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EXHIBIT 10.11
EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and among
MARKETING SPECIALISTS SALES COMPANY
as Buyer
THE SALES FORCE COMPANIES, INC.
as the Company
and
THE STOCKHOLDERS OF THE COMPANY
As of March 2, 2000
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STOCK PURCHASE AGREEMENT
INDEX
Page
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SECTION 1. SALE OF SHARES AND PURCHASE PRICE ............................... 1
1.1 Transfer of Company Shares ...................................... 1
1.2 Purchase Price and Payment ...................................... 2
1.3 Time and Place of Closing ....................................... 3
1.4 Further Assurances .............................................. 3
1.5 Termination of ESOT ............................................. 3
1.6 Spin-Off of Prism and PMG ....................................... 4
1.7 Transfer Taxes .................................................. 5
1.8 Non-ESOT Stockholders' Representative ........................... 6
1.9 Escrow Deposit .................................................. 7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
STOCKHOLDERS OTHER THAN THE ESOT ................................ 7
2.1 Making of Representations and Warranties ........................ 7
2.2 Organization and Qualifications of the Company .................. 7
2.3 Capital Stock of the Company; Beneficial Ownership .............. 8
2.4 Subsidiaries; Acquisitions ...................................... 9
2.5 Authority of the Company and the Stockholders ................... 9
2.6 No Conflicts .................................................... 10
2.7 Real and Personal Property ...................................... 10
2.8 Financial Statements ............................................ 13
2.9 Taxes ........................................................... 15
2.10 Collectibility of Accounts Receivable ........................... 16
2.11 Inventories ..................................................... 16
2.12 Absence of Certain Changes ...................................... 16
2.13 Ordinary Course ................................................. 18
2.14 Approvals; Consents ............................................. 18
2.15 Banking Relations ............................................... 19
2.16 Intellectual Property ........................................... 19
2.17 Year 2000 ....................................................... 20
2.18 Contracts ....................................................... 21
2.19 Litigation ...................................................... 23
2.20 Compliance with Laws ............................................ 23
2.21 Insurance ....................................................... 23
2.22 Powers of Attorney .............................................. 24
2.23 Finder's Fee .................................................... 24
2.24 Permits; Burdensome Agreements .................................. 24
2.25 Corporate Records; Copies of Documents .......................... 24
2.26 Transactions with Interested Persons ............................ 24
2.27 Employee Benefit Programs ....................................... 25
2.28 Environmental Matters ........................................... 28
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2.29 List of Directors and Officers .................................. 29
2.30 Employees; Labor Matters ........................................ 30
2.31 Principals ...................................................... 30
2.32 Absence of Improper Payments .................................... 32
2.33 Transfer of Shares .............................................. 32
2.34 Stock Repurchase ................................................ 32
2.35 Disclosure ...................................................... 32
SECTION 3. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS ................... 33
3.1 Making of Covenants and Agreements .............................. 33
3.2 Cooperation ..................................................... 33
3.3 Consents ........................................................ 33
3.4 Notice of Default ............................................... 33
3.5 Conduct of Business ............................................. 33
3.6 Acquisition Proposals ........................................... 35
3.7 Transfers of Shares; Voting ..................................... 35
3.8 Confidentiality ................................................. 36
3.9 Tax Returns ..................................................... 36
3.10 Options and Other Rights ........................................ 36
3.11 Consummation of Agreement ....................................... 36
3.12 Fees and Expenses ............................................... 36
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER ......................... 37
4.1 Making of Representations and Warranties ........................ 37
4.2 Organization of Buyer ........................................... 37
4.3 Authority of Buyer .............................................. 37
4.4 Litigation ...................................................... 37
