Exhibit 2(ii)
ASSET PURCHASE AGREEMENT
between
MidSouth Sign Company, LLC
Seller
and
▇▇▇▇ MSS, Inc.
Buyer
DATED: January 1, 2001
TABLE OF CONTENTS
Page
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ARTICLE I
TRANSFER OF PURCHASED ASSETS AND RELATED MATTERS...................... 1
1.1 Purchased Assets................................................. 1
1.2 Excluded Assets.................................................. 2
1.3 Assignment of Contracts.......................................... 3
1.4 Passage of Title and Risk of Loss................................ 3
ARTICLE II
ASSUMPTION OF CERTAIN LIABILITIES..................................... 3
2.1 Assumed Obligations.............................................. 3
2.2 Excluded Obligations............................................. 5
ARTICLE III
PURCHASE PRICE........................................................ 6
3.1 Purchase Price................................................... 6
3.2 Allocation....................................................... 6
3.3 Additional Obligations........................................... 6
ARTICLE IV
CLOSING............................................................... 7
4.1 Closing Date..................................................... 7
4.2 Simultaneous Actions............................................. 7
4.3 Deliveries by Seller............................................. 7
4.4 Deliveries by Buyer.............................................. 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER.............................. 9
5.1 Organizational Matters........................................... 9
5.2 Authority........................................................ 9
5.3 Noncontravention................................................. 10
5.4 Financial Statements............................................. 10
5.5 Absence of Undisclosed Liabilities............................... 10
5.6 Absence of Changes............................................... 11
5.7 Title to Assets.................................................. 12
5.8 Real Property - Owned............................................ 13
5.9 Real Property - Leased........................................... 13
5.10 Personal Property - Owned........................................ 14
5.11 Personal Property - Leased....................................... 14
5.12 Agreements....................................................... 14
5.13 Litigation....................................................... 16
(i)
5.14 Compliance; Governmental Authorization............................ 16
5.15 Labor Relations; Employees........................................ 17
5.16 Employee Benefit Plans............................................ 17
5.17 Related Party Transactions........................................ 18
5.18 Customers and Suppliers........................................... 19
5.19 Market Information................................................ 19
5.20 Intellectual Property............................................. 19
5.21 Insurance......................................................... 20
5.22 Accounts and Notes Receivable..................................... 20
5.23 Inventories....................................................... 20
5.24 Tax Matters....................................................... 20
5.25 Shares............................................................ 21
5.26 Brokers........................................................... 21
5.27 Disclosure........................................................ 21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND ▇▇▇▇........................ 21
6.1 Buyer's Representations and Warranties............................ 21
6.2 ▇▇▇▇'▇ Representations and Warranties............................. 22
ARTICLE VII
COVENANTS OF SELLER..................................................... 24
7.1 Conduct of Business Until Closing................................. 24
7.2 Access to Properties and Records.................................. 25
7.3 Advice of Changes................................................. 26
7.4 Conduct........................................................... 26
7.5 Approvals......................................................... 26
7.6 Further Assurances................................................ 26
7.7 Name Change....................................................... 26
7.8 Restrictions on Shares............................................ 26
7.9 Uncollected Receivables........................................... 26
ARTICLE VIII
COVENANTS OF BUYER...................................................... 27
8.1 Confidentiality; Return of Documents.............................. 27
8.2 Access to Records................................................. 27
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER...................................... 27
9.1 Authorization..................................................... 27
9.2 Accuracy of Representations and Warranties........................ 27
9.3 Performance of Agreements......................................... 27
9.4 Legislation....................................................... 28
9.5 Financial Standards............................................... 28
(ii)
9.6 Due Diligence................................................... 28
9.7 Financing....................................................... 28
9.8 Personal Guarantees............................................. 28
9.9 Release of Liens, Claims........................................ 28
9.10 Environmental Reports........................................... 28
9.11 Assets of The LandOak Company, LLC.............................. 28
ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER.................................... 29
10.1 Authorization................................................... 29
10.2 Accuracy of Representations and Warranties...................... 29
10.3 Performance of Agreements....................................... 29
10.4 Legislation..................................................... 29
ARTICLE XI
TERMINATION............................................................ 29
11.1 Termination..................................................... 29
11.2 Effect.......................................................... 30
ARTICLE XII
INDEMNIFICATION........................................................ 30
12.1 Survival........................................................ 30
12.2 Indemnification................................................. 30
12.3 Third Party Claims.............................................. 32
12.4 Remedies Cumulative............................................. 33
12.5 Recoveries...................................................... 33
ARTICLE XIII
MISCELLANEOUS.......................................................... 33
13.1 Expenses; Transfer Taxes........................................ 33
13.2 Parties in Interest............................................. 33
13.3 Entire Agreement; Amendments.................................... 33
13.4 Headings........................................................ 33
13.5 Notices......................................................... 33
13.6 Publicity....................................................... 34
13.7 Counterparts.................................................... 34
13.8 Governing Law................................................... 35
13.9 Waivers......................................................... 35
13.10 Defined Terms................................................... 35
13.11 Construction.................................................... 35
13.12 Attorneys Fees.................................................. 35
13.13 Arbitration..................................................... 35
(iii)
DEFINITIONS
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Section
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"Act".............................................................. 5.25
"Assumed Obligations".............................................. 2.1
"Balance Sheet".................................................... 5.4
"Balance Sheet Date"............................................... 5.4
"Buyer"............................................................ Introduction
"Closing".......................................................... 4.1
"Closing Date"..................................................... 4.1
"COBRA"............................................................ 5.16(f)
"Code"............................................................. 5.16(b)
"Encumbrances"..................................................... 5.7(a)
"ERISA"............................................................ 5.16(a)
"Excluded Assets".................................................. 1.2
"Excluded Obligations"............................................. 2.2
"Financial Statements"............................................. 5.4
"GAAP"............................................................. 9.5
"Hazardous Substance".............................................. 5.14(d)
"Indemnified Party"................................................ 12.3
"Indemnifying Party"............................................... 12.3
"Intellectual Property"............................................ 1.1(h)
"Plans"............................................................ 5.16(a)
"Purchased Assets"................................................. 1.1
"Purchased Business"............................................... Introduction
"Returns".......................................................... 5.24(a)
"Seller"........................................................... Introduction
"Shares"........................................................... 3.1
"Taxes"............................................................ 5.24
"▇▇▇▇"............................................................. Introduction
"Title Company".................................................... 4.3(d)
(iv)
INDEX TO EXHIBITS
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Section and Exhibit Description
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4.3(b) ▇▇▇▇ of Sale
4.3(f) Opinion of Seller's Counsel
4.3(h) Noncompetition Agreements
4.3(i) Investment Letter
4.4(c) Assumption Agreement
4.4(d) Opinion of Buyer's Counsel
INDEX TO SCHEDULES
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Section and Schedule Description
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1.1(e) Leases, Orders
1.1(h) Intellectual Property
1.1(k) Governmental Licenses
1.1(l) Securities or Stock
3.2 Allocation
5.1 Organization Matters
5.4 Financial Statements
5.5 Absence of Undisclosed Liabilities
5.6 Absence of Changes
5.7 Encumbrances
5.8 Real Property - Owned
5.9 Real Property - Leased
5.10 Personal Property - Owned
5.11 Personal Property - Leased
5.12 Agreements
5.13 Litigation
(v)
5.14 OSHA/Hazardous Substances
5.15 Labor Relations; Employees
5.16 Employee Benefit Plans
5.17 Related Party Transactions
5.18 Customers & Suppliers
5.19 Market Information
5.21 Insurance
5.22 Accounts and Notes Receivable
5.23 Inventories
5.24 Tax Matters
(vi)
This ASSET PURCHASE AGREEMENT is entered into as of January 1, 2001, among
▇▇▇▇ MSS, Inc., a Tennessee corporation ("Buyer"); MidSouth Sign Company, LLC, a
Tennessee limited liability company ("Seller"); and ▇▇▇▇ Technology, Inc., a
Delaware corporation ("▇▇▇▇").
WHEREAS, Seller is engaged in the business of providing sign products and
sign services (such business being called the "Purchased Business");
WHEREAS, the parties desire that Seller transfer, convey and assign to
Buyer substantially all of the assets, properties and rights of the Purchased
Business as a going concern; and that Buyer purchase and acquire the same,
subject to the assumption by Buyer of certain liabilities and obligations of
Seller, upon the terms set forth below; and
WHEREAS, ▇▇▇▇ has agreed to issue 5,000,000 of its Common Shares to Seller
as part of the consideration of the transfer of assets of Seller to Buyer, which
is a wholly owned subsidiary of ▇▇▇▇, and executes this Agreement to evidence
its commitment to issue such shares in accordance herewith;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
TRANSFER OF PURCHASED ASSETS AND RELATED MATTERS
1.1 Purchased Assets. On the terms and subject to the conditions of this
Agreement, at the Closing (as defined in Article IV hereof), Seller shall
transfer, convey and assign to Buyer, and Buyer shall purchase and acquire from
Seller, all of the assets, properties and rights of Seller, wherever located,
real, personal and mixed, tangible and intangible, as the same shall exist
immediately prior to the Closing (except for those assets set forth in Section
1.2 hereof), including, but not limited to, the following:
(a) all machinery, equipment, transportation equipment, tools, dies
and molds, vehicles, furniture, fixtures, office equipment and supplies and
other items of tangible personal property and all warranties relating
thereto;
(b) all real property and interests therein, including land,
buildings, structures and improvements located thereon, fixtures contained
therein, appurtenances attached thereto, and leasehold improvements;
(c) all inventories, including but not limited to, all raw materials,
work-in-process, intermediates, finished products, supplies, spare parts,
packaging and shipping containers and materials;
(d) all prepaid expenses, advances, escrows and deposits of Seller,
the benefit of which will accrue to Buyer, except for those that
specifically relate to Excluded Assets (as defined in Section 1.2) or
Excluded Obligations (as defined in Section 2.2);
(e) all rights of Seller under all contracts, licenses, leases,
permits, commitments, purchase orders, sales orders and other agreements
which are described on Schedule 1.1(e) attached hereto;
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(f) all cash (including, without limitation, bank accounts, ▇▇▇▇▇
cash and escrow and other accounts) and accounts and notes receivable;
(g) all rights of Seller in and to insurance and indemnity claims
relating to the Purchased Business, the Purchased Assets (as defined in
Section 1.1) or the Assumed Obligations (as defined in Section 2.1);
(h) all patents, patent applications, trade names, fictitious or
assumed names, service marks, service ▇▇▇▇ applications, trademarks,
trademark applications, copyrights, copyright applications, patterns,
inventions, trade secrets, logos, slogans, proprietary processes and
formulae, license agreements, research and development projects and
reports, market reports, product or customer surveys, and all other
proprietary, technical and other information and intellectual property
rights, whether patentable or unpatentable (collectively, the "Intellectual
Property"), and the goodwill associated therewith, including, but not
limited to, those described on Schedule 1.1(h) attached hereto;
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(i) all records and files, including, but not limited to, property
records, production records, product designs, engineering records,
purchasing and sales records, correspondence with suppliers and customers
(both actual and prospective), personnel and payroll records, accounting
records, plant records, mailing lists, customer and vendor lists and
records, sales aids, and computer programs, records, files and related
software;
(j) all stationery, purchase orders, forms, invoices, labels,
shipping material, catalogs, brochures, art work, photographs, advertising
materials, merchandising and display materials;
(k) to the extent transferable, all governmental licenses, permits,
authorizations and approvals, which are described on Schedule 1.1(k)
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attached hereto; and
(l) all shares of stock or other securities owned by Seller which
relate to the Purchased Business, which are described on Schedule 1.1(l)
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attached hereto.
