STOCK PURCHASE AGREEMENT
BETWEEN
▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D.
AND
NATIONAL VISION ASSOCIATES, LTD.
SEPTEMBER 15, 1997
TABLE OF CONTENTS
Page Nos.
1. Definitions
2. Purchase and Sale of Company Shares
(a) Basic Transaction
(b) Purchase Price
(c) The Closing
(d) Deliveries at the Closing
3. Representations and Warranties Concerning the Transaction
(a) Representations and Warranties of the Seller
(b) Representations and Warranties of the Buyer
4. Representations and Warranties Concerning the Company
(a) Organization, Qualification, and Corporate Power
(b) Capitalization
(c) Noncontravention
(d) Brokers' Fees
(e) Title to Assets
(f) Subsidiaries
(g) Financial Statements
(h) Events Subsequent to Most Recent Fiscal Year End
(i) Undisclosed Liabilities
(j) Legal Compliance
(k) Tax Matters
(l) Real Property
(m) Intellectual Property
(n) Tangible Assets
(o) Inventory
(p) Contracts
(q) Receivables
(r) Powers of Attorney
(s) Insurance
(t) Litigation
(u) Product Warranty
(v) Product Liability
(w) Employees and Optometrists
(x) Employee Benefits
(y) Guaranties
(z) Environmental Matters
(aa) Certain Business Relationships with the Company
(bb) Disclosure
5. Pre-Closing Covenants
(a) General
(b) Notices and Consents
(c) Operation of Business
(d) Preservation of Business
(e) Full Access
(f) Notice of Developments
(g) Exclusivity
(h) Cash Payments
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Transition
(d) Confidentiality
(e) Company Indebtedness
(f) Securities
7. Conditions to Obligation to Close
(a) Conditions to Obligation of the Buyer
(b) Conditions to Obligation of the Seller
8. Remedies for Breaches of This Agreement
(a) Survival of Representations and Warranties
(b) Indemnification Provisions for Benefit of the Buyer
(c) Indemnification Provisions for Benefit of the Seller
(d) Matters Involving Third Parties
(e) Adjustment of Purchase Price
(f) Recoupment Under Buyer Note
(g) Other Indemnification Provisions
9. Tax Matters
(a) Tax Periods Ending on or Before the Closing Date
(b) Tax Periods Beginning Before and Ending After the Closing Date
(c) Cooperation on Tax Matters
(d) Intentionally Omitted
(e) Certain Taxes
10. Termination
(a) Termination of Agreement
(b) Effect of Termination
11. Miscellaneous
(a) Intentionally Omitted
(b) Press Releases and Public Announcements
(c) No Third-Party Beneficiaries
(d) Entire Agreement
(e) Succession and Assignment
(f) Counterparts
(g) Headings
(h) Notices
(i) Governing Law
(j) Amendments and Waivers
(k) Severability
(l) Expenses
(m) Construction
(n) Incorporation of Exhibits and Schedules
(o) Specific Performance
(p) Arbitration
(q) Time of Essence
STOCK PURCHASE AGREEMENT
Agreement entered into as of September 15, 1997, by and between
National Vision Associates, Ltd., a Georgia corporation (the "Buyer"),
and ▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D., an optometrist licensed in Minnesota (the "Seller").
Recitals
A. The Seller owns all of the outstanding capital stock of Midwest
Vision, Inc., a Minnesota corporation (the "Company").
B. The Company is in the business of selling eyeglasses, contact
lenses, industrial eyewear and providing related optical and
optometric goods and services.
C. This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer,
all of the outstanding capital stock of the Company in return
for cash, the Buyer Note, and common stock of the Buyer.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the receipt and sufficiency of which are
acknowledged, the Parties agree as follows.
1. Definitions
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Action" means any claim, action, suit, hearing, charge, complaint,
demand, arbitration, mediation, inquiry, proceeding or investigation by or
before any Authority (or arbitrator or mediator, as the case may be) whether
at law or in equity, whether criminal or civil in nature.
"Accounting Applications" has the meaning set forth in Section 2(e)(i)
below.
"Accounting Firm" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP.
"Actual Value" has the meaning set forth in Section 2(e) below.
"Adverse Consequences" means all Actions, Orders, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs
and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Agreement" means this Stock Purchase Agreement.
"Ancillary Agreements" means the Headquarters Lease, the ▇▇▇▇▇▇▇
Employment Agreement, the Release, and the Put Option Agreement.
"Authority" means any federal, state, or local or any foreign
government, governmental, regulatory or administrative authority, agency,
or commission, or any court, tribunal or arbitral body.
"Bank" means First American Bank, N.A.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Buyer" has the meaning set forth in the preamble above.
"Buyer Note" means the promissory note attached as Exhibit A.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Closing Date Balance Sheet" has the meaning set forth in Section 2(e)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B.
"Common Shares" means shares of common stock, par value $.01 per share,
of the Buyer.
"Company" has the meaning set forth in the recitals above.
"Company Guarantee" means a guarantee, dated July 25, 1996, by the
Company in favor of the Bank, by which the Company guarantees payment of the
▇▇▇▇▇▇▇ Indebtedness.
"Company Indebtedness" means indebtedness of the Company to the Bank
represented by the Loan Documents.
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"Company Share" means any share of the common stock, par value $100
per share, of the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally
available to the public.
"Deferred Intercompany Transaction" has the meaning set forth in
Reg. Section 1.1502-13.
"Designated Leases" has the meaning set forth in Section 7(a)(x)
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Draft Closing Date Balance Sheet" has the meaning set forth in Section
2(e) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan, (c) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including any Multiemployer
Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit or
other retirement, bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Plan" has the meaning set forth in Section 4(x) below.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employees" means the employees of the Company.
"Environmental Requirements" shall mean all federal, state and local
statutes, regulations, ordinances and other provisions having the force or
effect of law, all judicial and administrative orders and determinations,
all contractual obligations and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and
as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Net Book Value" means $1,319,191.
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"Excess Amount" has the meaning set forth in Section 2(f) below.
"Excess Consideration" has the meaning set forth in Schedule 2(b).
"Exhibit" means an exhibit to this Agreement.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Headquarters" means the administrative offices and optical laboratory
of the Company located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇.
"Headquarters Lease" means the lease agreement attached hereto as
Exhibit B.
"High Value" has the meaning set forth in Section 2(e) below.
"Indemnified Party" has the meaning set forth in Section 8(d) below.
"Indemnifying Party" has the meaning set forth in Section 8(d) below.
"Index" means the attached index of Exhibits, Schedules, and other
items.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works
and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation),
(g) all other proprietary rights, and (h) all copies and tangible
embodiments thereof (in whatever form or medium).
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"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability or obligation of any nature whatsoever
(whether known or unknown, whether asserted or unasserted, whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability
for Taxes.
"Loan Documents" means the loan and related documents attached hereto
as Exhibit C.
"Low Value" has the meaning set forth in Section 2(e) below.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
Section 4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Net Book Value" means the excess of assets over liabilities as shown
on the Closing Date Balance Sheet.
"▇▇▇▇▇▇▇ Employment Agreement" means the employment agreement attached
as Exhibit D.
"▇▇▇▇▇▇▇ Guarantee" means a guarantee, dated July 25, 1996, by the
Seller in favor of the Bank, by which the Seller guarantees payment of the
Company Indebtedness.
