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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") made and entered into
as of October 29, 1997, by and among AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Purchaser"), SAUCES UNLIMITED, INC., a Texas corporation (the
"Company"), and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇
(collectively, the "Sellers").
W I T N E S S E T H:
WHEREAS, all of the outstanding shares of common stock, no par value
(the "Common Stock"), of the Company are owned of record and beneficially by
the Sellers in the amounts set forth on Appendix I attached hereto;
WHEREAS, the Sellers desire to sell, and the Purchaser desires to
purchase, all of the outstanding Common Stock on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of and subject to the mutual
agreements, terms and conditions herein contained, the parties hereto agree as
follows:
ARTICLE I
SALE OF SHARES
1.1 Purchase Price. At the Closing (as defined below), the
Sellers will sell, transfer, convey and deliver to the Purchaser all of the
outstanding shares of Common Stock (the "Shares") as evidenced by the delivery
of a certificate or certificates evidencing the Shares duly endorsed for
transfer or accompanied by duly executed stock powers in exchange for the
following consideration: (a) $2,400,000, payable at the Closing by wire
transfer or other delivery of immediately available funds and (b) warrants (the
"Warrants") to purchase an aggregate of 40,000 shares of common stock, par
value $1.00 per share (the "Purchaser Common Stock") for an initial exercise
price of $11.125 per share, which Warrants shall be issued pursuant to the
Warrant Agreement in the form attached hereto as Exhibit A (the "Warrant
Agreement"). The cash portion of the purchase price and the warrants will be
paid to the Sellers pro rata in accordance with their respective ownership of
the Common Stock.
1.2 Section 338(h)(10) Elections. The Sellers agree that, if
requested by the Purchaser within the time period prescribed by law for the
filing thereof, the Sellers, in their capacity as all of the shareholders of
the Company immediately before the Closing, shall join the Purchaser in making
a timely, irrevocable and effective election under section 338(h)(10) of the
Code (and Treasury Regulation section 1.338(h)(10)-1) and a similar election
under any applicable state income tax law (collectively, the "Section
338(h)(10) Elections") with respect to the Purchaser's purchase of the Shares.
To facilitate such election, at the Closing the Sellers shall deliver to the
Purchaser an Internal Revenue Service Form 8023 and any similar forms under
applicable state income tax law (the "Forms") with respect to the Purchaser's
purchase of the Shares, which Forms shall have been duly executed by each of
the Sellers. If the Purchaser determines to make the Section 338(h)(10)
Elections with respect to its purchase of the Shares, the Purchaser shall cause
the Forms to be duly executed by an authorized person for the Purchaser, shall
complete the schedules required to be
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attached thereto, shall provide a copy of the executed Forms and schedules to
the Seller Representative, and shall duly and timely file the Forms as
prescribed by Treasury Regulation section 1.338(h)(10)-1 or the corresponding
provisions of applicable state income tax law.
1.3 Closing. The closing ("Closing") of the sale and purchase of
the Shares shall take place at the offices of Duncan, Ulman, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, 603 ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, at 10:00
a.m. on October 30, 1997, or at such other place, time and date upon which the
parties hereto may agree (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
The Sellers and the Company jointly and severally warrant and
represent to the Purchaser as follows:
2.1 Organization, Qualification and Capacity. The Company (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas with corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
contemplated to be conducted, and (ii) is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where the
character of its properties or the nature of its business makes such
qualification necessary, which jurisdictions are listed on Schedule 2.1. Each
Seller has full power and authority to enter into this Agreement and the
capacity and authority to make the representations, warranties, covenants and
agreements herein.
2.2 Capital Stock. The authorized capital stock of the Company
consists solely of 1,000,000 shares of Common Stock, 510,000 of which shares
are validly issued and outstanding, fully paid and nonassessable and the
remainder of which are unissued. All of the issued and outstanding capital
stock of the Company is owned beneficially and of record by the Sellers, free
and clear of any pledge, lien, charge, encumbrance or other adverse claim.
There are no outstanding or authorized subscriptions, options, warrants,
rights, conversion rights, preemptive rights, rights of first refusal or other
agreements or commitments obligating the Company to issue or purchase shares of
its capital stock or any security convertible into capital stock or obligating
any Seller or the Company to purchase, sell or transfer any capital stock of
the Company. Preemptive rights have been denied in accordance with the Texas
Business Corporation Act since June 27, 1995, and all issuances of capital
stock of the Company prior to such denial were made in full compliance with any
preemptive rights. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the Common Stock. Set forth on
Schedule 2.2 is a true, complete and correct copy of the Company's stock
ledger, which fully and fairly describes all transactions involving any shares
of capital stock of the Company, including without limitation issuances,
repurchases and transfers of capital stock.
2.3 Subsidiaries. The Company has no subsidiaries (as hereinafter
defined).
2.4 Governmental Authorizations. To the best of Sellers'
knowledge, the Company holds, and after the consummation of the transactions
contemplated hereby will hold, such licenses,
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permits, consents, authorizations and orders of such Governmental Authorities
(as hereinafter defined) as are necessary to carry on its business as presently
being conducted, and to the best of Sellers' knowledge such licenses, permits,
consents, authorizations and orders are in full force and effect and have been
and are being fully complied with by the Company. To the best of Sellers'
knowledge, Schedule 2.4 lists and briefly describes all such licenses, permits,
consents, authorizations, and orders.
2.5 Financial Statements.
(a) Attached as Schedule 2.5 are copies of (i) the
statement of assets, liabilities and capital of the Company as of
September 30, 1997 (such date being referred to herein as the
"Statement Date") and the related statements of revenues and expenses
and statements of cash flows of the Company for the 12 months then
ended and (ii) the statement of assets, liabilities and capital of the
Company for the fiscal year ended September 30, 1996 and the related
statements of revenues and expenses and statements of cash flows of
the Company for such fiscal year (the financial statements described
in clauses (i) and (ii) are collectively referred to herein as the
"Financial Statements"). The Financial Statements (including the
notes thereto) have been prepared in accordance with generally
accepted accounting principles consistently applied, present fairly
the financial condition of the Company as of the Statement Date, are
correct and complete, and are consistent with the books and records of
the Company (which books and records are correct and complete).
(b) Except for pending litigation fully described in
Schedule 2.8, there are no debts, liabilities or other obligations of
any nature, whether accrued, absolute, contingent or otherwise, of the
Company as of the Statement Date that are not reflected in the
Financial Statements.
2.6 No Adverse Changes. Except as expressly permitted by this
Agreement or disclosed in Schedule 2.6, since the Statement Date, (a) to the
best of Sellers' knowledge, there have been no material adverse changes
(whether or not within the control of the Company or the Sellers) in the
results of operations, business, prospects or financial condition of the
Company from that set forth in the Financial Statements, and (b) to the best
of Sellers' knowledge, there have been no events or conditions (whether or not
within the control of the Company or the Sellers) affecting the assets,
properties, contracts with suppliers or customers, business, prospects or
operations of the Company from that in effect on the Statement Date.
2.7 Properties.
(a) Schedule 2.7(a) sets forth a brief description of all
real property, building and facilities leased by the Company
(collectively, the "Leases"). Except as fully described on Schedule
2.7(a), the Company enjoys peaceful and undisturbed possession under
all Leases. Except as set forth in Schedule 2.7(a), there is no other
real property, buildings or facilities owned, used or occupied by
Company.
(b) To the best of Sellers' knowledge, except as fully
described on Schedule 2.7(b), there are no parties in possession of
any portion of any real property purported to be
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leased by the Company (each a "Leasehold") as lessees, licensees,
tenants at sufferance, trespassers or otherwise, other than the
Company.
(c) Except as fully described in Schedule 2.7(c), there
is no pending or, to the best of Sellers' knowledge, threatened
condemnation or similar proceeding or special assessment affecting any
Leasehold, or any part thereof, nor has any Seller or the Company
received notification that any such proceeding or assessment is
contemplated by any Governmental Authority.
(d) To the best of Sellers' knowledge, neither (i) the
location, occupancy, operation or use of any Leasehold (including the
buildings, improvements, fixtures and equipment forming a part
thereof) nor (ii) the construction of any Leasehold violates any
applicable law, statute, ordinance, rule, regulation, order or
determination of any Governmental Authority or any board of fire
underwriters (or other body exercising similar functions), or any
restrictive covenant or deed restriction (recorded or otherwise)
affecting any of the Leasehold, including, without limitation, all
applicable zoning ordinances and building codes, flood disaster laws
and health laws and regulations (hereinafter sometimes collectively
called "Applicable Laws").
(e) To the best of Sellers' knowledge, no Leasehold is
within any area determined by the Department of Housing and Urban
Development to be flood prone under the Federal Flood Disaster
Protection Act of 1973.
(f) (i) There are no unpaid and presently due charges,
debts, liabilities, claims or obligations arising from the
construction, occupancy, ownership, use or operation of any Leasehold,
or the business operated thereon, that could give rise to any
mechanic's or materialmen's or other statutory lien (A) against such
Leasehold or any part thereof (including any leasehold estate
therein), or (B) for which the Company will be responsible, and (ii)
the Company has not entered into any agreement the performance of
which could give rise to a lien or other encumbrance against the
Leasehold.
(g) To the best of Sellers' knowledge, there exists no
action or proceeding to modify or terminate the present zoning, if
any, of any Leasehold.
(h) To the best of Sellers' knowledge, there exists no
judicial, quasi-judicial, administrative or other proceeding or court
order, building code provision, deed restriction or restrictive
covenant (recorded or otherwise) or other private or public limitation
that to the best of Sellers' knowledge could in any way impede or
adversely affect the use of such Leasehold by the Company as currently
used.
(i) Except as fully described on Schedule 2.7(i), each
Leasehold is connected to and serviced by water, septic tank or sewage
disposal (as applicable), gas, telephone and electric facilities that
are adequate for current use of such Leasehold and is in compliance
with all Applicable Laws. All public utilities required for the
operation of such Leasehold enter such Leasehold through adjoining
public streets or, if they pass through adjoining private land, do so
in accordance with valid public easements. Each Leasehold abuts on
and
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has direct vehicular access to a public road, or has access to a
public road via a permanent, irrevocable appurtenant easement.
