STOCK PURCHASE AGREEMENT AMONG TITAN GLOBAL HOLDINGS, INC. USA DETERGENTS, INC. USAD METRO HOLDINGS, LLC AND URI EVAN Dated as of July 30, 2007
AMONG
USA
DETERGENTS, INC.
USAD
METRO HOLDINGS, LLC
AND
URI
EVAN
Dated
as
of July 30, 2007
STOCK
PURCHASE AGREEMENT, dated as of July 30, 2007 (the “Agreement”), among Titan
Global Holdings, Inc., a corporation existing under the laws of Utah (the
“Purchaser”), USA Detergents, Inc., a corporation existing under the laws of
Delaware (the “Company”), and USAD Metro Holdings, LLC, a limited liability
company formed under the laws of New Jersey (the “Seller”), and Uri Evan, an
individual (“Evan”).
WITNESSETH:
WHEREAS,
Evan is a member of the Seller and the Seller owns (among other shares) an
aggregate of 32,000 shares of class A common stock, $.01 par value and 8,000
shares of class B common stock, $.01 par value (the “Shares”), of the Company,
which Shares constitute eighty percent (80%) of the issued and outstanding
shares of capital stock and voting rights of the Company; and
WHEREAS,
the Seller desires grant to the Purchaser a right to purchase the Shares, and
the Purchaser desires to have the right to purchase from the Seller, the Shares
for the purchase price and upon the terms and conditions hereinafter set forth;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE
I
GRANT
OF
RIGHT TO PURCHASE OF SHARES
1.1 Grant
of
Right to Purchase of Shares; Escrow.
Upon
the
closing (the “Closing”), the Seller shall deposit the Shares into escrow
pursuant to the terms and provisions of the escrow agreement attached hereto
as
Exhibit 1.1 (the “Escrow Agreement”). Upon the terms and subject to the
conditions contained herein, effective on and after the Closing and for a period
of sixty (60) days thereafter, the Purchaser shall have the right to purchase
the Shares from the Seller for the aggregate payment of One Dollar ($1.00)
(the
“Option”). Upon the exercise of such purchase option, the Seller shall be deemed
to sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser shall be deemed to purchase the Shares from the Seller.
ARTICLE
II
CLOSING
AND TERMINATION
2.1 Closing
Date.
Subject
to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof
(or the waiver thereof by the party entitled to waive that condition), the
Closing of the sale and purchase of the Option provided for in Section 1.1
hereof shall take place at the offices of Sichenzia ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
located at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other place as
the
parties may designate in writing) on such date as the Seller and the Purchaser
may designate. The date on which the Closing shall be held is referred to in
this Agreement as the "Closing Date".
2.2 Termination
of Agreement.
This
Agreement may be terminated prior to the Closing as follows:
(a) At
the
election of the Seller or the Purchaser on or after July 20, 2007, if the
Closing shall not have occurred by the close of business on such date, provided
that the terminating party is not in default of any of its obligations
hereunder;
(b) by
mutual
written consent of the Seller and the Purchaser; or
(c) by
the
Seller or the Purchaser if there shall be in effect a final nonappealable order
of a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
it being agreed that the parties hereto shall promptly appeal any adverse
determination which is not nonappealable (and pursue such appeal with reasonable
diligence).
2.3 Procedure
Upon Termination.
In
the
event of termination and abandonment by the Purchaser or the Seller, or both,
pursuant to Section 2.2 hereof, written notice thereof shall forthwith be given
to the other party or parties, and this Agreement shall terminate, and the
purchase of the Option hereunder shall be abandoned, without further action
by
the Purchaser or the Seller. If this Agreement is terminated as provided herein,
each party shall redeliver all documents, work papers and other material of
any
other party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party furnishing the
same.
2.4 Effect
of Termination.
In
the
event that this Agreement is validly terminated as provided herein, then each
of
the parties shall be relieved of their duties and obligations arising under
this
Agreement after the date of such termination and such termination shall be
without liability to the Purchaser, the Company or the Seller; provided,
however, that the obligations of the parties set forth in Section 10.4 hereof
shall survive any such termination and shall be enforceable hereunder; provided,
further, however, that nothing in this Section 2.4 shall relieve the Purchaser
or the Seller of any liability for a breach of this Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE SELLER
For
purposes of this Agreement, the term "Material Adverse Change" when used in
connection with a Borrower means any change, event, violation, inaccuracy,
circumstance or effect that is materially adverse to the business, assets
(including intangible assets), capitalization, financial condition or results
of
operations of such Borrower and its subsidiaries taken as a whole.
2
The
Company and the Seller hereby jointly and severally represent and warrant to
the
Purchaser that:
3.1. Organization
and Good Standing of the Company.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation as set forth above.
The
Company is not required to be qualified to transact business in any other
jurisdiction where the failure to so qualify would have an adverse effect on
the
business of the Company.
3.2. Authority.
(a) The
Company has full power and authority (corporate and otherwise) to carry on
its
business and has all permits and licenses that are necessary to the conduct
of
its business or to the ownership, lease or operation of its properties and
assets.
(b) The
execution of this Agreement and all related agreements and the delivery hereof
and thereof to the Purchaser and the sale contemplated herein have been, or
will
be prior to Closing, duly authorized by the Company’s Board of Directors and by
the Company’s stockholders having full power and authority to authorize such
actions.
(c) Subject
to any consents required under Section 3.7 below, the Seller and the Company
have the full legal right, power and authority to execute, deliver and carry
out
the terms and provisions of this Agreement; and this Agreement has been duly
and
validly executed and delivered on behalf of Seller and the Company and
constitutes a valid and binding obligation of each Seller and the Company
enforceable in accordance with its terms.
(d) Except
as
set forth in Schedule 3.2, neither the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated, nor compliance with
the terms of this Agreement will violate, conflict with, result in a breach
of,
or constitute a default under any statute, regulation, indenture, mortgage,
loan
agreement, or other agreement or instrument to which the Company or the Seller
is a party or by which it or any of them is bound, any charter, regulation,
or
bylaw provision of the Company, or any decree, order, or rule of any court
or
governmental authority or arbitrator that is binding on the Company or any
Seller in any way.
3.3. Capitalization; Shares.
(a) The
Company’s authorized capital stock consists of 40,000 shares of class A common
stock, par value $.01 per share, of which 40,000 are issued and outstanding,
10,000 shares of class B common stock, par value $.01 per share, of which 10,000
are issued and outstanding, and 10,000 shares of preferred stock, par value
$.01
per share, none of which are issued or outstanding. All of the Shares are duly
authorized, validly issued, fully paid and non-assessable.
3
(b) There
are
no authorized or outstanding subscriptions, options, warrants, calls, contracts,
demands, commitments, convertible securities or other agreements or arrangements
of any character or nature whatever under which the Seller or the Company are
or
may become obligated to issue, assign or transfer any shares of capital stock
of
the Company. Upon the delivery to Purchaser of the certificate(s) representing
the Shares, Purchaser will have good, legal, valid, marketable and indefeasible
title to eighty percent (80%) of the then issued and outstanding shares of
capital stock of the Company, free and clear of any liens, pledges,
encumbrances, charges, agreements, options, claims or other arrangements or
restrictions of any kind.
(c) The
only
shareholders of the Company are the Seller and Church & ▇▇▇▇▇▇ Company
(“Church and ▇▇▇▇▇▇”).
3.4. Basic
Corporate Records.
The
copies of the Articles of Incorporation of the Company, as defined in Section
3.6 hereof (certified by the Secretary of State or other authorized official
of
the jurisdiction of incorporation), and the Bylaws of the Company, as the case
may be (certified as of the date of this Agreement as true, correct and complete
by the Company’s secretary or assistant secretary), all of which have been
delivered to the Purchaser, are true, correct and complete as of the date of
this Agreement.
3.5. Minute
Books.
The
minute books of the Company, which shall be exhibited to the Purchaser between
the date hereof and the Closing Date, each contain true, correct and complete
minutes and records of all meetings, proceedings and other actions of the
shareholders, Board of Directors and committees of such Board of Directors
of
the Company, if any, and, on the Closing Date, will contain true, correct and
complete minutes and records of any meetings, proceedings and other actions
of
the shareholders and Board of Directors and committees of the Board of Directors
of the Company.
3.6. Subsidiaries
and Affiliates.
Any and
all businesses, entities, enterprises and organizations in which the Company
has
any ownership, voting or profit and loss sharing percentage interest (the
“Subsidiaries”) are identified in Section 3.6 hereto, together with the
Company’s interest therein. Unless the context requires otherwise or
specifically designated to the contrary on Section 3.6 hereto, “Company” as used
in this Agreement shall include all such Subsidiaries. Except as set forth
in
Section 3.6, (i) the Company has made no advances to, or investments in, nor
owns beneficially or of record, any securities of or other interest in, any
business, entity, enterprise or organization, (ii) there are no
arrangements through which the Company has acquired from, or provided to, the
Seller or their affiliates any goods, properties or services, (iii) there
are no rights, privileges or advantages now enjoyed by the Company as a result
of the ownership of the Company by the Seller which, to the knowledge of the
Seller or the Company, might be lost as a result of the consummation of the
transactions contemplated by this Agreement. Each entity shown on Schedule
3.6
is duly organized, validly existing and in good standing under the laws of
the
jurisdiction of its incorporation, and has full corporate power to own all
of
its property and to carry on its business as it is now being conducted. Also
set
forth on Schedule 3.6 is a list of jurisdictions in which each Subsidiary is
qualified as a foreign corporation. Such jurisdictions are the only
jurisdictions in which the ownership or leasing of property by each Subsidiary
or the conduct of its business requires it to be so qualified. All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable, and, except as set forth
on Schedule 3.6, are owned, of record and beneficially, by the Company, and
on
the Closing Date will be owned by the Company, free and clear of all liens,
encumbrances, equities, options or claims whatsoever. No Subsidiary has
outstanding any other equity securities or securities options, warrants or
rights of any kind that are convertible into equity securities of such
Subsidiary, except as set forth on Schedule 3.6.
