION 5.04. REPRESENTATIONS. The parties hereto (a) will
take all action necessary to render accurate as of the Closing Date their
respective representations and warranties contained herein, (b) will refrain
from taking any action which would render any such representation or warranty
inaccurate in any material respect as of such time, and (c) will perform or
cause to be satisfied each covenant or condition to be performed or satisfied
by it or them as contemplated by this Agreement.
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SECTION 5.05. GOVERNMENT REVIEWS. ▇▇▇▇▇▇ and the Buyer, in
a timely manner, shall (i) make required filings with, prepare applications to
and conduct negotiations with each governmental agency as to which such
filings, applications or negotiations are necessary or appropriate for the
consummation of the transactions contemplated hereby, and (ii) provide such
information as each may be required to make such filings, prepare such
applications and conduct such negotiations. ▇▇▇▇▇▇ and the Buyer shall
cooperate with each other and use their best efforts to assist the other in
making and pursuing such filings and applications and conducting such
negotiations and promptly shall respond to all requests for additional
information or documentation.
SECTION 5.06. PRESS RELEASES. The timing and content of all
announcements regarding any aspect of the Transactions to the financial
community, government agencies, employees of ▇▇▇▇▇▇ or the public generally
will be mutually agreed upon by the parties hereto in advance.
SECTION 5.07. BEST EFFORTS. Each of the Individuals, the
Company and the Buyer shall use its best efforts to cause all of the conditions
to the obligations of the others to consummate the Transactions to be met as
soon as practicable after the date of this Agreement.
SECTION 5.08. NOTICE OF BREACH. The Buyer will immediately
give notice to ▇▇▇▇▇ ▇▇▇▇▇▇, acting in such event as representative of all the
Individuals, of the occurrence of any event or the failure of any event to
occur that results in a breach of any representation or warranty hereunder by
the Buyer or a failure by the Buyer to comply with any covenant, condition or
agreement contained herein.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
INDEMNITIES. The parties hereto agree that their respective representations,
warranties and indemnities contained in this Agreement shall survive for a
period of two years from the Closing Date, except that those set forth in
Section 2.15 (Tax Matters) shall survive for the applicable statute of
limitations, and those set forth in Section 2.09(b) (Compliance With Law;
Permits) respecting environmental matters shall survive for an unlimited period
(the applicable period of survival of any representation or warranty being
referred to herein as the "Limitation Period"). No claim shall be made by any
party for breach of any representation or warranty unless (i) pursuant to the
indemnification provisions set forth in this Agreement and (ii) notice thereof
is given prior to the end of the applicable Limitation Period.
SECTION 6.02. INDEMNIFICATION BY THE COMPANY, ▇▇▇▇▇▇ AND
THE INDIVIDUALS. The Company, ▇▇▇▇▇▇ and the Individuals shall, jointly and
severally, save, defend and indemnify the Buyer and its officers, directors,
employees, affiliates, stockholders, agents, representatives, attorneys,
consultants, principals and associates (individually, an "Indemnitee"
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and collectively, "Indemnitees") against, and hold each of them harmless from,
any and all Damages (as defined in Section 6.04 below):
(a) arising from any breach of a representation or
warranty of the Company, ▇▇▇▇▇▇ or the Individuals contained in or
made pursuant to this Agreement or the Other Agreements or in any
certificate, instrument or agreement delivered to any Indemnitee
pursuant to or in connection with this Agreement or the Other
Agreements;
(b) resulting from a default in the performance of any of
the covenants or obligations that the Company, ▇▇▇▇▇▇ or any
Individual is required to perform under this Agreement or the Other
Agreements; provided, that no Individual shall be responsible for
Damages resulting from a default in the performance of any of the
covenants or obligations that the Company or ▇▇▇▇▇▇ is required to
perform under either Loan Agreement or under the Second Mortgage, the