(j) Except as fully described in Schedule 2.7(j), to the
best of Sellers' knowledge there is no change contemplated in any
Applicable Laws, or, to the best of Sellers' knowledge, any judicial
or administrative action, or, to the best of Sellers' knowledge, any
action by adjacent landowners, or, to the best of Sellers' knowledge,
any administrative action, or, to the best of Sellers' knowledge, any
natural or artificial conditions upon such Leasehold, or, to the best
of Sellers' knowledge, any significant adverse fact or condition
relating to such Leasehold or its current use by the Company, that
would prevent, limit, impede or render more costly the Company's use
of such Leasehold.
(k) Permanent certificates of occupancy, all licenses,
permits, authorizations and approvals required by all governmental
authorities having jurisdiction, and the requisite certificates of the
local board of fire underwriters (or other body exercising similar
functions) have been issued for such buildings and improvements
constituting a part of each Leasehold and have been paid for and all
of the foregoing are in full force and effect.
(l) Each Leasehold, including building and improvements,
is in good condition and repair. Except as set forth on Schedule
2.7(l), the equipment and other personal property used in connection
with the Company's business and operations is in good condition and
repair, subject only to normal wear and tear, is free of any latent or
patent structural defects, is suitable for the purpose for which it is
presently used, and has been maintained in accordance with industry
practice and manufacturer's recommended guidelines.
(m) No commitments have been made by the Company, any
Seller or other person to any Governmental Authority, utility company,
school board, church or other religious body, or any homeowners or
homeowners' association, or any other organization, group or
individual, relating to any Leasehold that would impose an obligation
upon the Purchaser or its successors or assigns to make any
contribution or dedication of money or land or to construct, install
or maintain any improvements of a public or private nature on or off
such Leasehold. Each Leasehold's compliance with all Applicable Laws
does not depend on, and no zoning, subdivision or other governmental
approval for such Leasehold depends on, any Leasehold, or rights
appurtenant thereto, other than such Leasehold. No Governmental
Authority has imposed any requirement that any developer of any
Leasehold pay directly or indirectly any special fees or contributions
or incur any expenses or obligations in connection with any
development of such Leasehold or any part thereof. The provisions of
this subparagraph shall not apply to any regular or nondiscriminatory
local real estate or school taxes assessed against any such Leasehold.
(n) Except as fully described on Schedule 2.7(n), each of
the Leases is valid and subsisting and in full force and effect in
accordance with its terms, provisions and conditions and constitutes
the legal, valid, binding and enforceable obligation of the Company
and the landlord thereunder; no party thereto is in default thereunder
and no event has occurred that, with notice or lapse of time or both,
would constitute a default; all initial installation work, if any, has
been fully performed, paid for and accepted. No landlord has given
any notice to the Company or Sellers of intention of instituting
litigation with respect to any Lease. True,
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complete and correct copies of each of the Leases as currently in
effect have been delivered to the Purchaser, and the Company is not
subject to any obligation to or for the benefit of the landlord with
respect the Leaseholds except as fully set forth in such Leases.
2.8 Litigation, Judgments, Etc. Except as fully described in
Schedule 2.8, to the best of Sellers' knowledge there are no actions, suits,
proceedings or investigations pending or threatened against or affecting the
Company or its assets in any court or before or by any federal, state or other
Governmental Authority, or before any arbitrator, and the Sellers have no
reason to believe that any such action, suit, proceeding or investigation will
be brought or threatened against the Company or its assets. The Company is not
in default with respect to any judgment, order, writ, injunction, decree or
award applicable to it of any court or other Governmental Authority or
arbitrator having jurisdiction over it and all such judgments, orders, writs,
injunctions, decrees and awards are described in Schedule 2.8. Except as fully
described in Section 2.10, Section 2.12, Section 2.13 or in any disclosure
schedule related thereto, the Company is not in default with respect to any
rule or regulation applicable to it of any Governmental Authority having
jurisdiction over it, or in violation of any law or statute.
2.9 Intellectual Property.
(a) Marks. Schedule 2.9(a) lists all foreign and
domestic trademarks, service marks, trade dress, and trade names
(collectively, the "Marks"), and registrations therefor, used by
Company in connection with the conduct of business now being
conducted. Except as disclosed in Schedule 2.9(a) Company is the sole
owner of all right, title and interest in the Marks and, to the best
of Sellers' knowledge, there exist no facts that would invalidate the
Marks in the areas in which business is presently being conducted.
Except as disclosed on Schedule 2.9(a), to the best of Sellers'
knowledge, the Marks, as currently being used, do not infringe upon
any rights of a third party. Neither the Company nor any Seller has
received notice from a third party asserting that one or more of the
Marks are infringing, or would infringe if used in a geographic area
outside the area in which the Company's business is presently
conducted. Except as disclosed on Schedule 2.9(a), to the best of
Sellers' knowledge, there are no third party uses of the Marks or
colorable imitations thereof. Neither the Company, any Seller or any
of their affiliates, nor, to the best of Sellers' knowledge, any other
person has granted any rights or license whatsoever with respect to
the use of the Marks "Sauces Unlimited, Inc.," "Trial By Fire,"
"Alamo Street," or any derivation thereof, or any other. Neither any
Seller nor any affiliate of the Company has any rights or license with
respect to any of the Marks. To the best of Sellers' knowledge no
rights in any of the Marks listed in Schedule 2.9(a) will be affected
in any way by virtue of the execution of this Agreement or the
consummation of the transactions contemplated hereby. To the best of
Sellers' knowledge, no ▇▇▇▇ is the subject of any pending litigation,
arbitration, interference or protest proceeding.
(b) Patents. Except as set forth on Schedule 2.9(b),
there are no foreign or domestic patents or applications therefor used
in the conduct of the business as now conducted or in which the
Company has rights (collectively, the "Patents"). To the best of
Sellers' knowledge, no patent rights other than those granted to the
Company by its purchase of equipment are necessary to conduct the
business of the Company as now conducted.
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(c) Copyrights. Except as set forth on Schedule 2.9(c),
there are no foreign or domestic copyright registrations or
applications for registration thereof used in the conduct of the
business of the Company as now conducted or in which the Company has
rights. All copyrights used in the conduct of the business as now
conducted, including all copyrights with respect to advertising,
software and photographs (collectively, the "Copyrights"), are solely
owned by the Company. Except as disclosed in Section 2.9(c), to the
best of Sellers' knowledge, neither Company nor any Seller has
received any notice from a third party asserting any allegations of
infringement of any Copyrights. Neither the Company nor any Seller
has sold, licenced or transferred to any Seller, employee or other
person or entity any rights to any of the Copyrights.
(d) Trade Secrets. All trade secrets confidential
information and know how used in the conduct of the business as now
conducted, including but not limited to customer information and
supplier information, are owned by the Company and, to the best of
Seller's knowledge, can be used or sold by the Company without
infringing trade secret or other rights of others. Schedule 2.9(d)
contains a list of all current employees who have (or could reasonably
be expected to have) knowledge of the trade secrets, confidential
information and know how. Each such employee has executed agreements
for maintaining the confidentiality of the trade secrets, confidential
information and know how, which are in full force and effect. Neither
the Company nor any Sellers have sold, licensed or otherwise
transferred to any Seller, employee or any other person any right to
use or disclose any trade secret confidential information and know
how. To the best of Sellers' knowledge, all such trade secrets,
confidential information and know how are presently valid and
protectable and, to the best of Sellers' knowledge, none of the trade
secrets, confidential information and know how are a part of the
public domain.
(e) Except as set forth in Schedule 2.9(e), all working
requirements and all fees, annuities and other payments that are due
on or before the Closing for any foreign or domestic Marks, Patents,
and Copyright and all application and/or registrations therefore have
been met or paid.
(f) To the best of Sellers' knowledge, the Company has
the right to use, free and clear of the rightful claims by others all
foreign and domestic Marks, Patents and Copyrights and all
applications and/or registrations therefore, as well as all trade
secrets confidential information and know how used or having been used
in the conduct of the business of the Company as now conducted.
2.10 Environmental and Health Laws.
(a) Except as set forth on Schedule 2.10(a), the Company
is not in violation of any Environmental Laws (as hereinafter defined)
or any order or requirement of any court or Governmental Authority to
the extent pertaining to health or the environment, nor are the
operations or assets of the Company subject to any remedial
obligations (except for customary closure obligations) under any
Environmental Law;
(b) Without limitation of clause (a) above, the Company
is not subject to any existing, pending or, to the best of Sellers'
knowledge, threatened action, suit, investigation,
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inquiry or proceeding by or before any court or Governmental Authority
under any Environmental Law and neither the Company nor the Sellers
have reason to believe that any such action, suit, investigation,
inquiry or proceeding will be brought against the Company;
(c) Except as set forth on Schedule 2.10(c), all notices,
permits, licenses or similar authorizations, if any, required to be
obtained or filed by the Company under any Environmental Law,
including without limitation those relating to the treatment, storage,
disposal or release of a hazardous substance or solid waste into the
environment, have been duly obtained or filed, and the Company is in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) Except as set forth in Schedule 2.10(d), since the
effective date of the relevant requirements of RCRA (as hereinafter
defined) all hazardous substances or solid wastes generated by the
Company or at any property currently or heretofore owned or leased by
the Company, including, but not limited to, the Leaseholds and
requiring disposal have been, to the extent required by any
Environmental Law, transported only by carriers maintaining valid
authorizations under RCRA and any other Environmental Laws and, to the
best of Sellers' knowledge, treated and disposed of only at treatment,
storage and disposal facilities maintaining valid authorizations under
RCRA and any other Environmental Law, and, to the best of Sellers'
knowledge, such carriers and facilities have been and are operating in
compliance with such authorizations and to the best of Sellers'
knowledge are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(e) Except as set forth in Schedule 2.10(e), to the best
of Sellers' knowledge, there are no underground storage tanks or other
underground containers on or under any of the Company's assets or
operations;
(f) Except as set forth in Schedule 2.10(f), without
limiting the foregoing, to the best of Sellers' knowledge, there is no
liability to any third party in connection with any release or
threatened release of any hazardous substances, solid wastes,
petroleum and petroleum products into the environment as a result of
or with respect to the Company's assets or operations; and
(g) Copies of all environmental reports and records
possessed by Sellers or the Company that address the environmental
condition of any property currently or heretofore owned or leased by
the Company, (including, but not limited to, the Leaseholds) or other
assets of the Company or environmental compliance or liability
concerns affecting the business of the Company are attached hereto as
Schedule 2.10(g).