"▇▇▇▇▇▇▇ Indebtedness" means indebtedness of the Seller to the Bank
represented by the Loan Documents.
"Notice" has the meaning set forth in Section 11(h) below.
"Optometric Agreements" means the agreements between the Company and
the Optometrists.
"Optometrists" means the optometrists who, as of the date of this
Agreement, render optometric and/or other services on premises of the
Company.
"Order" means any order, ruling, writ, judgment, injunction, decree,
demand letter, stipulation, determination or award issued or entered into
or agreed to with any Authority.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" means the Buyer and the Seller jointly.
"Permit" has the meaning set forth in Section 4(j)(ii) below.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Policy" means the following policies of life insurance No. 4302124
written by Principal Mutual Life Insurance Company and No. 0140120597
written by Lincoln Benefit Life Company.
"Preliminary Purchase Price" has the meaning set forth in Section 2(b)
below.
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(f) below.
"Put Option Agreement" means the option agreement attached hereto as
Exhibit E.
"Receivables" means all accounts receivable, notes and other amounts
receivable from third parties, including (without limitation) customers and
employees, whether or not in the Ordinary Course of Business, together with
any unpaid financial charges accrued thereon.
"Release" means the release attached hereto as Exhibit F.
"Schedule" means a schedule to this Agreement.
"Securities" means, collectively, the Buyer Note and the Common Shares
to be delivered to the Seller under this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Security Interest" means any mortgage, pledge, lien (including any
environmental and tax liens), encumbrance, charge, or other security
interest.
"Seller" has the meaning set forth in the preamble above.
"Seller's Note Payable" means the promissory note attached as Exhibit G.
6
"Seller's Note Receivable" means the promissory note attached as
Exhibit H.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Sunset Date" has the meaning set forth in Section 8(a) below.
"Sunset Representations" has the meaning set forth in Section 8(a)
below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Code Section 59A), customs duties, built-in gains tax under Code Section
1374, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
"Trailing Closing Price" means the average closing sale price of the
Common Shares (as reported by the National Association of Securities Dealers
Inc. Automatic Quotation System or the primary stock exchange or over the
counter market upon which the Common Shares are then traded) during the 20
consecutive trading days ending on the date the Buyer delivers to the Seller
the Draft Closing Date Balance Sheet.
"Transaction" means the transactions contemplated by this Agreement.
2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from the Seller, and the Seller
agrees to sell to the Buyer, all of his Company Shares for the consideration
specified below in this Section 2.
(b) Preliminary Purchase Price. The Buyer agrees to pay to the Seller
at the Closing the preliminary purchase price (the "Preliminary Purchase
Price") by delivery of (i) the Buyer Note, (ii) cash in the amount shown
on Schedule 2(b) payable by wire transfer or delivery of other immediately
available funds, and (iii) a certificate representing the number of Common
7
Shares shown on Schedule 2(b). Each such share shall have a value equal to
the closing sale price of the Common Shares, as reported by the National
Association of Securities Dealers, Inc. Automatic Quotation System, on the
Closing Date.
(c) The Closing. The closing of the Transaction (the "Closing") shall
take place at the offices of Hall & ▇▇▇▇▇, P.A. in St. Cloud, Minnesota,
commencing at 9:00 a.m. local time on the business day following the
satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the Transaction (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or such
other date as the Buyer and the Seller may mutually determine (the
"Closing Date"); provided, however, that the Closing Date shall
be no earlier than September 30, 1997. If and only if the Closing
actually occurs on or before October 30, 1997, the Closing Date shall be
deemed to be September 30, 1997; otherwise, the Closing Date shall be the
date on which the Closing occurs.
(d) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the
Seller the various certificates, instruments, and documents referred to
in Section 7(b) below, (iii) the Seller will deliver to the Buyer stock
certificates representing all of his Company Shares, endorsed in blank
or accompanied by duly executed assignment documents, and (iv) the
Buyer will deliver to the Seller the consideration specified in Section
2(b) above.
(e) Preparation of Closing Date Balance Sheet.
(i) Within 60 days after the Closing Date, the Buyer will
prepare and deliver to the Seller a draft balance sheet
(the "Draft Closing Date Balance Sheet") for the Company
as of the close of business on the Closing Date (determined
on a pro forma basis as though the Parties had not
consummated the Transaction). The Buyer will prepare the
Draft Closing Date Balance Sheet in accordance with GAAP
applied on a basis consistent with the preparation of the
Financial Statements. The Parties acknowledge that such
basis includes application of the accounting judgments
described on Schedule 2(e)(i) (the "Accounting Applications").
(ii) If the Seller has any objections to the Draft Closing Date
Balance Sheet, he will deliver a detailed statement
describing his objections to the Buyer within 30 days after
receiving the Draft Closing Date Balance Sheet. The Buyer
and the Seller will use reasonable efforts to resolve any
such objections themselves. If the Parties do not obtain a
final resolution within 30 days after the Buyer has received
the statement of objections, however, the Accounting Firm
will resolve any remaining objections. The determination
of the Accounting Firm will be set forth in writing and will
be conclusive and binding upon the Parties except for the
case of clear mistake or gross negligence. The Buyer will
revise the Draft Closing Date Balance Sheet as appropriate
8
to reflect the resolution of any objections thereto pursuant
to this Section 2(e)(ii). The "Closing Date Balance Sheet"
shall mean the Draft Closing Date Balance Sheet together
with any revisions thereto pursuant to this Section 2(e)(ii).
(iii)In the event the Parties submit any unresolved objections to
the Accounting Firm for resolution as provided in Section
2(e)(ii) above, the Buyer and the Seller will share
responsibility for the fees and expenses of the Accounting
Firm as follows:
(A) if the Accounting Firm resolves all of the remaining
objections in favor of the Buyer (the Net Book Value
so determined is referred to herein as the "Low Value"),
the Seller will be responsible for all of the fees and
expenses of the Accounting Firm.
(B) if the Accounting Firm resolves all of the remaining
objections in favor of the Seller (the Net Book Value
so determined is referred to herein as the "High Value"),
the Buyer will be responsible for all of the fees and
expenses of the Accounting Firm; and
(C) if the Accounting Firm resolves some of the remaining
objections in favor of the Buyer and the rest of the
remaining objections in favor of the Seller (the Net Book
Value so determined is referred to herein as the "Actual
Value"), the Seller will be responsible for that fraction
of the fees and expenses of the Accounting Firm equal
to (x) the difference between the High Value and the
Actual Value over (y) the difference between the High
Value and the Low Value, and the Buyer will be
responsible for the remainder of the fees and expenses.
(iv) The Buyer will make the work papers and back-up materials
used in preparing the Draft Closing Date Balance Sheet, and
the books, records, and financial staff of the Company
available to the Seller and his accountants and other
representatives at reasonable times and upon reasonable
notice at any time during (A) the preparation by the Buyer
of the Draft Closing Date Balance Sheet, (B) the review by
the Seller of the Draft Closing Date Balance Sheet, and
(C) the resolution by the Parties of any objections thereto.