4.5 Finder's Fee .................................................... 37
4.6 No Conflicts .................................................... 37
4.7 Reports and Financial Statements ................................ 38
SECTION 5. COVENANTS OF BUYER .............................................. 38
5.1 Making of Covenants and Agreements .............................. 38
5.2 Consents ........................................................ 38
5.3 Competitor Proposals ............................................ 38
5.4 Cooperation ..................................................... 39
5.5 Notice of Default ............................................... 39
5.6 Confidentiality ................................................. 39
SECTION 6. CONDITIONS ...................................................... 39
6.1 Conditions to the Obligations of Buyer .......................... 39
6.2 Conditions to Obligations of the Company and the Stockholders ... 42
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED ..................... 43
7.1 Termination ..................................................... 43
7.2 Effect of Termination ........................................... 44
7.3 Right to Proceed ................................................ 44
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SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING .................... 45
8.1 Survival of Warranties .......................................... 45
SECTION 9. INDEMNIFICATION ................................................. 45
9.1 Indemnification by the Stockholders ............................. 45
9.2 Limitations on Indemnification by the Stockholders .............. 46
9.3 Indemnification by Buyer ........................................ 48
9.4 Limitation on Indemnification by Buyer .......................... 48
9.5 Notice; Defense of Claims ....................................... 48
9.6 Satisfaction of Stockholder Indemnification Obligations ......... 49
SECTION 10. DEFINITIONS .................................................... 49
SECTION 11. MISCELLANEOUS .................................................. 54
11.1 Fees and Expenses ............................................... 54
11.2 Governing Law ................................................... 54
11.3 Notices ......................................................... 54
11.4 Entire Agreement ................................................ 55
11.5 Assignability; Binding Effect ................................... 55
11.6 Execution in Counterparts ....................................... 55
11.7 Amendments ...................................................... 55
11.8 Publicity and Disclosures ....................................... 56
11.9 Dispute Resolution; Consent to Jurisdiction ..................... 56
11.10 Consent to Jurisdiction ......................................... 57
11.11 Specific Performance ............................................ 57
11.12 No Third-Party Beneficiaries .................................... 58
11.13 Severability .................................................... 58
11.14 No Stock Restrictions ........................................... 58
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A: List of Stockholders, Stockholdings and Consideration to be Paid
Exhibit B: Form of Indemnification Escrow Agreement
Exhibit B-1 Form of Purchase Agreement Escrow
Exhibit C: Form of Promissory Note
Exhibit D: Form of Opinion of Counsel for the Company and the Stockholders
Exhibit E: Form of Opinion of Counsel for the ESOT
Exhibit F: Form of Employment and Noncompetition Agreement
Exhibit G: Form of General Release
Schedule
1.2(b) Liabilities and Working Capital
1.6 Customers of Prism and PMG
2.2 Organization and Qualifications of the Company
2.3 Capital Stock of the Company; Beneficial Ownership
2.4(a) Subsidiaries; Acquisitions
2.4(b) Acquisition Rights
2.6 No Conflicts
2.7(a) Real Property
2.7(b) Personal Property
2.8 Financial Statements
2.8(d) Projections of Commission Revenues
2.8(e) Automobile Expenses
2.8(f) Compensation
2.9 Taxes
2.10 Collectibility of Accounts Receivable
2.11 Inventories
2.12 Absence of Certain Changes
2.14 Approval; Consents
2.15 Banking Relations
2.16 Intellectual Property and Intellectual Property Rights
2.18 Contracts, etc.
2.19 Litigation
2.20 Compliance with Laws
2.21 Insurance
2.24 Permits, Burdensome Agreements
2.26 Transactions with Interested Persons
2.27 Employee Benefit Programs
2.28 Environmental Matters
2.29 List of Officers and Directors
2.30 Employees; Labor Matters
2.31 Principals
2.31(f) Annual Commission Revenues
2.32 Promotional Funds
2.34 Stock Repurchase
4.6 No Conflicts
6.1(k) Employment and Noncompetition Agreements
(v)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") entered into as of
March 2, 2000 by and among Marketing Specialists Sales Company, a Texas
corporation ("Buyer"), The Sales Force Companies, Inc., an Indiana corporation
(the "Company"), and the holders of the Company's capital stock listed on
Exhibit A hereto, such stockholders being herein collectively referred to as the
"Stockholders" and individually as a "Stockholder."