For purposes of this Agreement, the term "Environmental Laws" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders or
determinations of any Governmental Authority pertaining to health or the
environment currently or hereafter in effect in any and all jurisdictions in
which the Company's assets are located or in which its operations are
conducted, including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act of 1970, as amended, the Resource
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Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking
Water Act, as amended, the Toxic Substances Control Act, as amended,the
Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, any state laws pertaining to the handling of
wastes or the use, maintenance, and closure of pits and impoundments, and other
environmental conservation or protection laws. For purposes of this Agreement,
the terms "hazardous substance" and "release" (or "threatened release") have
the meanings specified in CERCLA, and the terms "solid waste" and "disposal"
(or "disposed") have the meanings specified in RCRA; provided, however, that to
the extent the laws of the state in which the property is located or the
operations are conducted establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" that is broader than that specified in
either CERCLA or RCRA, such broader meaning shall apply. For purposes of this
Agreement, the term "Governmental Authority" includes the United States, the
state, county, city and political subdivisions in which the Company's
operations or assets are located or which exercises jurisdiction over any of
the Company or its operations or assets, and any agency, department,
commission, board, bureau or instrumentality or any of them that exercises
jurisdiction over the Company or its operations or assets.
2.11 Additional Schedules. Schedule 2.11 contains the following
separate schedules and has attached the following documents:
(a) Copies of all currently effective contracts or
options relating to the acquisition by the Company of any operating
business.
(b) Copies of all currently effective contracts for the
performance of services involving aggregate annual receipts or
payments by the Company in excess of $10,000.
(c) Copies of all currently effective contracts for the
purchase, sale, lease or exchange of real or personal property
involving aggregate receipts or payments by the Company in excess of
$10,000.
(d) Copies of all currently effective contracts for
construction on or improvement of any Leasehold (and all documentation
relating thereto) involving aggregate receipts or payments by the
Company in excess of $10,000.
(e) A schedule, as of the Statement Date, of the trade
and accounts receivable of the Company in excess of $10,000 showing
separately for each such receivable its age denominated by an
appropriate classification.
(f) Except as otherwise delivered pursuant to clause (g)
or (j), copies of all currently effective agreements or arrangements
with regard to the payment of compensation (including without
limitation bonuses), profit-sharing, pension, vacation, retirement or
other compensation benefits to, or providing for the indemnification
of, current or former directors, officers or employees of the Company
whose compensation exceeds $40,000 per year, regardless of whether
said agreements or arrangements are legally binding (a schedule
setting forth the name or identification of each current or former
director, officer or employee of the Company who is currently being
paid or who is entitled to compensation (other than at hourly rates)
benefits that in the aggregate exceed $10,000 per year and the rate or
amounts
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thereof is set forth in Schedule 2.18); and all currently effective
written contracts or commitments with unions or other groups or
otherwise with respect to wages, working conditions, work rules or
employee benefits.
(g) A summary of all material statements of practice
followed by the Company with regard to the payment of compensation
(including without limitation bonuses), profit-sharing, pension,
vacation, retirement or other compensation benefits to current or
former directors, officers or employees of the Company whose
compensation exceeds$40,000 per year, whether or not said practices
are legally binding; and all currently effective material contracts or
commitments with unions or other groups or otherwise with respect to
wages, bonuses, working conditions, work rules or employee benefits
that were not required to be delivered pursuant to subparagraph (f) or
(j).
(h) Copies of all complaints and other pleadings (and
settlement documents and releases) relating to threatened, pending or
settled litigation or governmental proceedings or claims set forth on
Schedule 2.8.
(i) A schedule listing and itemizing all current and
forecasted depreciation expenses of the Company or assets owned on the
Statement Date or acquired by the Company since such date.
(j) Copies of all pension, profit sharing, retirement,
bonus or stock option or stock purchase plans or hospitalization,
sickness and accident or other fringe benefit plans or programs of the
Company currently in effect with respect to employees or others.
(k) Copies of all currently effective contracts, notes,
financing statements, mortgages, deeds of trust and other instruments
relating to the borrowing of money or the guaranty of any obligation
for the borrowing of money and of all currently effective letters of
credit to which the Company is a party or otherwise liable or that
relate to the Company or its assets (whether contingently or
absolutely) including but not limited to (i) the WCMA Loan Agreement
and the notes relating thereto, and (ii) the CIT Loan Agreement and
the note relating hereto.
(l) Copies of all other currently effective contracts
material to the business and operations of the Company, regardless of
whether made in the ordinary course of business.
(m) Copies of all currently effective contracts
containing covenants limiting the freedom of the Company to compete in
any line of business or with any person in any geographical area.
(n) Copies of all currently effective contracts requiring
the payment to any person of any royalty or similar commission or fee
in excess of $10,000 per annum, of the Company not delivered pursuant
to subparagraph (g) above.
(o) Copies of all currently effective contracts to which
both (X) the Company, on one hand, and (Y) any Seller or any of its
officers, directors, partners or affiliates other than the Company, on
the other hand, are parties not otherwise delivered pursuant to this
Section
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2.11 and except for the Amended Lease Agreement dated August 1, 1996
between the Company and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ attached to Schedule
2.7(a).
The Company is not, and but for a requirement that notice be given or that a
period of time elapse or both would not be, in default under any contract,
agreement, lease or other instrument to which it is a party or by which it or
its properties is bound. All of the purportedly currently effective contracts,
agreements, understandings, licenses, franchises, permissions and commitments,
whether or not attached to a schedule to this Agreement, of the Company are in
good standing, valid and effective and the Company has, in the ordinary course
of business, paid all amounts due thereunder and has satisfied in full all the
liabilities and obligations with respect thereto and, no party other than the
Company is in default under any such contract, agreement, understanding,
franchise, permission or commitment.
2.12 Taxes.
(a) Except as set forth in Schedule 2.12(a), (i) all
returns and reports ("Tax Returns") of or with respect to any Tax (as
hereinafter defined) that are required to be filed on or before the
Closing Date by or with respect to the Company or the assets or
business of the Company have been or will be duly and timely filed,
(ii) all items of income, gain, loss, deduction and credit or other
items required to be included in each such Tax Return have been or
will be so included and all information provided in each such Tax
Return is true, correct and complete, (iii) all Taxes that have become
or will become due with respect to the period covered by each such Tax
Return (whether or not shown on such Tax Return) have been or will be
timely paid in full, (iv) all withholding Tax requirements imposed on
or with respect to the Company or its business have been or will be
satisfied in full in all respects, and (v) no penalty, interest or
other charge is or will become due with respect to the late filing of
any such Tax Return or late payment of any such Tax. For purposes of
this Agreement, "Taxes" shall mean any federal, state, local, foreign
and other taxes, assessments, fees and other governmental charges,
including without limitation income, gross receipts, net proceeds,
alternative or add-on minimum, ad valorem, value added, turnover,
sales, use, property (tangible and intangible), stamp, lease, user,
excise, duty, franchise, transfer, license, withholding, payroll,
employment, fuel, excess profits, occupational, interest equalization,
windfall profit, severance, and other similar governmental charges
(including interest and penalties).
(b) No Tax Returns of or with respect to the Company or
its business have been audited by the applicable Governmental
Authority.
(c) There is no claim against the Company or its assets
or business for any Taxes, and no assessment, deficiency or adjustment
has been asserted or proposed with respect to any Tax Return of or
with respect to the Company or its business, other than those
disclosed (and to which are attached true and complete copies of all
audit or similar reports) in Schedule 2.12(c).
(d) Except as set forth in Schedule 2.12(d), there is not
in force any extension of time with respect to the due date for the
filing of any Tax Return of or with respect to the Company or its
assets or business or any waiver or agreement for any extension of
time for
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the assessment or payment of any Tax of or with respect to the Company
or its assets or business.
(e) The total amounts set up as liabilities for current
and deferred Taxes in the Financial Statements are sufficient to cover
the payment of all Taxes, whether or not assessed or disputed, which
are, or are hereafter found to be, or to have been, due by or with
respect to the Company and its assets or business up to and through
the periods covered thereby.
(f) Neither the execution or deliver of this Agreement,
nor the performance by any party of its obligations hereunder has
resulted or will result in the imposition of any Tax (or the
requirement to file any Tax Return) on the Company or any shareholder
of the Company (other than the Sellers).
2.13 Employee Benefit Plans. Schedules 2.11(f), Schedule 2.11(g)
or Schedule 2.11(j) set forth all employee benefit plans within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") sponsored, maintained or contributed to by the Company for the
benefit of the employees of the Company ("Plans"), or has been so sponsored,
maintained or contributed to within six years prior to the Closing Date.
Except as otherwise set forth Schedule 2.11(f), Schedule 2.11(g) or Schedule
2.11(j), (a) all reports and disclosures relating to the Plans required to be
filed with or furnished to governmental agencies, Plan participants or Plan
beneficiaries have been filed or furnished in accordance with applicable law in
a timely manner, and each Plan has been administered in substantial compliance
with its governing documents and applicable law, (b) each of the Plans intended
to be qualified under Section 401 of the Code, satisfies the requirements of
such Section and has received a favorable determination letter from the
Internal Revenue Service regarding such qualified status and has not, since
receipt of the most recent favorable determination letter, been amended or, to
the knowledge of Seller, operated in a way which would adversely affect such
qualified status, and (c) no act, omission or transaction has occurred which
would result in imposition on the Company of (i) breach of fiduciary duty
liability damages under Section 409 of ERISA, (ii) a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (iii) a tax
imposed pursuant to Chapter 43 of Subtitle D of the Code. Further, there is no
Plan sponsored, maintained or contributed to by the Company, or that has been
sponsored, maintained or contributed to by the Company that is subject to Title
IV of ERISA, and there is no employee benefit plan, within the meaning of
Section 3(3) of ERISA, which is not listed in Schedule 2.11(f), Schedule
2.11(g) or Schedule 2.11(j), and which is sponsored, maintained or contributed
to, or has been sponsored, maintained or contributed to by any corporation,
trade, business or entity under common control with the Company, within the
meaning of Section 414(b), (c) or (m) of the Code or Section 4001 of ERISA.
The termination of any Plans will not violate any law, rule or regulation and
will not result in (and has not resulted in) any liability to the Company
(other than resulting solely from reasonable expenses incurred to terminate any
such plan). Schedule 2.13 sets forth by number and employment classification
the approximate numbers of employees employed by the Company as of the date of
this Agreement, and none of said employees are subject to union or collective
bargaining agreements with the Company. The Company has not at any time on or
after January 1, 1997 had or, to the knowledge of Seller, been threatened with
any work stoppages or other labor disputes or controversies with respect to its
employees which had a material adverse effect on the Company.