License Agreement, the Reimbursement Agreement or the Warrant
Agreements unless such Individual, acting in breach of his or her
obligations to the Company or ▇▇▇▇▇▇, as the case may be, whether
pursuant to this Agreement or any of the Other Agreements or
otherwise, caused the Company or ▇▇▇▇▇▇, as the case may be, to so
default; or
(c) resulting from any foreign, Federal, state or local
income or franchise tax payable (i) with respect to the period ending
on the Closing Date or (ii) in consequence of the Redemption or the
payment of the Redemption Notes;
provided, however, that neither the Company, ▇▇▇▇▇▇ nor any Individual shall be
required to pay any Damages unless (i) the aggregate amount of Damages exceeds
$100,000, in which event the indemnity pursuant to this Section 6.02 shall
require payment of all Damages incurred by the Indemnitees in excess of $50,000
(e.g., if total Damages incurred are $150,000, payment of $100,000 shall be
required), and (ii) the claim for such Damages is made by an Indemnitee and
received by the Company, ▇▇▇▇▇▇ or any Individual in accordance with the
provisions of Sections 6.01 and 6.05, it being understood and agreed that the
Indemnitee may elect, in its sole discretion, to bring such claim against any
or all of the Company, ▇▇▇▇▇▇ or an Individual. In no event, however, shall
the Damages payable pursuant to this Section 6.02 by a Former Stockholder
exceed, in the aggregate, the sum set forth opposite the name of such Former
Stockholder in Schedule 6.02 attached hereto, nor shall the Damages payable
pursuant to this Section 6.02 by parties who are not Former Stockholders
exceed, in the aggregate, the sum of $4,000,000.
SECTION 6.03. INDEMNIFICATION BY THE BUYER. The Buyer
shall be liable for, save, defend and indemnify the Company, ▇▇▇▇▇▇ and the
Individuals and their respective officers, directors, employees, affiliates,
stockholders, agents, representatives, attorneys, consultants, principals and
associates (also individually, an "Indemnitee" and collectively, "Indemnitees")
against, and hold each of them harmless from, any and all Damages:
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(a) arising from any breach of a representation
or warranty of the Buyer contained in or made pursuant to this
Agreement or the Other Agreements or in any certificate,
instrument or agreement delivered to an Indemnitee pursuant to
or in connection with this Agreement or the Other Agreements;
or
(b) resulting from a default in the performance
of any of the covenants or obligations that the Buyer is
required to perform under this Agreement or the Other
Agreements;
provided, however, that the Buyer shall not be required to pay any Damages
unless (i) the aggregate amount of such Damages exceeds $100,000, in which
event the indemnity pursuant to this Section 6.03 shall require payment of all
Damages incurred by the Indemnitees in excess of $50,000 (e.g., if total
Damages incurred are $150,000, payment of $100,000 shall be required), and (ii)
the claim for such Damages is made by an Indemnitee and received by the Buyer
in accordance with the provisions of Sections 6.01 and 6.05. In no event,
however, shall the Damages payable pursuant to this Section 6.03 exceed, in the
aggregate, the sum of $4,000,000.
SECTION 6.04. DAMAGES. For the purposes of this Agreement,
"Damages" shall mean any loss, liability, damage, cost or expense, including,
without limitation, reasonable costs of defense and prosecution of litigation
and counsel fees incurred by an Indemnitee.
SECTION 6.05. LEGAL PROCEEDINGS.
(a) If any legal proceeding shall be instituted, or any
claim or demand made, against an indemnified party in respect of which an
indemnifying party may be liable hereunder, the indemnified party shall give
prompt written notice thereof to the indemnifying party. The indemnifying
party, at its expense, may participate in and, with the consent of the
Indemnitee, direct any such legal proceeding and the negotiation and settlement
of any such claim or demand. The Indemnitee shall have the absolute right, in
its sole discretion and without the consent of the indemnifying party, to
settle any such legal proceeding, claim or demand; provided, however, that if
the Indemnitee shall so settle without the consent of the indemnifying party,
the indemnifying party shall be discharged from any liability hereunder with
respect to the proceeding, claim or demand so settled.