W I T N E S S E T H
WHEREAS, the Stockholders own, or will own as of the Closing (as
defined in Section 1.3 hereof, of record and beneficially all of the issued and
outstanding shares (the "Company Shares") of the common stock, par value $0.50
per share (the "Common Stock"), of the Company; and
WHEREAS, the Stockholders desire to sell all of the Company Shares to
Buyer, and Buyer desires to acquire all of the Company Shares.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF SHARES AND PURCHASE PRICE.
1.1 Transfer of Company Shares. In consideration of and in reliance
upon the representations, warranties and covenants contained herein and upon the
terms and subject to the conditions set forth in this Agreement, Buyer hereby
purchases, and each Stockholder hereby sells, assigns, conveys, transfers and
delivers to Buyer all of such Stockholder's right, title and interest in any and
all of the Company Shares owned beneficially or of record by such Stockholder
free and clear of any and all liens, encumbrances, charges, claims or adverse
interests of any kind. At the Closing, each Stockholder shall deliver or cause
to be delivered to Buyer certificates representing all of the Company Shares
owned by such Stockholder, as set forth in Exhibit A attached hereto. Such stock
certificates shall be duly endorsed in blank for transfer or shall be presented
with stock powers duly executed in blank, with such signature guarantees and
such other documents as may be reasonably required by Buyer to effect a valid
transfer of such Company Shares by such Stockholder in accordance with this
Agreement. Each Stockholder by execution of this Agreement hereby appoints Buyer
as his attorney-in-fact to effectuate transfer of the Company Shares at the
Closing.
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1.2 Purchase Price and Payment.
(a) In consideration of the sale by the Stockholders to Buyer of
the Company Shares and in reliance upon the representations and warranties of
the Company and the Stockholders herein contained and made at the Closing and
subject to the satisfaction of all of the conditions contained herein, Buyer
agrees that, subject to Section 1.2(b) hereof, it will: (i) pay (i) $5,020,324
in cash at the Closing to the Company's Employee Stock Ownership Trust (the
"ESOT"), (ii) deliver to the Escrow Agent $750,000, subject to reduction as set
forth in Section 1.2(b) below (the "Escrow Amount"), to be held by the Escrow
Agent pursuant to and in accordance with the terms of the Indemnification Escrow
Agreement to be executed by the ESOT substantially in the form attached hereto
as Exhibit B (the "Indemnification Escrow Agreement") and (iii) deliver to each
Stockholder, other than the ESOT, a junior subordinated promissory note in the
principal amount specified in Exhibit A (the "Notes") substantially in the form
attached hereto as Exhibit C (the amounts specified in clauses (i), (ii) and
(iii) of this sentence, the "Purchase Price"). The aggregate amount of the Notes
is $7,459,920.
(b) The Purchase Price will be increased or decreased, as
appropriate, dollar-for-dollar to the extent that, as of the Closing: (x) the
long-term liabilities and the present value (assuming an 8% discount rate) of
the off-balance-sheet liabilities of the Company and its Subsidiaries (as
defined in Section 2.4 hereof) in the aggregate are more or less than $12.8
million ("Liabilities") or (y) the working capital of the Company (calculated on
the basis of unrestricted cash) is more or less than $1.5 million ("Working
Capital") (either clause (x) or (y) or both may give rise to an adjustment in
the Purchase Price). The Purchase Price will be decreased dollar-for-dollar to
the extent that, as of the Closing, the Company has less than $2.4 million of
unrestricted cash. Unrestricted cash means cash, cash equivalents and marketable
securities not subject to any restrictions as to their application. At least two
(2) business days prior to the Closing the Company and Buyer shall prepare a
statement to be attached hereto as Schedule 1.2(b) which sets forth the
Liabilities, Working Capital, unrestricted cash and the amount of any adjustment
to the Purchase Price, each as estimated as of the Closing Date. The Purchase
Price adjustment shall be calculated based on the balance sheet of the Company
as of a date not more than seven (7) days prior to the Closing Date. The
Purchase Price will be increased or decreased, as appropriate, as of the Closing
Date in accordance with Schedule 1.2(b). Any decrease in the Purchase Price
pursuant to this Section 1.2(b) which is allocable to the ESOT shall not exceed
$750,000 and will reduce the Escrow Amount by an amount equal to the decrease in
Purchase Price allocable to the ESOT. The pay off amounts due to LaSalle
National Bank, LaSalle National Leasing Corporation and the cost of the letter
of credit for the ESOT as of the Closing will not reduce the amount of
unrestricted cash of the Company for purposes of this Section 1.2(b) but will be
considered Liabilities for purposes of this Section 1.2(b). The Prism Tax
Reserve (as defined in Section 1.6(h)) shall not be included in the calculation
of Working Capital or unrestricted cash for purposes of this Section 1.2(b). Any
upward Purchase Price adjustment pursuant to this Section 1.2 shall be payable
in cash in the case of payments to be made to the ESOT within ninety (90) days
after the Closing and, in the case of any other Stockholder, will be pro rata in
accordance with each Stockholder's respective equity interests in the Company.