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2.14 Authorization of Agreement - No Violation - No Consents.
Each of the Sellers and the Company has full power and authority to enter into
this Agreement and the other documents delivered pursuant to this Agreement
(collectively, the "Documents") to the extent each is a party thereto and the
capacity and authority to make the representations, warranties, covenants and
agreements herein or therein. Except as set forth on Schedule 2.14, neither
the execution or delivery of the Documents nor the consummation of the
transactions contemplated herein or therein (a) will conflict with or result in
a breach, default or violation of (i) any of the terms, provisions or
conditions of the Articles of Incorporation or Bylaws of the Company (copies of
all of which organization documents are attached as Schedule 2.14) or (ii) any
agreement, document, instrument, judgment, decree, order, governmental permit,
certificate, license, law, statute, rule or regulation to which any Seller or
the Company is a party or to which it is subject, (b) will result in the
creation of any lien, charge or other encumbrance on any property or assets of
the Company, or (c) will require any Seller or the Company to obtain the
consent of any private nongovernmental third party not already obtained.
Except as expressly contemplated by the Documents, no consent, action, approval
or authorization of, or registration, declaration or filing with, any
governmental department, commission, agency or other instrumentality or any
other person or entity is required to authorize, or is otherwise required in
connection with, the execution and delivery of the Documents by any Seller or
the Company or their performance of the terms of the Documents or the validity
or enforceability of the Documents. This Agreement and each Document delivered
pursuant hereto constitutes the legal, valid and binding obligation of the
Company and each Seller (to the extent a party thereto) enforceable against
each such person in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and to the principles of equity (whether
enforcement is sought in a proceeding in equity or at law).
2.15 Brokerage Agreements. None of any Seller or the Company has
entered (directly or indirectly) into any agreement, with any person, firm or
corporation for the payment of any commission, brokerage or "finder's fee" in
connection with the transactions contemplated herein.
2.16 Accounts Receivable. All accounts and notes receivable of
the Company in excess of $10,000 arose, to the best of Sellers' knowledge, in
the ordinary and usual course of business, represent, to the best of Sellers'
knowledge, valid obligations subject to no set-offs or counterclaims, and, to
the best of Sellers' knowledge, either have been collected or are collectible
(subject only to bankruptcy stays sought by account debtors) in the ordinary
and usual course of business in the aggregate recorded amounts as reflected in
the books of account of the Company in accordance with their terms.
2.17 Banks. Schedule 2.17 sets forth (a) the name of each bank,
trust company, stock and other broker with which the Company has an account,
credit line, or safe deposit box or vault or maintains any relations, (b) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (c) the purpose of each such account, safe deposit box or
vault, and (d) the names of all persons authorized by proxies, powers of
attorney or like instruments, to act on behalf of the Company in matters
concerning any of its business or affairs.
2.18 Directors, Officers and Key Employees. Schedule 2.18
contains a true and complete list of the name, address and salary, as well as
the title or functional position, of each current director and officer of the
Company, and each other current employee, consultant, representative, salesman
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or agent employed or under contract with the Company who received or accrued or
on an annualized basis would have received or accrued aggregate direct cash
remuneration as reflected on such person's Form W-2 at the rate of $40,000 or
more per annum from the Company in respect of the 24 months ended on the
Statement Date. Except as set forth on Schedule 2.18, none of the persons
listed on Schedule 2.18 has received any wage or salary increase or bonus since
the Statement Date, nor have any such increases or bonuses been adopted since
the Statement Date. Neither any Seller, the Company nor, to the best of
Sellers' knowledge, any of the officers or directors of the Company has ever
been convicted of a felony. None of any Seller or any of the persons set forth
on Schedule 2.18, and no relative or affiliate known to any Seller or the
Company of any such person has had in the last five years any transaction with
the Company involving the receipt by or payment by the Company of more than
$10,000 in cash, property or services or the increase in the debt or other
liabilities of the Company, except in the ordinary course of their employment
as set forth in Schedule 2.18 or as otherwise set forth on Schedule 2.18.
2.19 Suppliers and Customers. Schedule 2.19 sets forth the ten
most significant third party suppliers and the twenty most significant third
party customers of the Company (in terms of payments to or by such persons)
during the twelve-month period ended the Statement Date. The relationships of
the Company with its suppliers and customers are satisfactory.
2.20 No Material Omissions. To the best of Sellers' knowledge,
neither this Agreement nor any of the documents delivered in connection
therewith contains any untrue statement of a material fact, nor, to the best of
Sellers' knowledge, does this Agreement or any such document omit to state any
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made. To the best of Sellers'
knowledge, there is no fact that would materially adversely affect the
operations, business, assets or prospects of the Company that has not been
disclosed in this Agreement or any Schedule hereto.
2.21 Outstanding Debt. Except as disclosed on Schedule 2.21 or the
Financial Statements or incurred in the ordinary course of business since the
Statement Date, the Company has no outstanding debt, payables, liabilities or
liens of any kind, whether fixed, contingent, matured or unmatured. All such
debt, payables, liabilities or liens incurred as described above in the
ordinary course of business and existing on July 31, 1997 are listed on
Schedule 2.21.
2.22 Company Loans. Attached as Schedule 2.22 are copies of
(i)that certain Term WCMA Loan and Security Agreement between the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services Inc. dated January 26, 1996 (the
"WCMA Loan Agreement") and the notes relating thereto (such notes being known
as the "Term Note" and the "WCMA Note"), and (ii) those certain Texas Security
Agreement between the Company and The CIT Group/Equipment Financing, Inc.
("CIT") dated November 22, 1996 and May 20, 1997 (collectively, the "CIT Loan
Agreement"). The Company is not, and but for a requirement that notice be
given or a period of time elapse or both would not be, in default under such
agreements or documents delivered in connection therewith including the notes
relating thereto and any mortgages or security interests securing the debt
created thereunder. The combined current outstanding balance under the note(s)
relating to the WCMA Loan Agreement is set forth on Schedule 2.22. The current
outstanding balance under the note(s) relating to the CIT Loan Agreement is set
forth on Schedule 2.22.
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2.23 Insurance. Schedule 2.23 Part I sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation and bond and surety
arrangements) related to the Company or its assets:
(a) the name, address, and telephone number of the agent,
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) the policy number and period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(e) a description of any retrospective premium
adjustments or other loss-sharing arrangements.
True and complete copies of each such insurance policy are attached as
Schedule 2.23 Part II.
2.24 Inventory. The Company's inventory (including raw materials
and work-in-progress): (i) were acquired in the ordinary course of business
consistent with past practice; (ii) are of a quality, quantity, and condition
useable or saleable in the ordinary course of business within the Company's
normal inventory turnover experience; and (iii) are valued in accordance with
generally accepted accounting principles. The Company does not have any
material liability with respect to the return or repurchase of any goods in the
possession of any customer outside the ordinary course of business.
2.25 Compliance with Laws. (a) To the best of Seller's knowledge,
the Company is in compliance with all laws, regulations and orders applicable
to it, its respective business and operations (as conducted by it now and in
the past), and its properties and assets (in each case owned or used by it now
or in the past). The Company has not been cited, fined or otherwise notified
of any asserted past or current material failure to comply with any laws,
regulations or orders and no proceeding with respect to any such material
violation is pending or, to the Sellers' knowledge, threatened. The Company
has not made any payment of funds in connection with its business that is
prohibited by law, and no funds have been set aside to be used in connection
with its business for any payment prohibited by law.
(b) The Company has complied with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended (the "Immigration Act").
With respect to each Employee (as defined in 8 C.F.R. 274a.1(f)) of the Company
for whom compliance with the Immigration Act as employer is required, the
Company has on file a true, accurate and complete copy of (i) each Employee's
Form I-9 (Employment Eligibility Verification Form) and (ii) all other records,
documents or other papers prepared, procured and/or retained by the Company
pursuant to the Immigration Act. The Company has not been cited, fined, served
with a Notice of Intent to Fine or with a Cease and Desist Order, nor has any
action or administrative proceeding been initiated or, to the knowledge of the
Sellers, threatened against the Company, by the Immigration and Naturalization
Service by reason of any actual or alleged failure to comply with the
Immigration Act.
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(c) The Company is not subject to any contract, decree or
injunction that restricts the continued operation of any business or the
expansion thereof to other geographical areas, customers and suppliers or lines
of business.
2.26 Status of Securities. Each Seller represents and warrants
that they have received a copy of the Prospectus dated August 27, 1997 of the
Purchaser (the "Prospectus"), and have reviewed the Prospectus carefully. Each
Seller further represents that neither the issuance to such persons of the
Warrants pursuant to the terms of this Agreement nor the underlying shares of
Purchaser Common Stock upon exercise thereof have been registered or qualified
under the Securities Act of 1933, as amended (the "Securities Act") or any
state securities or "blue sky" laws. Each Seller further acknowledges that
such securities may not be sold, transferred or otherwise disposed of without
an effective registration statement under the Securities Act and compliance
with applicable state securities and "blue sky" laws, or an applicable
exemption therefrom, and that the certificates for such shares shall bear a
restrictive legend to such effect. Each Seller represents to the Company that
such person is taking such shares for investment and not with a view to
distribution, within the meaning of the Securities Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, with corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
contemplated to be conducted, and is not required to qualify to do business as
a foreign corporation in any jurisdiction.
3.2 Authorization of Agreement - No Violation - No Consents. The
Purchaser has full power and authority to enter into the Documents (to the
extent a party thereto) and to make the representations, warranties, covenants
and agreements made herein and therein. Except as expressly provided in this
Agreement, neither the execution or delivery of the Documents by the Purchaser
nor the consummation of the transactions contemplated herein by the Purchaser
(a) will conflict with or result in a breach, default or violation of (i) any
of the terms, provisions or conditions of the articles of incorporation or
bylaws of the Purchaser or (ii) any agreement, document, instrument, judgment,
decree, order, governmental permit, certificate, license, law, statute, rule or
regulation to which the Purchaser is a party or to which it is subject, (b)
will result in the creation of any lien, charge or other encumbrance on any
property or assets of the Purchaser or (c) will require the Purchaser to obtain
the consent of any private nongovernmental third party. No consent, action,
approval or authorization of, or registration, declaration or filing with, any
governmental department, commission, agency or other instrumentality or any
other person or entity is required to authorize, or is otherwise required in
connection with, the execution and delivery of the Documents by the Purchaser
or its performance of the terms hereof by the Purchaser or the validity or
enforceability hereof or thereof against the Purchaser. This Agreement and the
Documents delivered by the Purchaser pursuant hereto constitute the legal,
valid and binding obligations of the Purchaser enforceable against the
Purchaser in accordance with their respective terms, subject to applicable
bankruptcy, insolvency,
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reorganization, moratorium and other similar laws affecting creditors' rights
generally and to the principles of equity (whether enforcement is sought in a
proceeding in equity or at law).