(f) Adjustment to Preliminary Purchase Price. The Preliminary Purchase
Price will be adjusted as follows:
(i) If the Net Book Value exceeds the Estimated Net Book Value,
the Buyer will pay to the Seller an amount (such amount, the
"Excess Amount") equal to such excess by delivery of the
9
Excess Consideration within three business days after the
date on which the Net Book Value finally is determined
pursuant to Section 2(e) above.
(ii) If the Net Book Value is less than the Estimated Net Book
Value, the Seller will pay to the Buyer an amount equal to
such deficiency by wire transfer or delivery of other
immediately available funds within three business days after
the date on which the Net Book Value finally is determined
pursuant to Section 2(e) above.
The Preliminary Purchase Price as so adjusted is referred to herein as the
"Purchase Price".
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer that the statements contained in this Section 3(a)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3(a)) with respect to himself, except as set forth in Schedule 3(a).
(i) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions. The Seller need not
give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Authority in order
to consummate the Transaction.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the Transaction, will
(A) violate any constitution, statute, regulation, rule,
Order, charge, or other restriction of any Authority to which
the Seller is subject or (B) conflict with, result in a
breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which he is
bound or to which any of his assets is subject.
(iii)Brokers' Fees. The Seller has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to
the Transaction for which the Buyer could become liable or
obligated.
(iv) Investment. The Seller (A) understands that the Securities
have not been, and will not be, registered under the
Securities Act, or under any state securities laws, and are
10
being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering,
(B) is acquiring the Securities solely for his own account
for investment purposes, and not with a view to the
distribution thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial matters,
(D) has received certain information concerning the Buyer
and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks
inherent in holding the Securities, (E) is able to bear the
economic risk and lack of liquidity inherent in holding the
Securities, (F) is an Accredited Investor, and (G) acknowledges
and agrees that each certificate representing Common Shares
to be delivered under this Agreement will be imprinted with
the legend described in Section 6(f)(ii) below.
(v) Company Shares. The Seller holds of record and owns
beneficially the number of Company Shares set forth next to
his name in Section 4(b) of the Disclosure Schedule, free and
clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims, and demands.
The Seller is not a party to any option, warrant, purchase
right, or other contract or commitment that could require
the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Company (other than this Agreement).
The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any
capital stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3(b)), except as set forth in Schedule 3(b).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions. The Buyer need
not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Authority in order
to consummate the Transaction.
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(iii)Noncontravention. Neither the execution and the delivery of
this Agreement (including the Buyer Note), nor the consummation
of the Transaction, will (A) violate any constitution, statute,
regulation, rule, Order, charge, or other restriction of any
Authority to which the Buyer is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to
which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
(iv) Common Shares. The Common Shares to be issued to the Seller
pursuant to this Agreement, when issued in accordance with
the terms of this Agreement, will be validly issued, fully
paid, and nonassessable.
(v) Brokers' Fees. The Buyer has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to
the Transaction for which the Seller could become liable or
obligated.
4. Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in the disclosure schedule
delivered by the Seller to the Buyer on the date hereof and initialed by the
Parties (the "Disclosure Schedule"). Nothing in the Disclosure Schedule shall
be deemed adequate to disclose an exception to a representation or warranty
made herein, however, unless the Disclosure Schedule identifies the exception
with particularity and describes the relevant facts in detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of
a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein, unless the
representation or warranty has to do with the existence of the document or
other item itself. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 4.
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Company has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Section 4(a) of
the Disclosure Schedule lists the directors and officers of the Company.
The Seller has delivered to the Buyer correct and complete copies of the
charter and bylaws of the Company (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
12
certificate books, and the stock record books of the Company are correct
and complete. The Company is not in default under or in violation of any
provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
consists of 250 Company Shares, of which 220 Company Shares are issued and
outstanding and no Company Shares are held in treasury. All of the issued
and outstanding Company Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the Seller as set
forth in Section 4(b) of the Disclosure Schedule. There are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights
with respect to the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital
stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the Transaction, will (i) violate any
constitution, statute, regulation, rule, Order, ruling, charge, or other
restriction of any Authority to which the Company is subject or any
provision of the charter or bylaws of the Company or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any Security Interest upon any of its
assets). The Company does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any Authority in
order for the Parties to consummate the Transaction.
(d) Brokers' Fees. The Company has no Liability to pay any fees or
commissions to any broker, finder, or agent with respect to the Transaction.
(e) Title to Assets. The Company has good and marketable title to, or
a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. The Company has no Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit I are the
following financial statements (collectively the "Financial Statements"):
(i) audited balance sheets and statements of income, statements of retained
earnings, and statements of cash flows as of and for the fiscal years ended
December 31, 1994, December 31, 1995, and December 31, 1996 (the "Most
Recent Fiscal Year End") for the Company; and (ii) unaudited balance sheets
(the "Most Recent Financial Statements") as of and for the six months ended
13
June 30, 1997 (the "Most Recent Fiscal Month End") for the Company. The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods,
are correct and complete, and are consistent with the books and records of
the Company (which books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in
the business, financial condition, operations, results of operations, or
future prospects of the Company. Without limiting the generality of the
foregoing, since that date:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $10,000 or
outside the Ordinary Course of Business;
(iii)no party (including the Company) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases,
and licenses) involving more than $10,000 to which the Company
is a party or by which it is bound;
(iv) the Company has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than
$10,000 or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans,
and acquisitions) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vii)the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000 singly or
$25,000 in the aggregate;
14
(viii)the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the
Ordinary Course of Business;
(ix) the Company has not cancelled, compromised, waived, or
released any right or claim (or series of related rights and
claims);
(x) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Company;
(xii)the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants,
or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(xiii)except as expressly provided in this Agreement, the Company
has not declared, set aside, or paid any dividend or made
any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
(xiv)the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) except as expressly provided in this Agreement, the Company
has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xvi)except as expressly provided in this Agreement, the Company
has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xvii)the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xviii)the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken
any such action with respect to any other Employee Benefit
Plan);
15
(xix)the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xx) the Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of
Business;
(xxi)there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
(xxii)the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no Liability (and there is
no Basis for any present or future Action against it giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) Liabilities
which have arisen after the Most Recent Fiscal Month End in the Ordinary
Course of Business (none of which results from, arises out of, relates to,
is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(j) Legal Compliance.
(i) Each of the Company and its predecessors and Affiliates has
complied with all applicable laws (including rules,
regulations, codes, plans, Orders, and charges thereunder)
of Authorities, and no Action or notice has been filed or
commenced against any of them alleging any failure so
to comply.
(ii) Section 4(j)(ii) of the Disclosure Schedule lists all types
of material licenses, certifications, permits, pending
applications, consents, approvals and authorizations of or
from any Authority, used in or otherwise necessary or
appropriate for the operation or conduct of the Company's
business (collectively, the "Permits"). No other Permits
are required by the Company for the conduct of its business.
The Company has complied in all material respects with all
conditions and requirements imposed by the Permits. The
Company owns and has the right to use the Permits in
accordance with the terms thereof, and each Permit is valid
and in full force and effect.
(iii)No officer or director of the Company has, directly or
indirectly, given or agreed to give any significant rebate,
gift or similar benefit to any supplier, customer,
governmental employee or other Person who was, is or may be
in a position to help or hinder the Company (or assist in
16
connection with any actual or proposed transaction) which
(i) could subject the Company to any damage or penalty in
any Action, or (ii) if not continued in the future, would
result in a material adverse effect to the Company.