4
For
purposes of this Agreement, "Affiliate"
means, with respect to any Person, a relative, partner, shareholder, member,
manager, director, officer, or employee of such Person, any parent or subsidiary
of such Person, or any Person controlling, controlled by or under common control
with such Person or any other Person affiliated, directly or indirectly, by
virtue of family membership, ownership, management or otherwise.
"Person"
means any individual, sole proprietorship, partnership, joint venture, limited
liability
company, trust, unincorporated organization, association, corporation,
government or any agency or political division thereof, or any other
entity.
3.7. Consents.
Except
as set forth in Schedule 3.7, no consents or approvals of any public body or
authority and no consents or waivers from other parties to leases, licenses,
franchises, permits, indentures, agreements or other instruments are
(i) required for the lawful consummation of the transactions contemplated
hereby, or (ii) necessary in order that the business of the Company can be
conducted by the Purchaser in the same manner after the Closing as heretofore
conducted by the Company, nor will the consummation of the transactions
contemplated hereby result in creating, accelerating or increasing any liability
of the Company.
3.8. Financial
Statements.
The
Company has delivered, or will deliver prior to Closing, to the Purchaser copies
of the following financial statements (which include all notes and schedules
attached thereto), all of which are true, complete and correct, have been
prepared from the books and records of the Company in accordance with generally
accepted accounting principles (“GAAP”) consistently applied with past practice
and fairly present the financial condition, assets, liabilities and results
of
operations of the Company as of the dates thereof and for the periods covered
thereby:
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the
audited balance sheet of the Company as at December 31, 2005 and
2006, and
the related audited statements of operations, and of cash flows of
the
Company for the period then ended, (ii) the unaudited balance sheet
of the
Company as of March 31, 2007 and the related compiled statement of
operations of the Company for the five month period then ended, and
(iii)
the unaudited balance sheet and related financial trial balances
through
June 30, 2007 and the eight months prior thereto, without notes which
are
not in accordance with GAAP (such statements, including the related
notes
and schedules thereto, are referred to herein as the “Financial
Statements.”)
|
In
such
Financial Statements, the Statements of Operations do not contain any items
of
special or nonrecurring income or any other income not earned in the ordinary
course of business except as set forth in Schedule 3.8, and the financial
statements for the interim periods indicated include all adjustments, which
consist of only normal recurring accruals, necessary for such fair presentation.
There are no facts known to any of the Seller or the Company that, under
generally accepted accounting principles consistently applied, would alter
the
information contained in the foregoing Financial Statements in any material
way,
which may also include immaterial changes to accounts payable as of June 30,
2007.
5
For
the
purposes hereof, the balance sheet of the Company as of June 30, 2007 is
referred to as the “Balance Sheet” and June 30, 2007 is referred to as the
“Balance Sheet Date”.
3.9. Records
and Books of Account.
The
records and books of account of the Company and of each Subsidiary reflect
all
material items of income and expense and all material assets, liabilities and
accruals, and have been, and to the Closing Date will be, regularly kept and
maintained in conformity with GAAP applied on a consistent basis with preceding
years.
3.10. Absence
of Undisclosed Liabilities.
Except
as and to the extent reflected or reserved against in the Company’s Financial
Statements or disclosed in Schedule 3.10, there are no liabilities or
obligations of the Company of any kind whatsoever, whether accrued, fixed,
absolute, contingent, determined or determinable, and including without
limitation (i) liabilities to former, retired or active employees of the
Company under any pension, health and welfare benefit plan, vacation plan or
other plan of the Company, (ii) tax liabilities incurred in respect of or
measured by income for any period prior to the close of business on the Balance
Sheet Date, or arising out of transactions entered into, or any state of facts
existing, on or prior to said date, and (iii) contingent liabilities in the
nature of an endorsement, guarantee, indemnity or warranty, and there is no
condition, situation or circumstance existing or which has existed that could
reasonably be expected to result in any liability of the Company, other than
liabilities and contingent liabilities incurred in the ordinary course of
business since the Balance Sheet Date consistent with the Company’s recent
customary business practice, none of which is materially adverse to the
Company.
3.11 Taxes.
(a) For
purposes of this Agreement, “Tax” or “Taxes” refers to: (i) any and all federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities relating to taxes, including taxes based
upon or measured by gross receipts, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes and escheatment payments,
together with all interest, penalties and additions imposed with respect to
such
amounts and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of
a
predecessor entity; (ii) any liability for the payment of any amounts of the
type described in clause (i) as a result of being or ceasing to be a member
of
an affiliated, consolidated, combined or unitary group for any period
(including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of foreign, state or local
law); and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
6
(b) (i) The
Company has timely filed all federal, state, local and foreign returns,
estimates, information statements and reports (“Returns”) relating to Taxes
required to be filed by the Company with any Tax authority. All such Returns
are
true, correct and complete in all respects. The Company has paid all Taxes
shown
to be due on such Returns. Except as listed on Schedule 4.11 hereto, the Company
is not currently the beneficiary of any extensions of time within which to
file
any Returns. The Seller and the Company have furnished and made available to
the
Purchaser complete and accurate copies of all income and other Tax Returns
and
any amendments thereto filed by the Company in the last three (3)
years.
(ii) The
Company, as of the Closing Date, will have withheld and accrued or paid to
the
proper authority all Taxes required to have been withheld and accrued or
paid.
(iii) The
Company has not been delinquent in the payment of any Tax nor is there any
Tax
deficiency outstanding or assessed against the Company. The Company has not
executed any unexpired waiver of any statute of limitations on or extending
the
period for the assessment or collection of any Tax.
(iv) There
is
no dispute, claim, or proposed adjustment concerning any Tax liability of the
Company either (A) claimed or raised by any Tax authority in writing or
(B) based upon personal contact with any agent of such Tax authority, and
there is no claim for assessment, deficiency, or collection of Taxes, or
proposed assessment, deficiency or collection from the Internal Revenue Service
or any other governmental authority against the Company which has not been
satisfied. The Company is not a party to nor has it been notified in writing
that it is the subject of any pending, proposed, or threatened action,
investigation, proceeding, audit, claim or assessment by or before the Internal
Revenue Service or any other governmental authority, nor does the Company have
any reason to believe that any such notice will be received in the future.
Neither the Internal Revenue Service nor any state or local taxation authority
has ever audited any income tax return of the Company. The Company has not
filed
any requests for rulings with the Internal Revenue Service. No power of attorney
has been granted by the Company or its Affiliates with respect to any matter
relating to Taxes of the Company. There are no Tax liens of any kind upon any
property or assets of the Company, except for inchoate liens for Taxes not
yet
due and payable.
(v) The
Company has no liability for any unpaid Taxes which has not been paid or accrued
for or reserved on the Financial Statements in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise.
(vi) There
is
no contract, agreement, plan or arrangement to which the Company is a party
as
of the date of this Agreement, including but not limited to the provisions
of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, would reasonably be expected to give rise to
the
payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”).
There
is no contract, agreement, plan or arrangement to which the Company is a party
or by which it is bound to compensate any individual for excise taxes paid
pursuant to Section 4999 of the Code.
7
(vii) The
Company has not filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition
of
a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned
by
the Company.
(viii) The
Company is not a party to, nor has any obligation under any tax-sharing, tax
indemnity or tax allocation agreement or arrangement.
(ix) None
of
the Company’s assets are tax exempt use property within the meaning of
Section 168(h) of the Code.
3.12. Accounts
Receivable.
The
accounts receivable of the Company shown on the Balance Sheet Date, and those
to
be shown in the Financial Statements, are, and will be, actual bona fide
receivables from transactions in the ordinary course of business representing
valid and binding obligations of others for the total dollar amount shown
thereon, and as of the Balance Sheet Date were not (and presently are not)
subject to any recoupments, set-offs, or counterclaims. All such accounts
receivable are and will be collectible in amounts not less than the amounts
(net
of reserves) carried on the books of the Company, including the Financial
Statements, and will be paid in accordance with their terms. Except as listed
on
Schedule 3.12 hereto, all such accounts receivable are and will be actual bona
fide receivables from transactions in the ordinary course of
business.