For convenience of reference, the assets, properties and rights to be
transferred, conveyed and assigned to Buyer hereunder, exclusive of the Excluded
Assets, are herein collectively called "Purchased Assets."
1.2 Excluded Assets. Anything contained in Section 1.1 hereof to the
contrary notwithstanding, there are expressly excluded from the assets,
properties and rights to be transferred, conveyed and assigned to Buyer
hereunder the following:
(a) the consideration delivered by Buyer to Seller pursuant to this
Agreement; and
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(b) Seller's minute books and other records having exclusively to do
with the organization of Seller.
For convenience of reference, the assets, properties and rights which are not to
be transferred, conveyed and assigned to Buyer hereunder are herein collectively
called "Excluded Assets."
1.3 Assignment of Contracts. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement or attempted
agreement to transfer, sublease or assign any contract, license, lease, sales
order, purchase order, commitment or other agreement or any claim or right or
any benefit arising thereunder or resulting therefrom or any permit or operating
authority if an attempted transfer, sublease or assignment thereof, without the
consent of any other party thereto, would constitute a breach thereof or in any
way adversely affect the rights of Buyer or Seller thereunder. Seller will use
its best efforts to obtain the consent of such other party to the assignment or
transfer thereof to Buyer in all cases in which such consent is required for
assignment or transfer. If such consent is not obtained, Seller will cooperate
with Buyer in any arrangements necessary or desirable to provide for Buyer the
benefits thereunder, including, without limitation, enforcement for the benefit
of Buyer of any and all rights of Seller against the other party thereto arising
out of the cancellation by such other party or otherwise. Nothing contained in
this Section 1.3 will affect the liability, if any, of Seller pursuant to this
Agreement for failing to disclose the need for such consent or approval or any
termination rights of Buyer hereunder if consent is not obtained.
1.4 Passage of Title and Risk of Loss. Legal and equitable title and risk
of loss with respect to the Purchased Assets will not pass to Buyer until such
assets are transferred at the Closing.
ARTICLE II
ASSUMPTION OF CERTAIN LIABILITIES
2.1 Assumed Obligations. At the closing, Buyer will assume the following
liabilities and obligations, and only the following liabilities and obligations,
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of Seller:
(a) Promissory Note dated May 27, 1999 in favor of BankFirst, provided
that the principal owed on such note together with accrued, unpaid interest
and any other sums owed thereunder do not exceed $240,000;
(b) Revolving Line of Credit dated July 25, 2000 in favor of
BankFirst, provided that the principal owed on such note together with
accrued, unpaid interest and any other sums owed thereunder do not exceed
$150,000, which amount will be increased to include up to $50,000 borrowed
after January 1, 2001 and prior to Closing;
(c) Promissory Note dated May 30, 2000 in favor of AmSouth Bank,
provided that the principal owed on such note together with accrued, unpaid
interest and any other sums owed thereunder do not exceed $21,000;
(d) Promissory Note dated January 1, 1999 in favor of Federal Signal
Corporation originally made by ▇▇▇▇▇ ▇▇▇▇▇▇ and assumed by Seller on July
27,1995, provided that the principal
3
owed on such note together with accrued, unpaid interest and any other sums
owed thereunder do not exceed $180,000;
(e) Installment Contract dated July 15, 1998 in favor of Green Tree
Financial Servicing, provided that the principal owed on such contract
together with accrued, unpaid interest and any other sums owed thereunder
do not exceed $110,000;
(f) Installment Contract dated October 20, 1998 in favor of Associates
Commercial Corporation, provided that the principal owed on such contract
together with accrued, unpaid interest and any other sums owed thereunder
do not exceed $15,000;
(g) Agreement in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ under
which Seller agreed to make payments owed by them under the note held by
National Bank of Commerce (the proceeds of which were contributed to
Seller), provided that Buyer shall not be required to make payments in an
amount greater than $15,000 in any quarter, all payments shall be made
directly to National Bank of Commerce (unless the debt to the bank
described in this paragraph has been paid in full), and the principal,
interest and other payments made thereunder do not exceed $99,000;
(h) those liabilities and obligations arising after the Closing under
those contracts, licenses, leases, permits, commitments, purchase orders,
sales orders and other agreements set forth on Schedule 1.1(e), effectively
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assigned and transferred to Buyer pursuant to Section 1.1(e) hereof, to the
extent such do not constitute any misrepresentation or breach of warranty
by Seller; and
(i) obligations within the categories listed below to the extent that
the total of all such obligations which were incurred by Seller in the
ordinary course of business prior to the Closing and do not exceed the
amounts listed opposite the category (any excess to be an Excluded
Obligation unless otherwise expressly agreed by Buyer):
Amount Assumed
Category of Obligation Not to Exceed
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Trade Accounts Payable $500,000
Customer Deposits $275,000
Accrued Payroll $ 60,000
Accrued/Payable Payroll Taxes $ 15,000
Accrued Vacation $ 20,000
Simple ▇▇▇ Withholding/Matching $ 6,000
Legal, Accounting, Professional Fees
of Seller Relating to Sale to Buyer $ 40,000
Sales Tax Payable $ 7,000
Accrued Property Taxes $ 7,000
Accrued Interest Expense $ 7,000
Miscellaneous Other Expenses $ 20,000
4
For convenience of reference, the liabilities and obligations being assumed by
Buyer as stated above are herein collectively called the "Assumed Obligations."
2.2 Excluded Obligations. Any other provision of this Agreement to the
contrary notwithstanding, Buyer will not assume any liability or obligation of
Seller or the Purchased Business not included in the Assumed Obligations or
exceeding any limit for Assumed Obligations, including, but not limited to, the
following:
(a) any liabilities and obligations of Seller for Federal, state,
territorial, local and foreign taxes, including, without limitation,
franchise, income, personal, real property, sales, use, unemployment, gross
receipts, excise, payroll, withholding or other taxes;
(b) any claims, demands, liabilities or obligations of any nature
whatsoever (including, without limitation, warranty claims) which are not
included in the Assumed Obligations and within the limits set forth therein
and which arose or were incurred at or before the Closing, or which are
based on events occurring or conditions existing at or before the Closing,
or which are based on services performed by Seller at or before the
Closing, or which relate to goods or products of Seller shipped or
delivered at or before the Closing or goods or products of Seller in
transit prior to or at the Closing and delivered after the Closing, (1)
notwithstanding that the claim, demand, liability or obligation arises or
becomes manifest after the Closing and (2) regardless of whether or not set
forth or otherwise disclosed on any Schedule attached hereto (whether or
not required to be so set forth or disclosed);
(c) any actions, suits, claims, investigations or legal,
administrative or arbitration proceedings pending or threatened against
Seller or the Purchased Business;
(d) any liabilities and obligations of Seller for amounts owed to any
owner or creditor of Seller or any person affiliated therewith, in such
person's capacity as an owner or creditor of Seller which are not
specifically assumed hereunder;
(e) any liabilities and obligations of Seller existing at the Closing
with respect to accrued holiday, vacation and severance pay relating to
employees of Seller or the Purchased Business which exceed the limits set
forth above as part of the Assumed Obligations;
(f) any liabilities or obligations for payments due or required to be
made under any pension, retirement, savings or other compensation plan
maintained by Seller or any other entity which exceed the limits set forth
above as part of the Assumed Obligations;
(g) any liabilities and obligations of Seller under this Agreement or
with respect to or arising out of the transactions contemplated hereby,
except for the $40,000 of legal, accounting and professional fees included
in Section 2.1(i) as an Assumed Obligation;
(h) any liabilities and obligations relating to the Excluded Assets;
and
5
(i) any other liabilities and obligations of Seller not being
specifically assumed by Buyer pursuant to Section 2.1 above.
For convenience of reference, the liabilities and obligations of Seller not
being assumed by Buyer as aforesaid are collectively called the "Excluded
Obligations." Seller shall take any and all actions which may be necessary to
prevent any person, firm or governmental authority from having recourse against
the Purchased Business, any of the Purchased Assets or against Buyer with
respect to any Excluded Obligations and shall discharge all Excluded Obligations
when they become due and payable.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The aggregate consideration to be paid to Seller for
the Purchased Assets shall be the assumption of the Assumed Obligations and the
issuance to Buyer of 5,000,000 restricted Common Shares (the "Shares") of ▇▇▇▇
(subject to certain restrictions on transfer or distribution more fully
disclosed in Section 7.8).
3.2 Allocation. The total purchase price (the value of the Shares and the
amount of the Assumed Obligations) will be allocated as set forth on Schedule
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3.2. However, the allocation set forth on Schedule 3.2 may be revised by Buyer
--- ------------
based upon the results of the audit that Buyer intends to have performed of
Seller's business after the Closing. Buyer will notify Seller of any revisions
to the allocation. The parties will use such allocation in reporting the
transaction for Federal and state tax purposes.
3.3 Additional Obligations. (a) In addition to the Assumed Obligation,
Buyer agrees to assume up to $50,000 in the aggregate of additional obligations
of Seller which arose prior to the Closing provided that such obligations are
not owed to any owner of Seller or other related party of Seller and provided
that such obligations arose in the ordinary course of the Purchased Business.
(b) If after Buyer has assumed or paid $50,000 in the aggregate of
additional obligations of Seller which are not part of the Assumed Obligations,
additional obligations arise and are not satisfied by Seller (including, without
limitation, additional obligation incurred as a result of failure to obtain
consents to assignments as required herein), Buyer, at its option, may pay or
assume such obligations and reduce the Purchase Price as provided below or
exercise its remedies under this Agreement.
(c) If Buyer pays or assumes obligations as provided in Section
3.3(b)above, the number of Shares shall be reduced as follows: for each $1 of
additional obligations assumed or paid by Buyer, $1 in value of the Shares shall
be returned to ▇▇▇▇. The Shares shall have an assumed value of $0.21 which was
the price at which shares of stock of ▇▇▇▇ traded on the electronic bulletin
board on December 29, 2000, the trade on the day closest to the Closing Date. In
calculating the number of Shares to be returned, all fractional shares shall be
rounded down to the nearest whole number.
6
ARTICLE IV
CLOSING
4.1 Closing Date. The closing for the consummation of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices of
▇▇▇▇, ▇▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, on such date and at such
time as is set forth in a notice from Buyer to Seller given at least ten
business days prior thereto, or on such other date and at such other time or
place as Buyer and Seller may mutually agree. The Closing shall be effective as
of January 1, 2001 which shall be the "Closing Date."