(b) If the amount of Damages paid, at any time subsequent
to such payment, shall be reduced by any recovery, settlement or otherwise, the
amount of such reduction, less any expense incurred by the party receiving such
recovery in connection therewith, promptly shall be repaid to the indemnifying
party.
(c) The parties hereto shall consult and use their best
efforts to cooperate in resolving questions regarding Damages. If a party
hereto shall believe that it has a claim under this Article VI, such party
shall give notice of such claim to the other parties, specifying in reasonable
detail the nature of the Damages for which payment is claimed, the Section or
Sections of this Agreement upon which such claim is based and the amount
payable in respect thereof.
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ARTICLE VII
TERMINATION OF AGREEMENT
SECTION 7.01. TERMINATION OF AGREEMENT. This Agreement and
the Transactions may be terminated or abandoned at any time before the Closing
Date:
(a) by mutual consent of the parties;
(b) by the Buyer, if there has been a material
misrepresentation in this Agreement by the Company, ▇▇▇▇▇▇ or any Individual,
or a material breach by the Company, ▇▇▇▇▇▇ or any Individual of any warranty
or covenant set forth herein, or a failure of any condition to which the
obligations of the Buyer are subject;
(c) by the Company, if there has been a material
misrepresentation in this Agreement by the Buyer, or a material breach by the
Buyer of any warranty or covenant set forth herein, or a failure of any
condition to which the obligations of the Company are subject; or
(d) by either the Company or the Buyer, if the Closing
Date shall not have occurred on or before May 31, 1995, for any reason other
than the failure of the party seeking to terminate this Agreement to perform
its obligations hereunder.
ARTICLE VIII
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligations of the Buyer to purchase the Buyer Shares
pursuant to this Agreement, enter into the Other Agreements and perform
thereunder, shall be subject to the satisfaction, at or before the Closing
Date, of the following conditions (any of which may be waived, in whole or in
part, by the Buyer):
SECTION 8.01. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company, ▇▇▇▇▇▇ and the Individuals
contained in this Agreement (including the Schedules and Exhibits hereto), or
in any certificate or document delivered to the Buyer in connection herewith,
shall be true in all material respects at the Closing Date as if made again on
and as of the Closing Date. The Company, ▇▇▇▇▇▇ and the Individuals shall have
duly performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them at or before the Closing
Date. The Buyer shall have been furnished with certificates of the Individuals
and of appropriate officers of the Company and ▇▇▇▇▇▇ certifying in such detail
as the Buyer may reasonably request to the fulfillment of the foregoing
conditions.
SECTION 8.02. CERTAIN DOCUMENTS. ▇▇▇▇▇▇ shall have
furnished the Buyer with the following documents:
(a) The Certificate or Articles (as the case may be) of
Incorporation of the Company and ▇▇▇▇▇▇ and all amendments thereto, duly
certified by the proper officials of the jurisdictions in which the Company and
▇▇▇▇▇▇ were organized;
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(b) Certificates as to the good standing of the Company
and ▇▇▇▇▇▇ and payment of all applicable state taxes thereby, executed, in the
case of the Company, by the appropriate official of the State of Delaware and
each jurisdiction listed in Schedule 2.01, and, in the case of ▇▇▇▇▇▇, by the
appropriate official of the State of South Dakota and each jurisdiction listed
in Schedule 2.01;
(c) The by-laws of the Company and ▇▇▇▇▇▇, duly certified
by the incorporator of the Company and the Secretary or an Assistant Secretary
of ▇▇▇▇▇▇ as being in full force and effect;
(d) Uniform Commercial Code search reports, on Form
UCC-11 or other appropriate form, from the appropriate official for the States
of Delaware, South Dakota and other jurisdictions in which ▇▇▇▇▇▇ is qualified
to do business, and from the appropriate official or recording office in each
county or other jurisdictional subdivision of each state in which the Company