(iv) The Company is not obligated and will not become obligated to
repay any amounts previously paid or currently owing to the
Company by any governmental or other third party reimbursement
agency or program.
(k) Tax Matters.
(i) The Company has filed all Tax Returns that it has been required
to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Company (whether or not
shown on any Tax Return) have been paid. The Company
currently is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been
made by an Authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any
of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and timely paid all Taxes required
to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii)Neither Seller nor any director or officer (or employee
responsible for Tax matters) of the Company expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Company either
(A) claimed or raised by any Authority in writing or (B)
as to which the Seller and the directors and officers (and
employees responsible for Tax matters) of the Company has
Knowledge based upon personal contact with any agent of such
Authority. Section 4(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed
with respect to the Company for taxable periods ended on or
after December 31, 1993, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Seller has delivered
to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company
since December 31, 1993.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
17
(v) The Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the
meaning of Code Section 6662. The Company is not a party to
any Tax allocation or sharing agreement. The Company (A) has
not been a member of an Affiliated Group filing a consolidated
federal income Tax Return and (B) has no Liability for the
Taxes of any Person (other than the Company) under Reg.
Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract,
or otherwise.
(vi) Section 4(k)(vi) of the Disclosure Schedule sets forth the
following information with respect to the Company as of the
most recent practicable date (as well as on an estimated pro
forma basis as of the Closing giving effect to the consummation
of the Transaction): (A) the basis of the Company in its
assets; and (B) the amount of any net operating loss, net
capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to
the Company.
(vii)The unpaid Taxes of the Company (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company
in filing its Tax Returns.
(viii)The Company has been a validly electing S corporation within
the meaning of Code Sections 1361 and 1362 at all times since
January 1, 1997 and the Company will be an S corporation up
to and including the date before the Closing Date. No
election has been or will be made under Code Section
338(h)(10).
(l) Real Property.
(i) The Company owns no real property.
(ii) Section 4(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to
the Company. The Seller has delivered to the Buyer correct
and complete copies of the leases and subleases listed in
Section 4(l)(ii) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in
Section 4(l)(ii) of the Disclosure Schedule:
18
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the
Transaction;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice
or lapse of time, would constitute a breach or default
or permit termination, modification, or acceleration
thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E)
above are true and correct with respect to the
underlying lease;
(G) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered in any manner
any interest in the leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have
received all approvals of Authorities (including licenses
and permits) required in connection with the operation
thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services reasonably
necessary and desirable for the operation of said
facilities.
(m) Intellectual Property.
(i) Section 4(m) of the Disclosure Schedule sets forth a list of
all trademarks, trade names, services marks, logos and
copyrights owned, controlled, licensed or used by the Company.
The Company has delivered or made available to the Buyer
true and complete copies (or descriptions) of all of such
19
Intellectual Property rights. All trademarks listed on the
Disclosure Schedule are in full force, there is no third
party claim affecting the use or ownership thereof, and all
applications listed therein as pending have been prosecuted
in good faith as required by law and are in good standing.
The Company owns or possesses adequate licenses or other
rights to use all Intellectual Property of the Company.
(ii) All of the Company's rights in the Intellectual Property
rights, licenses, contracts and other agreements listed or
described on the Disclosure Schedule are in full force and
effect and there is no third party claim affecting the use
thereof. The Company is not in default under any such
license, contract or other agreement and there are no defaults
by any other party to any such license, contract or other
agreement. The Company has not granted any Person any right
to use any of the Intellectual Property used or intended to
be used in or related to the Company's Business for any
purpose.
(iii)None of the Company's rights in the Intellectual Property
listed or described on the Disclosure Schedule is involved
in any interference or opposition proceeding, and there has
been no notice received by the Company that any such
proceeding will hereafter be commenced. The Company has used
all commercially reasonable efforts to protect the
Intellectual Property used or intended to be used in or
related to the Company's business against infringement by
others and to preserve its Confidential Information and none
of such Intellectual Property is being infringed by others.
There has been no infringement by the Company with respect
to any Intellectual Property rights of others.
(n) Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
its businesses as presently conducted. Each such tangible asset is free
from material defects (patent and latent), has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for
which it presently is used. A defect shall be deemed "material" if the
cost of repair or replacement exceeds $5,000.
(o) Inventory. The inventory of the Company consists of raw materials,
packaging, and supplies, manufactured and purchased parts, work in process,
and finished goods, all of which is merchantable and fit for the purpose
for which it was procured or manufactured, and none of which is obsolete,
damaged, or defective. The inventories of the Company are at normal and
adequate levels for the continuation of business in the Ordinary Course of
Business. All work in progress can be completed for sale in the Ordinary
Course of Business. The Company owns all its inventory free and clear of
all Security Interests, except inventory subject to the agreements described
in Section 4(p)(xii). Under each such agreement, the Company may return all
inventory without being obligated to pay any penalty whatsoever.
20
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease
payments in excess of $1,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over
a period of more than one year, result in a material loss to
any of the Company, or involve consideration in excess of
$5,000;
(iii)any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in
excess of $5,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with the Seller;
(vii)any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of its current
or former directors, officers, and employees;
(viii)any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $15,000 or providing
severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the
business, financial condition, operations, results of
operations, or future prospects of the Company; or
(xii)any agreement for the consignment of inventory;
21
(xiii)any other agreement (or group of related agreements) the
performance of which involves consideration in excess of
$5,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4(p) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions
of each oral agreement referred to in Section 4(p) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the Transaction;
(C) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; (D) no
party has repudiated any provision of the agreement; and (E) with respect
to any agreement described in Section 4(p)(iv), such agreement may be
prepaid without penalty or payment of any premium.
(q) Receivables. All Receivables of the Company are reflected
properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Company has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past three years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii)the policy number and the period of coverage;
(iv) 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
22
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the Transaction;
(C) neither the Company nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving
of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the
policy has repudiated any provision thereof. The Company has been covered
during the past 10 years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the
aforementioned period. Section 4(s) of the Disclosure Schedule describes
any self-insurance arrangements affecting the Company.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any outstanding Order
or charge or (ii) is a party or, to the Knowledge of the Seller and the
directors and officers (and employees with responsibility for litigation
matters) of the Company, is threatened to be made a party to any Action.
None of the Actions set forth in Section 4(t) of the Disclosure Schedule
could result in any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Company. None of the Seller and the directors and officers (and employees
with responsibility for litigation matters) of the Company has any reason
to believe that any such Action may be brought or threatened against the
Company. To the knowledge of the Seller and the directors and officers
(and employees with responsibility for litigation matters) of the Company,
there is no Basis for the commencement of any Action against the Company.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company has been in conformity with all applicable
contractual commitments and all express and implied warranties, and the
Company has no Liability (and there is no Basis for any present or future
Action against the Company giving rise to any Liability) for replacement or
repair thereof or other damages in connection therewith. No product
manufactured, sold, leased, or delivered by the Company is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard
terms and conditions of sale or lease. Section 4(u) of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or
lease for each of the Company (containing applicable guaranty, warranty,
and indemnity provisions).
(v) Product Liability. The Company has no Liability (and there is
no Basis for any present or future Action against the Company giving rise
to any Liability) arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured,
sold, leased, or delivered by the Company.