Any such increase in the Purchase Price payable to a Stockholder other than the
ESOT will be payable by delivery of a
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replacement Note in exchange for the Note then held by such Stockholder. The
principal amount of such replacement Note will be equal to the sum of the
principal amount outstanding under the Note then held by such Stockholder plus
the additional purchase price allocable to such Stockholder pursuant to this
Section 1.2(b). In all other respects the terms of the replacement Note shall be
the same as the terms of the prior Note.
(c) In addition, in the event that within one year following the
Closing the Company or Buyer or any affiliate of the Company is appointed to
represent Colgate and/or Schering-Plough and such appointment(s) results in
incremental annualized commission revenue of at least $3.5 million in the year
following the date of such appointment (it being understood that the commission
revenue resulting from the Company's and Buyer's existing Colgate and
Schering-Plough business as of the Closing shall be excluded from the
calculation of such commission revenues), the Purchase Price shall be increased
by $2.2 million, to be allocated among the Stockholders other than the ESOT as
set forth on Exhibit A hereto, payable in the form of a junior subordinated
promissory note substantially in the form attached hereto as Exhibit C after the
date of such appointment. Further, in the event that following the Closing the
Buyer sells all of the capital stock or all or substantially all of the assets
of the Company, Marketing Specialists Corporation or Buyer to a purchaser that
has annual revenues in excess of $1 billion for the year preceding such sale,
the present value (assuming a 9% discount rate) of all amounts not yet paid to
the Stockholders shall become immediately due and payable upon the consummation
of such sale.
(d) In the event that the Non-ESOT Stockholders' Representative (as
defined in Section 1.8(a)) notifies Buyer in writing that the Notes have been
deposited with a central collection agency, Buyer shall use commercially
reasonable efforts to make all payments under the Notes to such central
collection agency in accordance with the instructions of the Stockholders'
Representative.
1.3 Time and Place of Closing. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at
10:00 a.m. on April 14, 2000 at the offices of Xxxxxxx, Procter & Xxxx XXX,
Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 or at such other place as may be
determined by Buyer and the Company.
1.4 Further Assurances. The Stockholders from time to time after the
Closing at the request of Buyer and without further consideration shall execute
and deliver further instruments of transfer and assignment and take such other
action as Buyer may reasonably require to more effectively transfer and assign
to, and vest in Buyer the Company Shares and all rights thereto, and to fully
implement the provisions of this Agreement.
1.5 Termination of ESOT. It is the intention of the parties to this
Agreement that the ESOT will be terminated as soon as reasonably practicable
after the Closing Date but in no event later than one year following the Closing
Date. The Buyer agrees to pay administrative
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expenses and trustee fees of the ESOT in accordance with the terms and
conditions of that certain Trustee Agreement between First Bankers Trust Company
and the Company.