or ▇▇▇▇▇▇ leases any real property or maintains an office or any assets, as to
any liens, claims, charges, exceptions or encumbrances of record on any of the
assets, properties or business of the Company or ▇▇▇▇▇▇;
(e) Resignations, effective on the Closing Date, of
certain of the officers and directors of ▇▇▇▇▇▇, other than ▇▇▇▇▇ ▇▇▇▇▇▇, as
may be requested by the Buyer;
(f) The complete and correct corporate minute books,
stock transfer records and corporate seals of the Company and ▇▇▇▇▇▇;
(g) A certificate of the Secretary or an Assistant
Secretary of ▇▇▇▇▇▇ certifying (i) that attached thereto is a true and complete
copy of all instruments reflecting actions of the incorporator of the Company,
and of all resolutions of the board of directors of ▇▇▇▇▇▇ pertaining to the
Transactions, the latter being duly adopted at meetings of such board at which
a quorum of directors was present and acting throughout, and certifying (ii) as
to the incumbency and authority of the incorporator and officers of the Company
and ▇▇▇▇▇▇ executing this Agreement and the documents executed and delivered by
the Company and ▇▇▇▇▇▇ in connection herewith;
(h) Evidence satisfactory to the Buyer that the members
of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group are the sole stockholders of ▇▇▇▇▇▇ and that the
Company has no stockholders;
(i) Evidence satisfactory to the Buyer respecting the
declaration of a dividend by ▇▇▇▇▇▇ to the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group,
in return of a capital contribution, in the aggregate amount of $600,000;
(j) Third-party and governmental and regulatory approvals
and consents necessary to consummate the Transactions, including, without
limitation, all required approvals and consents of (i) FNBO, Valley and any
other lenders to ▇▇▇▇▇▇, (ii) lessors of Leased Realty and (iii) the Lease
Finance Group and/or its assignees, as applicable;
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(k) Evidence satisfactory to the Buyer that (i) the
Revolving Loan Agreement shall have been amended to provide for a Loan
Termination Date not earlier than May 31, 1997, and shall have been amended in
no other manner except for changes, if any, required to reflect the payment of
$1,500,000 to be made to FNBO at the Closing as contemplated by Section 1.05(d)
above, and (ii) the Valley Releases shall have been executed and delivered to
▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, respectively;
(l) A copy of the memorandum of the Auditors respecting
certain tax matters;
(m) A copy of the audited financial statements of ▇▇▇▇▇▇
for the fiscal year ended December 31, 1994, including a balance sheet, the
related statements of income and of changes in financial position for the
period then ended, the accompanying notes and reports of the Auditors, the only
qualification of which shall relate to the effect of the current status of
▇▇▇▇▇▇'▇ indebtedness to FNBO on ▇▇▇▇▇▇'▇ ability to continue as a going
concern;
(n) Evidence satisfactory to the Buyer that ▇▇▇▇▇ ▇▇▇▇▇▇
has obtained at least $130,000 in loan funds from his family members; and
(o) All documents referred to herein and such other
documents as the Buyer may reasonably request.
SECTION 8.03. OPINION OF COUNSEL. The firm of Lynn, Jackson,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. shall have delivered to the Buyer a favorable opinion or
opinions, dated the Closing Date, substantially in the form of Exhibit J.
SECTION 8.04. LEGAL MATTERS SATISFACTORY. All legal
matters, and the form and substance of all documents to be delivered by the
Company, ▇▇▇▇▇▇ and the Individuals to the Buyer at the Closing, shall have
been approved by and satisfactory to the Buyer.
SECTION 8.05. THE BUYER SHARES. The Company shall have
delivered to the Buyer a certificate or certificates for the Buyer Shares
together with funds sufficient for payment of any applicable stock transfer tax
payable in respect of the transfer of the Buyer Shares to the Buyer.
SECTION 8.06. FORMER STOCKHOLDER RELEASES. Each Former
Stockholder shall have delivered to the Buyer, the Company, ▇▇▇▇▇▇ and the
members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group a general release of all claims he or she may
have through the Closing Date against the Company, ▇▇▇▇▇▇ or any member of the
▇▇▇▇▇ ▇▇▇▇▇▇ Group.