3.3 Brokerage Agreements. The Purchaser has not entered
(directly or indirectly) into any agreement under which Seller or any affiliate
of Seller could be liable with any person, firm or corporation providing for
the payment of any commission, brokerage or "finder's fee" in connection with
the transactions contemplated herein.
ARTICLE IV
COVENANTS OF THE COMPANY AND THE SELLERS
Each of the Company and the Sellers further agrees, jointly and
severally, except as set forth in or contemplated by this Agreement or as
otherwise approved by the Purchaser in writing, that from the date hereof
through the Closing Date:
4.1 Conduct of Business of the Company Prior to the Closing Date.
(a) The business of the Company shall be operated only in
the ordinary course of business and consistent with past practice, and
consistent with such operation, the Company and the Sellers will use
all reasonable efforts to preserve intact the present organization of
the Company and the relationships of the Company with persons having
relationships with them;
(b) No change shall be made in the Articles of
Incorporation or Bylaws of the Company;
(c) No change shall be made in the number of shares of
authorized or issued capital stock of the Company; nor shall any
option, warrant, call, right, commitment, conversion right, right of
first refusal, or agreement of any character be granted or made by the
Company relating to the authorized or issued capital stock thereof;
nor shall the Company issue, grant or sell any securities or
obligations convertible into shares of the capital stock of the
Company; nor shall the Company make any declaration, setting aside or
payment of any dividend or distribution of assets of any kind in
respect of its capital stock, nor repurchase or agree to repurchase
any share of such capital stock;
(d) The Company shall not settle any tax claims
(including interest and penalties);
(e) The Company shall duly comply with all laws
applicable to the Company and all laws applicable to the transactions
contemplated by this Agreement;
(f) Except as fully reflected in the Financial Statements
and except in the ordinary course of business, the Company shall not
(i) incur any indebtedness in addition to any indebtedness outstanding
on the date hereof or renew or extend any indebtedness outstanding on
the date hereof; (ii) enter into any agreement requiring the
maintenance of a specified net worth; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
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individual, firm or corporation, except for the endorsement of checks
for collection in the ordinary course of business; or (iv) make any
loans, advances or capital contributions to, or investments in, any
other individual, firm or corporation, except in connection with
normal relocations, travel advances or other advances which in the
aggregate are not in excess of $10,000;
(g) The Company shall not (i) increase the compensation
payable or to become payable by the Company to any officer, employee,
or director thereof, or increase any bonus, insurance, pension or
other employee benefit plan, or increase any payment plan, payment or
arrangement made to, for or with any officer, employee, or director or
(ii) commit itself (A) to any additional pension, profit-sharing,
bonus, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement
or other employee benefit plan, agreement or arrangement, or to any
employment or material consulting agreement with or for the benefit of
any person or (B) to amend any of such plans or any of such agreements
in existence on the date hereof (other than amendments required by law
to preserve the qualified status of a Plan), (iii) engage in any
transaction (either acting alone or in conjunction with Sellers, any
Plan or trust created thereunder) in connection with which the Company
could be subjected (directly or indirectly) to either a civil penalty
assessed pursuant to subsections (c), (i) or (1) of Section 502 of
ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the
Code, (iv) terminate any Plan in a manner, or take any other action
with respect to any Plan, that could result in the liability of the
Company to any person, (v) take any action that could adversely affect
the qualification of any Plan or its compliance with the applicable
requirements of ERISA, (vi) fail to make full payment when due of all
amounts that, under the provisions of any Plan, any agreement relating
thereto or applicable law, the Company is required to pay as
contributions thereto or (vii) fail to file, on a timely basis, all
reports and forms required by federal regulations with respect to any
Plan;
(h) The Company shall not, except in the ordinary course
of business, sell, transfer, mortgage, or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage or otherwise dispose of
or encumber, any properties, real, personal or mixed, tangible or
intangible, which have a value on the books of the Company, either
individually or in the aggregate, in excess of $10,000;
(i) The Company shall not enter into any other agreement,
commitment or contract, except agreements, commitments or contracts
for the purchase, sale or lease of products or services in the
ordinary course of business, consistent with past practice and not in
excess of current requirements;
(j) Except as fully reflected in the Financial Statements
or on Schedule 4.1(j), the Company shall not make any single capital
expenditure, capital addition or capital improvement in an amount
exceeding $10,000 for any single facility;
(k) Without limiting the provisions of Section 4.5
hereof, none of the Company, the Sellers or the officers or directors
of the Company may approve, recommend or undertake, with the Company
as the surviving, disappearing or acquiring corporation, any merger,
consolidation, acquisition of all or substantially all of the assets,
tender offer or other
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takeover transaction or enter into any negotiations with, or furnish
or cause to be furnished, any information concerning its business,
properties or assets to, any person (other than the Purchaser) that
the Company or any of such officers or directors knows to be
interested in any such transaction;
(l) The Company shall not take, or permit to be taken,
any action or do, or permit to be done, anything in the conduct of the
business of the Company that would be contrary to or in breach of any
of the terms or provisions of this Agreement or that would cause any
of the representations contained herein to be or to become untrue;
(m) Except as fully described on Schedule 4.1(m), the
Company shall not settle any claim, action or proceeding existing on
or commenced after the date hereof or waive any right against a third
party;
(n) The Company shall not make any loan or advance to any
officer, director, employee, consultant, representative, salesman or
agent of the Company involving more than $10,000 in the aggregate or
make any other loan or advance;
(o) The Company shall not pay or commit to pay any
commission or other amount to any director or officer of the Company
or any employee, consultant, representative, salesman or agent of the
Company or any relative or affiliate of any of them except in
accordance with employment contracts or arrangements entered into in
the ordinary or usual course of business;
(p) The Company shall not make any unlawful payment to
governmental or quasi-governmental officials or, except as fully
described on Schedule 2.11(m), payments to customers or suppliers for
the sharing of fees or rebating of charges or reciprocal practices;
(q) None of any Seller or any of the persons set forth on
Schedule 2.18, and no relative or affiliate known to any Seller or the
Company of any such person shall enter into any transaction with the
Company involving the receipt by or payment by the Company of more
than $10,000 in cash, property or services or the increase in the debt
or other liabilities of the Company, except in the ordinary course of
their employment or as set forth on Schedule 2.18; and
(r) Except as fully described on Schedule 4.1(r), or as
provided in Section 6.1(h) the Company or the Sellers shall not amend
any Lease or any instrument affecting the Leasehold.
4.2 Obtaining Consents. The Sellers and the Company will use all
reasonable efforts to obtain, and to assist the Purchaser in obtaining, all
consents, resignations, authorizations and approvals and making all filings
necessary for the consummation of the transactions contemplated by this
Agreement.
4.3 Access by the Purchaser to the Company. During the period
from the date of this Agreement to the Closing Date or the prior termination of
this Agreement pursuant to Section 6.3, the Purchaser and its employees,
representatives and agents shall be given access to the facilities,
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properties, personnel, books and records of the Company for the purpose of
conducting an investigation of its financial condition, corporate status,
business, properties and assets; provided, however, that such investigation
shall be conducted in a manner that does not interfere with normal operations
of the Company. The Company will cause the employees, counsel, accountants and
other representatives of the Company to be available to the Purchaser and its
employees and agents at all reasonable times for such purposes.
4.4 Confidentiality. None of the Company, any Seller or any
employee or other representative or agent of the Company or any Seller will
disclose or use any information obtained in the course of the negotiation of
this Agreement or otherwise or set forth in any schedule hereto, except (a) in
connection with the consummation hereof, (b) as required by law, (c) as may be
necessary to the prosecution or defense of any claim or suit brought to enforce
rights under this Agreement, or (d) to the extent that the same may become
public other than through the action of the Company or any Seller or the
representatives, agents or employees of the Company or any Seller. If the
transactions contemplated hereby are not consummated and this Agreement
terminates, the Company, any Seller, their employees and other representatives
and agents promptly will return all copies of documents, contracts or records
and other properties furnished by the Purchaser or its affiliates pursuant to
this Agreement.
4.5 Exclusive Agreement. Except to the extent otherwise expressly
contemplated by this Agreement, unless this Agreement is terminated prior to
Closing, none of Sellers, the Company nor any affiliate thereof will directly
or indirectly (a) encourage, solicit or engage in discussions or any
negotiations with, or provide any information to, any person or entity (other
than the Purchaser or affiliates of the Purchaser) concerning any possible
disposition of any of the Company or any asset (unless and to the extent that
such property or asset would be expressly permitted by this Agreement to be
disposed of), or (b) do anything or enter into any agreement or take any action
that by its terms or effect could reasonably be expected to adversely affect
the ability of the parties to consummate the transactions contemplated by this
Agreement on the terms and conditions set forth herein or that would be
contrary to or breach any of the terms or provisions of this Agreement or that
would cause any of the representations or warranties contained herein to be or
become untrue in any material respect.
4.6 Satisfaction of Closing Conditions. The Company and Sellers
shall use all reasonable efforts to satisfy the conditions to Closing set forth
in Article VI relating to any Seller or the Company in an expeditious manner.
4.7 Delivery of Documents at Closing. At the Closing, subject to
satisfaction of the conditions set forth in Article VI, Sellers and the Company
shall execute and deliver to the Purchaser all documents required to be
delivered pursuant to Section 6.1.
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ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser further agrees, except as set forth in or contemplated
by this Agreement or as otherwise approved by the Sellers in writing, as
follows:
5.1 Obtaining Consents. The Purchaser will use all reasonable
efforts to obtain all consents, authorizations and approvals and making all
filings necessary for the consummation of the transactions contemplated by this
Agreement.