3.13. Inventory.
The
inventories of the Company are located at the locations listed on Schedule
3.13
attached hereto. The
inventories of the Company shown on its Balance Sheet (net of reserves) are
carried at values which reflect the normal inventory valuation policy of the
Company of stating the items of inventory at average cost in accordance with
generally accepted accounting principles consistently applied. Inventory
acquired since the Balance Sheet Date has been acquired in the ordinary course
of business and valued as set forth above. The Company will maintain the
inventory in the normal and ordinary course of business from the date hereof
through the Closing Date. Notwithstanding the foregoing, the Company is using
commercially reasonable best efforts to sell slow moving inventory prior to
the
Closing Date.
3.14. Machinery
and Equipment.
Except
for items disposed of in the ordinary course of business, all machinery, tools,
furniture, fixtures, equipment, vehicles, leasehold improvements and all other
tangible personal property (hereinafter “Fixed Assets”) of the Company currently
being used in the conduct of its business, or included in determining the net
book value of the Company on the Balance Sheet Date, together with any machinery
or equipment that is leased or operated by the Company, are in fully serviceable
working condition and repair. Said Fixed Assets shall be maintained in such
condition from the date hereof through the Closing Date. Except as described
on
Schedule 3.14 hereto, all Fixed Assets owned, used or held by the Company are
situated at its business premises and are currently used in its business.
Schedule 3.14 describes all Fixed Assets owned by or an interest in which is
claimed by any other person (whether a customer, supplier or other person)
for
which the Company is responsible (copies of all agreements relating thereto
being attached to said Schedule 3.14), and all such property is in the Company’s
actual possession and is in such condition that upon the return of such property
in its present condition to its owner, the Company will not be liable in any
amount to such owner. There are no outstanding requirements or recommendations
by any insurance company that has issued a policy covering either (i) such
Fixed Assets or (ii) any liabilities of the Company relating to operation
of the Business, or by any board of fire underwriters or other body exercising
similar functions, requiring or recommending any repairs or work to be done
on
any Fixed Assets or any changes in the operations of the Business, any equipment
or machinery used therein, or any procedures relating to such operations,
equipment or machinery. All Fixed Assets of the Company are set forth on
Schedule 3.14 hereto.
8
3.15. Real
Property Matters.
The
Company does not own any real property as of the date hereof and has not owned
any real property during the three years preceding the date hereof.
3.16. Leases.
All
leases of real and personal property of the Company are described in Schedule
3.16, are in full force and effect and constitute legal, valid and binding
obligations of the respective parties thereto enforceable in accordance with
their terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting generally the enforcement
of
creditor’s rights, and have not been assigned or encumbered. The Company has
performed in all material respects the obligations required to be performed
by
it under all such leases to date and it is not in default in any material
respect under any of said leases, except as set forth in Schedule 3.16, nor
has
it made any leasehold improvements required to be removed at the termination
of
any lease, except signs. No other party to any such lease is in material default
thereunder. Except as noted on Schedule 3.16, none of the leases listed thereon
require the consent of a third party in connection with the transfer of the
Shares.
3.17. Patents,
Software, Trademarks, Etc.
The
Company owns, or possesses adequate licenses or other rights to use, all
patents, software, trademarks, service marks, trade names and copyrights and
trade secrets, if any, necessary to conduct its business as now operated by
it.
The patents, software, trademarks, service marks, copyrights, trade names and
trade secrets, if any, registered in the name of or owned or used by or licensed
to the Company and applications for any thereof (hereinafter the “Intangibles”)
are described or referenced in Schedule 3.17. The Company hereby specifically
acknowledge that all right, title and interest in and to all patents and
software listed on Schedule 3.17 as patents owned by the Company are owned
by
the Company and that the ownership of such patents and software will be
transferred as part of the Company to Purchaser as part of the transaction
contemplated hereby. No officer, director, shareholder or employee of the
Company or any relative or spouse of any such person owns any patents or patent
applications or any inventions, software, secret formulae or processes, trade
secrets or other similar rights, nor is any of them a party to any license
agreement, used by or useful to the Company or related to the Business except
as
listed in Schedule 3.17. All of said Intangibles are valid and in good standing,
are free and clear of all liens, security interests, charges, restrictions
and
encumbrances of any kind whatsoever, and have not been licensed to any third
party except as described in Schedule 3.17. The Company has not been charged
with, nor has it infringed, nor to the Seller’s knowledge is it threatened to be
charged with infringement of, any patent, proprietary rights or trade secrets
of
others in the conduct of its business, and, to the date hereof, neither the
Seller nor the Company has received any notice of conflict with or violation
of
the asserted rights in intangibles or trade secrets of others. The Company
is
not now manufacturing any goods under a present permit, franchise or license,
except as set forth in said Schedule 3.17. The consummation of the transactions
contemplated hereby will not alter or impair any rights of the Company in any
such Intangibles or in any such permit, franchise or license, except as
described in Schedule 3.17. The Intangibles and the Company’s tooling,
manufacturing and engineering drawings, process sheets, specifications, bills
of
material and other like information and data are in such form and of such
quality and will be maintained in such a manner that the Company can, following
the Closing, design, produce, manufacture, assemble and sell the products and
provide the services heretofore provided by it so that such products and
services meet applicable specifications and conform with the standards of
quality and cost of production standards heretofore met by it. The Company
has
the sole and exclusive right to use its corporate and trade names in the
jurisdictions where it transacts business.
9
3.18. Insurance
Policies.
There
is set forth in Schedule 3.18 a list and brief description of all insurance
policies on the date hereof held by the Company or on which it pays premiums,
including, without limitation, life insurance and title insurance policies,
which description includes the premiums payable by it thereunder. Schedule
3.18
also sets forth, in the case of any life insurance policy held by the Company,
the name of the insured under such policy, the cash surrender value thereof
and
any loans thereunder. All such insurance premiums in respect of such coverage
have been, and to the Closing Date will be, paid in full, or if not due,
properly accrued on the Balance Sheet. All claims, if any, made against the
Company which are covered by such policies have been, or are being, settled
or
defended by the insurance companies that have issued such policies. Up to the
Closing Date, such insurance coverage will be maintained in full force and
effect and will not be cancelled, modified or changed without the express
written consent of the Purchaser, except to the extent the maturity dates of
any
such insurance policies expiring prior to the Closing Date. No such policy
has
been, or to the Closing Date will be, cancelled by the issuer thereof, and,
to
the knowledge of the Seller and the Company, between the date hereof and the
Closing Date, there shall be no increase in the premiums with respect to any
such insurance policy caused by any action or omission of the Seller or of
the
Company.
3.19. Banking
and Personnel Lists.
The
Seller and the Company will deliver to the Purchaser prior to the Closing Date
the following accurate lists and summary descriptions relating to the
Company:
(i) The
name
of each bank in which the Company has an account or safe deposit box and the
names of all persons authorized to draw thereon or have access
thereto.
(ii) The
names, current annual salary rates and total compensation for the preceding
fiscal year of all of the present directors and officers of the Company, and
any
other employees whose current base accrual salary or annualized hourly rate
equivalent is $20,000 or more, together with a summary of the bonuses,
percentage compensation and other like benefits, if any, paid or payable to
such
persons for the last full fiscal year completed, together with a schedule of
changes since that date, if any.
10
(iii) A
schedule of workers’ compensation payments of the Company over the past five
full fiscal years and the fiscal year to date, a schedule of claims by employees
of the Company against the workers’ compensation fund for any reason over such
period, identification of all compensation and medical benefits paid to date
on
each such claim and the estimated amount of compensation and medical benefits
to
be paid in the future on each such claim.
(iv) The
name
of all pensioned employees of the Company whose pensions are unfunded and are
not paid or payable pursuant to any formalized pension arrangements, their
agent
and annual unfunded pension rates.
3.20. Lists
of Contracts, Etc.
There is
included in Schedule 3.20 a list of the following items (whether written or
oral) relating to the Company, which list identifies and fairly summarizes
each
item:
(i) All
collective bargaining and other labor union agreements (if any); all employment
agreements with any officer, director, employee or consultant; and all employee
pension, health and welfare benefit plans, group insurance, bonus, profit
sharing, severance, vacation, hospitalization, and retirement plans,
post-retirement medical benefit plans, and any other plans, arrangements or
custom requiring payments or benefits to current or retiring
employees.
(ii) All
joint
venture contracts of the Company or affiliates relating to the
Business;
(iii) All
contracts of the Company relating to (a) obligations for borrowed money,
(b) obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (d) obligations under capital leases, (e) debt of others
secured by a lien on any asset of the Company, and (f) debts of others
guaranteed by the Company.
(iv) All
agreements of the Company relating to the supply of raw materials for and the
distribution of the products of the Business, including without limitation
all
sales agreements, manufacturer’s representative agreements and distribution
agreements of whatever magnitude and nature, and any commitments
therefor;
(v) All
contracts that individually provide for aggregate future payments to or from
the
Company of $25,000 or more, to the extent not included in (i) through (iv)
above;
(vi) All
contracts of the Company that have a term exceeding one year and that may not
be
cancelled without any liability, penalty or premium, to the extent not included
in (i) through (v) above;
11
(vii) A
complete list of all outstanding powers of attorney granted by the Company;
and
(viii) All
other
contracts of the Company material to the business, assets, liabilities,
financial condition, results of operations or prospects of the Business taken
as
a whole to the extent not included above.