SECTION 8.07. NO MATERIAL CHANGE. There shall not have
been any material adverse change in the assets, liabilities, results of
operations, business, or prospects of the Company or ▇▇▇▇▇▇ at the Closing Date
from that disclosed in the Balance Sheet for the period from the date of the
Balance Sheet to the Closing Date, or in the assets or properties of the
Company and ▇▇▇▇▇▇, taken as a whole, from the date of the Balance Sheet to the
Closing Date, and the Buyer shall have been furnished with a certificate to
that effect executed by the President
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or Vice President and the Treasurer or Chief Financial Officer of ▇▇▇▇▇▇ and
the incorporator of the Company.
SECTION 8.08. NO LITIGATION. No action, suit, proceeding
or investigation shall be pending or, so far as is known to the Buyer, the
Individuals, the Company or ▇▇▇▇▇▇'▇ executive officers, be threatened before
any court or governmental body, or by any governmental agency challenging the
transactions contemplated by this Agreement or otherwise seeking damages, or
seeking to restrain or prevent the consummation of the Transactions or to
prohibit or limit the ability of the Buyer to exercise full rights of ownership
of the Buyer Shares.
SECTION 8.09. OTHER AGREEMENTS. The Company, ▇▇▇▇▇▇ and
the Individuals, in each case as applicable, shall have executed and delivered
the Loan Agreements, the Stockholders' Agreement, the License Agreement, the
Reimbursement Agreement, their respective Warrant Agreements and
Indemnification Agreements.
SECTION 8.10. TITLE INSURANCE. The Buyer shall have
obtained title insurance for the Owned Realty which represents the principal
place of business of ▇▇▇▇▇▇ in amounts and pursuant to such terms and
conditions as the Buyer shall reasonably require.
SECTION 8.11. COMPANY CONSENTS, ETC. The Company and
▇▇▇▇▇▇ shall have received all written consents, authorizations and approvals
for the Transactions (i) required by any applicable law, rule or regulation of
any Federal or state governmental or administrative body, (ii) from the lessors
under the Leases, (iii) from FNBO, such consent to include the FNBO Extension,
(iv) from Valley and from any other lender pursuant to the Mortgages, (v) from
the Lease Finance Group and/or its assignees, as required, and (vi) from any
other third party to a material contract with the Company or ▇▇▇▇▇▇ as deemed
necessary by the Buyer.
SECTION 8.12. BUYER CONSENTS. The Buyer shall have
received consent to the Transactions from such of its lenders as may be
required.
SECTION 8.13. ENVIRONMENTAL. The Buyer shall have received a
Phase I environmental study with respect to the Owned Realty and the Leased
Realty satisfactory in form and substance to the Buyer.
ARTICLE IX
CONDITIONS TO THE COMPANY'S AND ▇▇▇▇▇ ▇▇▇▇▇▇'▇ OBLIGATIONS
The obligations of the Company to sell the Buyer Shares to the
Buyer pursuant to this Agreement and of ▇▇▇▇▇ ▇▇▇▇▇▇ to execute and deliver
this Agreement and the Other Agreements to which he is a party shall be subject
to the satisfaction, at or before the Closing Date, of the following conditions
(any of which may be waived, in whole or in part, by the Company or ▇▇▇▇▇
▇▇▇▇▇▇):
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SECTION 9.01. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Buyer contained in this Agreement or in
any certificate or document delivered to the Company pursuant hereto shall be
true in all material respects at the Closing Date as if made on and as of the
Closing Date. The Buyer shall have duly performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with by the Buyer at or before the Closing Date. The Company shall
have been furnished with certificates of appropriate officers of the Buyer,
dated the Closing Date, certifying in such detail as the Company may reasonably
request to the fulfillment of the foregoing conditions.
SECTION 9.02. PAYMENT. The Buyer shall have paid to the
Company by wire transfer on the Closing Date the amount required to be paid to
the Company pursuant to Section 1.02.