1.6 Spin-Off of Prism and PMG. The parties to this Agreement
acknowledge and agree that prior to or concurrently with the Closing, The
Deliverance Group, Inc. ("Deliverance"), a wholly-owned subsidiary of the
Company, will sell its fifty percent (50%) general partnership interest in Prism
Partners, an Illinois partnership ("Prism") and its twenty-five (25%) general
partnership interest in Prism Merchandising Group, an Illinois partnership
("PMG") to JTW, Inc., a corporation controlled by Xxxxxx Xxxxxxxxxxx or other
entity controlled by Xxxxxx Xxxxxxxxxxx (the "Spin-Off Sale"). The terms of the
Spin-Off Sale include deferred payments to be made to Deliverance over a period
of five years ("Deferred Payment Obligation"). Immediately following the
Spin-Off Sale, Deliverance will transfer the Deferred Payment Obligation to the
Company and the Company will distribute the Deferred Payment Obligation to the
Stockholders in redemption of some of their shares (the "Redemption"). In
connection with the Spin-Off Sale the parties to this Agreement agree that:
(a) Deliverance, in accordance with a plan of liquidation, will
liquidate as soon as possible subsequent to the consummation of the Spin-Off
Sale and the Closing (the "Deliverance Liquidation");
(b) the Redemption, in and of itself, is a permitted transaction
and will not be deemed to violate the covenants, representations or warranties
set forth herein;
(c) Buyer agrees that for a period of one year from the Closing
Date, it will not directly or indirectly, solicit any customers of Prism or PMG
that are set forth on Schedule 1.6 hereto ("Prism Customers"):
(d) The persons listed below, who will be employed by Buyer after
the Closing, will not be required by Buyer or its affiliates to disclose to
Buyer, its agents, officers or employees any confidential information of Prism
or PMG, or to compete for or solicit any Prism Customers for a period of three
(3) years after the Closing: Xxxxxxx X. Xxx, Xxxxx XxXxxxxx and Xxxx Xxxxxxx.
(e) Buyer agrees that if at any time while the Deferred Payment
Obligation is unpaid, Buyer (or any of its affiliates) receives material
revenues from any of the Prism Customers for services rendered of the type
previously performed by Prism or PMG which results in a corresponding loss in
material revenues to Prism or PMG ("Loss Customer Revenues") and if, subsequent
to the receipt of such revenues, there is a default of Prism, PMG, JTW, Inc., or
other obligor (each, an "Obligor") under the Deferred Payment Obligation, Buyer
shall pay on the same terms as the Notes to the holders of the Deferred Payment
Obligation an amount equal to:
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(i) the percentage (or aggregate of such percentages) which
are set forth on Schedule 1.6 hereto for each Prism
Customer (or Prism Customers) from whom Buyer received
Loss Customer Revenues multiplied by
(ii) the balance of the Deferred Payment Obligation due at the
date of default.
Notwithstanding anything in this Section 1.6(e) to the contrary, Buyer
shall have no obligation to make payments to the holders of the Deferred Payment
Obligation in accordance with this Section 1.6(e) upon a payment default by the
Obligor unless the default by the Obligor occurs as a result of Obligor's
financial inability due to insolvency to pay the Deferred Payment Obligation and
Obligor has (i) filed a petition for bankruptcy or (ii) is the subject of an
involuntary proceeding under the Bankruptcy Act, or (iii) makes an assignment
for the benefit of creditors, or (iv) initiates or is the subject of any other
similar proceeding, or (v) a receiver or liquidator is appointed for Obligor by
a court of competent jurisdiction, or (vi) the holders of the Deferred Payment
Obligation obtain a judgment against Obligor, which remains unsatisfied for 31
days after its entry, and for which no surety appeal bond has been filed and
approved by a court of competent jurisdiction.
(f) If and to the extent any payments are made by Buyer pursuant to
Section 1.6(e), Buyer shall be subrogated in any bankruptcy proceeding of the
Obligor to the rights of the payees who have received such payments to the
extent of such payments, provided, however, Buyer's rights shall, in all cases,
be subordinate to the rights of all payees on the Deferred Payment Obligation.
(g) If Buyer or any affiliate becomes entitled to any tax refund,
credit or other benefit relating to the distribution of the Deferred Payment
Obligation in the Redemption, Buyer shall restore such refund, credit or other
benefit to the parties to whom the Deferred Payment Obligation was distributed.