4.2 Simultaneous Actions. All actions to be taken and all documents to be
executed and delivered by the parties at the Closing will be deemed to have been
taken and executed simultaneously and no actions will be deemed taken nor any
documents executed or delivered until all have been taken, executed and
delivered.
4.3 Deliveries by Seller. On or before the Closing, Seller will deliver
to Buyer the following:
(a) Closing Certificate. An accurate certificate, dated the date of
the Closing, of Seller, satisfactory in form and substance to Buyer,
certifying that:
(1) the representations and warranties of Seller contained in this
Agreement are true and accurate on and as of the Closing with the
same force and effect as if made on the date of the Closing;
(2) Seller has performed and complied with all covenants, obligations
and agreements to be performed or complied with by it on or
before the Closing pursuant to this Agreement;
(3) attached thereto are true and complete copies of resolutions
adopted by Seller's board of governors and members approving this
Agreement and the transactions contemplated hereby;
(4) the incumbency and specimen signature of each manager of Seller
executing this Agreement and any other document to be executed by
Seller are as set forth in such certificate; and
(5) Seller is not a foreign person within the meaning of Section 1445
of the Internal Revenue Code.
(b) Instruments of Transfer. A duly executed ▇▇▇▇ of sale and general
instrument of assignment in substantially the form of Exhibit 4.3(b)
--------------
attached hereto and such other duly executed general warranty deeds,
endorsements, assignments and instruments of transfer, conveyance and
assignment in form and substance reasonably satisfactory to Buyer, as are
necessary or desirable to effect the transfers, conveyances and assignments
to Buyer referred to in Article I hereof.
7
(c) Survey. A duly certified survey with respect to each parcel of
real property to be conveyed hereunder bearing a current date not more than
sixty days prior to the Closing Date, prepared by a reputable surveyor
satisfactory to Buyer. Each such survey shall show the perimeters of such
real property, the location of all improvements, flood plains, building
setback lines and easements thereon, no encroachment by said improvements
on any flood plain, easement, building setback lines or on adjoining real
property and no encroachments on such real property, and shall show no
other matter except an Encumbrance disclosed on Schedule 5.7. Such survey
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will be in such detail and contain such certifications as shall be required
by the Title Company (as hereinafter defined).
(d) Title Insurance. A commitment of a nationally recognized title
insurance company reasonably acceptable to Buyer (the "Title Company"),
bearing a current date not more than thirty days prior to the Closing, in
form and substance satisfactory to Buyer to issue an ALTA Form B fee policy
of title insurance with respect to each parcel of real property to be
conveyed to Buyer, in an amount acceptable to Buyer, insuring in Buyer good
and marketable and fee simple title to said real property, free and clear
of all liens, encumbrances, charges, easements, rights-of-way,
restrictions, expenses, reservations, clouds or equities of whatsoever kind
to every parcel of the aforesaid real estate, said title policy to insure,
also, title to such real property over the preprinted General Exceptions
set forth in Schedule B to the title policy; and such title policy shall
have been issued to Buyer.
(e) Articles of Amendment. Articles of Amendment to Seller's Articles
of Organization in form suitable for filing, changing Seller's name as
contemplated by Section 7.7 hereof.
(f) Opinion of Counsel. An opinion of counsel for Seller in the form
of Exhibit 4.3(f), dated as of the Closing.
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(g) Consents. Duly executed consents, authorizations, orders or
approvals of any third party (including, without limitation, any
governmental body, lender, lessor, licensor, supplier, customer or other
party to any agreement listed on Schedule 5.12 which are required for the
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consummation of the transactions contemplated by this Agreement, each of
which shall be in full force and effect on the Closing.
(h) Noncompetition Agreements. Noncompetition Agreements for Seller,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the form attached
hereto as Exhibit 4.3(h).
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(i) Investment Letter. Investment Letter in the form attached hereto
as Exhibit 4.3(i).
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4.4 Deliveries by Buyer. On or before the Closing (with the exception of
the delivery of the certificate for the Shares which will occur after the
Closing), Buyer will have delivered to Seller the following:
(a) Closing Certificate. An accurate certificate, dated the date of
the Closing, of a duly authorized officer of Buyer, satisfactory in form
and substance to Seller, certifying that:
8
(1) the representations and warranties of Buyer contained in this
Agreement are true and accurate on and as of the date of the
Closing with the same force and effect as if made on the date of
the Closing;
(2) Buyer has performed and complied with all covenants, obligations
and agreements to be performed or complied with by it on or
before the Closing pursuant to this Agreement;
(3) attached thereto are true and complete copies of resolutions
adopted by Buyer's board of directors approving this Agreement
and the transactions contemplated hereby; and
(4) the incumbency and specimen signature of each officer of Buyer
executing this Agreement and any other document to be executed by
Buyer are as set forth in such certificate.
(b) Shares. The certificate representing the Shares to be issued to
Seller bearing a legend reflecting the restrictions on transfer.
(c) Assumption Agreement. A duly executed instrument of assumption
whereby Buyer shall assume the Assumed Obligations as provided herein,
which instrument of assumption shall be in substantially the form of
Exhibit 4.4(c) attached hereto.
--------------
(d) Opinion of Counsel. An opinion of counsel for Buyer in the form
of Exhibit 4.4(d), dated as of the date of the Closing.
--------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
5.1 Organizational Matters. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Tennessee. Seller is duly qualified and in good standing to do business in
every jurisdiction in which such qualification is necessary because of the
nature of the property owned, leased or operated by it in connection with the
Purchased Business or the nature of the business conducted by the Purchased
Business (each of which jurisdictions is listed in Schedule 5.1 attached
------------
hereto). Seller has delivered to Buyer complete and correct copies of its
Articles of Organization and Operating Agreement in each case as amended to the
date hereof.
5.2 Authority. Seller has all requisite power and authority to: own,
lease and operate its properties; carry on the Purchased Business as now being
conducted; enter into this Agreement; perform its obligations hereunder; and
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, have been duly and validly authorized by all
necessary action on the part of Seller. This Agreement
9
has been duly and validly executed by Seller, and is a valid and binding
obligation of Seller, enforceable in accordance with its terms.
5.3 Noncontravention. Neither the execution, delivery and performance of
this Agreement by Seller, nor the consummation by Seller of the transactions
contemplated hereby nor compliance by Seller with any of the provisions hereof
will:
(a) conflict with or result in a breach of any provision of the
Articles of Organization or Operating Agreement,
(b) except for those agreements listed on Schedule 5.12 for which it
-------------
has been disclosed that consent is required, cause a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms of any note, bond, lease, mortgage, indenture, license, warranty or
other instrument or agreement to which Seller is a party, or by which
Seller or any of its assets is or may be bound or benefitted, or
(c) violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree applicable to Seller or any of its
respective assets.
No consent or approval by, or any notification of or filing with, any public
body or authority is required in connection with the execution, delivery and
performance by Seller of this Agreement, or the consummation by Seller of the
transactions contemplated hereby.
5.4 Financial Statements. Schedule 5.4 attached hereto contains true and
------------
complete copies of the following (collectively, the "Financial Statements"):
(a) the unaudited balance sheets of Seller at December 31, 1999 and
December 31, 1998, and the related statements of income for each of the
fiscal years then ended, prepared by Seller; and
(b) the unaudited balance sheet (the "Balance Sheet") of Seller at
November 30, 2000 (the "Balance Sheet Date") and the related statement of
income for the eleven months then ended, prepared by Seller.
All allocations of corporate expenses, interest and other charges reflected in
the Financial Statements have been made on a consistent basis from period to
period. Except as otherwise noted in the Financial Statements, the Financial
Statements are complete and present fairly the financial position of Seller and
the results of its operations as of the dates thereof and for the periods
covered thereby.
5.5 Absence of Undisclosed Liabilities. Except as set forth on Schedule
--------
5.5 attached hereto, at the Balance Sheet Date:
---
(a) the Purchased Business had no liabilities or obligations of any
nature (matured or unmatured, fixed or contingent) which were not provided
for or disclosed on the Balanced Sheet,
10
(b) all reserves established by Seller and set forth on the Balance
Sheet were adequate for the purposes indicated therein, and
(c) there were no loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board) which were not adequately provided for in the
Balance Sheet.
5.6 Absence of Changes. Since the Balance Sheet Date, except as set forth
on Schedule 5.6 attached hereto, Seller has operated the Purchased Business in
------------
the ordinary course and there has not been:
(a) any adverse change in the condition (financial or otherwise),
assets, liabilities, earnings or business of Seller;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting any of the Purchased Assets;
(c) any increase in the compensation or benefits of any officer,
director, employee, consultant or agent (including, without limitation, any
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment), or the entering into of any contract with any officer,
director or employee, or the making of any loan to, or engagement in any
transaction with, any officers or directors of Seller;
(d) any capital expenditure or commitment therefor by Seller in
excess of $1,000 in the aggregate for additions to property, plant or
equipment;
(e) any forward purchase commitments in excess of the requirements
for normal operating inventories or at prices higher than market prices
prevailing at the time the commitment was entered into;
(f) any forward sales commitments other than in the ordinary course
of business consistent with past practices;
(g) any change in the manner in which inventory of the Purchased
Business is marketed or any increase in inventory levels in excess of
levels reasonably required for the fulfillment of existing orders in
accordance with the terms thereof, or any change in the manner in which the
Purchased Business extends discounts or credit to, or accepts returns of
merchandise from, customers or otherwise deals with its customers;
(h) any write-down or write-up of the value of any inventory of the
Purchased Business or any write-off as uncollectible of any accounts or
notes receivable of the Purchased Business or any portion thereof;
(i) any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) incurred, or any
transaction, contract or commitment entered into, by Seller, other than
items incurred or entered into (as the case may be) in the ordinary course
of
11
business and consistent with the past practice of Seller, each of which
has been properly recorded in Seller's financial records;
(j) any payment, discharge or satisfaction of any claim, encumbrance
or liability by Seller other than in the ordinary course of business
(whether absolute, accrued, contingent or otherwise and whether due or to
become due);
(k) any amendment or termination of any contract, license, lease,
commitment or other agreement to which Seller is a party, except in the
ordinary course of business and consistent with the past practice of
Seller;
(l) any actual or threatened labor trouble, problem or grievance
adversely affecting the Purchased Business or the Purchased Assets;
(m) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset or Intellectual Property of
the Purchased Business except sales of inventory in the ordinary course of
business and consistent with the past practice of Seller;
(n) any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of Seller relating to the Purchased
Assets or the Purchased Business;
(o) any change in the accounting methods or practices followed by
Seller or any change in depreciation or amortization policies or rates
theretofore adopted;
(p) any change in the suppliers, customers or the personnel of Seller
other than such routine changes which occur in the ordinary course of
business and which are consistent with the past practices of Seller, which
changes have not been, individually or in the aggregate, adverse to the
Purchased Business;
(q) any material change in the prices charged or to be charged by
Seller to its customers or by any supplier to Seller;
(r) any decrease in the level of maintenance of tangible Purchased
Assets from that level generally in effect prior to the Balance Sheet Date;
(s) any failure to operate the Purchased Business in the ordinary
course of business consistent with past practice, including, but not
limited to, any failure by Seller to make capital expenditures or
investments in the Purchased Business or any failure to pay trade accounts
payable when due; or
(t) any agreement or understanding, whether in writing or otherwise,
for Seller to take any of the actions specified above in items (a) through
(s) above.