5.2 Confidentiality. Until the transactions contemplated hereby
have been consummated (and if for any reason such transactions are not
consummated for a period of two years after the effective date hereof), neither
the Purchaser nor any employee or other representative or agent of the
Purchaser will disclose or use any information obtained in the course of its
investigation under Section 4.3, the negotiation of this Agreement or otherwise
or set forth in any schedule hereto, except (a) in connection with the
consummation hereof, (b) as required by law, (c) as may be necessary to the
prosecution or defense of any claim or suit brought to enforce rights under
this Agreement, (d) to the extent that the same may become public other than
through the action of the Purchaser, or the representatives, agents or
employees of the Purchaser or (e) in connection with the negotiation and
consummation of the sale of securities of the Purchaser or any of its
affiliates to investors, provided that such investors agree to keep such
information confidential on the terms set forth herein. If the transactions
contemplated hereby are not consummated and this Agreement terminates, the
Purchaser, its employees and other representatives and agents promptly will
return all copies of documents, contracts or records and other properties
furnished by Sellers or Company pursuant to this Agreement.
5.3 Satisfaction of Closing Conditions. The Purchaser shall use
all reasonable efforts to satisfy the conditions to Closing set forth in
Article VI relating to the Purchaser in an expeditious manner.
5.4 Delivery of Documents at Closing. At the Closing, subject to
satisfaction of the conditions set forth in Article VI, the Purchaser shall
execute and deliver to the Sellers the documents contemplated to be delivered
pursuant to Section 6.2.
ARTICLE VI
CONDITIONS TO THE CLOSING; TERMINATION
6.1 Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to effect the transactions contemplated by this Agreement is
subject to the following conditions:
(a) Representations and Warranties of the Company and the
Sellers to be True. (i) The representations and warranties of the
Company and the Sellers hereunder shall be made again at the Closing
and to the extent qualified with respect to materiality shall be true
and correct in all respects as of the Closing, and to the extent not
so qualified shall be true
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and correct in all material respects as of the Closing, (ii) the
Company and the Sellers shall have performed (or caused to have been
performed) in all material respects all covenants required of them
(and their affiliates) by this Agreement as of the Closing and (iii)
the Company and the Sellers shall have furnished the Purchaser at the
Closing with a certificate of the Sellers and the President of the
Company to such effect.
(b) Third Party Consents. The Company and the Sellers
shall have obtained all required consents to the transactions
contemplated by this Agreement from the parties to material contracts,
agreements, understandings, franchises, permissions and commitments of
the Company, the Sellers and the Purchaser including, but not limited
to, all necessary consents relating to Purchaser's assumptions or
discharge of (i) Sellers' obligations under the WCMA Loan Agreement,
and (ii) Sellers' obligations under the CIT Loan Agreement.
.
(c) Statutory Requirements; Litigation. All statutory
requirements for the valid consummation of the transactions
contemplated herein shall have been fulfilled and all necessary
governmental consents, approvals or authorizations shall have been
obtained, and there shall not be any actual or threatened litigation
(including any investigation by any Governmental Authority) to
restrain or invalidate the transactions contemplated herein, the
defense of which would, in the judgment of the Purchaser, made in good
faith and based upon the advice of counsel, involve expense or lapse
of time that would be materially adverse to the interests of the
Purchaser.
(d) Stock Certificates. The Sellers shall have delivered
to the Purchaser at the Closing one or more stock certificates
representing the Shares in good delivery form and duly endorsed for
transfer or accompanied by duly executed stock powers evidencing all
of the Common Stock.
(e) Lease Agreement. The Company, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have executed and delivered to each other a
Lease Agreement in the form of Exhibit B attached hereto (the "Lease
Agreement").
(f) Officers and Directors. The Company and the Sellers
shall have delivered to the Purchaser resignations for each officer
and director of the Company, which resignations shall be effective
contemporaneously with the closing of the purchase by the Purchaser of
the Common Stock; provided, however, that the resignations for
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇ shall not constitute
resignations as employees, and the parties acknowledge and agree that
such persons shall continue as employees of the Company following the
Closing Date on an "at will" basis.
(g) Leaseholds. The Sellers shall have delivered to the
Purchaser the following documents:
(i) Landlord Estoppel Certificates. An estoppel
certificate from the landlord under each Lease certifying as
to such Lease (A) neither the landlord nor, to the landlord's
knowledge, the Company is in default, (B) the amount of any
prepaid rent and any security deposit, (C) if the Company is
obligated to pay rent in respect of increased operating
expenses, (1) the expense stop or base for calculating
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such rent, (2) the tenant's proportionate share of operating
expenses (expressed as a percentage), and (3) the 1996
operating expenses for the building in which the premises
subject to the Lease are located and an estimate of the 1997
operating expenses therefor, (D) any improvements required to
be installed or completed in the premises by the tenant under
the Lease after the Closing Date, and (E) the name of any
ground lessor or lienholder whose lease or liens encumber the
premises; additionally, such certificate shall contain the
landlord's consent to the transactions contemplated by this
Agreement, if such consent is required.
(ii) Removal of Existing Tenants. Evidence
satisfactory to the Purchaser in its reasonable judgment that,
except with regard to ▇▇▇▇▇ Container, Inc. ("▇▇▇▇▇") pursuant
to that certain Sublease Agreement between ▇▇▇▇▇ and the
Company dated July 22, 1997 (the "Sublease Agreement"),
neither any Existing Tenant nor any other person occupies any
portion of any of the Leaseholds or has any rights to occupy
any portion of any of the Leaseholds.
(iii) Subtenant Estoppel Certificate. An estoppel
certificate from ▇▇▇▇▇ certifying that neither ▇▇▇▇▇ nor, to
the best of ▇▇▇▇▇' knowledge, the Company is in default under
the Sublease Agreement.
(h) Lender Estoppel Certificates. The Sellers shall have
delivered to the Purchaser an estoppel certificate from the lender
under the WCMA Loan Agreement and the CIT Loan Agreement, in each
case certifying that the Company is not in default under such loan
agreement.
(i) Repayment of Amounts Owed to the Company by the
Sellers. Any amounts owed by any Seller to the Company shall be
repaid in full at or prior to the Closing.
6.2 Conditions to Obligations of the Sellers and the Company. In
addition to the satisfaction of the conditions referred to in subparagraph (b)
of Section 6.1 hereof, the obligations of the Company and the Sellers to effect
the transactions contemplated by this Agreement shall be subject to the
following conditions:
(a) Representations and Warranties of the Purchaser to Be
True. (i) The representations and warranties of the Purchaser
hereunder shall be made again at the Closing and shall be true in all
material respects as of the Closing Date, (ii) the Purchaser shall
have performed in all material respects all covenants required of it
by this Agreement as of the Closing Date and (iii) the Purchaser shall
have furnished the Sellers at the Closing with a certificate of one of
its authorized representatives to such effect.
(b) Statutory Requirements; Litigation. All statutory
requirements for the valid consummation of the transactions
contemplated herein shall have been fulfilled and all necessary
governmental consents, approvals or authorizations shall have been
obtained and there shall not be any actual or threatened litigation
(including any investigation by any Governmental Authority) to
restrain or invalidate the transactions contemplated herein, the
defense of which would, in the judgment of the Sellers, made in good
faith and based upon
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the advice of counsel, involve expense or lapse of time that would be
materially adverse to the interests of the Sellers.
(c) Payment of Purchase Price. The Purchaser shall have
paid the cash purchase price for the shares of Common Stock to be paid
at the Closing as specified in Section 1.1 hereof.
(d) Release of Personal Guaranties. At or prior to the
Closing, Mr. and ▇▇▇. ▇▇▇▇▇▇▇ shall have been released from the
personal guaranties of the indebtedness or lease obligations of the
Company listed on Schedule 2.22.
(e) Lease Agreement. The Company, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have executed and delivered to each other
the Lease Agreement.
(f) Delivery of the Warrant. The Purchaser shall have
delivered the Warrants to the Sellers.
6.3 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated herein may be
terminated at any time before the Closing as follows:
(a) Mutual Consent. By the mutual consent of the Sellers
and the Purchaser.
(b) Expiration Date. By any of the Sellers or the
Purchaser if the Closing shall not have occurred on or before November
30, 1997, provided, however, that no party hereto can terminate this
Agreement pursuant to this clause 6.3(b) if at such time such party is
in breach of any provision of this Agreement.
6.4 Effect of Termination and Failure of Conditions. In the event
of termination of this Agreement as provided in Section 6.3, or of the failure
of a condition resulting in the Purchaser, the Company or the Sellers not
performing its or their obligations hereunder pursuant to the terms of Section
6.1 or 6.2, as the case may be, this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto with respect
thereto except (i) the provisions of Sections 4.4 and 5.2 shall survive any
such termination and (ii) nothing herein shall relieve any party from liability
for any breach hereof.
ARTICLE VII
ADDITIONAL AGREEMENTS OF THE PARTIES
7.1 Survival of Representations and Warranties.
(a) All statements contained in any certificate,
schedule, exhibit, financial statement or other document or instrument
delivered by or on behalf of any party hereto pursuant to or in
connection with this Agreement for the purposes of this Agreement
shall be deemed to be representations and warranties hereunder.
Except to the extent otherwise provided in paragraph (b) below, the
representations, warranties and covenants hereunder
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shall survive the Closing and any investigation of any of the parties
with respect thereto indefinitely.
(b) The representations hereunder shall survive the
Closing for the following periods after the Closing Date:
(i) The representations and warranties set forth
in Sections 2.2 and 2.10, and all of the covenants set forth
in this Agreement, shall survive without limitation as to
time.
(ii) The representations and warranties set forth
in Sections 2.12 and 2.13 shall survive until one day after
the expiration of the applicable statute of limitations
(including all extensions).
(iii) All other representations shall survive for
two years and one day.
The date of expiration of any representation or warranty shall
be referred to herein as the "Termination Date". Representations and
warranties under this Agreement shall be of no further force or effect
after the applicable Termination Date; provided, however, that there
shall be no such termination of any representation or warranty with
respect to a bona fide claim asserted with respect thereto prior to
such date in accordance with the terms of Section 7.2.