Except
as
set forth in Schedule 3.20, (i) all contracts, agreements and commitments
of the Company set forth in Schedule 3.20 are valid, binding and in full force
and effect, and (ii) neither the Company nor any other party to any such
contract, agreement, or commitment has materially breached any provision thereof
or is in default thereunder. Except as set forth in Schedule 3.20, the sale
of
the Shares by the Seller in accordance with this Agreement will not result
in
the termination of any contract, agreement or commitment of the Company set
forth in Schedule 3.20, and immediately after the Closing, each such contract,
agreement or commitment will continue in full force and effect without the
imposition or acceleration of any burdensome condition or other obligation
on
the Company resulting from the sale of the Shares by the Seller. True and
complete copies of the contracts, leases, licenses and other documents referred
to in this Schedule 3.20 will be delivered to the Purchaser, certified by the
Secretary or Assistant Secretary of the Company as true, correct and complete
copies, not later than four weeks from the date hereof or ten business days
before the Closing Date, whichever is sooner.
There
are
no pending disputes with customers or vendors of the Company regarding quality
or return of goods involving amounts in dispute with any one customer or vendor,
whether for related or unrelated claims, in excess of $5,000 except as described
on Schedule 3.20 hereto, all of which will be resolved to the reasonable
satisfaction of Purchaser prior to the Closing Date. To the knowledge of Seller
and the Company, there has not been any event, happening, threat or fact that
would lead them to believe that any of said customers or vendors will terminate
or materially alter their business relationship with the Company after
completion of the transactions contemplated by this Agreement.
3.21. Compliance
With the Law.
The
Company is not in violation of any applicable federal, state, local or foreign
law, regulation or order or any other, decree or requirement of any
governmental, regulatory or administrative agency or authority or court or
other
tribunal (including, but not limited to, any law, regulation order or
requirement relating to securities, properties, business, products,
manufacturing processes, advertising, sales or employment practices, terms
and
conditions of employment, occupational safety, health and welfare, conditions
of
occupied premises, product safety and liability, civil rights, or environmental
protection, including, but not limited to, those related to waste management,
air pollution control, waste water treatment or noise abatement). Except as
set
forth in Schedule 3.21, the Company has not been and is not now charged with,
or
to the knowledge of the Seller or the Company under investigation with respect
to, any violation of any applicable law, regulation, order or requirement
relating to any of the foregoing, nor, to the knowledge of the Seller or the
Company after due inquiry, are there any circumstances that would or might
give
rise to any such violation. The Company has filed all reports required to be
filed with any governmental, regulatory or administrative agency or
authority.
12
3.22. Litigation;
Pending Labor Disputes.
Except
as specifically identified on the Balance Sheet or footnotes thereto or set
forth in Schedule 3.22:
(i) There
are
no legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the knowledge of Seller or the Company,
threatened, against the Seller or the Company, relating to the Company or its
properties (including leased property), or the transactions contemplated by
this
Agreement, nor is there any basis known to the Company or the Seller for any
such action.
(ii) There
are
no judgments, decrees or orders of any court, or any governmental department,
commission, board, agency or instrumentality binding upon Seller or the Company
relating to the business of the Company the effect of which is to prohibit
any
business practice or the acquisition of any property or the conduct of any
business by the Company or which limit or control or otherwise adversely affect
its method or manner of doing business.
(iii) No
work
stoppage has occurred and is continuing or, to the knowledge of Seller or the
Company, is threatened affecting the business of the Company, and no
representation question involving recognition of a collective bargaining agent
exists in respect of any employees of the Company.
(iv) There
are
no pending labor negotiations or union organization efforts relating to
employees of the Company.
(v) There
are
no charges of discrimination (relating to sex, age, race, national origin,
handicap or veteran status) or unfair labor practices pending or, to the
knowledge of the Seller or the Company, threatened before any governmental
or
regulatory agency or authority or any court relating to employees of the
Company.
3.23. Absence
of Certain Changes or Events.
The
Company has not, since the Balance Sheet Date, except as described on Schedule
3.23:
(i) Incurred
any material obligation or liability (absolute, accrued, contingent or
otherwise) or in connection with the performance of this Agreement, and any
such
obligation or liability incurred in the ordinary course is not materially
adverse, except for claims, if any, that are adequately covered by
insurance;
(ii) Discharged
or satisfied any lien or encumbrance, or paid or satisfied any obligations
or
liability (absolute, accrued, contingent or otherwise) other than
(a) liabilities shown or reflected on the Balance Sheet, and
(b) liabilities incurred since the Balance Sheet Date in the ordinary
course of business that were not materially adverse;
(iii) Increased
or established any reserve or accrual for taxes or other liability on its books
or otherwise provided therefor, except (a) as disclosed on the Balance
Sheet, or (b) as may have been required under generally accepted accounting
principles due to income earned or expense accrued since the Balance Sheet
Date
and as disclosed to the Purchaser in writing;
13
(iv) Mortgaged,
pledged or subjected to any lien, charge or other encumbrance any of its assets,
tangible or intangible;
(v) Sold
or
transferred any of its assets or cancelled any debts or claims or waived any
rights, except in the ordinary course of business and which has not been
materially adverse;
(vi) Disposed
of or permitted to lapse any patents or trademarks or any patent or trademark
applications material to the operation of its business;
(vii) Incurred
any significant labor trouble or granted any general or uniform increase in
salary or wages payable or to become payable by it to any director, officer,
employee or agent, or by means of any bonus or pension plan, contract or other
commitment increased the compensation of any director, officer, employee or
agent;
(viii) Authorized
any capital expenditure for real estate or leasehold improvements, machinery,
equipment or molds in excess of $5,000.00 in the aggregate;
(ix) Except
for this Agreement, entered into any material transaction;
(x) Issued
any stocks, bonds, or other corporate securities, or made any declaration or
payment of any dividend or any distribution in respect of its capital stock;
or
(xi) Experienced
damage, destruction or loss (whether or not covered by insurance) individually
or in the aggregate materially and adversely affecting any of its properties,
assets or business, or experienced any other material adverse change or changes
individually or in the aggregate affecting its financial condition, assets,
liabilities or business.
3.24. Employee
Benefit Plans.
(a) Schedule
3.24 lists
a
description of the only Employee Programs (as defined below) that have been
maintained (as such term is further defined below) by the Company at any time
during the five (5) years prior to the date hereof.
(b) There
has
not been any failure of any party to comply with any laws applicable with
respect to any Employee Program that has been maintained by the Company. With
respect to any Employee Programs now or heretofore maintained by the Company,
there has occurred no breach of any duty under the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) or other applicable law which could
result, directly or indirectly in any taxes, penalties or other liability to
the
Purchaser, the Company or any affiliate (as defined below). No litigation,
arbitration, or governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for benefits)
is
pending or, to the knowledge of the Company and Seller, threatened with respect
to any such Employee Program.
14
(c) Except
as
set forth in Schedule
3.24 attached
hereto, neither the Company nor any affiliate has ever (i) provided health
care or any other non-pension benefits to any employees after their employment
was terminated (other than as required by Part 6 of Subtitle B of
Title I of ERISA) or has ever promised to provide such post-termination
benefits or (ii) maintained an Employee Program provided to such employees
subject to Title IV of ERISA, Section 401(a) or Section 412 of Code,
including, without limitation, any Multiemployer Plan.
(d) For
purposes of this Section 3.24:
(i) “Employee
Program”
means (A) all employee benefit plans within the meaning of ERISA
Section 3(3), including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes and employee benefit plans
(such
as foreign or excess benefit plans) which are not subject to ERISA; and
(B) all stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans, agreements,
and arrangements not described in (A) above. In the case of an Employee
Program funded through an organization described in Code Section 501(c)(9),
each
reference to such Employee Program shall include a reference to such
organization;
(ii) An
entity
“maintains” an Employee Program if such entity sponsors, contributes to, or
provides (or has promised to provide) benefits under such Employee Program,
or
has any obligation (by agreement or under applicable law) to contribute to
or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries);
(iii) An
entity
is an “affiliate” of the Company for purposes of this Section 3.24 if it
would have ever been considered a single employer with the Company under ERISA
Section 4001(b) or part of the same “controlled group” as the Company for
purposes of ERISA Section 302(d)(8)(C); and
(iv) “Multiemployer
Plan” means a (pension or non-pension) employee benefit plan to which more than
one employer contributes and which is maintained pursuant to one or more
collective bargaining agreements.
3.25. Product
Warranties and Product Liabilities.
The
product warranties and return policies of the Company in effect on the date
hereof and the types of products to which they apply are described on Schedule
3.25 hereto. Schedule 3.25 also sets forth all product liability claims
involving amounts in controversy in excess of $5,000 that are currently either
pending or, to the best of the Seller’s and the Company’s knowledge, threatened
against the Company. The Company has not paid in the aggregate, or allowed
as
credits against purchases, or received claims for more than one percent (1%)
per
year of gross sales, as determined in accordance with GAAP consistently applied,
during the past three years pursuant to obligations under any warranty or any
product liability claim with respect to goods manufactured, assembled or
furnished by the Company. The future cost of performing all such obligations
and
paying all such product liability claims with respect to goods manufactured,
assembled or furnished prior to the Closing Date will not exceed the average
annual cost thereof for said past three year period.