5.7 Title to Assets. (a) Seller has good and marketable title to all of
the Purchased Assets, free and clear of all mortgages, liens, pledges, charges,
security interests, rights of way, options, rights of first
12
refusal, conditions, restrictions or encumbrances of any kind or character,
whether or not relating to the extension of credit or the borrowing of money
(collectively, "Encumbrances"), except for the Encumbrances set forth on
Schedule 5.7, and liens for taxes and governmental charges not yet due and
------------
payable.
(b) The Purchased Assets include all assets and properties and all
rights necessary or desirable to permit Buyer to carry on the Purchased Business
as presently conducted by Seller. Seller has complete and unrestricted power
and the unqualified right to sell, convey, assign, transfer and deliver the
Purchased Assets (subject to obtaining any consents or waivers of third parties
disclosed on Schedule 5.12 and required in connection with such sale,
-------------
conveyance, assignment, transfer and delivery of the Purchased Assets or any
part thereof). The instruments of transfer, conveyance and assignment executed
and delivered by Seller to Buyer at the Closing will be valid and binding
obligations of Seller, enforceable in accordance with their respective terms,
sufficient for purposes of recordation and filing where permitted by law,
sufficient to transfer, convey and assign to Buyer all of Seller's interest in
and to the Purchased Assets, the foregoing to constitute good and marketable
title thereto, free and clear of all Encumbrances, and sufficient to vest in
Buyer the full right, power and authority to conduct the Purchased Business as
presently conducted.
5.8 Real Property - Owned. Schedule 5.8 attached hereto contains a list
------------
and brief description of all real property owned in whole or in part by Seller
which relates to or is used in connection with the Purchased Business, including
a brief description of each such parcel, the record title holder thereof, the
location thereof, the material improvements thereon and all Encumbrances
thereon. All of the buildings and structures (including improvements) owned in
whole or in part by Seller are in good operating condition and repair, are
adequate and suitable for the uses for which intended by Seller, each has
adequate rights of ingress and egress for the operation of its business in the
ordinary course and there does not exist any condition which interferes in any
material way with the use or the economic value thereof. Neither any of such
buildings and structures, nor any appurtenances thereto or equipment therein,
nor the operation or maintenance thereof, violates in any manner any restrictive
covenants or encroaches on any easement, right-of-way or property owned by
others, flood plain or building setback line. No building or structure of third
parties encroaches upon property owned by Seller. No condemnation proceeding is
pending or, to the best of Seller's knowledge, threatened which would preclude
or impair the use of any such property by Seller for the uses for which intended
by it. Except as set forth on said Schedule 5.8, such real property and all
------------
improvements on such real property and the uses thereof, conform to applicable
governmental laws and regulations (including, without limitation, applicable
environmental and occupational safety and health laws and regulations and zoning
and building ordinances).
5.9 Real Property - Leased. Schedule 5.9 attached hereto contains a list
------------
and brief description (including with respect to each lease (i) a statement as
to whether there is any requirement of consent of the lessor to the assignment
and (ii) a statement as to whether the lessee has or has not agreed to
subordinate the leasehold estate to any liens encumbering the property) of the
terms of all real estate leases to which Seller is a party (as lessee or
lessor). True, complete and correct copies (or, in the case of oral leases,
descriptions) of each lease have been furnished to Buyer. Except as disclosed
on Schedule 5.9, each such lease is in full force and effect and constitutes a
------------
legal, valid and binding obligation of the respective parties thereto. All
rents and additional amounts due to date on each such lease have been paid. In
each case, except as disclosed on Schedule 5.9, the lessee is in peaceable
------------
possession under such lease, has a
13
valid leasehold interest therein and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor, nor does there exist any event, condition or occurrence
which, with the giving of notice or the lapse of time, or both, would constitute
such a default under any such lease. Except as disclosed on Schedule 5.9, Seller
------------
has not violated any of the terms or conditions under any such lease in any
respect which violation would give rise to the right of the other party thereto
to terminate such lease or ▇▇▇ for damages thereunder. All buildings,
structures, appurtenances or real property leased by Seller (a) are in good
operating condition and repair, (b) are in such condition as to permit surrender
by Seller to the lessors on the date hereof without any cost or expense to
Seller for repair or restoration if such leases were terminated on the date
hereof, (c) are adequate and suitable for the uses for which intended by Seller,
and (d) afford adequate rights of ingress and egress for operation of its
business in the ordinary course. None of such buildings, structures and
appurtenances, any equipment therein nor the use, operation or maintenance
thereof, violates any restrictive covenant or encroaches on any property owned
by others. No condemnation proceeding is pending or, to the best of Seller's
knowledge, threatened which would preclude or impair the use of any such
property by Seller for the uses for which intended by it. All of the foregoing
conform to applicable Federal, state, territorial, local and foreign laws and
regulations (including applicable environmental and occupational safety and
health laws and regulations and zoning and building ordinances).
5.10 Personal Property - Owned. Schedule 5.10 attached hereto contains a
-------------
summary and brief description of all tangible personal properties and assets
owned by Seller. All such personal property is in good operating condition and
repair, is adequate and suitable for the uses for which intended by Seller in
the ordinary course of the Purchased Business, and there does not exist any
condition which interferes in any material way with the use or economic value
thereof.
5.11 Personal Property - Leased. Schedule 5.11 attached hereto contains a
-------------
list of all leases or other material agreements under which Seller is lessee of
or holds or operates any items of machinery, equipment, motor vehicles, office
furniture, computer software, fixtures or other tangible personal property owned
by any third party. True, complete and correct copies (or, in the case of oral
leases or agreements, descriptions) of such leases and agreements have been
furnished to Buyer. Seller is the owner and holder of all of the leasehold
estates purported to be granted by such leases or agreements and all other
leases or agreements under which it is lessee of or holds or operates any such
items owned by a third party. Each of such leases and agreements is in full
force and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto. There is not under any of such leases any existing
default or event, condition or occurrence which, with the giving of notice or
lapse of time, or both, would constitute a default thereunder. Each of the items
of personal property covered by leases or agreements of Seller is in good
operating condition and repair, is in such condition as to permit surrender
thereof by Seller to the lessors on the date hereof without any cost or expense
for repair or restoration if such leases were terminated on the date hereof, is
suitable for the uses for which intended by Seller in the ordinary course of the
Purchased Business and there does not exist any condition which interferes in
any material way with the use or economic value thereof.
5.12 Agreements. Schedule 5.12 attached hereto sets forth a true, complete
-------------
and correct list and brief description (including a statement as to whether
there is any requirement of consent of any party other than Seller to
assignment) of all written or oral contracts, agreements and other instruments
not made in the ordinary course of business to which Seller is a party, or made
in the ordinary course of business and
14
referred to in clauses (a) through (m) of the next sentence of this Section
5.12. Except as set forth on said Schedule 5.12, Seller is not a party to any
-------------
written or oral, formal or informal,
(a) distributor, dealer, sales, advertising, agency, manufacturer's
representative, franchise or similar contract or any other contract
relating to the distribution of its products or to the payment of any fees
or commissions;
(b) collective bargaining agreement or contract with or commitment to
any labor union;
(c) continuing contract for the future purchase of finished goods,
material, supplies, equipment or services;
(d) contract for the future sale of products and/or services;
(e) contract or commitment for the employment of any officer,
manager, employee or consultant, management contract or any other type of
contract or understanding with any officer, manager, employee or
consultant;
(f) profit-sharing, bonus, stock option, stock purchase, savings and
investment, pension, retirement, deferred compensation, severance or
termination pay, disability, hospitalization, insurance or similar plan or
agreement, formal or informal, providing benefits to any current or former
manager, officer, employee or consultant;
(g) indenture, mortgage, promissory note, loan agreement, guaranty or
other agreement or commitment for the borrowing of money, for a line of
credit or for a leasing transaction of a type required to be capitalized in
accordance with FASB Statement of Financial Accounting Standards No. 13 or
any tax benefit transfer lease;
(h) contract or commitment for charitable contributions;
(i) contract or commitment for capital expenditures in excess of
$2,500 in the aggregate;
(j) contract or commitment for the sale of any assets, properties or
rights other than inventory in the ordinary course of business;
(k) lease or other agreement pursuant to which it is a lessee of or
holds or operates any real property, machinery, equipment, motor vehicles,
office furniture, computer software, fixtures or similar personal property
owned by any third party;
(l) any contract or agreement having a value of or otherwise
involving at least $5,000 (including, without limitation, purchase orders
and sales orders), whether or not in the ordinary course of business; or
15
(m) agreement which restricts Seller from engaging in any aspect of
the Purchased Business anywhere in the world.
Each such agreement, lease, contract, commitment, instrument and obligation is
in full force and effect and constitutes a legal, valid and binding obligation
of Seller and of each other party thereto and is enforceable in accordance with
its terms. Seller has performed all the obligations required to be performed by
it to date and is not in default or alleged to be in default in any respect
under any agreement, lease, contract, commitment, instrument or obligation.
There exists no event, condition or occurrence which, after notice or lapse of
time, or both, would constitute a default by it of any of the foregoing. Seller
is not aware of any default by any other party to any such agreement, lease,
contract, commitment, instrument or obligation. Seller has furnished to Buyer
complete and correct copies of all documents set forth on said Schedule 5.12,
-------------
except as otherwise indicated thereon.
5.13 Litigation. Except as set forth on Schedule 5.13 attached hereto,
-------------
there are no (a) audits, inspections, actions, suits, claims, investigations or
legal or administrative or arbitration proceedings pending or threatened against
Seller, whether at law or in equity, whether civil or criminal in nature or
whether before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, nor, to the best knowledge of Seller, does any basis exist therefor or
(b) judgments, decrees, injunctions or orders of any court, governmental
department, commission, agency, instrumentality or arbitrator against Seller.
Seller has made available to Buyer all documents and correspondence relating to
matters referred to in Schedule 5.13.
-------------
5.14 Compliance; Governmental Authorization. (a) Seller has complied with
all material aspects of all Federal, state, territorial, local or foreign laws,
ordinances, regulations or orders applicable to the Purchased Business or the
Purchased Assets, including, by way of description, and not limitation, matters
relating to the environment, anti-competitive practices, discrimination,
employment, health and safety, customs duties and requirements, and foreign
practices. Seller has all governmental licenses and permits necessary in the
conduct of the Purchased Business as presently conducted, which licenses and
permits are in full force and effect, and to Seller's knowledge, no violations
are outstanding or uncured with respect to any such licenses or permits and no
proceeding is pending or threatened to revoke or limit any of them.