7.2 Indemnification.
(a) Breaches of Representations, Warranties, Covenants or
Agreements. Sellers jointly and severally agree to defend, indemnify
and hold harmless the Purchaser Indemnitees (as hereinafter defined)
from and against any and all Losses (as hereinafter defined) asserted
against, resulting from, imposed upon or incurred by any of the
Purchaser Indemnitees by, or arising out of, or as a result of, any of
the representations, warranties, covenants or agreements of Sellers or
the Company contained in this Agreement or any certificate or
instrument delivered by any Seller or the Company pursuant to the
terms hereof being incorrect, untrue or breached. For purposes of
this Section 7.2, in determining whether a representation or warranty
of Sellers or the Company is incorrect, untrue, or breached, as well
as the amount of any loss resulting therefrom, the provisions of
Article II that are qualified by materiality shall be read and
interpreted as if such qualification was not included therein. The
Purchaser agrees to defend, indemnify and hold harmless the Seller
Indemnitees from and against any and all Losses asserted against,
resulting from, imposed upon or incurred by any of the Seller
Indemnitees by, or arising out of, or as a result of, any of the
representations, warranties, covenants or agreements of the Purchaser
contained in this Agreement or any certificate or instrument delivered
by the Purchaser pursuant to the terms hereof being incorrect, untrue
or breached. Notwithstanding the foregoing provisions of this
Section 7.2(a), Sellers and/or the Purchaser shall have liability
pursuant to this Section 7.2(a) arising out of representations and
warranties being incorrect or untrue or covenants or agreements
breached only with respect to Losses arising out of or as a result of
a breach or untruth described in a Claim Notice (as hereinafter
defined) given to Sellers or the Purchaser,
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respectively, in accordance with the provisions hereof on or prior to
the applicable Termination Date, if any.
(b) Express Negligence Acknowledgment. Without limiting
or enlarging the scope of the indemnification obligations set forth in
this Agreement, AN INDEMNIFIED PARTY WILL BE ENTITLED TO
INDEMNIFICATION IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT
REGARDLESS OF WHETHER THE LOSS GIVING RISE TO SUCH INDEMNIFICATION
OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT, OR COMPARATIVE
NEGLIGENCE, FAULT, OR STRICT LIABILITY OF SUCH INDEMNIFIED PARTY.
(c) Seller Basket Losses. Indemnification by Sellers for
Losses under Section 7.2(a), except for indemnification for breaches
of (i) any covenant, (ii) any representations contained in Sections
2.2, 2.5, 2.15 and 2.21, and (iii) any obligation of any Seller set
forth in this Agreement or in any document delivered pursuant hereto
to pay sums to any Purchaser Indemnitee which obligation was not
otherwise subject to the limitations of this Section 7.2(c)
(collectively "Seller Basket Losses"), shall be subject to the
following limitations:
(i) Any Loss (or series of related Losses) that
would otherwise be a Seller Basket Loss must equal or exceed
$2,000 in order to be subject to indemnification or constitute
a Seller Basket Loss.
(ii) Sellers shall not be required to indemnify
the Purchaser Indemnitees for any Seller Basket Losses until
the aggregate amount of all Seller Basket Losses equals or
exceeds $25,000; provided, however, that if the aggregate
amount of Seller Basket Losses exceeds $25,000, then the
Sellers shall indemnify the Purchaser Indemnitees for all
Seller Basket Losses, including, without limitation, the
Seller Basket Losses below the $25,000 threshold.
(d) Purchaser Basket Losses. Indemnification by
Purchaser for Losses under Sections 7.2(a), except for indemnification
for breaches of any covenant and breaches of any representation
contained in Section 3.3 and except for breaches of any obligation of
the Purchaser set forth in this Agreement or in any document delivered
pursuant hereto to pay sums to any Seller Indemnitee which obligation
was not otherwise subject to the limitations of this Section 7.2(d)
(collectively "Purchaser Basket Losses"), shall be subject to the
following limitations:
(i) Any Loss (or series of related Losses) that
would otherwise be a Purchaser Basket Loss must equal or
exceed $2,000 in order to be subject to indemnification or
constitute a Purchaser Basket Loss.
(ii) The Purchaser shall not be required to
indemnify the Seller Indemnitees for any Purchaser Basket
Losses until the aggregate amount of all Purchaser Basket
Losses equals or exceeds $25,000; provided, however, that if
the aggregate amount of Purchaser Basket Losses exceeds
$25,000, then the Purchasers shall indemnify the Seller
Indemnitees for all Purchaser Basket Losses, including,
without limitation, the Purchaser Basket Losses below the
$25,000 threshold.
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(e) Assertion of Claims. All claims for indemnification
by any of the Seller Indemnitees or any of the Purchaser Indemnitees
under Section 7.2(a) or any other provision of this Agreement or any
Document shall be asserted and resolved as follows:
(i) Any person claiming indemnification hereunder
is hereinafter referred to as the "Indemnified Party" and any
person against whom such claims are asserted hereunder is
hereinafter referred to as the "Indemnifying Party." In the
event that any Losses are asserted against or sought to be
collected from an Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness and in
writing notify the Indemnifying Party of the Losses,
specifying the nature of and specific basis for such Losses
and the indemnity claim and the amount or the estimated amount
thereof to the extent then feasible and enclosing a copy of
all papers (if any) served with respect to the claim (the
"Claim Notice"). The Indemnifying Party shall not be
obligated to indemnify the Indemnified Party with respect to
any such Losses if the Indemnified Party fails to notify the
Indemnifying Party thereof in accordance with the provisions
of this Agreement in reasonably sufficient time so that the
Indemnifying Party's ability to defend against the Losses is
not prejudiced, but only to the extent such notification
within such time period is practicable. The Indemnifying
Party shall have 30 days from the date the Claim Notice is
given in accordance with the notice provisions hereof (the
"Notice Period") to notify the Indemnified Party (x) whether
it disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such Losses and
(y) whether it desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against
such Losses; which election to defend may be made without
prejudicing the Indemnifying Party as to its liability
hereunder, other than with respect to the costs of defense.
Notwithstanding the foregoing, any Indemnified Party is hereby
authorized prior to and during the Notice Period to file any
motion, answer or other pleading that it shall deem necessary
or appropriate to protect its interests or those of the
Indemnifying Party (and of which it shall have given notice
and opportunity to comment to the Indemnifying Party) and that
is not prejudicial to the Indemnifying Party. (A) In the
event that the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the
Indemnified Party against such Losses and except as
hereinafter provided, the Indemnifying Party shall have the
right to defend by all appropriate proceedings, and with
counsel of its own choosing, which proceedings shall be
promptly settled or prosecuted by them to a final conclusion.
If the Indemnified Party desires to participate in, but not
control, any such defense or settlement it may do so at its
sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Losses
that the Indemnifying Party elects to contest, or, if
appropriate and related to the claim in question, in making
any counterclaim against the person asserting the third party
Losses, or any cross-complaint against any person. No claim
with respect to which the Indemnifying Party has admitted its
liability may be settled or otherwise compromised without the
prior written consent of the Indemnifying Party. Any party
settling or compromising a claim in violation of the preceding
sentence shall be solely liable for the amount of the
settlement or compromise. (B) If the Indemnifying Party does
not notify the Indemnified Party within 30 days after the
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receipt of a Claim Notice that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to
defend at the expense of the Indemnifying Party the claim with
counsel of its choosing reasonably satisfactory to the
Indemnifying Party, subject to the right of the Indemnifying
Party to assume the defense of any claim at any time prior to
settlement or final determination thereof. Any such defense
shall be prosecuted promptly and vigorously by the Indemnified
Party. In the case of either (A) or (B), if the Indemnifying
Party has not yet admitted its liability for a claim, the
Indemnified Party shall send a written notice to the
Indemnifying Party of any proposed settlement of any claim
received by the Indemnified Party. The Indemnifying Party
shall have an option for 30 days following receipt of such
notice to (i) admit liability for the claim if it has not
already done so and (ii) if liability has been admitted,
reject, in its reasonable judgment, the proposed settlement.
Failure to reject such settlement within such 30-day period
shall be deemed an acceptance of such settlement. If the
Indemnified Party settles any such claim over the objection of
the Indemnifying Party, the Indemnified Party shall thereby
waive any right to indemnity therefor, unless the Indemnifying
Party has not prior to the time of settlement admitted
liability for such claim.
(ii) In the event any Indemnified Party should
have a claim for Losses against any Indemnifying Party
hereunder that does not involve a Loss being asserted against
or sought to be collected from it by a third party (for
example, but without limitation, a Loss resulting from a
breach of a representation, warranty or covenant), the
Indemnified Party shall send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying
Party does not notify the Indemnified Party within 30 days
from the date the claim notice is given that it disputes such
claim for Losses, the amount of such Losses shall be
conclusively deemed a liability of the Indemnifying Party
hereunder.
7.3 Sellers' Access to the Company. If the Closing occurs, then,
following such Closing and upon at least 48 hours' prior written notice, the
Sellers and their employees, representatives and agents shall be given access
during reasonable business hours to the facilities, properties, personnel,
books and non-privileged records of the Company for the purpose of satisfying
any obligations imposed upon the Sellers pursuant to this Agreement, including
without limitation the indemnification obligations imposed pursuant to Section
7.2; provided, however, that such investigation shall be conducted in a manner
that does not interfere with normal operations of the Company. The Company
will cause the employees, counsel, accountants and other representatives of the
Company to be available to the Sellers and its employees and agents at all
reasonable times during business hours for such purposes.
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7.4 Agreement Not to Compete.
(a) As a further inducement to the Purchaser to enter
into this Agreement, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agree
that (except for any activities undertaken by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
solely in his capacity as an employee of the Company) during the
period from the Closing Date until the fifth anniversary thereof:
(i) Neither ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ nor ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall, directly or indirectly, for their own account
or for the account of others, as an officer, director, passive
stockholder, owner, partner, member, promoter, consultant,
advisor, employee, manager or otherwise, participate in the
promotion, financing, ownership, operation or management of,
or assist in, furnish advice with respect to, or carry on
through a proprietorship, partnership, joint venture, limited
liability company, corporation, other form of business entity
or otherwise, any business activity in a geographic market
within the State of Texas or any other state where the Company
is doing such business or, as of the date of this Agreement
has plans to do such business, involving or relating to the
business of distributing, packaging, and processing picante
sauce, pasta sauce, salsa, dips, cheese sauce, and related
products; provided, however, that nothing in this clause (i)
shall prohibit ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇ or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇'▇
aggregate beneficial ownership of not in excess of 1% of any
class of common stock that is listed for trading on a national
securities exchange; and
(ii) Neither ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall furnish advice to, solicit, or do business with
any customer (or any previous customer within the last year)
of the Company or any of its subsidiaries relating to the
business of the Company in any geographic market within the
State of Texas or any other state where such customer is doing
business with the Company or any of its subsidiaries.