15
3.26. Assets.
The
assets of the Company are located at the locations listed on Schedule
3.26
attached
hereto. Except
as
described in Schedule 3.26, the assets of the Company are, and together with
the
additional assets to be acquired or otherwise received by the Company prior
to
the Closing, will at the Closing Date be, sufficient in all material respects
to
carry on the operations of the Business as now conducted by the Company. The
Company (including for such purpose any Subsidiaries thereof listed on Schedule
3.20) is the only business organization through which the Business is conducted.
Except as set forth in Schedule 3.16 or
Schedule 3.26, all assets used by the Company are, and will on the Closing
Date
be, owned by the Company.
3.27. Absence
of Certain Commercial Practices.
Except
as described on Schedule 4.27, neither the Company nor any Seller has made
any
payment (directly or by secret commissions, discounts, compensation or other
payments) or given any gifts to another business concern, to an agent or
employee of another business concern or of any governmental entity (domestic
or
foreign) or to a political party or candidate for political office (domestic
or
foreign), to obtain or retain business for the Company or to receive favorable
or preferential treatment, except for gifts and entertainment given to
representatives of customers or potential customers of sufficiently limited
value and in a form (other than cash) that would not be construed as a bribe
or
payoff.
3.28. Licenses,
Permits, Consents and Approvals.
The
Company has, and at the Closing Date will have, all licenses, permits or other
authorizations of governmental, regulatory or administrative agencies or
authorities (collectively, “Licenses”) required to conduct the Business. All
Licenses of the Company are listed on Schedule 3.28 hereto.
At the Closing, the Company will have all such Licenses which are material
to
the conduct of the Business and will have renewed all Licenses which would
have
expired in the interim. Except as listed in Schedule 3.28, no registration,
filing, application, notice, transfer, consent, approval, order, qualification,
waiver or other action of any kind (collectively, a “Filing”) will be required
as a result of the sale of the Shares by Seller in accordance with this
Agreement (a) to avoid the loss of any License or the violation, breach or
termination of, or any default under, or the creation of any lien on any asset
of the Company pursuant to the terms of, any law, regulation, order or other
requirement or any contract binding upon the Company or to which any such asset
may be subject, or (b) to enable Purchaser (directly or through any
designee) to continue the operation of the Company and the Business
substantially as conducted prior to the Closing Date. All such Filings will
be
duly filed, given, obtained or taken on or prior to the Closing Date and will
be
in full force and effect on the Closing Date.
3.29. Environmental
Matters.
Except
as
set forth on Schedule 3.29 hereto:
(a) The
operations of the Company are in compliance with all applicable laws promulgated
by any governmental entity which prohibit, regulate or control any hazardous
material or any hazardous material activity (“Environmental Laws”) and all
permits issued pursuant to Environmental Laws or otherwise except for where
noncompliance or the absence of such permits would not, individually or in
the
aggregate, have a Material Adverse Effect;
16
(b) The
Company has obtained all permits required under all applicable Environmental
Laws necessary to operate its business;
(c) The
Company is not the subject of any outstanding written order or Contract with
any
governmental authority or person respecting Environmental Laws or any violation
or potential violations thereof; and,
(d) The
Company has not received any written communication alleging either or both
that
the Company may be in violation of any Environmental Law, or any permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law.
3.30 Broker.
Neither
the Company nor the Seller has retained any broker in connection with any
transaction contemplated by this Agreement. Purchaser and the Company shall
not
be obligated to pay any fee or commission associated with the retention or
engagement by the Company or Seller of any broker in connection with any
transaction contemplated by this Agreement.
3.31. Related
Party Transactions.
Except
as described in Schedule 3.31, all transactions during the past five years
between the Company and any current or former shareholder or any entity in
which
the Company or any current or former shareholder had or has a direct or indirect
interest have been fair to the Company as determined by the Board of Directors.
No portion of the sales or other on-going business relationships of the Company
is dependent upon the friendship or the personal relationships (other than
those
customary within business generally) of any Seller, except as described in
Schedule 3.31. During the past five years, the Company has not forgiven or
cancelled, without receiving full consideration, any indebtedness owing to
it by
the Seller.
3.32 Patriot
Act.
The
Company and the Seller certify that neither the Company nor any of its
Subsidiaries has been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order 13224. The Company and the
Seller hereby acknowledge that the Purchaser seeks to comply with all applicable
laws concerning money laundering and related activities. In furtherance of
those
efforts, the Company and the Seller hereby represent, warrant and agree that:
(i) none of the cash or property that the Seller has contributed or paid or
will
contribute and pay to the Company has been or shall be derived from, or related
to, any activity that is deemed criminal under United States law; and (ii)
no
contribution or payment by the Company or any of its Subsidiaries to the
Purchaser, to the extent that they are within the Company’s and/or its
Subsidiaries’ control shall cause the Purchaser to be in violation of the United
States Bank Secrecy Act, the United States International Money Laundering
Control Act of 1986 or the United States International Money Laundering
Abatement and Anti-Terrorist Financing Act of 2001. The Seller shall promptly
notify the Purchaser if any of these representations ceases to be true and
accurate regarding the Seller, the Company or any of its Subsidiaries. The
Seller agrees to provide the Purchaser any additional information regarding
the
Company or any of its Subsidiaries that the Purchaser reasonably requests to
ensure compliance with all applicable laws concerning money laundering and
similar activities.
17
3.33. Disclosure.
All
statements contained in any schedule, certificate, opinion, instrument, or
other
document delivered by or on behalf of the Seller or the Company pursuant hereto
or in connection with the transactions contemplated hereby shall be deemed
representations and warranties by the Seller and the Company herein. No
statement, representation or warranty by the Seller or the Company in this
Agreement or in any schedule, certificate, opinion, instrument, or other
document furnished or to be furnished to the Purchaser pursuant hereto or in
connection with the transactions contemplated hereby contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading or necessary in order to provide a prospective
purchaser of the business of the Company with full and fair disclosure
concerning the Company, its business, and the Company’s affairs.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND EVAN
The
Seller and Evan jointly and severally hereby represent and warrant to the
Purchaser that:
4.1 Legal
Capacity, Organization and Good Standing.
The
Seller is duly organized, validly existing and in good standing under the laws
of the jurisdiction of such entity’s incorporation or formation and has all
requisite power and authority to enter into this Agreement and to comply with
the provisions hereof.
4.2. Authority.
(a) The
execution of this Agreement and all related agreements and the delivery hereof
and thereof to the Purchaser and the sale contemplated herein have been, or
will
be prior to Closing, duly authorized by the Seller’s Board of Directors and by
the Seller’s members having full power and authority to authorize such
actions.
(b) Each
of
the Seller and Evan has the full legal right, power and authority to execute,
deliver and carry out the terms and provisions of this Agreement; and this
Agreement has been duly and validly executed and delivered on behalf of the
Seller and Evan and constitutes a valid and binding obligation of the Seller
and
Evan enforceable in accordance with its terms.
(c) Neither
the execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, nor compliance with the terms of this
Agreement will violate, conflict with, result in a breach of, or constitute
a
default under any statute, regulation, indenture, mortgage, loan agreement,
or
other agreement or instrument to which the Seller or Evan is a party or by
which
it or any of them is bound, any charter, regulation, or bylaw provision of
the
Seller, or any decree, order, or rule of any court or governmental authority
or
arbitrator that is binding on the Seller or Evan in any way.
18
4.3 Ownership
of Shares.
The
Seller is the lawful record and beneficial owner of the Shares, free and clear
of any liens, pledges, encumbrances, charges, claims or restrictions of any
kind, and has, or will have on the Closing Date, the absolute, unilateral right,
power, authority and capacity to enter into and perform this Agreement without
any other or further authorization, action or proceeding, except as specified
herein.
4.4 Absence
of Claims.
Neither
the Seller nor Evan has any commitment, action, debt, claim, counterclaim,
suit,
cause of action or similar right, at law or in equity, contingent or otherwise,
against the Company or the officers, directors, employees, stockholders,
affiliates, predecessors, successors or assigns of any of them, including,
but
not limited to, any claims which relate to or arise out of Evan’s relationship
with the Company or his rights or status as a stockholder, officer, director,
or
employee of the Company.
4.5 Litigation.
There
are no Legal Proceedings pending or, to the best knowledge of the Seller or
Evan, threatened that are reasonably likely to prohibit or restrain the ability
of the Seller or Evan to enter into this Agreement or consummate the
transactions contemplated hereby.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
5.1 Organization
and Good Standing.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Utah.
5.2 Authority.
(a) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been, or will prior to Closing be, duly
and validly approved and acknowledged by all necessary corporate action on
the
part of the Purchaser.
(b) The
execution of this Agreement and the delivery hereof to the Seller and the
Company and the purchase contemplated herein have been, or will be prior to
Closing, duly authorized by the Purchaser’s Board of Directors having full power
and authority to authorize such actions.
5.3 Conflicts;
Consents of Third Parties.
(a) The
execution and delivery of this Agreement, the acquisition of the Shares by
Purchaser and the consummation of the transactions herein contemplated, and
the
compliance with the provisions and terms of this Agreement, are not prohibited
by the Articles of Incorporation or Bylaws of the Purchaser and will not
violate, conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any court order, indenture, mortgage, loan
agreement, or other agreement or instrument to which the Purchaser is a party
or
by which it is bound.