SECTION 9.03. OPINION OF COUNSEL. The Buyer shall have
furnished to the Company and ▇▇▇▇▇ ▇▇▇▇▇▇ a favorable opinion, dated the
Closing Date, of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., General Counsel of the Buyer,
substantially in the form of Exhibit K.
SECTION 9.04. CERTAIN DOCUMENTS. The Buyer shall have
furnished the Company with the following documents:
(a) The Certificate of Incorporation of the Buyer and all
amendments thereto;
(b) Certificate as to the good standing of the Buyer,
executed by the appropriate official of the State of Delaware.
(c) The By-laws of the Buyer, duly certified by the
Secretary or an Assistant Secretary of the Buyer as being in full force and
effect;
(d) A certificate of the Secretary or an Assistant
Secretary of the Buyer certifying (i) that attached thereto is a true and
complete copy of all resolutions of the executive committee of the board of
directors of the Buyer pertaining to the Transactions, duly adopted at meetings
of such committee at which a quorum of directors was present and acting
throughout and (ii) as to the incumbency and authority of the officers of the
Buyer executing this Agreement and the documents executed and delivered by the
Buyer in connection herewith; and
(e) such other documents as the Company may reasonably
request.
SECTION 9.05. OTHER AGREEMENTS. The Buyer shall have
executed and delivered the Stockholders' Agreement, the License Agreement (in
acknowledgment of its obligations pursuant to Article IX thereof), the
Reimbursement Agreement and the Indemnification Agreements.
SECTION 9.06. LEGAL MATTERS SATISFACTORY. All legal
matters, and the form and substance of all documents to be delivered by the
Buyer to the Company, ▇▇▇▇▇▇ and the Individuals, shall have been approved by
and satisfactory to the Company, ▇▇▇▇▇▇ and the Individuals.
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SECTION 9.07. CONSENTS. The Buyer shall have received all
written consents, authorizations and approvals required by any applicable law,
rule or regulation of any Federal or state governmental or administrative body
respecting the sale of the Buyer Shares pursuant to the provisions of this
Agreement.
SECTION 9.08. VALLEY RELEASES. ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇ shall have received their respective Valley Releases, each such release
to be satisfactory in form and substance to such party and his counsel.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. BANK AND VENDOR TRANSACTIONS. At the Closing,
the Company and/or ▇▇▇▇▇▇ shall provide satisfactory evidence of (a) the
payment of $1,500,000 to FNBO and the receipt of the FNBO Extension; (b) the
payment of $400,000 to Valley and the receipt of the Valley Release; (c) the
repayment of certain notes payable to the Former Stockholders as set forth in
Schedule 1.05; (d) the payment to the members of the ▇▇▇▇▇ ▇▇▇▇▇▇ Group of cash
dividends in the aggregate amount of $600,000 declared on April 28, 1995 as set
forth in such Schedule; and (e) the payment to the Former Stockholders of the
outstanding Redemption Notes.
SECTION 10.02. OTHER COMMITMENTS OF ▇▇▇▇▇ ▇▇▇▇▇▇.
(a) At the Closing, ▇▇▇▇▇ ▇▇▇▇▇▇ shall purchase from
▇▇▇▇▇▇ the meeting facility of ▇▇▇▇▇▇ located at Okoboji Lake, Iowa,
as more fully described in Exhibit L attached hereto, for a cash
purchase price of $75,000, payable one third at the Closing, one third
on or before July 1, 1995 and one third on or before December 31,
1995, in each case by certified check or wire transfer with no
prepayment penalties or interest charges to an account designated by
▇▇▇▇▇▇, in exchange for a quitclaim deed in recordable form to be
delivered to ▇▇▇▇▇ ▇▇▇▇▇▇ by ▇▇▇▇▇▇ upon full payment of all such
amounts.
(b) ▇▇▇▇▇ ▇▇▇▇▇▇ will expend at least $800,000 in the
opening and roll out of the two New Stores to be opened pursuant to
the License Agreement.
SECTION 10.03. OTHER COMMITMENTS OF THE BUYER.