(iii) Neither ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ nor ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall permit any corporation, partnership, limited
partnership, limited liability company, or other entity in
which either of them owns an interest and that is not listed
for trading on a national securities exchange to, make any
offer of employment to any person employed by the Company as
of the Closing.
(b) Although the parties to this Agreement have, in good
faith, used all reasonable efforts to make this covenant reasonable in
both geographic area and in duration, and it is not anticipated, nor
is it intended, by either of the parties to this Agreement that any
court of competent jurisdiction would find it necessary to reform this
covenant not to compete to make it reasonable in both geographic area
and in duration, or otherwise, the parties to this Agreement agree
that any court of competent jurisdiction making a determination that
it is necessary to reform this covenant not to compete to make it
reasonable in either geographic area or duration, or otherwise, shall
be, and hereby is, empowered and directed to reform this Agreement to
a reasonable restriction rather than invalidating this covenant or
otherwise rendering it unenforceable.
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(c) In the event of breach by either ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of this covenant not to compete, it is understood
and agreed (i) that the Purchaser or the Company shall be entitled to
injunctive relief as well as any and all other applicable remedies at
law and in equity; and (ii) that damages, if any, for the breach of
this covenant not to compete will accrue and be recoverable by the
Purchaser or any subsidiary as of and from the date of the breach
insofar as the damages for such breach relate to an action that
occurred within the scope of the geographic area and duration of the
covenant not to compete determined to be reasonable (whether or not
the covenant is reformed in connection with such determination).
ARTICLE VIII
MISCELLANEOUS
8.1 Certain Definitions. The following terms as used in this
Agreement shall have the following meanings:
(a) The term "subsidiary" shall mean with respect to a
specified entity (i) in the case of a corporation, 40% or more of the
capital stock, the holders of which are regularly entitled to vote for
the election of directors, is owned directly or indirectly by such
entity, (ii) in the case of a trust, partnership or other entity, a
trust, partnership or entity of which such specified entity owns
directly or indirectly 40% or more of the beneficial interest or
equity; and
(b) The term "affiliate" shall mean with respect to a
specified entity, an entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under
common control with the entity specified.
8.2 Expenses. Each party hereto shall bear its own legal,
accounting and other costs and expenses incident to the negotiation of this
Agreement and the performance of the transactions contemplated herein. All
expenses of the Company with respect to the transactions contemplated herein
shall be solely for the account of Sellers.
8.3 Notices. Any notice, communication, request, instruction or
other document required or permitted hereunder or under any document delivered
pursuant hereto shall be given in writing and delivered in person or sent by
U.S. Mail postage prepaid, return receipt requested, or by telex, facsimile or
telecopy to the addresses or facsimile numbers, as appropriate, as set forth
below.
If to the Sellers, and, prior to the Closing, the Company, to:
▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and
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▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Duncan, Ulman, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
603 ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and in the case of the Purchaser, and after the Closing, the Company, to:
Authentic Specialty Foods, Inc.
c/o The Shansby Group
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
3300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or facsimile number as may have been specified by like
notice.
8.4 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and do not
constitute a part of the Agreement.
8.5 Entire Agreement. This Agreement, the documents to be
executed hereunder, and the exhibits attached hereto constitute the entire,
completely integrated agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties
pertaining to the subject matter hereof, including without limitation (a) that
certain letter of intent dated October 8, 1996 by and among the Purchaser
(which was known at the time as "Calidad Foods, Inc."), the Company, ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (b) that certain letter of intent dated January
13, 1997 by and among the Purchaser, the Company, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇▇▇▇ and (c) that certain letter of intent dated September 19, 1997 by
and among the Purchaser, the Company, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
▇▇
▇▇
8.6 Waiver. At any time prior to the Closing, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto or (b) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on behalf of
such party. The consummation of the transactions contemplated hereby shall not
be deemed a waiver of the right any party may have hereunder with respect to
any other party's representations, warranties, covenants or agreements
contained in or related to this Agreement being incorrect, untrue or breached.
8.7 Amendment. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto. No supplement,
alteration or modification of this Agreement shall be binding unless executed
in writing by the parties hereto.
8.8 Public Statements. Prior to the Closing Date, Sellers, the
Company and the Purchaser shall consult with each other with regard to all
publicity, general employee announcements and public announcements concerning
this Agreement and the transactions contemplated hereby and, except as required
by applicable law or the applicable rules or regulations of any governmental
body or stock exchange (including, without limitation, the Nasdaq Stock
Market), no party shall issue a press release or announcement concerning this
Agreement and the transactions contemplated hereby without the prior written
consent of the other parties hereto. After the Closing Date, Sellers shall not
issue a press release or announcement concerning this Agreement and the
transactions contemplated hereby without the prior written consent of the
Purchaser.
8.9 Further Actions. Each party shall execute and deliver such
other certificates, agreements and other documents and take such other actions
as may reasonably be requested by the other parties in order to consummate or
implement the transactions contemplated by this Agreement. Without limiting
the foregoing, Sellers agree to perform any reasonable acts necessary to obtain
state, federal or foreign registration of any ▇▇▇▇ currently used in the
Company's business as now conducted.
8.10 Assignment. No Seller may assign or delegate any of its
rights or duties hereunder, without the prior written consent of the Purchaser.
Any assignment or delegation made without such consent shall be void. Except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors,
assigns and legal representatives.
8.11 Independent Covenants. The covenants contained herein are
independent and separate, and in the event that any provision contained herein
is declared invalid or illegal, the other provisions hereof shall not be
affected or impaired thereby and shall remain valid and enforceable.
8.12 Specific Performance. In the event of a breach or threatened
breach by any party hereto of the provisions of this Agreement, any other party
hereto shall be entitled to specific performance. Nothing herein shall be
construed as prohibiting any party hereto from pursuing any other remedies
available for such breach or threatened breach, including the recovery of
damages.
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8.13 Governing Law. This Agreement and the other documents
delivered pursuant hereto and the legal relations between the parties shall be
governed and construed in accordance with the laws of the State of Texas,
without giving effect to principles of conflict of laws.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but
all of which together shall constitute one and the same instrument.
8.15 Withholding or Granting of Consent. Except as otherwise
provided in this Agreement, each party hereto may, with respect to any consent
or approval that it is entitled to grant pursuant to this Agreement or any
other document or instrument or agreement delivered or entered into pursuant
hereto, grant or withhold such consent or approval in its sole and uncontrolled
discretion, with or without cause, and subject to such conditions as it shall
deem appropriate.
8.16 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any claim,
cause of action, remedy or right of any kind, it being the intent of the
parties that this Agreement shall not be construed as a third party beneficiary
contract; provided, however, that the indemnification provisions in Sections
7.2 shall inure to the benefit of the Purchaser Indemnitees and the Seller
Indemnitees as provided therein.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
AUTHENTIC SPECIALTY FOODS, INC.
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Chief Financial Officer
SAUCES UNLIMITED, INC.
By:
-----------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
--------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
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APPENDICES, EXHIBITS, AND SCHEDULES
Appendix I Ownership of Common Stock
Exhibit A Form of Warrant Agreement
Exhibit B Form of Lease Agreement
Schedule 2.1 Foreign Jurisdictions
Schedule 2.2 Stock Ledger
Schedule 2.4 Governmental Authorizations
Schedule 2.5 Financial Statements
Schedule 2.6 Adverse Changes
Schedule 2.7(a) Leases
Schedule 2.7(b) Other Parties in Possession
Schedule 2.7(c) Condemnation Proceedings
Schedule 2.7(i) Utility Connections
Schedule 2.7(j) Land Use Restrictions
Schedule 2.7(l) Equipment
Schedule 2.7(n) Leases
Schedule 2.8 Litigation
Schedule 2.9(a) Marks
Schedule 2.9(c) Copyrights
Schedule 2.9(d) Certain Employees
Schedule 2.9(e) Working Requirements, Fees, Etc.
Schedule 2.10(a) Environmental and Health Laws
Schedule 2.10(c) Environmental Permits
Schedule 2.10(d) Waste Disposal
Schedule 2.10(e) Underground Storage Tanks
Schedule 2.10(f) Releases
Schedule 2.10(g) Environmental Reports
Schedule 2.11(a) Options
Schedule 2.11(b) Service Agreements
Schedule 2.11(c) Agreements Relating to Real Property
Schedule 2.11(d) Construction Contracts
Schedule 2.11(e) Accounts Receivable
Schedule 2.11(f) Compensation
Schedule 2.11(g) Compensation Policies
Schedule 2.11(h) Pleadings and Complaints
Schedule 2.11(i) Depreciation Schedules
Schedule 2.11(j) Employee Benefits
Schedule 2.11(k) Credit Documents
Schedule 2.11(l) Material Contracts
Schedule 2.11(m) Agreements Not to Compete
Schedule 2.11(n) Royalty Agreements
Schedule 2.11(o) Contracts with Interested Parties
Schedule 2.12(a) Tax Returns
Schedule 2.12(c) Tax Claims
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Schedule 2.12(d) Tax Extensions
Schedule 2.13 Employee Benefit Plan, Employee Classification
Schedule 2.14 Conflicts
Schedule 2.17 Banks
Schedule 2.18 Officers and Directors
Schedule 2.19 Suppliers and Customers
Schedule 2.21 Outstanding Indebtedness
Schedule 2.22 Company Loans
Schedule 2.23 Part I Insurance Information
Schedule 2.23 Part II Insurance Policies
Schedule 4.1(j) Capital Expenditures, Additions, and Improvements
Schedule 4.1(r) Certain Amendments
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APPENDIX I
OWNERSHIP OF COMMON STOCK
NUMBER OF NUMBER OF
SHARES OF PORTION OF CASH WARRANTS
COMMON STOCK PURCHASE PRICE TO TO BE
SHAREHOLDER OWNED BE RECEIVED RECEIVED
----------- ----- ----------- --------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 500,000 $2,352,941 39,216
▇▇▇▇▇ ▇. ▇▇▇▇▇ 10,000 47,059 784
-------- ---------- -------
Total 510,000 $2,400,000 40,000
======== ========== =======
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