19
(b) No
consent, waiver, approval, order, permit or authorization of, or declaration
or
filing with, or notification to, any person or governmental body is required
on
the part of the Purchaser in connection with the execution and delivery of
this
Agreement or the Purchaser Documents or the compliance by Purchaser with any
of
the provisions hereof or thereof.
5.4 Litigation.
There
are no Legal Proceedings pending or, to the best knowledge of the Purchaser,
threatened that are reasonably likely to prohibit or restrain the ability of
the
Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.
5.5 Broker.
The
Purchaser has not retained any broker in connection with any transaction
contemplated by this Agreement. Seller shall not be obligated to pay any fee
or
commission associated with the retention or engagement by the Purchaser of
any
broker in connection with any transaction contemplated by this
Agreement.
5.6 Patriot
Act.
The
Purchaser certifies that neither the Purchaser nor any of its subsidiaries
has
been designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Purchaser hereby acknowledges that the
Company and the Seller seek to comply with all applicable laws concerning money
laundering and related activities. In furtherance of those efforts, the
Purchaser hereby represents, warrants and agrees that: (i) none of the cash
or
property that the Purchasers have contributed or paid or will contribute and
pay
to the Seller has been or shall be derived from, or related to, any activity
that is deemed criminal under United States law; and (ii) no contribution or
payment by the Purchaser or any of its subsidiaries to the Seller, to the extent
that they are within the Purchaser’s control shall cause the Seller or the
Company to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Purchaser shall promptly notify the Seller if any of these
representations ceases to be true and accurate regarding the Purchaser or any
of
its subsidiaries. The Purchaser agrees to provide the Seller any additional
information regarding the Purchaser or any of its subsidiaries that the Seller
reasonably requests to ensure compliance with all applicable laws concerning
money laundering and similar activities.
ARTICLE
VI
COVENANTS
6.1 Access
to Information.
The
Seller and the Company agree that, prior to the Closing Date, the Purchaser
shall be entitled, through its officers, employees and representatives
(including, without limitation, its legal advisors and accountants), to make
such investigation of the properties, businesses and operations of the Company
and its Subsidiaries and such examination of the books, records and financial
condition of the Company and its Subsidiaries as it reasonably requests and
to
make extracts and copies of such books and records. Any such investigation
and
examination shall be conducted during regular business hours and under
reasonable circumstances, and the Seller shall cooperate, and shall cause the
Company and its Subsidiaries to cooperate, fully therein. No investigation
by
the Purchaser prior to or after the date of this Agreement shall diminish or
obviate any of the representations, warranties, covenants or agreements of
the
Seller contained in this Agreement or the any other documents delivered by
Seller, the Company or Evan in connection herewith (the “Seller Documents”). In
order that the Purchaser may have full opportunity to make such physical,
business, accounting and legal review, examination or investigation as it may
reasonably request of the affairs of the Company and its Subsidiaries, the
Seller shall cause the officers, employees, consultants, agents, accountants,
attorneys and other representatives of the Company and its Subsidiaries to
cooperate fully with such representatives in connection with such review and
examination.
20
6.2 Conduct
of the Business Pending the Closing.
(a) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, until the Option shall be exercised or expire, the
Seller shall, and shall cause the Company to:
(i) Conduct
the business of the Company only in the ordinary course consistent with past
practice;
(ii) Use
its
best efforts to (A) preserve its present business operations, organization
(including, without limitation, management and the sales force) and goodwill
of
the Company and (B) preserve its present relationship with persons having
business dealings with the Company;
(iii) Maintain
(A) all of the assets and properties of the Company in their current condition,
ordinary wear and tear excepted and (B) insurance upon all of the properties
and
assets of the Company in such amounts and of such kinds com-parable to that
in
effect on the date of this Agreement;
(iv) (A)
maintain the books, accounts and records of the Company in the ordinary course
of business consistent with past practices, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and without
discounting or accelerating payment of such accounts, and (C) comply with all
contractual and other obligations applicable to the operation of the Company;
and
(v) Comply
in
all material respects with applicable Laws.
(b) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, until the Option shall be exercised or expire, the
Seller shall not, and shall cause the Company not to:
(i) Declare,
set aside, make or pay any dividend or other distribution in respect of the
capital stock of the Company or repurchase, redeem or otherwise acquire any
outstanding shares of the capital stock or other securities of, or other
ownership interests in, the Company;
21
(ii) Transfer,
issue, sell or dispose of any shares of capital stock or other securities of
the
Company or grant options, warrants, calls or other rights to purchase or
otherwise acquire shares of the capital stock or other securities of the
Company;
(iii) Effect
any recapitalization, reclassification, stock split or like change in the
capitalization of the Company;
(iv) Amend
the
certificate of incorporation or by-laws of the Company;
(v) (A)
materially increase the annual level of compensation of any employee of the
Company, (B) increase the annual level of compensation payable or to become
payable by the Company to any of its executive officers, (C) grant any unusual
or extraordinary bonus, benefit or other direct or indirect compensation to
any
employee, director or consultant, (D) increase the coverage or benefits
available under any (or create any new) severance pay, termination pay, vacation
pay, company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or
other
employee benefit plan or arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the Company or otherwise
modify or amend or terminate any such plan or arrangement or (E) enter into
any
employment, deferred compensation, severance, consulting, non-competition or
similar agreement (or amend any such agreement) to which the Company is a party
or involving a director, officer or employee of the Company in his or her
capacity as a director, officer or employee of the Company;
(vi) Except
for trade payables and for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice, borrow monies
for
any reason or draw down on any line of credit or debt obligation, or become
the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other Person, or change the terms
of
payables or receivables;
(vii) Subject
to any lien (except for leases that do not materially impair the use of the
property subject thereto in their respective businesses as presently conducted),
any of the properties or assets (whether tangible or intangible) of the
Company;
(viii) Acquire
any material properties or assets or sell, assign, transfer, convey, lease
or
otherwise dispose of any of the material properties or assets (except for fair
consideration in the ordinary course of business consistent with past practice)
of the Company except, with respect to the items listed on Schedule 6.2(b)(viii)
hereto, as previously consented to by the Purchaser;
(ix) Cancel
or
compromise any debt or claim or waive or release any material right of the
Company except in the ordinary course of business consistent with past
practice;
(x) Enter
into any commitment for capital expenditures out of the ordinary
course;
22
(xi) Permit
the Company to enter into any transaction or to make or enter into any Contract
which by reason of its size or otherwise is not in the ordinary course of
business consistent with past practice;
(xii) Permit
the Company to enter into or agree to enter into any merger or consolidation
with, any corporation or other entity, and not engage in any new business or
invest in, make a loan, advance or capital contribution to, or otherwise acquire
the securities of any other person;
(xiii) Except
for transfers of cash pursuant to normal cash management practices, permit
the
Company to make any investments in or loans to, or pay any fees or expenses
to,
or enter into or modify any Contract with, any Seller or any Affiliate of any
Seller; or
(xiv) Agree
to
do anything prohibited by this Section 6.2 or anything which would make any
of
the representations and warranties of the Seller in this Agreement or the Seller
Documents untrue or incorrect in any material respect as of any time through
and
including the date of the Option exercise.
6.3 Consents.
The
Seller and the Company shall use their best efforts, and the Purchaser shall
cooperate with the Seller and the Company, to obtain at the earliest practicable
date all consents and approvals required to consummate the transactions
contemplated by this Agreement, including, without limitation, the consents
and
approvals referred to in Section 3.7 hereof; provided, however, that neither
the
Seller, the Company nor the Purchaser shall be obligated to pay any
consideration therefor to any third party from whom consent or approval is
requested.
6.4 Other
Actions.
Each
of
the Seller and the Purchaser shall use its best efforts to (i) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement and (ii) cause the fulfillment at the earliest practicable date of
all
of the conditions to their respective obligations to consummate the transactions
contemplated by this Agreement.
6.5 No
Solicitation.
The
Seller will not, and will not cause or permit the Company or any of the
Company's directors, officers, employees, representatives or agents
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as
the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any amount of the assets or capital stock or other equity interest in the
Company other than the transactions contemplated by this Agreement (an
"Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect
of an
Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person,
any information concerning the business, operations, properties or assets of
the
Company in connection with an Acquisition Transaction, or (iv) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.
The Seller and the Company will inform the Purchaser in writing immediately
following the receipt by the Seller, the Company or any Representative of any
proposal or inquiry in respect of any Acquisition Transaction.
23
6.6 Preservation
of Records.
Subject
to Section 9.4(e) hereof (relating to the preservation of Tax records) and
the
exercise of the Option, the Seller and the Purchaser agree that each of them
shall preserve and keep the records held by it relating to the business of
the
Company for a period of three years from the Closing Date and shall make such
records and personnel available to the other as may be reasonably required
by
such party in connection with, among other things, any insurance claims by,
legal proceedings against or governmental investigations of the Seller or the
Purchaser or any of their Affiliates or in order to enable the Seller or the
Purchaser to comply with their respective obligations under this Agreement
and
each other agreement, document or instrument contemplated hereby or thereby.