(a) The Buyer agrees to cause its subsidiaries to phase
in the receipt of ▇▇▇▇▇▇ catalog telemarketing activities pursuant to
a schedule to be mutually agreed upon by ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and the
Buyer. The Buyer further agrees that it shall not allocate to the
Company or ▇▇▇▇▇▇ any telemarketing customer contact costs incurred
from the Closing Date through December 30, 1995 in excess of $3.28 per
customer order, representing a guaranteed savings of at least 10% over
▇▇▇▇▇▇'▇ projected 1995 Business Plan cost of $3.64 per customer order
(based upon such Plan's budgeted talk time and call to order ratio).
For the 1996 fiscal year and beyond, costs shall be allocated in the
same manner as for the Buyer's other catalogs, as set forth in the
Reimbursement Agreement.
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The Buyer will retain and produce for inspection during normal
business hours, on reasonable notice by ▇▇▇▇▇▇, data sufficient to
verify the accuracy of the costs incurred and allocations made. The
Buyer agrees that ▇▇▇▇▇▇ shall not approve the relocation of warehouse
and telemarketing facilities for the ▇▇▇▇▇▇ business in the absence of
a demonstrated plan for savings of at least 10% over ▇▇▇▇▇▇'▇
now-current fulfillment costs.
(b) The Buyer agrees that the Buyer will, at its expense,
use its best efforts to link the Buyer's MACSII system with ▇▇▇▇▇▇'▇
▇▇▇▇▇▇▇ and inventory forecasting systems on a one-way outbound feed
from a data center operated by the Buyer or one of its subsidiaries.
The Buyer further agrees to use its best efforts to integrate ▇▇▇▇▇▇'▇
operations with the Buyer's MACSII system by March 31, 1996 and to
complete such outbound-feed link within sixty (60) days following such
integration into the MACSII system.
(c) The Buyer acknowledges to ▇▇▇▇▇ ▇▇▇▇▇▇ its present
intention to cause the Company and/or ▇▇▇▇▇▇ to open one new ▇▇▇▇▇▇'▇
retail store in 1995 and four in 1996, provided in each case that (i)
the Company's ▇▇▇▇▇▇'▇ retail stores collectively are profitable, (ii)
the Company as a whole is operating on budget and (iii) the new stores
in question are self-funding (including use of availability under the
Revolving Loan Agreement provided that such use does not restrict in
any way other business activities of the Company and/or ▇▇▇▇▇▇) so
that no financing need be obtained in order to open any such store.
The parties acknowledge that the statement of intention set forth in
this Section 10.03(c) shall be a nonbinding expression of intent only.
(d) The Buyer agrees with each of ▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ that, within the following time periods, the Buyer will
obtain the release and discharge of the respective personal guarantees
made by each: (i) the guarantees in favor of FNBO, on or before May
31, 1997, and (ii) the guarantees in favor of the Lease Finance Group
as set forth in Schedule 2.06, on or before May 31, 1998.
(e) The Buyer agrees with each of ▇▇▇▇▇ ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to execute and deliver, at the Closing, the
Indemnification Agreements, substantially in the form set forth in
Exhibit G, with such additions and changes as shall be agreed upon by
the Buyer, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
SECTION 10.04. REPRESENTATIONS AND WARRANTIES. The
representations and warranties made in this Agreement and in any certificate,
Schedule, Exhibit, release or other instrument or document delivered in
connection therewith shall survive the Closing Date. The covenants of the
parties hereto shall continue in full force and effect in accordance with their
terms.
SECTION 10.05. NO BROKERS. Except as contemplated by Section
1.03 hereof, each party hereto represents and warrants that there are no claims
for brokerage commissions or finder's fees in connection with the transactions
contemplated hereby resulting from any action taken by any party, or the
officers or directors of any corporate party.
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SECTION 10.06. GOVERNING LAW. This Agreement shall be
construed and enforced in accordance with the internal, substantive laws of the
State of New Jersey, without giving effect to the conflict of law rules
thereof.