(b) Schedule 1.1(k) attached hereto contains a true, correct and complete
---------------
list of all of the aforesaid governmental licenses and permits, consents,
orders, decrees and other compliance agreements under which Seller is operating
or bound. Seller has furnished to Buyer true, complete and correct copies
thereof. Except as set forth in said Schedule 1.1(k), none of such licenses,
---------------
consents and permits will be affected in any respect by the transactions
contemplated hereby, and Seller has the right to transfer each of such licenses,
consents and permits to Buyer.
(c) Except as disclosed on Schedule 5.14, Seller has furnished to Buyer
-------------
copies of all reports of inspections of the Purchased Business during the five
years preceding the date hereof under OSHA, U.S. EPA, and under all other
applicable Federal, state and local health and safety or environmental laws and
regulations. The deficiencies, if any, noted on such reports have been
corrected.
16
(d) As used in this Agreement, "Hazardous Substance" shall mean and
include all hazardous or toxic substances, wastes or materials, any pollutants
or contaminants (including, without limitation, all oil and petroleum of any
kind and in any form, asbestos and raw materials which include hazardous
constituents), or any other similar substances, or materials which are included
under or regulated by any local, state or Federal law, rule or regulation
pertaining to environmental regulation, contamination, clean-up or disclosure,
including, without limitation, the Clean Air Act, the Federal Water Pollution
Control Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act of 1976, the Toxic Substances Control
Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right-to-Know Act of
1986, and all comparable state or local laws, orders and regulations, as any of
the foregoing has heretofore been or is hereafter amended.
(e) Except as disclosed on Schedule 5.14, Seller has no knowledge of the
-------------
presence, storage, disposition, generation, treatment, release or discharge of
any Hazardous Substance on, under or about the Purchased Assets or the land and
buildings on and in which the Purchased Business currently conducts its
operations.
5.15 Labor Relations; Employees. Seller enjoys a satisfactory employer-
employee relationship with all of its employees, taken as a whole. Seller is in
compliance with all material aspects of all Federal, state, territorial, local
and foreign laws and regulations respecting labor, employment and employment
practices, terms and conditions of employment and wages and hours. There is no
unfair labor practice complaint against Seller pending before the National Labor
Relations Board or any state, local or foreign agency. Except as set forth on
Schedule 5.15 hereto: there is no labor strike, dispute, slowdown, stoppage or
-------------
organizational effort actually pending or threatened involving the Purchased
Business; no representation question exists respecting the employees of the
Purchased Business; and no collective bargaining agreement presently covers any
employees of the Purchased Business, nor is any currently being negotiated by
Seller on behalf of the Purchased Business. Schedule 5.15 attached hereto lists
-------------
all employees of the Purchased Business, their current salary and benefits.
5.16 Employee Benefit Plans. (a) Schedule 5.16 attached hereto lists all
-------------
"employee pension benefit" plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all "employee
welfare benefit" plans (as defined in Section 3(1) of ERISA) and any other
qualified or non-qualified plans, programs or letters of commitment promising
current or future benefits or deferred compensation (individually, a "Plan" and,
collectively, the "Plans") maintained by Seller.
(b) All Plans which are "employee pension benefit" plans are so
indicated in Schedule 5.16. Favorable determination letters have been issued as
-------------
to the qualification of each such Plan and the exempt status of its related
trust under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended ("Code"), respectively, and nothing has occurred which would, and
nothing contemplated hereunder will, cause the loss of such qualification.
True, correct and complete copies of the last Internal Revenue Service
determination letters with respect to the qualification of such Plans and copies
of any amendments (or descriptions of any amendments which have not yet been
adopted as formal amendments) to such Plans since the date of such determination
letters have been delivered to Buyer. All reports,
17
statements, returns and other information required to be furnished or filed with
respect to Seller's employee benefit plans have been furnished or filed, or
both, in accordance with Sections 101 through 105 of ERISA and Sections 6057
through 6059 of the Code, and they are accurate and complete. Records have been
maintained in accordance with Section 107 of ERISA.
(c) Seller has timely made or accrued and timely paid all
contributions required by law (including the minimum funding standards described
in Section 412 of the Code and Title I, Subtitle B, Part 3 of ERISA) or required
under all Plans which are "employee pension benefit" plans as of the date hereof
and no "accumulated funding deficiency" exists with respect to any Plan which is
a "defined benefit plan" (within the meaning of Section 3(35) of ERISA). The
actuarial present value of all vested accrued benefits and unvested accrued
benefits under any Plan which is "defined benefit plan" as of January 1, 1998
was on a "termination" basis, using actuarial assumptions accepted both
individually and in the aggregate under applicable regulations, not more than
the then fair market value of the assets of such Plan.
(d) There have been no "reportable events" (within the meaning of
Section 4043 of ERISA) with respect to any Plan which is a "defined benefit
plan" and there currently exists no condition or set of circumstances which
presents a risk of the termination or partial termination of any such "defined
benefit plan" or any other liability to the Pension Benefit Guaranty
Corporation.
(e) None of the Plans, Seller, or to the best knowledge of Seller,
any trustee or other "party in interest" or "disqualified person" (within the
meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the Plans, has engaged, or will engage in
connection with the transactions contemplated hereunder, in any "prohibited
transaction" (within the meaning of Section 406 of ERISA or Section 4975(c)(1)
of the Code) or has committed any violation of Part 4 of Subpart B of Title I of
ERISA, which could subject such Plans or Seller, any trustee or other party in
interest, disqualified person or other person dealing with the Plans to any
liability under Sections 405, 406, 409 and 502(i) of ERISA or Section 4975 of
the Code. There are no actions, suits or claims pending, or to the knowledge of
Seller, threatened against, involving, or affecting any Plan, and Seller has no
material liability, civil or criminal, under any provision of ERISA or any other
applicable statute or rule of law with respect to the Plans.
(f) There are no violations of the health care continuation coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), with respect to employees of the Purchased Business or any
qualified beneficiaries of such employees. With respect to any violation that
may have occurred on or prior to the Closing, Seller's indemnity in Section
12.1(a) hereof in favor of Buyer shall also include lost tax deductions that may
be incurred by Buyer, any potential income inclusion that may be incurred by
Buyer and Buyer's employees, any excise tax that Buyer may incur as a sanction
for Seller's COBRA violations, and any civil and/or criminal penalties imposed
under ERISA for Seller's COBRA violations.
5.17 Related Party Transactions. Except for compensation to regular
employees of Seller, or as disclosed in Schedule 5.17, no current or former
-------------
manager, officer, employee or owner or any immediate family member of any such
person (defined as a person's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law) is
presently, or during the last three fiscal years has been:
18
(a) party to any transaction with Seller (including, but not limited
to, any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such manager, officer, employee, owner
or immediate family member);
(b) the direct or indirect owner of an interest in any corporation,
firm, association or business organization which is or was a competitor,
supplier or customer of Seller; or
(c) a recipient of income from any source other than Seller which
relates to the business of, or should properly accrue to, Seller.
5.18 Customers and Suppliers. Schedule 5.18(a) attached hereto contains
----------------
a true and complete list of the twenty largest customers (in dollar volume) of
the Purchased Business during the 11-month period ended November 30, 2000
including the amount of sales to each during such period. Schedule 5.18(b)
----------------
attached hereto contains a true and complete list of the ten largest suppliers
(in dollar volume) of the Purchased Business during said period, including the
amount purchased from each during such period. The relationship of Seller with
suppliers and customers is good, and Seller is not aware of any intention of any
such supplier or customer to terminate or modify any of such relationships.
5.19 Market Information. All market reports, product surveys and customer
surveys, which have been conducted by or for the Company since January 1, 1997,
are listed on Schedule 5.19 attached hereto, true and complete copies of which
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have been delivered to Buyer.
5.20 Intellectual Property. Set forth on Schedule 1.1(h) is a true and
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complete description of:
(a) all Intellectual Property rights owned by Seller or used in
connection with the Purchased Business;
(b) all agreements by which Seller licenses any Intellectual
Property, whether as licensor or licensee;
(c) all claims, if any, pending or threatened to the effect that (1)
the present or past operations of Seller infringe or conflict the alleged
rights of others in any Intellectual Property; or (2) any Intellectual
property of the Seller is invalid or unenforceable; and
(d) any outstanding orders, decrees, judgments, stipulations, claims
or settlements relating to any Intellectual Property rights of Seller.
Seller owns or possesses adequate licenses or other rights to use all
Intellectual Property necessary to conduct the Purchased Business as now
operated. Seller is not aware of any infringement, misappropriation or other
misuse being made by any other party of Seller's Intellectual Property,
including, without limitation, the name "MidSouth Sign Company" or any
derivative thereof. Subject to Seller's obtaining the consents set forth on
Schedule 5.12 hereof, no contract, agreement or understanding between Seller and
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any party exists which would impede or prevent assignment to Buyer of the right,
title and interest of Seller in and to the Intellectual Property.
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5.21 Insurance. Schedule 5.21 attached hereto contains a list of all
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policies of liability, theft, fidelity, life, fire, product liability, worker's
compensation, health and other forms of insurance held by Seller (specifying the
insurer, amount of coverage, type of insurance, policy number and any pending
claims thereunder). Seller has not, during the last three fiscal years, been
denied or had revoked or rescinded any policy of insurance.
5.22 Accounts and Notes Receivable. Schedule 5.22 contains a true aged
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list of unpaid accounts and notes receivable owing to Seller from third parties
as of the Balance Sheet Date. All such unpaid accounts and notes receivable
owing to Seller from third parties at the date hereof constitute, and at the
Closing will constitute, valid and enforceable claims arising in bona fide
---- ----
transactions in the ordinary course of business. Except as set forth in said
Schedule 5.22, there is (a) no account or note debtor who has refused or
-------------
threatened to refuse to pay its obligations or who has or threatened to set-off
such obligations for any reason, (b) no account or note debtor who is to
Seller's knowledge insolvent or bankrupt and (c) no account or note receivable
pledged to any third party. The reserves and allowances provided for on the
Balance Sheet have been established on the basis of historical experience in
accordance with generally accepted accounting principles consistently applied.
5.23 Inventories. The inventories of Seller (a) shall be valued in
accordance with Schedule 5.23 attached hereto; (b) are and, at the Closing will
-------------
be, of a quantity which is reasonable in the circumstances of the Purchased
Business; and (c) are, and at the Closing will be, of a quality which is salable
at regular prices in the ordinary course of the Purchased Business.
5.24 Tax Matters. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other assessments of whatever kind or nature,
including, without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupancy or property
taxes, customs duties, fees, assessments or charges of any kind whatsoever
(together with any interest and any penalties, additions to tax or additional
amounts) imposed by any taxing authority (domestic or foreign) upon or payable
by Seller. For purposes of this Section 5.24, the term "Seller" shall include
each other corporation with which Seller files consolidated or combined income
tax returns or reports. Except as noted in Schedule 5.24:
-------------
(a) Seller has filed, within the time and in the manner prescribed
by law, all returns, declarations, reports, estimates, information returns
and statements (collectively, "Returns") required to be filed under
federal, state, local or any foreign laws by Seller, and all such Returns
are true and complete in all material respects.