6.7 Publicity.
None
of
the Seller, the Company nor the Purchaser shall issue any press release or
public announcement concerning this Agreement or the transactions contemplated
hereby without obtaining the prior written approval of the other party hereto,
which approval will not be unreasonably withheld or delayed, unless, in the
sole
judgment of the Purchaser, the Company or the Seller, disclosure is otherwise
required by applicable Law or by the applicable rules of any stock exchange
on
which the Purchaser lists securities, provided that, to the extent required
by
applicable law, the party intending to make such release shall use its best
efforts consistent with such applicable law to consult with the other party
with
respect to the text thereof.
6.8 Efforts
to Resolve Outstanding Issues.
From
and
after the Closing Date, the Company, Evan and Seller shall use their best
efforts to resolve the following issues:
(a) the
issuance of pending credits to the Company’s customers;
(b) the
note
payable to EPB Holdings, LLC(“EPB”) in the original principal amount of
$750,000, which is guaranteed by Evan;
(c) rent
at a
favorable rate for the Company’s two facilities pursuant to the lease with EPB
or its affiliate and the lease with AH Realty Associates, LLC;
(d) the
$4,300,000 of subordinated debt payable to the parties listed on Schedule 6.8(d)
and any other related parties;
(e) the
outstanding accounts payable to Church and ▇▇▇▇▇▇ and the release of backlogged
products from Church and ▇▇▇▇▇▇ for the Company’s customers; and
24
(f) Titan
shall not be entitled to receive any additional capital stock of the Company
unless and until it shall make equity investments in the Company beyond
reasonable amounts which shall be agreed upon on or prior to the Option exercise
date.
6.9 Management
Agreement; Chief Restructuring Officer.
On
or
prior to the Closing Date, the Company and the Purchaser shall enter into a
management services agreement, substantially in the form of agreements attached
hereto as Exhibit 6.9 (the “Management Agreement”). Further, on the Closing Date
the Company shall appoint a designee of Titan to serve as Chief Restructuring
Officer of the Company. The fees and expenses of such person shall be borne
by
the Company.
6.10 Board
of Directors; Advisor.
Upon
the
Closing, ▇▇▇▇▇ Chance shall be appointed as an advisor to the Board of Directors
of the Company. Such advisor shall be entitled to: (i) notice of all meeting
of
the Board, (ii) participate (but not vote) at all meetings of the Board, and
(iii) copies of all proposed written consents of the Board, at the time such
consents are delivered to Board members for review. Each current member of
the
Board of Directors of the Company shall deliver an undated resignation to the
escrow agent pursuant to the Escrow Agreement, such resignation to be
effectuated upon the exercise of the Option (the “Resignations”). Immediately
upon exercise of the Option, the Board consent and resignations shall be dated
and effectuated.
6.11 Proxy.
From
and
after the Closing Date until the expiration date of the Option, the Seller
shall
grant the Purchaser a proxy in the form attached hereto as Exhibit 6.11 to
votes
the Shares on all matters (the “Proxy”).
6.12 Limited
Guarantee by Purchaser.
Titan
shall provide a limited guarantee to GBC Funding, LLC (“GBC”) of up to
$1,500,000, solely with respect to amounts advanced by GBC to the Company as
an
over-advance from and after the Closing Date.
6.13 Financial
Statements.
If
required, the Seller and the Company shall cooperate with the Purchaser to
provide all information required for the completion of any additional financial
statements of the Company to be prepared and delivered no later than 60 days
from the Closing Date.
6.14 Non-Competition.
To the
extent that the Option is exercised, for a period of three years after the
Closing Date, the Seller and Evan each agree not to engage in any of the
following competitive activities: (a) engaging directly or indirectly in any
business or activity substantially similar to any business or activity engaged
in (or scheduled to be engaged) by the Company or the Purchaser; (b) engaging
directly or indirectly in any business or activity competitive with any business
or activity engaged in (or scheduled to be engaged) by the Company or the
Purchaser; (c) soliciting or taking away any employee, agent, representative,
contractor, supplier, vendor, customer, franchisee, lender or investor of the
Company or the Purchaser, or attempting to so solicit or take away; (d)
interfering with any contractual or other relationship between the Company
or
the Purchaser and any employee, agent, representative, contractor, supplier,
vendor, customer, franchisee, lender or investor; or (e) using, for the benefit
of any person or entity other than the Company, any confidential information
of
the Company or the Purchaser. In addition, neither the Seller nor Evan shall
make or permit the making of any negative statement of any kind concerning
the
Company, the Purchaser or their affiliates, or their directors, officers or
agents.
25
6.15 Removal
of Evan Guarantee.
On or
prior to the date of the Option exercise, Titan shall either have Evan removed
as a personal guarantor of the Company debt to GBC as well as all other
obligations guaranteed by Evan or shall provide Evan an indemnity agreement
with
respect to such guarantees which shall be reasonably satisfactory to
Evan.
ARTICLE
VII
CONDITIONS
TO CLOSING
7.1 Conditions
Precedent to Obligations of Purchaser.
The
obligation of the Purchaser to consummate the transactions contemplated by
this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Company, Seller and Evan contained herein
shall be true and correct as of the date hereof;
(b) all
representations and warranties of the Company, Seller and Evan contained herein
qualified as to materiality shall be true and correct, and the representations
and warranties of the Company, Seller and Evan contained herein not qualified
as
to materiality shall be true and correct in all material respects, at and as
of
the Closing Date with the same effect as though those representations and
warranties had been made again at and as of that time;
(c) the
Company, Seller and Evan shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing Date;
(d) the
Purchaser shall have been furnished with certificates (dated the Closing Date
and in form and substance reasonably satisfactory to the Purchaser) executed
by
the Seller and the Company certifying as to the fulfillment of the conditions
specified in Sections 7.1(a), 7.1(b) and 7.1(c) hereof;
(e) certificates
representing the Shares shall have been delivered to the escrow agent pursuant
to the terms of the Escrow Agreement, free and clear of any and all
Liens;
(f) there
shall not have been or occurred any Material Adverse Change;
26
(g) the
Seller and the Company shall have obtained all consents and waivers referred
to
in Section 3.7 hereof, in a form reasonably satisfactory to the Purchaser,
with
respect to the transactions contemplated by this Agreement and the Seller
Documents;
(h) no
Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Seller, Evan, the Company, or the Purchaser seeking to restrain
or
prohibit or to obtain substantial damages with respect to the consummation
of
the transactions contemplated hereby, and there shall not be in effect any
order
by a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
and
(i) the
Proxy, Resignations, Escrow Agreement and the Management Agreement shall have
been executed.
7.2 Conditions
Precedent to Obligations of the Seller and Evan.
The
obligations of the Seller and Evan to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions (any or all of which may be waived
by
the Seller in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Purchaser contained herein shall be true
and correct as of the date hereof;
(b) all
representations and warranties of the Purchaser contained herein qualified
as to
materiality shall be true and correct, and all representations and warranties
of
the Purchaser contained herein not qualified as to materiality shall be true
and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that date;
(c) the
Purchaser shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by Purchaser on or prior to the Closing Date;
(d) the
Seller shall have been furnished with certificates (dated the Closing Date
and
in form and substance reasonably satisfactory to the Seller) executed by the
Chief Executive Officer of the Purchaser certifying as to the fulfillment of
the
conditions specified in Sections 7.2(a), 7.2(b) and 7.2(c); and
(e) no
Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Seller, Evan, the Company, or the Purchaser seeking to restrain
or
prohibit or to obtain substantial damages with respect to the consummation
of
the transactions contemplated hereby, and there shall not be in effect any
order
by a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby.
27
ARTICLE
VIII
DOCUMENTS
TO BE DELIVERED
8.1 Documents
to be Delivered by the Seller and the Company.
At
the
Closing, the Seller and the Company shall deliver, or cause to be delivered,
to
the Purchaser the following:
(a) the
Resignations and stock certificates representing the Shares, duly endorsed
in
blank and accompanied by medallion guaranteed stock transfer powers, delivered
to the escrow agent;
(b) the
certificates referred to in Section 7.1(d) and 7.1(e) hereof;
(c) copies
of
all consents and waivers referred to in Section 7.1(g) hereof;
(d) the
Management Agreement and the Escrow Agreement;
(e) certificate
of good standing with respect to the Company issued by the Secretary of State
of
the State of incorporation, and for each state in which the Company is qualified
to do business as a foreign corporation; and
(f) such
other documents as the Purchaser shall reasonably request.
8.2 Documents
to be Delivered by the Purchaser.
At
the
Closing, the Purchaser shall deliver to the Seller the following:
(a) the
certificates referred to in Section 7.2(d) hereof; and
(b) such
other documents as the Seller shall reasonably request.