SECTION 10.07. NOTICES. All notices, consents, requests,
instructions, approvals and other communications provided for herein shall be
deemed validly given, made or served if in writing and delivered personally (as
of such delivery) or sent by certified mail, return receipt requested (as of
two days after deposit in a United States post office), postage prepaid, or by
facsimile transmission (as of such transmission provided it is subsequently
confirmed in writing) or by prepaid overnight courier (as of the time of
delivery):
(a) if to the Buyer, addressed to:
Hanover Direct, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to the Company or ▇▇▇▇▇▇, addressed to:
▇▇▇▇▇▇ Holdings, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax. No.: ▇▇▇-▇▇▇-▇▇▇▇
(c) if to the Individuals, addressed to:
c/o ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
and also to:
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as shall be furnished in writing by a party to the
others. It is understood and agreed that the confirmed receipt by either of
▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of a notice sent to them on behalf of the
Individuals shall constitute notice to all of the Individuals.
SECTION 10.08. JURISDICTION; AGENT FOR SERVICE. Legal
proceedings commenced by any party hereto arising out of any of the
Transactions or obligations contemplated by this Agreement shall be brought
exclusively in the Federal courts or, in the absence of Federal jurisdiction,
state courts, in either case in the State of New Jersey. The parties hereto
irrevocably and unconditionally submit to the jurisdiction of such courts and
agree to take any and all future action necessary to submit to the jurisdiction
of such courts. Each of the parties hereto irrevocably waives any objection
which it may now or hereafter have to the laying of venue of
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any suit, action or proceeding brought in any Federal or state court in the
State of New Jersey and further irrevocably waives any claims that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. The Company hereby irrevocably designates, appoints and
empowers Corporation Trust Company, whose present address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, as its authorized agent to receive, for
and on behalf of the Company, service of process in the State of New Jersey as
and when such actions and proceedings may be brought, and such service of
process shall be deemed completed upon the date of delivery thereof to such
agent, whether or not such agent gives notice thereof to the Company, or upon
the earliest of any other date permitted by applicable law. Final judgment
against the Company in any such suit shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and the amount of any indebtedness or
liability of the Company therein described, or by appropriate proceedings under
any applicable treaty or otherwise.
SECTION 10.09. ASSIGNMENT; AMENDMENTS, WAIVERS.
(a) Neither the Buyer nor the Company shall assign any of
its rights or obligations under this Agreement without the prior written
consent of the other, except that the Buyer may assign its rights hereunder to
one or more direct or indirect wholly-owned subsidiaries of the Buyer provided
that the Buyer shall continue to be obligated to perform all the obligations to
be performed by the Buyer hereunder.
(b) This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective successors and permitted
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
(c) No provision of this Agreement may be amended,
modified or waived except by written agreement duly executed by each of the
parties.
SECTION 10.10. ENTIRE AGREEMENT. This Agreement represents
the entire agreement between the parties and supersedes and cancels any prior
oral or written agreement, letter of intent or understanding related to the
subject matter hereof, including, without limitation, that certain letter of
intent dated March 15, 1995 among the Buyer, ▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇
individually and on behalf of the other Individuals.
SECTION 10.11. BINDING AGREEMENT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and no other person shall acquire
or have any right under or by virtue of this Agreement.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed
in one or more counterparts, and shall become effective when one or more
counterparts have been signed by
--BALANCE OF PAGE LEFT INTENTIONALLY BLANK--
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each of the parties.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto on the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: EVP
▇▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Incorporator
THE ▇▇▇▇▇▇ COMPANY
By: ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President/CEO
THE INDIVIDUALS:
(a) THE ▇▇▇▇▇ ▇▇▇▇▇▇ GROUP:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, as custodian for each of
▇▇▇▇, ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
(b) THE FORMER STOCKHOLDERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
--SIGNATURES CONTINUED ON FOLLOWING ▇▇▇▇--
▇▇
▇▇
--SIGNATURES CONTINUED FROM PRECEDING PAGE--
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇, as custodian for each of
Kara and ▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, his
attorney in fact
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