23
(w) Employees and Optometrists.
(i) The Company is not a party to or bound by any collective
bargaining agreement, nor has the Company experienced any
strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has not
committed any unfair labor practice. None of the Seller and
the directors and officers (and employees with responsibility
for employment matters) of the Company has any Knowledge of
any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees
of the Company.
(ii) Section 4(w)(ii) of the Disclosure Schedule lists all
Employees, sets forth their wages, and describes any written
or oral employment arrangements between the Company and any
Employee. The Employees are all the current employees of
the Company as of the date of this Agreement. The Employees
will, to the Seller's knowledge, be available for employment
by the Company as of the Closing Date. No Employee has a
written employment agreement with the Company which is not
terminable on notice by the Company without cost or other
liability to the Company. No Employee has indicated that
he or she intends to terminate his or her employment with
the Company or seek a material change in his or her duties
or status with the Company.
(iii)Section 4(w)(iii) of the Disclosure Schedule lists all
Optometrists. No Optometrist is employed by the Company or
is deemed by any Authority to be employed by the Company and
there is no Basis for any Authority to make such a claim.
No Optometrist has indicated to the Company that he or she
intends to terminate his or her Optometric Agreement or to
renegotiate its terms. Section 4(w)(iii) of the Disclosure
Schedule lists all Optometric Agreements. Each Optometric
Agreement is valid and in full force and effect in accordance
with its terms. A true and correct copy of the standard
form of Optometric Agreement is attached and made part of
Exhibit J. Section 4(w)(iii) of the Disclosure Schedule
accurately and completely sets forth for each Optometric
Agreement, (i) the parties to the Optometric Agreement,
(ii) the date of its execution and expiration, (iii) any
options to renew, (iv) the location of the property which
is the subject of the Optometric Agreement, (v) rent and
other fees payable thereunder, and (vi) any terms and
provisions which differ from those contained in the standard
form of Optometric Agreement. There has not been any
amendment, modification, or variation of any of the
Optometric Agreements other than as reflected on Section
4(w)(iii) of the Disclosure Schedule and each Optometric
Agreement truly, accurately, and completely sets forth all
terms and conditions of the entire contractual relationship
between the Company and the Optometrist. There is not under
24
any Optometric Agreement any default (or any claim of default)
by any party to such Optometric Agreement, or any event of
default or event which with notice or lapse of time or both
would constitute a default by such party and in respect of
which such party has not taken adequate steps to prevent a
default on its part from occurring. The Company has not
received (and has no notice of) any exercise (by any Person
(including any Optometrist)) of a right to cancel or terminate
(whether or not arising out of an alleged default) any
Optometric Agreement. The interest of the Company in and
under each Optometric Agreement is unencumbered by any
Security Interest and is subject to no present Action or
threatened Action. The Company has performed all the
obligations required to be performed by it under each of the
Optometric Agreements.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule contains a complete
and correct list of each Employee Benefit Plan covering any
present or former employees of the Company and each other
material plan or arrangement providing for severance
benefits, deferred compensation, fringe benefits, pension
benefits, insurance benefits, profit sharing, retirement
benefits, stock purchases, stock options, incentives, bonuses,
vacations, disability benefits, hospitalization benefits,
medical insurance, life insurance and other employee benefit
plans, programs or arrangements or a similar type of benefit
or compensation covering any present or former employee of
the Company (an "Employee Plan"), whether or not such Employee
Plan has been terminated. The Company has provided the Buyer
with complete and correct copies of the material documents
comprising each Employee Plan and (where applicable) the most
recent Form 5500 Annual Report and the summary plan description
for each Employee Plan.
(ii) Each Employee Plan which is subject to ERISA conforms in all
material respects to, and its operation and administration are
in all material respects in compliance with, all applicable
requirements of ERISA, the Code, and other applicable laws.
Each Employee Plan which is intended to comply with Code
Section 401(a) has received a determination letter from the
Internal Revenue Service to the effect that such Employee
Plan is qualified under Code Section 401 and that any trust
maintained pursuant thereto is exempt from federal income
taxes under Code Section 501 and there is no reasonable
Basis for the loss of such qualification or exemption or for
any Liability with respect to such Employee Plan. There has
been no Prohibited Transaction with respect to any Employee
Plan. There are no Actions pending (other than routine claims
25
for benefits) or threatened against or with respect to any
Employee Plan or against the assets of any Employee Plan. No
Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any Employee
Plan. No Employee Plan is under audit or investigation by
the Internal Revenue Service or the Department of Labor, or
any other Authority, and no such completed audit, if any,
has resulted in the imposition of any Tax, interest or
penalty.
(iii)The Company has not maintained or contributed to, and has not
been required to maintain or contribute to, any Employee
Plan which is intended to be qualified as an Employee Pension
Benefit Plan.
(iv) None of the Employee Plans is an Employee Welfare Benefit
Plan.
(v) The Company does not contribute to, never has contributed to,
and never has been required to contribute to any Multiemployer
Plan and has no Liability under any Multiemployer Plan.
(vi) The Company does not maintain, never has maintained or
contributes, never has contributed, and never has been
required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
(vii)The consummation of the Transaction will not alone give rise
to any Liability for any employee benefits, including without
limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or
accelerate the time of payment or vesting or increase the
amount of compensation or benefits due to any current or
former employee of the Company.
(y) Guaranties. Except for the Company Guarantee, the Company is not a
guarantor or otherwise liable for any Liability (including indebtedness) of
any other Person.
(z) Environmental Matters.
(i) Each of the Company and its respective predecessors and
Affiliates has complied and is in compliance with all
Environmental Requirements.
(ii) Without limiting the generality of the foregoing, each of the
Company and its Affiliates has obtained and complied with,
and is in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental
Requirements for the occupation of its facilities and
the operation of its business; a list of all such permits,
26
licenses and other authorizations is set forth in Section
4(z)(ii) of the Disclosure Schedule.
(iii)Neither the Company nor its predecessors or Affiliates has
received any written or oral notice, report or other
information regarding any actual or alleged violation of
Environmental Requirements, or any Liabilities, including
any investigatory, remedial or corrective obligations,
relating to any of them or its facilities arising under
Environmental Requirements.
(iv) None of the following exists or has existed at any property
or facility owned or operated by the Company: (1) underground
storage tanks, (2) asbestos-containing material in any form
or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(v) None of the Company or its predecessors or Affiliates has
treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or
owned or operated any property or facility (and no such
property or facility is contaminated by any such substance)
in a manner that has given or would give rise to Liabilities,
including any Liability for response costs, corrective
action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Solid
Waste Disposal Act, as amended ("SWDA") or any other
Environmental Requirements.
(vi) Neither this Agreement nor the consummation of the
Transaction will result in any obligations for site
investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of
the so-called "transaction-triggered" or "responsible
property transfer" Environmental Requirements.
(vii)Neither the Company, nor any of its predecessors or
Affiliates has, either expressly or by operation of law,
assumed or undertaken any Liability, including without
limitation any obligation for corrective or remedial action,
of any other Person relating to Environmental Requirements.