ARTICLE
IX
INDEMNIFICATION
9.1 Indemnification.
(a) Subject
to Section 9.2 hereof, the Seller and Evan hereby agree to jointly and severally
indemnify and hold the Purchaser, the Company, and their respective directors,
officers, employees, Affiliates, agents, successors and assigns (collectively,
the "Purchaser Indemnified Parties") harmless from and against:
(i) any
and
all liabilities of the Company of every kind, nature and description, absolute
or contingent, existing as against the Company prior to and including the
Closing Date or thereafter coming into being or arising by reason of any state
of facts existing, or any transaction entered into, on or prior to the Closing
Date, except to the extent that the same have been fully provided for in the
Balance Sheet or disclosed in the notes thereto or were incurred in the ordinary
course of business between the Balance Sheet date and the Closing Date;
28
(ii) subject
to Section 10.3, any and all losses, liabilities, obligations, damages, costs
and expenses based upon, attributable to or resulting from the failure of any
representation or warranty of the Seller, Evan or the Company set forth in
Section 3 hereof, or any representation or warranty contained in any certificate
delivered by or on behalf of the Seller, Evan or the Company pursuant to this
Agreement, to be true and correct in all respects as of the date made;
(iii) any
and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of the Seller or Evan under this Agreement;
(iv) any
and
all notices, actions, suits, proceedings, claims, demands, assessments,
judgments, costs, penalties and expenses, including attorneys' and other
professionals' fees and disbursements (collectively, "Expenses") incident to
any
and all losses, liabilities, obligations, damages, costs and expenses with
respect to which indemnification is provided hereunder (collectively,
"Losses").
(b) Subject
to Section 9.2, Purchaser hereby agrees to indemnify and hold the Seller and
Evan and their respective Affiliates, agents, successors and assigns
(collectively, the "Seller Indemnified Parties") harmless from and
against:
(i) any
and
all Losses based upon, attributable to or resulting from the failure of any
representation or warranty of the Purchaser set forth in Section 5 hereof,
or
any representation or warranty contained in any certificate delivered by or
on
behalf of the Purchaser pursuant to this Agreement, to be true and correct
as of
the date made;
(ii) any
and
all Losses based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of the Purchaser under this Agreement
or
arising from the ownership or operation of the Company from and after the
Closing Date; and
(iii) any
and
all Expenses incident to the foregoing.
9.2 Limitations
on Indemnification for Breaches of Representations and
Warranties.
An
indemnifying party shall not have any liability under Section 9.1(a)(ii) or
Section 9.1(b)(i) hereof unless the aggregate amount of Losses and Expenses
to
the indemnified parties finally determined to arise thereunder based upon,
attributable to or resulting from the failure of any representation or warranty
to be true and correct, other than the representations and warranties set forth
in Sections 4.3, 4.11, 4.24 and 4.29 hereof, exceeds $5,000 (the “Basket”) and,
in such event, the indemnifying party shall be required to pay the entire amount
of such Losses and Expenses in excess of $5,000 (the “Deductible”).
Notwithstanding anything else contained herein, Evan shall not be required
to
pay any amounts in excess of $1,000,000 with respect to any claim for
indemnification.
29
9.3 Indemnification
Procedures.
(a) In
the
event that any Legal Proceedings shall be instituted or that any claim or demand
("Claim") shall be asserted by any Person in respect of which payment may be
sought under Section 9.1 hereof (regardless of the Basket or the Deductible
referred to above), the indemnified party shall reasonably and promptly cause
written notice of the assertion of any Claim of which it has knowledge which
is
covered by this indemnity to be forwarded to the indemnifying party. The
indemnifying party shall have the right, at its sole option and expense, to
be
represented by counsel of its choice, which must be reasonably satisfactory
to
the indemnified party, and to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder.
If the indemnifying party elects to defend against, negotiate, settle or
otherwise deal with any Claim which relates to any Losses indemnified against
hereunder, it shall within five (5) days (or sooner, if the nature of the Claim
so requires) notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as herein provided or
contests its obligation to indemnify the indemnified party for such Losses
under
this Agreement, the indemnified party may defend against, negotiate, settle
or
otherwise deal with such Claim. If the indemnified party defends any Claim,
then
the indemnifying party shall reimburse the indemnified party for the Expenses
of
defending such Claim upon submission of periodic bills. If the indemnifying
party shall assume the defense of any Claim, the indemnified party may
participate, at his or its own expense, in the defense of such Claim; provided,
however, that such indemnified party shall be entitled to participate in any
such defense with separate counsel at the expense of the indemnifying party
if,
(i) so requested by the indemnifying party to participate or (ii) in the
reasonable opinion of counsel to the indemnified party, a conflict or potential
conflict exists between the indemnified party and the indemnifying party that
would make such separate representation advisable; and provided, further, that
the indemnifying party shall not be required to pay for more than one such
counsel for all indemnified parties in connection with any Claim. The parties
hereto agree to cooperate fully with each other in connection with the defense,
negotiation or settlement of any such Claim.
(b) After
any
final judgment or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction and the expiration of the
time in which to appeal therefrom, or a settlement shall have been consummated,
or the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due
and
owing to the indemnified party by wire transfer of immediately available funds
within 10 business days after the date of such notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
30
9.4 Tax
Treatment of Indemnity Payments.
The
Seller and the Purchaser agree to treat any indemnity payment made pursuant
to
this Article 9 as an adjustment to the purchase price for federal, state, local
and foreign income tax purposes.
ARTICLE
X
MISCELLANEOUS
10.1 Payment
of Sales, Use or Similar Taxes.
All
sales, use, transfer, intangible, recordation, documentary stamp or similar
Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
the transactions contemplated by this Agreement shall be borne by the
Seller.
10.2 Survival
of Representations and Warranties.
The
parties hereto hereby agree that the representations and warranties contained
in
this Agreement or in any certificate, document or instrument delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
and the Closing hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnifications with respect to the representation
and
warranties contained in Sections 4.3, 4.11 and 4.24, which shall survive for
periods coterminous with any applicable statutes of limitation) shall terminate
unless within twenty-four (24) months after the Closing Date written notice
of
such claims is given to the Seller or such actions are commenced.
10.3 Expenses.
Except
as
otherwise provided in this Agreement, the Seller, Evan, the Company and the
Purchaser shall each bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby, it being understood that in no
event shall the Company bear any of such costs and expenses.
10.4 Specific
Performance.
The
Seller and the Company acknowledge and agree that the breach of this Agreement
would cause irreparable damage to the Purchaser and that the Purchaser will
not
have an adequate remedy at law. Therefore, the obligations of the Seller and
the
Company under this Agreement, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement
or
otherwise.
31
10.5 Further
Assurances.
The
Seller, Evan, the Company and the Purchaser each agrees to execute and deliver
such other documents or agreements and to take such other action as may be
reasonably necessary or desirable for the implementation of this Agreement
and
the consummation of the transactions contemplated hereby.
10.6 Submission
to Jurisdiction; Consent to Service of Process.
(a) The
parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
of
any federal or state court located within the state of Texas over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims
in
respect of such dispute or any suit, action proceeding related thereto may
be
heard and determined in such courts. The parties hereby irrevocably waive,
to
the fullest extent permitted by applicable law, any objection which they may
now
or hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
(b) Each
of
the parties hereto hereby consents to process being served by any party to
this
Agreement in any suit, action or proceeding by the mailing of a copy thereof
in
accordance with the provisions of Section 10.10.
10.7 Entire
Agreement; Amendments and Waivers.
This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of
any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation
by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant
or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further
or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise
of
any other right, power or remedy. All remedies hereunder are cumulative and
are
not exclusive of any other remedies provided by law.
10.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
state of Texas.
32
10.9 Notices.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally or mailed by certified mail,
return receipt requested, to the parties (and shall also be transmitted by
facsimile to the Persons receiving copies
thereof) at the following addresses (or to such other address as a party may
have specified by notice given to the other party pursuant to this
provision):
|
(a)
|
Purchaser:
|
Titan
Global Holdings, Inc
▇▇▇▇
▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ Chance, CEO
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Copy
to:
▇▇▇▇▇▇
▇.
▇▇▇▇, Esq.
Sichenzia
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
|
(b)
|
Seller,
Evan and Company:
|
USA
Detergents, Inc.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Uri
Evan, CEO
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
Copy
to:
Greenbaum,
Rowe, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Phone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
10.10 Severability.
If
any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
33
10.11 Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not a party to this Agreement except as provided below. No
assignment of this Agreement or of any rights or obligations hereunder may
be
made by either the Seller, Evan, the Company or the Purchaser (by operation
of
law or otherwise) without the prior written consent of the other parties hereto
and any attempted assignment
without the required consents shall be void; provided, however, that the
Purchaser may assign this Agreement and any or all rights or obligations
hereunder (including, without limitation, the Purchaser's rights to purchase
the
Shares and the Purchaser's rights to seek indemnification hereunder) to any
Affiliate of the Purchaser. Upon any such permitted assignment, the references
in this Agreement to the Purchaser shall also apply to any such assignee unless
the context otherwise requires.
[intentionally
blank]
34
| |
|
|
| By: | /s/ ▇▇▇▇▇ Chance | |
|
▇▇▇▇▇ Chance, |
||
| Chief Executive Officer | ||
|
USA
DETREGENTS, INC.
|
||
| |
|
|
| By: | /s/ | |
|
Name: |
||
| Title: | ||
|
SELLER:
USAD
METRO HOLDINGS, LLC
|
||
| |
|
|
| By: | /s/Uri Evan | |
|
Uri Evan, |
||
| Managing Member | ||
| /s/Uri Evan | ||
|
Uri Evan |
||
35