(b) Seller, within the time and in the manner prescribed by law, has
paid (and until the Closing Date will pay) all Taxes that are due and
payable.
(c) Seller has established (and through the Closing Date will
establish) on its books and records reserves that are adequate for the
payment of all Taxes not yet due and payable.
(d) There are no liens for Taxes upon the assets of Seller except
liens for Taxes not yet due.
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(e) No deficiency for any Taxes has been proposed, asserted or
assessed against Seller or any of its assets which has not been resolved
and paid in full. No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Returns.
(f) There are no outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Returns that have been given by Seller.
(g) Seller is not a party to any tax-sharing or allocation
agreement, nor does Seller owe any amount under any tax-sharing or
allocation agreement.
(h) Seller has complied (and will comply through the Closing) in all
respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and, within the time and in the manner
prescribed by law, has withheld and will withhold from employee wages, and
has paid and will pay over to the proper governmental authorities all
amounts required to be so withheld and paid over under all applicable laws.
5.25 Shares. Seller understands that the Shares have not been registered
or qualified under the Securities Act of 1993, as amended (the "Act"), or under
the securities law of any state in reliance on exemptions from registration
provided by the Act and the rules and regulations thereunder. The Shares may not
be transferred for twenty-four months after issuance to Seller; and the Shares
may not be resold or distributed in any event unless they are registered under
applicable securities law or unless exemptions from registration or
qualification are available. Buyer is under no obligation to register the
Shares. Seller also understands that the Shares represent a highly speculative
investment and involve a high degree of risk.
5.26 Brokers. Neither Seller, nor any of its officers, managers, owners
or employees, have employed any broker or finder in connection with the
transactions contemplated by this Agreement. Seller shall indemnify, defend and
hold Buyer harmless from any and all claims or losses relating to brokerage
fees, commissions or finder's fees owed or claimed to be owed to any broker or
finder engaged or claimed to be engaged by Seller.
5.27 Disclosure. Neither this Agreement (including the Schedules and
Exhibits attached hereto) nor any other document, certificate or statement
furnished to Buyer by or on behalf of Seller in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND ▇▇▇▇
6.1 Buyer's Representations and Warranties. Buyer hereby represents and
warrants to Seller as follows:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee. Buyer has
delivered to Seller complete and correct copies of its Articles of
Incorporation and Bylaws in each case as amended to the date hereof.
21
(b) Buyer has all requisite corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly and
validly executed and delivered by Buyer, and is a valid and binding
obligation of Buyer, enforceable in accordance with its terms.
(c) Neither the execution, delivery and performance of this
Agreement by Buyer, nor the consummation by Buyer of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions
hereof will:
(1) conflict with or result in a breach of any provision of the
Articles of Incorporation or Bylaws of Buyer,
(2) cause a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms of any
agreement, instrument or obligation to which Buyer is a party, or by
which any of its properties or assets may be bound, in each case
excluding the Purchased Assets as to which no representation or
warranty is made by Buyer, or
(3) violate any statute, rule or regulation or judgment, order,
writ, injunction or decree of any court, administrative agency or
governmental body, in each case applicable to Buyer or any of its
assets.
No filing with, and no permit, authorization, consent or approval of, any
public body or authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement.
(d) Neither Buyer nor any of its officers, directors or employees
have employed any broker or finder in connection with the transactions
contemplated by this Agreement. Buyer shall indemnify, defend and hold
Seller harmless from any and all claims or losses relating to brokerage
fees, commissions or finder's fees owed or claimed to be owed to any broker
or finder engaged or claimed to be engaged by Buyer.
6.2 ▇▇▇▇'▇ Representations and Warranties. ▇▇▇▇ hereby represents and
warrants to Seller as follows:
(a) ▇▇▇▇ is authorized to issue 30,000,000 Common Shares, 5,000,000
Class B Common Shares, 600,000 Class D Common Shares and 10,000,000
Preferred Shares, all with a par value of $0.01 per share. ▇▇▇▇ has issued
and outstanding 8,548,329 Common Shares and 750,000 Class B Common Shares.
All such issued and outstanding shares are fully paid and nonassessable.
▇▇▇▇ has issued and outstanding 998,000 Common Stock Purchase Warrants,
each authorizing the holder to purchase one Common Share at an exercise
price of $8.00 per share and expiring on July 31, 2001. ▇▇▇▇ also has
issued and outstanding (1) warrants to purchase up to 100,000 Common Shares
at an exercise price of $0.50 per share and expiring on June 25, 2003, (2)
options to purchase up to 50,000 Common Shares at an exercise price of
$1.00 per share and expiring on July 31, 2004,
22
and (3) employee stock options allowing the holders to purchase up to
761,071 Common Shares at various exercise prices and periods. ▇▇▇▇ has
agreed to issue 50,000 Common Shares to one of its vendors in payment for
services provided by such vendor. Except as described above, there are no
outstanding shares of ▇▇▇▇, or options or warrants which would require ▇▇▇▇
to issue additional shares of stock. ▇▇▇▇ has delivered to Seller complete
and correct copies of its Certificate of Incorporation and Bylaws in each
case as amended to the date hereof. ▇▇▇▇ is duly qualified and in good
standing to do business in every jurisdiction in which such qualification
is necessary because of the nature of the property owned, leased or
operated by it.
(b) Upon payment for, and delivery of, the Shares in accordance with
the terms of this Agreement, Seller will have good and valid title to the
Shares. Upon delivery of the Shares to Seller, the Shares will be fully
paid and nonassessable, free and clear of any liens, pledges, encumbrances,
charges, agreements or claims, except those that arise out of Seller's
actions or the status of Seller's affairs, any restrictions imposed under
securities laws and the twenty-four month restriction on transfer of the
Shares described herein and in the Investment Letter. The certificates
evidencing the ownership of the Shares will be in proper form for the
enforcement of rights and limitations of rights pertaining to the Shares
which are set forth in the Certificate of Incorporation and the Bylaws of
▇▇▇▇. Notwithstanding the foregoing, the Shares will bear legends
evidencing securities laws restrictions and the restrictions on transfer
described herein
(c) ▇▇▇▇ has all requisite power and authority to: own, lease and
operate its properties; carry on its business as now being conducted; enter
into this Agreement; perform its obligations hereunder; and consummate the
transactions contemplated hereby. The execution, delivery and performance
of this Agreement by ▇▇▇▇, and the consummation of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
action on the part of ▇▇▇▇. This Agreement has been duly and validly
executed by ▇▇▇▇, and is a valid and binding obligation of ▇▇▇▇,
enforceable in accordance with its terms.
(d) Neither the execution, delivery and performance of this
Agreement by ▇▇▇▇, nor the consummation by ▇▇▇▇ of the transactions
contemplated hereby nor compliance by ▇▇▇▇ with any of the provisions
hereof will:
(1) conflict with or result in a breach of any provision of its
Certificate of Incorporation or Bylaws,
(2) cause a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms of any
note, bond, lease, mortgage, indenture, license, warranty
or other instrument or agreement to which ▇▇▇▇ is a party,
or by which ▇▇▇▇ or any of its assets is or may be bound or
benefitted, or
(3) violate any law, statute, rule or regulation or order,
writ, judgment, injunction or decree applicable to ▇▇▇▇ or
any of its respective assets.
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No consent or approval by, or any notification of or filing with, any
public body or authority is required in connection with the execution,
delivery and performance by ▇▇▇▇ of this Agreement, or the consummation by
▇▇▇▇ of the transactions contemplated hereby..
ARTICLE VII
COVENANTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
7.1 Conduct of Business Until Closing. Except as permitted or required
hereby or as Buyer may otherwise consent in writing, between the date hereof and
the Closing:
(a) Seller will:
(1) operate its business only in the usual, regular and ordinary
manner as such business was conducted before the Balance Sheet
Date;
(2) maintain all properties necessary to conduct its business,
whether owned or leased, in substantially the same condition as
they now are, except for (A) damage due to unavoidable casualty;
and (B) reasonable wear and tear which do not materially
adversely affect its operations;
(3) as to any material Purchased Asset damaged before the Closing by
casualty not covered by insurance, at Buyer's option, either (A)
restore it to its condition before such damage; (B) replace it
with another item of similar quality and condition; or (C)
reduce its net book value by the amount of such loss;
(4) maintain its books, records and accounts in the usual, regular
and ordinary manner, on a basis consistent with that used in
prior periods;
(5) comply in all material respect with all laws that apply to the
conduct of its business;
(6) perform all of its material obligations (including paying tax
liabilities) without default;
(7) promptly give Buyer written notice of any damage to Purchased
Assets of more than $25,000;
(8) preserve its business organization intact, and preserve the good
will and business of the customers, suppliers and other persons
having business relations with Seller, and retain the services
of its present employees; and
(9) maintain all of its assets in substantially the same condition
as they now are (subject to reasonable wear and tear), and
replace all items of equipment at time intervals consistent with
past practice.
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(b) Seller will not, other than in the ordinary course of business:
(1) convey, transfer, sell, lease or otherwise dispose of any
material Purchased Asset;
(2) acquire any material asset or property;
(3) incur any material fixed or contingent obligation or enter into
any material agreement, commitment or other transaction or
arrangement; or
(4) change or terminate any of the agreements described in Section
5.12 above; and
(c) Seller will not:
(1) encumber, mortgage or voluntarily subject to lien any of the
Purchased Assets;
(2) increase by more than 5% the compensation payable (or to become
payable) to any employee;
(3) hire any new employee at an annual rate of compensation of
$20,000 or more;
(4) add or increase any employee benefits program;
(5) accelerate any billing of its customers or the collection of its
accounts receivable, delay the payment of its accounts payable
or accrued expenses, or defer expenses;
(6) permit any of its respective officers, managers and owners to,
pursue any discussions or negotiations with anyone other than
Buyer concerning the sale of all or any part of its assets or
membership interests and Seller shall advise Buyer of any
solicitation made to Seller by any third party in respect to any
such discussion or negotiation;
(7) without Buyer's prior written consent, enter into, renew, amend,
modify or adopt any material agreement, commitment, license or
lease; or
(8) breach or violate or cause any of the representations and
warranties contained in Article IV of this Agreement to be
breached or violated.
7.2 Access to Properties and Records. Seller will give to Buyer and to
its counsel, accountants and other representatives reasonable access during
normal business hours to such of its properties, personnel, books, tax returns,
contracts, commitments and records as relate to the Purchased Business and the
right to make copies thereof. Seller will furnish to Buyer and such
representatives all such additional documents and financial and other
information concerning the Purchased Business as Buyer or its representatives
may from time to time reasonably request and permit Buyer and such
representatives to examine all records and working papers relating to the
preparation, review and audits of the financial statements and tax returns
relating to the Purchased Business.