(viii)No facts, events or conditions relating to the past or
present facilities, properties or operations of the Company,
or any of its predecessors or Affiliates, will prevent,
hinder or limit continued compliance with Environmental
Requirements, give rise to any investigatory, remedial or
corrective obligations pursuant to Environmental Requirements,
or give rise to any other Liabilities pursuant to
Environmental Requirements, including without limitation
27
any relating to onsite or offsite releases or threatened
releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
(aa) Certain Business Relationships with the Company.
(i) The Seller has not been involved in any business arrangement
or relationship with the Company within the past 12 months,
and the Seller does not own any asset, tangible or intangible,
which is used in the business of the Company.
(ii) Section 4(aa)(ii) of the Disclosure Schedule sets forth a
list of the ten largest customers and ten largest suppliers
of the Company for the most recent twelve-month period,
together with the amount of sales or purchases attributable
to such customers or suppliers expressed in dollars. No
customer or supplier which was significant to the Company
during the past three years, has terminated, materially
reduced or threatened to terminate or materially reduce its
purchases from or provision of products or services to the
Company, as the case may be.
(bb) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its best efforts to
take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the Transaction (including
satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
(b) Notices and Consents. The Seller will cause the Company to give
any notices to third parties, and will cause the Company to use its best
efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in Section 4(c) above.
Each of the Parties will (and the Seller will cause the Company to) give
any notices to, make any filings with, and use its best efforts to obtain
any authorizations, consents, and approvals of Authorities in connection
with the matters referred to in Section 3(a)(i), Section 3(b)(ii), and
Section 4(c) above.
(c) Operation of Business. The Seller will not cause or permit the
Company to, and the Company shall not, engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Seller
will not, except as provided in Section 5(h) below, cause or permit the
Company to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
28
otherwise acquire any of its capital stock, or (ii) otherwise engage in
any practice, take any action, or enter into any transaction of the sort
described in Section 4(h) above.
(d) Preservation of Business. The Seller will cause the Company to
keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
(e) Full Access. The Seller will permit, and the Seller will cause
the Company to permit, representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Company, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents
of or pertaining to the Company.
(f) Notice of Developments. The Seller will give prompt written
notice to the Buyer of any material adverse development causing a breach of
any of the representations and warranties in Section 4 above. Each Party
will give prompt written notice to the other Party of any material adverse
development causing a breach of any of his or its own representations and
warranties in Section 3 above. No disclosure by any Party pursuant to this
Section 5(f), however, shall be deemed to amend or supplement Schedule 3(a),
Schedule 3(b), or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. The Seller will not (and the Seller will not cause
or permit the Company to) (i) solicit, initiate, or encourage the submission
of any proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets, of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing. The Seller will not vote
his Company Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Seller will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.
(h) Cash Payments and Other Distributions.
(i) Immediately prior to the Closing, the Seller will cause the
Company to make the following payments to the Seller:
(A) a cash dividend equal to $14,000.
(B) a cash dividend equal to (x) the amount then owing under
the Seller's Note Payable plus (y) $134,840.
(C) a cash payment in full satisfaction of the Seller's
Note Receivable.
29
(ii) Immediately prior to the Closing, the Seller will make a cash
payment to the Company in full satisfaction of the Seller's
Note Payable.
(iii)After the payments described in this Section 5(h) have been
made, the Company will deliver the Seller's Note Payable,
marked "Paid in Full" to the Seller, and the Seller will
deliver the Seller's Note Receivable, marked "Paid in
Full" to the Company.
(iv) Immediately prior to the Closing, the Seller shall (A) pay
and discharge the ▇▇▇▇▇▇▇ Indebtedness in full and (B) cause
the Bank to release and terminate the Company Guarantee and
any security agreement and security with respect thereto.
(v) Immediately prior to the Closing, the Company shall assign
the Policy to the Seller, by instrument reasonably
satisfactory to the Parties.
6. Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Seller acknowledges and agrees that from and
after the Closing the Buyer will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of
any sort relating to the Company.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any Action in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Company, each of the Parties will
cooperate with him or it and his or its counsel in the contest or defense,
make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting
or defending Party (unless the contesting or defending Party is entitled
to indemnification therefor under Section 8 below).
(c) Transition. The Seller will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Company from
maintaining the same business relationships with the Company after the
Closing as it maintained with the Company prior to the Closing. The Seller
will refer all customer inquiries relating to the business of the Company
to the Buyer from and after the Closing.
30
(d) Confidentiality. The Seller will treat and hold the Confidential
Information as confidential, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information
which are in his possession. In the event that the Seller is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Seller will
notify the Buyer promptly of the request or requirement so that the Buyer
may seek an appropriate protective order or waive compliance with the
provisions of this Section 6(d). If, in the absence of a protective order
or the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal
or else stand liable for contempt, the Seller may disclose the Confidential
Information to the tribunal; provided, however, that the Seller shall use
his reasonable best efforts to obtain, at the reasonable request of the
Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
(e) Company Indebtedness. Immediately after the Closing, the Buyer
shall cause the Company to (i) pay and discharge the Company Indebtedness
in full and (ii) cause the Bank to release and terminate the ▇▇▇▇▇▇▇
Guarantee.
(f) Securities.
(i) The Buyer Note will be imprinted with a legend substantially
in the following form:
The payment of principal and interest on this Note is subject
to certain recoupment provisions set forth in a Stock
Purchase Agreement dated as of September 15, 1997 (the
"Purchase Agreement") between the issuer of this Note and
the person to whom this Note originally was issued. This
Note was originally issued on October 8, 1997, and has not
been registered under the Securities Act of 1933, as amended.
The transfer of this Note is subject to certain restrictions
set forth in the Purchase Agreement. The issuer of this Note
will furnish a copy of these provisions to the holder hereof
without charge upon written request.
(ii) Each certificate representing Common Shares delivered under
this Agreement will be imprinted with a legend substantially
in the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Federal Act"), or the securities laws of any state or other
jurisdiction, but have been acquired by the registered owner
31
hereof for purposes of investment and in reliance on the
statutory exemptions contained in Sections 3(b) and 4(2) of
the Federal Act, in Section 10-5-9(13) of the Georgia
Securities Act of 1973 and in comparable exemptions in the
securities laws of other jurisdictions to the extent
applicable. Such shares may not be sold, pledged, transferred
or assigned except in a transaction which is exempt under such
Federal Act and such other laws, or pursuant to an effective
registration statement thereunder or in a transaction
otherwise in compliance with such Act and other laws, and in
the case of an exemption or other such transaction otherwise
in compliance, unless the Company has received an opinion of
counsel, satisfactory to it, or a communication from the
Securities and Exchange Commission and any other governmental
authority empowered to interpret the securities laws of
states or other jurisdictions that are applicable to such
transaction, that such transaction does not require
registration of the shares under the Federal Act or under
such other laws, as the case may be.