25
7.3 Advice of Changes. Between the date hereof and the Closing, Seller
will advise Buyer promptly in writing of any fact of which Seller becomes aware,
which, if known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement.
7.4 Conduct. Except as permitted or required hereby or as Buyer may
otherwise consent in writing, Seller will not enter into any transaction, take
any action or fail to take any action, which would result in any of the
representations and warranties of Seller contained in this Agreement or in any
Schedule or Exhibit hereto not being true and correct at and as of the time
immediately after such transaction has been entered into or such event has
occurred and on the Closing.
7.5 Approvals. Seller will use its best efforts to obtain in writing
prior to the Closing all approvals, consents and waivers, required to be
obtained by Seller in order to effectuate the transactions contemplated hereby,
and will deliver to Buyer copies, reasonably satisfactory in form and substance
of such approvals and consents. Seller will not be required to pay any
additional consideration or enter into any modification in order to obtain such
approvals and consents. Approvals cannot, without the written consent of Buyer,
be obtained at a cost or other adverse consequence to Buyer.
7.6 Further Assurances. Seller will at any time and from time to time
after the Closing, upon the request of Buyer and at the expense of Seller, do,
execute, acknowledge and deliver, and cause to be done, executed, acknowledged
or delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney or assurances as may be required for the better transferring,
assigning, conveying, granting, assuring and confirming to Buyer, or for aiding
and assisting in the collection of or reducing to possession by Buyer, of the
Purchased Assets, or to vest in Buyer good, valid and marketable title to the
Purchased Assets and otherwise to consummate the transactions contemplated by
this Agreement.
7.7 Name Change. Promptly following Closing, Seller will take all steps
and make all filings necessary to change its corporate name or any assumed names
to a name which does not include any of the trademarks or tradenames included in
the Purchased Assets.
7.8 Restrictions on Shares. Seller will not transfer or distribute the
Shares except in accordance with applicable securities laws and for at least
twenty-four months after their issuance.
7.9 Uncollected Receivables. After the Closing, Buyer will use its
reasonable efforts, in accordance with Buyer's past business practices, to
collect all accounts and notes receivable of the Purchased Business outstanding
as of the Closing Date. Buyer's reasonable efforts need not include litigation
or the use of any third parties unless Seller so directs Buyer to proceed at
Seller's expense and such expenses are advanced to Buyer by Seller. If the
accounts and notes receivable reflected on the Balance Sheet (less the
applicable reserves in respect thereof shown on the Balance Sheet) are not
collected in full within ninety days after the Closing Date, the uncollected
amounts will be deducted from the $50,000 of additional obligations of Seller
Buyer has agreed to assume under Section 3.3. If less than such amount remains
of the $50,000, the difference, if so elected by Buyer in accordance with
Section 3.3(c), will cause a portion of the Shares to be returned to Buyer as
provided and as calculated in such Section. Buyer will take all action and
deliver all instruments necessary to effectively vest in Seller all of the
right, title and interest of Buyer with respect to any uncollected accounts or
notes receivable so purchased by
26
Seller, and Buyer shall promptly remit to Seller any payments with respect to
such receivables thereafter received by Buyer. When the billing to an accounts
receivable debtor includes indebtedness incurred on or after the Closing Date as
well as indebtedness prior to the Closing Date, payments received will be
applied to the indebtedness oldest in time except where the debtor otherwise
indicates the indebtedness for which payment is being made.
ARTICLE VIII
COVENANTS OF BUYER
8.1 Confidentiality; Return of Documents. Unless and until the
transactions contemplated by this Agreement are consummated, Buyer will keep in
confidence all proprietary and financial information of Seller including
information concerning its customers, suppliers, business and know-how, and will
not, except to the extent required by law or to the extent any such information
is otherwise publicly available or received from a third party not affiliated
with Seller, without the prior written consent of Seller, reveal any such
financial or proprietary information to any third party other than affiliates or
representatives of Buyer and potential lenders and other providers of funds each
of whom shall agree to be bound by the same restrictions with respect to
confidentiality imposed on Buyer hereunder. If the transactions contemplated by
this Agreement are not consummated, Buyer will return to Seller, at Seller's
request, all documents supplied to Buyer by Seller pursuant to the provisions of
this Agreement.
8.2 Access to Records. Following the Closing, Buyer will upon request
provide Seller, its accountants and attorneys reasonable access at times to be
designated by Buyer during normal working hours, to the books and records of
Seller which are to be transferred to Buyer pursuant to Section 1.1(i) hereof.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to the
satisfaction, on or before the Closing, of the following conditions, any of
which may be waived by Buyer. The waiver of any of the following conditions in
order to close the transaction will not constitute a waiver or forfeiture of
Buyer's right to indemnification for Seller's failure to fulfill such condition.
9.1 Authorization. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby will have been duly and
validly taken by Seller, and Seller will have full power and right to sell the
Purchased Assets as contemplated hereby.
9.2 Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement and in any schedule or exhibit
hereto shall be true and accurate on and as of the Closing, with the same force
and effect as if made on the date of the Closing, except as affected by
transactions contemplated or permitted hereby.
9.3 Performance of Agreements. Seller shall have performed and complied
with all covenants, obligations and agreements to be performed or complied with
by it on or before the Closing
27
pursuant to this Agreement or any schedule or exhibit hereto, including, but not
limited to, each of Seller's obligations under Section 4.3 and the successful
transfer or assignment of all agreements to be transferred or assigned
hereunder.
9.4 Legislation. No Federal, state, territorial, local or foreign
statute, rule or regulation shall have been enacted which prohibits, restricts,
delays or materially adversely affects the consummation of the transactions
contemplated by this Agreement or any of the conditions to the consummation of
such transactions. No temporary restraining order or injunction shall be in
effect restraining the consummation of the transactions contemplated hereby.
9.5 Financial Standards. On the Closing, the value of the Purchased
Assets determined in accordance with generally accepted accounting principles
("GAAP") shall exceed the amount of the Assumed Obligations by at least
$400,000. Cash flow of the Purchased Business, defined as earnings before
interest, taxes, amortization and depreciation, during the twelve months
immediately preceding the Closing also determined in accordance with GAAP, shall
be at least $100,000. No material adverse change in financial position or
operations shall have occurred between November 30, 2000 and the Closing.
9.6 Due Diligence. Buyer shall have completed its due diligence
investigation and the results thereof shall be satisfactory to it in its sole
discretion.
9.7 Financing. BankFirst and Federal Signal Corporation shall have
approved the transfer of Seller's existing credit facilities with terms similar
to or better than those currently in place for Seller. Buyer shall have also
obtained additional financing acceptable to it in its sole discretion in both
amount and terms.
9.8 Personal Guarantees. The members of Seller shall continue their
personal guarantees which are currently in place with respect to all financing,
liens and trade payables until such time as the Assumed Obligations have been
paid in full and agree to provide similar guarantees in the event Buyer
refinances obligations for which such members currently have guarantees in
place. Buyer agrees to make a good faith effort to remove the guarantees on
trade payables, but shall not be required to expend money, provide additional
deposits or incur any additional credit restrictions to do so.
9.9 Release of Liens, Claims. Creditors of Seller shall have released all
liens, security interests or other claims relating to the Purchased Assets,
except those relating to the Assumed Obligations, and Seller's counsel shall
have issued an opinion letter to Buyer confirming such release.
9.10 Environmental Reports. Buyer shall have received Phase I
Environmental Reports acceptable to it on all real property to be acquired or
leased in connection with the acquisition of the Purchased Business.
9.11 Assets of The LandOak Company, LLC. Buyer shall acquire the assets of
The LandOak Company, LLC, in accordance with the Asset Purchase Agreement
between Buyer and the LandOak Company, LLC in a transaction which closes
simultaneously with the acquisition hereunder.
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ARTICLE X
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to the
satisfaction, on or before the Closing, of the following conditions, any of
which may be waived by Seller. The waiver of any of the following conditions in
order to close the transaction will not constitute a waiver or forfeiture of
Seller's right to indemnification for Buyer's failure to fulfill such condition.
10.1 Authorization. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby will have been duly and
validly taken by Buyer.
10.2 Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement or in any schedule or exhibit
hereto shall be true and accurate on and as of the Closing, with the same force
and effect as if made on the date of the Closing, except as affected by
transactions contemplated or permitted hereby.
10.3 Performance of Agreements. Buyer shall have performed and complied
with all covenants, obligations and agreements to be performed or complied with
by it on or before the Closing pursuant to this Agreement or any schedule or
exhibit hereto, including, but not limited to, each of Buyer's obligations under
Section 4.4.
10.4 Legislation. No Federal, state, territorial, local or foreign
statute, rule or regulation shall have been enacted which prohibits, restricts,
delays or materially adversely affects the consummation of the transactions
contemplated by this Agreement or any of the conditions to the consummation of
such transactions. No temporary restraining order or injunction shall be in
effect restraining the consummation of the transactions contemplated hereby.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by Seller or Buyer at any time after March 31, 2001, other than
due to the failure of the party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement;
(b) by Buyer, if there has been a violation or breach by Seller of
any material agreement, representation or warranty of Seller contained in
this Agreement and such violation or breach has not been waived by Buyer,
or, with respect to a violation or breach of an agreement, cured by the
deadline provided in Section 11.1(a) above (or by its nature cannot be
cured);
(c) by Seller, if there has been a violation or breach by Buyer of
any material agreement, representation or warranty of Buyer contained in
this Agreement and such violation or breach has
29
not been waived by Seller or, with respect to a violation or breach of an
agreement, cured by the deadline provided in Section 11.1(a) above (or by
its nature cannot be cured).
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Section 11.1, written notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto.
11.2 Effect. If this Agreement is terminated as a result of the failure
of a party to consummate or fulfill a condition which is within the reasonable
control of such party, such party shall continue to be liable hereunder for any
such breach. Section 8.1 will survive termination.
ARTICLE XII
INDEMNIFICATION
12.1 Survival. All representations and warranties contained herein shall
survive the Closing.