(iii)Each holder desiring to transfer a Security first must furnish
the Buyer with (i) a written opinion reasonably satisfactory
to the Buyer in form and substance from counsel reasonably
satisfactory to the Buyer by reason of experience to the
effect that the holder may transfer the Security as desired
without registration under the Securities Act and (ii) a
written undertaking executed by the desired transferee
reasonably satisfactory to the Buyer in form and substance
agreeing to be bound by the restrictions on transfer
contained herein and, with respect to the Buyer Note, the
recoupment provisions contained herein.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a)
and Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the
Closing;
(iii)the Company shall have procured all of the third party
consents specified in Section 5(b) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any Authority wherein an unfavorable Order or charge
32
would (A) prevent consummation of the Transaction, (B) cause
the Transaction to be rescinded following consummation, (C)
affect adversely the right of the Buyer to own the Company
Shares and to control the Company, or (D) affect adversely
the right of the Company to own its assets and to operate
its businesses (and no such Order or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate,
in the form of Exhibit K, to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is
satisfied in all respects;
(vi) the relevant parties shall have entered into the Ancillary
Agreements and the same shall be in full force and effect;
(vii)the Buyer shall have received from counsel to the Seller an
opinion in form and substance as set forth in Exhibit L
attached hereto, addressed to the Buyer, and dated as of
the Closing Date;
(viii)the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the
Company;
(ix) the Buyer shall have received such environmental site audits
or assessments of the operations and facilities of the
Company (including the Headquarters) as the Buyer considers
necessary or desirable, and the Buyer shall be reasonably
satisfied with such site audits and assessments;
(x) the leases described in Schedule 7(a)(x) (the "Designated
Leases") shall have been amended by instruments in form and
substance acceptable to the Buyer;
(xi) the Board of Directors of the Buyer shall have approved this
Agreement and the Transaction.
(xii)all actions to be taken by the Seller in connection with
consummation of the Transaction and all certificates,
opinions, instruments, and other documents required to
effect the Transaction (including the Disclosure Schedule)
will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
33
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii)no action, suit, or proceeding shall be pending or threatened
before any Authority wherein an unfavorable Order or charge
would (A) prevent consummation of the Transaction or (B)
cause the Transaction to be rescinded following consummation
(and no such Order or charge shall be in effect);
(iv) the Buyer shall have delivered to the Seller a certificate
in the form of Exhibit M, to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is
satisfied in all respects;
(v) the Seller shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit N
attached hereto, addressed to the Seller, and dated as of
the Closing Date; and
(vi) all actions to be taken by the Buyer in connection with
consummation of the Transaction and all certificates,
opinions, instruments, and other documents required to
effect the Transaction will be reasonably satisfactory in
form and substance to the Seller.
The Seller may waive any condition specified in this Section 7(b) if he
executes a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. Except only for the
representations and warranties described in Schedule 8(a) (the "Sunset
Representations"), all of the representations and warranties of the Parties
contained in this Agreement shall survive the Closing hereunder (even if
the damaged Party knew or had reason to know of any misrepresentation or
breach of warranty or covenant at the time of Closing) and continue in full
force and effect thereafter (subject to any applicable statutes of
limitations). The Sunset Representations shall expire on the date set
forth on Schedule 8(a) (the "Sunset Date"), except that claims, if any,
asserted on or prior to the Sunset Date which are identified as a claim
for indemnification shall survive until finally resolved and satisfied
in full.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event the Seller breaches (or in the event any third
party alleges facts that, if true, would mean the Seller has
breached) any of his representations, warranties, and
34
covenants contained herein, and, provided that the Buyer
makes a written claim for indemnification against the Seller
pursuant to Section 11(h) below, then the Seller agrees to
indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after
the date of the claim for indemnification (including any
Adverse Consequences the Buyer may suffer after the end
of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the
breach (or the alleged breach), provided, however, that
the Seller shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or
caused by the breach (or alleged breach) of any
representation or warranty of the Seller contained in
Section 4(a)-(bb) above until the Buyer has suffered Adverse
Consequences by reason of all such breaches (or alleged
breaches) in excess of a $25,000 aggregate threshold (at
which point the Seller will be obligated to indemnify the
Buyer from and against all such Adverse Consequences relating
back to the first dollar), provided further, however, that
in the determination of whether the Adverse Consequences
exceed the $25,000 aggregate threshold just described (and
only for the purpose of such determination), the first
$10,000 (in the aggregate) of Adverse Consequences resulting
solely from, arising solely out of, and relating only to,
or caused solely by the breach (or alleged breach) of any
representation or warranty of the Seller contained either
in Section 4(g) and/or in Section 4(k) above shall be
excluded.
(ii) The Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the
nature of, or caused by any Liability of the Company (x)
for any Taxes of the Company with respect to any Tax year
or portion thereof ending on or before the Closing Date (or
for any Tax year beginning before and ending after the
Closing Date to the extent allocable (determined in a
manner consistent with Section 9(b)) to the portion of such
period beginning before and ending on the Closing Date),
to the extent such Taxes are not reflected in the reserve
for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing
Balance Sheet, and (y) for the unpaid Taxes of any Person
(other than the Company) under Reg. Section 1.1502-6 (or
any similar provision of state or local law), as a
transferee or successor, by contract, or otherwise.
(iii)The Seller further agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer
may suffer resulting from or arising out of the operation
of the business of the Company prior to the Closing.
35
(iv) For purposes of this Section 8(b), Adverse Consequences which
the Buyer may suffer include any Adverse Consequences
suffered by the Company.
(c) Indemnification Provisions for Benefit of the Seller. In the event
the Buyer breaches (or in the event any third party alleges facts that, if
true, would mean the Buyer has breached) any of its representations,
warranties, and covenants contained herein, and, provided that the Seller
makes a written claim for indemnification against the Buyer pursuant to
Section 11(h) below, then the Buyer agrees to indemnify the Seller from
and against the entirety of any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Seller may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this
Section 8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves
only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish
a precedential custom or practice materially adverse to
the continuing business interests of the Indemnified Party,
36
and (E) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(iii)So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate
in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party
may defend against, and consent to the entry of any judgment
or enter into any settlement with respect to, the Third Party
Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith),
(B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys'
fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.
(e) Adjustment of Purchase Price. All indemnification payments under
this Section 8 shall be deemed adjustments to the Purchase Price. For the
purpose of determining Adverse Consequences under this Section 8, the Buyer
shall make appropriate adjustments for payments received by it under
insurance coverage.
(f) Recoupment Under Buyer Note. The Buyer shall have the option of
recouping all or any part of any Adverse Consequences it may suffer (in
lieu of seeking any indemnification to which it is entitled under this
Section 8) by notifying the Seller that the Buyer is reducing the principal
amount outstanding under the Buyer Note. Such reduction shall affect the
timing and amount of payments required under the Buyer Note in the same
manner as if the Buyer had made a permitted prepayment (without premium
or penalty) thereunder. Notwithstanding the foregoing, the Buyer may
exercise its recoupment option under this Section 8(f) only if and to the
extent that (i) the Buyer has incurred an out-of-pocket expense; (ii) an
amount has been reduced to judgment; or (iii) an Action has been settled
pursuant to the terms of this Agreement.
37
(g) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such
remedy arising under Environmental Requirements) any Party may have with
respect to the Company or the Transaction. The Seller hereby agrees that
he will not make any claim for indemnification against the Company by
reason of the fact that he was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement,
or otherwise) with respect to any Action brought by the Buyer against the
Seller (whether such Action is pursuant to this Agreement, applicable law,
or otherwise).
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Buyer and the Seller for certain tax matters
following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. The Buyer shall permit Company
to review and comment on each such Tax Return described in the preceding
sentence prior to filing. To the extent permitted by applicable law, the
Seller shall include any income, gain, loss, deduction or other tax items
for such periods on his Tax Returns in a manner consistent with the
Schedule K-1's furnished by the Company to the Seller for such periods.
Seller shall reimburse the Buyer for Taxes of the Company with respect to
such periods within fifteen (15) days after payment by the Buyer or the
Company of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
shown on the face of the Closing Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company for Tax periods which begin before
the Closing Date and end after the Closing Date. The Seller shall pay to
the Buyer within fifteen (15) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of such
Taxes which relates to the portion of such Taxable period ending on the
Closing Date to the extent such Taxes are not reflected in the reserve
for Tax Liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown on the
face of the Closing Date Balance Sheet. For purposes of this Section,
in the case of any Taxes that are imposed on a periodic basis and are
payable for a Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the portion of
such Taxable period ending on the Closing Date shall (x) in the case of
any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire Taxable period
38
multiplied by a fraction the numerator of which is the number of days in
the Taxable period ending on the Closing Date and the denominator of which
is the number of days in the entire Taxable period, and (y) in the case
of any Tax based upon or related to income or receipts, be deemed equal
to the amount which would be payable if the relevant Taxable period
ended on the Closing Date. Any credits relating to a Taxable period that
begins before and ends after the Closing Date shall be taken into account
as though the relevant Taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Company.
(c) Cooperation on Tax Matters.
(i) The Buyer and the Seller shall cooperate fully, as and to
the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the
retention and (upon the other Party's request) the provision
of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis
to provide additional information and explanation of any
material provided hereunder. The Company and Seller agree
(A) to retain all books and records with respect to Tax
matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by the Buyer or the Seller, any extensions thereof)
of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable
written notice prior to transferring, destroying or
discarding any such books and records and, if the other
party so requests, the Company or the Seller, as the case
may be, shall allow the other Party to take possession
of such books and records.
(ii) The Buyer and the Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document
from any Authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the
Transaction).
(iii)The Buyer and the Seller further agree, upon request, to
provide the other Party with all information that either
Party may be required to report pursuant to Code Section
6043.
(d) Intentionally omitted.
39
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by
the Seller when due, and the Seller will, at his own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, if required by applicable law, the Buyer will, and will cause
its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this Agreement
as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Seller on or before the 30th day following
the date of this Agreement if the Buyer is not reasonably
satisfied with the results of its continuing business,
legal, environmental, and accounting due diligence regarding
the Company;
(iii)the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A)
in the event the Seller has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the
Seller of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or
(B) if the Closing shall not have occurred on or before
December 31, 1997, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iv) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A)
in the event the Buyer has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect, the Seller has notified
the Buyer of the breach, and the breach has continued
without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or
before December 31, 1997, by reason of the failure of
any condition precedent under Section 7(b) hereof (unless
the failure results primarily from the Seller himself
breaching any representation, warranty, or covenant contained
in this Agreement).
40
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other
Party (except for any Liability of any Party then in breach). In the
event of any termination of this Agreement pursuant to Section 10(a)(iii)
or (iv) above, the non-breaching Party shall, in addition to its other
rights and remedies under this Agreement, be entitled to an immediate
payment of $50,000 from the breaching Party, as partial compensation for
the cost, expense, and effort associated with the negotiation of this
Agreement and preparation for the Transaction.
11. Miscellaneous.
(a) Intentionally omitted.
(b) Press Releases and Public Announcements. Neither Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way
to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of
its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
41
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder (collectively, "Notices") will be in writing. Any
Notice shall be deemed duly given if (and then one business day after) it
is sent by recognized overnight delivery service, and addressed to the
intended recipient as set forth below:
If to the Seller:
▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D. Copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ & ▇▇▇▇▇, ▇.▇.
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ First Bank Place
▇▇▇▇ ▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Buyer:
National Vision Copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Associates, Ltd. General Counsel
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ National Vision Associates, Ltd.
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Any Party may send any Notice to the intended recipient at the address set
forth above using any other means (including personal delivery, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
Notice shall be deemed to have been duly given unless and until it actually
is received by the intended recipient. Any Party may change the address
to which Notices are to be delivered by giving the other Parties notice in
the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Georgia without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Georgia or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Georgia.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
42
(l) Expenses. Each of the Parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the Transaction. The Buyer agrees that the Company may,
prior to the date of any payments pursuant to Section 2(f) hereof, pay any
costs and expenses (including any legal and accounting fees and expenses) of
the Seller in connection with this Agreement or the Transaction. The
Parties further agree that the Net Book Value shall be reduced by the amount
of such costs and expenses paid or incurred on or before September 30, 1997.
Any payment by the Buyer to the Seller pursuant to Section 2(f) hereof shall
be further reduced by any such costs and expenses paid or incurred after
September 30, 1997. The Seller warrants and represents that no such cost
or expense shall be paid or incurred on or after October 15, 1997.
(m) Construction. Any reference to any federal, state, or local statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
(including the Disclosure Schedule) identified in this Agreement and in the
Index are incorporated herein by reference and made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Party shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and, subject to
Section 11(p) below, to enforce specifically this Agreement and the terms
and provisions hereof in any Action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it or he may be entitled,
at law or in equity.
(p) Arbitration. After the Transaction has closed, any dispute or
controversy arising out of, based on, or in connection with this Agreement,
or the Transaction shall be settled by arbitration to be held in Minneapolis,
Minnesota in accordance with the rules then in effect of the American
Arbitration Association or any successor thereto. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive, and binding on the
Parties. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction, and the Parties irrevocably consent to the jurisdiction
of the Georgia courts for this purpose. In any such arbitration, the Parties
waive personal service of any process or other papers and agree that service
thereof may be made in accordance with Section 11(h) hereof. The losing
Party in such arbitration shall pay all the costs and expenses of such
arbitration and all the reasonable counsel fees and expenses of the other
Party.
43
(q) Time of Essence. Time is of the essence under this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
BUYER:
NATIONAL VISION ASSOCIATES, LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:__________________________
SELLER:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D.
44
INDEX TO STOCK PURCHASE AGREEMENT
BETWEEN
▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D.
AND
NATIONAL VISION ASSOCIATES, LTD.
Exhibits
--------
Exhibit A - Buyer Note
Exhibit B - Headquarters Lease
Exhibit C - Loan Documents
Exhibit ▇ - ▇▇▇▇▇▇▇ Employment Agreement
Exhibit E - Put Option Agreement
Exhibit F - Release
Exhibit G - Seller's Note Payable
Exhibit H - Seller's Note Receivable
Exhibit I - Financial Statements
Exhibit J - Form of Optometric Agreement
Exhibit K - Seller's Certificate
Exhibit L - Opinion of Seller's Counsel
Exhibit M - Buyer's Certificate
Exhibit N - Opinion of Buyer's Counsel
Schedules
---------
Schedule 2(b) - Cash and Share Payments
Schedule 2(e)(i) - Accounting Applications
Schedule 3(a) - Exceptions to Seller's representations
and warranties concerning the Transaction
Schedule 3(b) - Exceptions to Buyer's representations
and warranties concerning the Transaction
Schedule 7(a)(x) - Designated Leases
Schedule 8(a) - Sunset Representations and Sunset Date
Other
-----
Disclosure Schedule
The Registrant hereby agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.