12.2 Indemnification. (a) Seller will indemnify, defend and save Buyer
harmless from, against, for and in respect of the following:
(1) any and all liabilities and obligations of Seller or the
Purchased Business (whether absolute, accrued, contingent or otherwise and
whether a contractual, tax or any other type of liability, obligation or
claim) not specifically assumed by Buyer pursuant to this Agreement and the
Assumption Agreement;
(2) any damages, losses, obligations, liabilities, claims, actions
or causes of action sustained or suffered by Buyer and arising from a
breach of any representation or warranty of Seller contained in or made
pursuant to this Agreement (including the Schedules and Exhibits attached
hereto), or in any certificate, instrument or agreement delivered by Seller
pursuant hereto or in connection with the transactions contemplated hereby;
(3) all fines and penalties and liabilities, including all
foreseeable and unforeseeable consequential damages and any other damages,
costs and losses, including reasonable attorneys' and consultants' fees,
directly or indirectly and in whole or in part arising out of or
attributable to:
(i) (A) Hazardous Substances released into or existing on or
prior to the Closing in the air, water or beneath or on the surface
of the Purchased Assets or the land and buildings on and in which the
Purchased Business currently conducts its operations or (B) as to
those Hazardous Substances in (A) which migrated or migrate at
anytime (whether before or after the Closing) within or from the
Purchased Assets or the land and buildings on and in which the
Purchased Business currently conducts its operations; or
(ii) Hazardous Substances existing on or prior to the Closing
at or migrating from any other location for which Seller is
responsible and with respect to which any liability is sought to be
imposed upon Buyer, its employees, officers, directors or their
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respective successors or assigns, as an alleged successor to Seller
or the Purchased Business;
including, without limitation, any natural resource damages and the cost of
any remedial, removal, response, abatement, clean-up, investigative and
monitoring costs and any other related costs and expenses;
(4) all damages, losses, obligations, liabilities, claims, actions
or causes of action sustained or suffered by Buyer as a result of the
failure to obtain any consent or provide any benefit under any contract,
license, lease, sales order, purchase order or other agreement, claim,
right, permit or operating authority contemplated by Section 1.3 hereof;
(5) any damages, losses, obligations, liabilities, claims, actions
or causes of action sustained or suffered by Buyer and arising from a
breach of any covenant or agreement of Seller contained in or made pursuant
to this Agreement; and
(6) all reasonable costs and expenses (including, without
limitation, reasonable attorneys', accountants' and other professional fees
and expenses) incurred by Buyer in connection with any action, suit,
proceeding, demand, investigation, assessment or judgment incident to any
of the matters indemnified against under this Section 12.2(a).
No claim, demand, suit or cause of action will be brought against Seller under
or pursuant to this Section 12.2(a) with respect to an alleged breach of any
representation or warranty unless Buyer gives Seller written notice, with
reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon the giving of such written notice as
aforesaid, Buyer will have the right, in addition to all other remedies
available to it, to commence legal proceedings for the enforcement of its rights
under this Agreement.
(b) Buyer will indemnify, defend and save Seller harmless from,
against, for and in respect of the following:
(1) any liabilities or obligations of Seller assumed by Buyer
pursuant to this Agreement and the Assumption Agreement;
(2) any damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by Seller and arising
from a breach of any representation or warranty of Buyer contained in or
made pursuant to this Agreement or in any certificate, instrument or
agreement delivered by it pursuant hereto or in connection with the
transactions contemplated hereby; and
(3) any damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by Seller and arising
from a breach of any covenant or agreement of Buyer contained in or made
pursuant to this Agreement; and
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(4) all reasonable costs and expenses (including, without
limitation, reasonable attorneys', accountants' and other professional fees
and expenses) incurred by Seller in connection with any action, suit,
proceeding, demand, investigation assessment or judgment incident to any of
the matters indemnified against under this Section 12.2(b).
No claim, demand, suit or cause of action will be brought against Buyer under or
pursuant to this Section 12.2(b) with respect to an alleged breach of
representation or warranty unless Seller gives Buyer written notice, with
reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon the giving of such written notice as
aforesaid, Seller will have the right to commence legal proceedings for the
enforcement of any of its rights under this Agreement.
12.3 Third Party Claims. With respect to claims resulting from assertion
of liability by third parties, the obligations and liabilities of the party
responsible for indemnification (the "Indemnifying Party") hereunder with
respect to indemnification claims by the party entitled to indemnification (the
"Indemnified Party") will be subject to the following terms and conditions:
(a) The Indemnified Party will give prompt written notice to the
Indemnifying Party of any assertion of liability by a third party which
might give rise to a claim by the Indemnified Party against the
Indemnifying Party based on the indemnity agreements contained in Section
12.2 hereof, stating the nature and basis of said assertion and the amount
thereof, to the extent known.
(b) If any action, suit or proceeding is brought against the
Indemnified Party, with respect to which the Indemnifying Party may have
liability under the indemnity agreement contained in Section 12.2 hereof,
the action, suit or proceeding will, upon the written agreement of the
Indemnifying Party that it is obligated to indemnify under the indemnity
agreement contained in Section 12.2 hereof, be defended (including all
proceedings on appeal or for review which counsel for the defendant shall
deem appropriate) by the Indemnifying Party. The Indemnified Party will
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party
unless (1) the employment of such counsel is authorized by the Indemnifying
Party in connection with the defense of such action, suit or proceeding,
(2) the Indemnifying Party does not agree, promptly after the notice to it
provided in subsection (a) above, that it is obligated to indemnify under
the indemnity agreement contained in Section 12.2 hereof or (3) such
Indemnified Party reasonably concludes that such action, suit or proceeding
involves to a significant extent matters beyond the scope of the indemnity
agreement contained in Section 12.2 hereof, or that there may be defenses
available to it which are different from or additional to those available
to the Indemnifying Party, in any of which events the Indemnifying Party
will not have the right to direct the defense of such action, suit or
proceeding on behalf of the Indemnified Party and that portion of such fees
and expenses reasonably related to matters covered by the indemnity
agreement contained in Section 12.2 hereof will be borne by the
Indemnifying Party. The Indemnified Party will be kept fully informed of
such action, suit or proceeding at all stages thereof whether or not it is
so represented. The Indemnifying Party will make available to the
Indemnified Party and its attorneys and accountants all books and records
of the Indemnifying Party relating to such proceedings or litigation and
the parties hereto agree to render to each other such assistance as they
may reasonably require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
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(c) The Indemnifying Party will not make any settlement of any
claims without the written consent of the Indemnified Party.
12.4 Remedies Cumulative. The remedies provided for in this Article XII
are cumulative and will not preclude assertion by the Indemnified Party of any
other rights or the seeking of any other remedies against the Indemnifying
Party.
12.5 Recoveries. In the event an Indemnified Party subsequently receives
payment (including, without limitation, proceeds of insurance and payments on
accounts receivable) with respect to a matter for which it has been indemnified
by the Indemnifying Party, the Indemnified Party will promptly pay the amount of
such payment up to the indemnification received, to the Indemnifying Party.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses; Transfer Taxes. All fees, costs and expenses, including,
without limitation, legal and accounting fees and expenses, incurred by Seller
in connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby in excess of the $40,000 of legal, accounting and
professional fees agreed to be assumed by Buyer under Section 2.1(i) will be
borne by Seller. All fees and expenses incurred by Buyer in connection with this
Agreement will be borne by Buyer. All sales taxes and all registration,
recording or transfer taxes which may be payable in connection with the
transactions contemplated by this Agreement will be borne by Seller. All real
and personal property taxes will be pro rated with Seller responsible for taxes
relating to the period up to the Closing Date and Buyer responsible for taxes
relating to the period including and after the Closing Date.
13.2 Parties in Interest. This Agreement is not assignable by either
Buyer or Seller without the prior written consent of the other, except that
without relieving Buyer of any of its obligations under this Agreement, Buyer
may assign this Agreement to any affiliate of Buyer. Subject to the foregoing,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the respective successors, heirs, legal representatives and assigns of the
parties hereto. This Agreement constitutes an agreement among the parties
hereto and none of the agreements, covenants, representations or warranties
contained herein is for the benefit of any third party not a party to this
Agreement.
13.3 Entire Agreement; Amendments. This Agreement (including the
Schedules and Exhibits attached hereto) contains the entire understanding of the
parties with respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof. This Agreement may be amended only by a written instrument duly
executed by the parties, and any condition to a party's obligations hereunder
may only be waived in writing by such party.
13.4 Headings. The article and section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
13.5 Notices. All notices, claims, certificates, requests, demands and
other communications hereunder will be in writing and shall be deemed given if
delivered personally, if mailed (by registered or
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certified mail, return receipt requested and postage prepaid), if sent by
reputable overnight courier service for next business day delivery, or if sent
by facsimile transmission, as follows:
if to Seller: MidSouth Sign Company, LLC
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ____________________
Facsimile: ____________________
with a copy to: Woolf, McClane, ▇▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, PLLC
900 Riverview Tower
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Buyer: ▇▇▇▇ MSS, Inc.
▇▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ PLLC
1700 Citizens Plaza
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication will be effective on the date of receipt (or, if received on a
non-business day, on the first business day after the date of receipt).
13.6 Publicity. The parties agree that, except as otherwise required by
law, the issuance of any reports, statements or releases pertaining to this
Agreement or the transactions contemplated hereby will require mutual consent.
13.7 Counterparts. This Agreement may be signed in any number of
counterparts and by different parties in separate counterparts, each of which
will be deemed an original instrument, but all of
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which together will constitute one agreement. This Agreement will become
effective when one or more counterparts have been signed by Seller and Buyer,
and delivered to Buyer and Seller, respectively. Any party may deliver an
executed copy of this Agreement (and an executed copy of any documents
contemplated by this Agreement) by facsimile transmission to another party, and
such delivery will have the same force and effect as any other delivery of a
manually signed copy of this Agreement (or such other document).
13.8 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Tennessee.
13.9 Waivers. Any provision of this Agreement may be waived only by a
written instrument executed by the party to be charged with such waiver. The
waiver by any party hereto of a breach of any provision of this Agreement will
not operate or be construed as a waiver of any subsequent breach.
13.10 Defined Terms. Throughout this Agreement various terms have been
defined by being enclosed in quotation marks, usually in parentheses, and used
with their initial letters capitalized. Unless the context otherwise requires,
such defined terms will have their designated meaning whenever used in this
Agreement or any attached schedules. Unless an express reference is made to a
different document, all references to a Section or Article shall be understood
to refer to the indicated Section or Article of this Agreement, and all
references to a Schedule or Exhibit shall be understood to refer to the
indicated Schedule or Exhibit attached to this Agreement.
13.11 Construction. This Agreement is the result of negotiations between
Seller and Buyer. No provision of this Agreement shall be construed against a
party because of such party's role as the drafter of the provision.
13.12 Attorneys Fees. If there is any litigation or arbitration
proceeding between the parties related to this Agreement or the transactions
contemplated by this Agreement, the prevailing party will be entitled to recover
all reasonable costs and expenses (including, without limitation, reasonable
attorneys', accountants' and other professional fees and expenses).
13.13 Arbitration. If the parties disagree as to any matter governed by
this Agreement or relating to the transactions contemplated by this Agreement,
the parties will promptly consult with one another in an effort to resolve the
disagreement. If such effort is unsuccessful, any controversy or claim arising
out of or relating to this Agreement, or the breach of this Agreement, will be
settled exclusively by arbitration in Knoxville, Tennessee in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
(subject to the provisions stated below). Judgment upon the award rendered by
the arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitrators will have the power to render equitable, as well as other, awards
and relief. The arbitrators will have the power to award reasonable fees and
expenses in accordance with Section 13.12 above.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
SELLER: MidSouth Sign Company, LLC
------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: Chief Manager
-------------------------------
BUYER: ▇▇▇▇ MSS, Inc.
-----
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: President
-------------------------------
▇▇▇▇: ▇▇▇▇ Technology, Inc.
----
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Title: President
-------------------------------
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