(h) Any taxes payable by the Company in connection with the
transactions contemplated by the Spin-Off Sale and the Redemption will be borne
by the Company and an amount sufficient to pay all such taxes will be set aside
by the Company from the initial purchase price due at the closing of the
Spin-Off Sale (the "Prism Tax Reserve").
(i) Any indemnification obligations of Deliverance which arise out
of or in connection with the transactions contemplated by the Spin-Off Sale or
the Redemption will be paid by the Stockholders.
1.7 Transfer Taxes. All excise, sales, transfer and similar taxes, fees
and duties under applicable law incurred in connection with the Spin-Off Sale,
the Redemption and the sale and transfer of the Company Shares under this
Agreement will be borne and paid by the
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Stockholders, and the Stockholders shall promptly reimburse the Company and
Buyer for any such tax, fee or duty which any of them is required to pay under
applicable law.
1.8 Non-ESOT Stockholders' Representative.
(a) In order to administer efficiently (i) the implementation of
the Agreement by the Stockholders, (ii) the waiver of any condition to the
obligations of the Stockholders to consummate the transactions contemplated
hereby, and (iii) the settlement of any dispute with respect to the Agreement,
the Stockholders, other than the ESOT, hereby designate Xxxxxxx X. Xxx as their
representative (the "Non-ESOT Stockholders' Representative"). For purposes of
this Section 1.8, the term "Stockholder" shall be deemed not to include the
ESOT.
(b) The Stockholders hereby authorize the Non-ESOT Stockholders'
Representative (i) to take all action necessary in connection with the
implementation of the Agreement on behalf of the Stockholders, the waiver of any
condition to the obligations of the Stockholders to consummate the transactions
contemplated hereby, or the settlement of any dispute, (ii) to give and receive
all notices required to be given under the Agreement and (iii) to take any and
all additional action as is contemplated to be taken by or on behalf of the
Stockholders by the terms of this Agreement, including without limitation, the
execution and delivery of documents to transfer the Company Shares to Buyer;
provided, however, that the Non-ESOT Stockholders' Representative shall not have
authority to commence legal proceedings on behalf of the Stockholders without
their consent.
(c) In the event that the Non-ESOT Stockholders' Representative
dies, becomes legally incapacitated or resigns from such position, Xxxxxx X.
Xxxxxxxxx shall fill such vacancy and shall be deemed to be the Non-ESOT
Stockholders' Representative for all purposes of this Agreement; however, no
change in the Non-ESOT Stockholders' Representative shall be effective until
Buyer is given notice of it by the Stockholders.
(d) All decisions and actions by the Non-ESOT Stockholders'
Representative shall be binding upon all of the Stockholders, and no Stockholder
shall have the right to object, dissent, protest or otherwise contest the same.
(e) By their execution of this Agreement, the Stockholders agree
that:
(i) Buyer shall be able to rely conclusively on the
instructions and decisions of the Non-ESOT Stockholders'
Representative as to any actions required or permitted to
be taken by the Stockholders or the Non-ESOT
Stockholders' Representative hereunder, and no party
hereunder shall have any cause of action against Buyer
for any action taken by Buyer in reliance upon the
instructions or decisions of the Non-ESOT Stockholders'
Representative;
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(ii) all actions, decisions and instructions of the Non-ESOT
Stockholders' Representative shall be conclusive and
binding upon all of the Stockholders and no Stockholder
shall have any cause of action against the Non-ESOT
Stockholders' Representative for any action taken,
decision made or instruction given by the Non-ESOT
Stockholders' Representative under this Agreement, except
for fraud or willful breach of this Agreement by the
Non-ESOT Stockholders' Representative;
(iii) remedies available at law for any breach of the
provisions of this Section 1.8 are inadequate; therefore,
Buyer shall be entitled to temporary and permanent
injunctive relief without the necessity of proving
damages if Buyer brings an action to enforce the
provisions of this Section 1.8; and
(iv) the provisions of this Section 1.8 are independent and
severable, shall constitute an irrevocable power of
attorney, coupled with an interest and surviving death,
granted by the Stockholders to the Non-ESOT Stockholders'
Representative and shall be binding upon the executors,
heirs, legal representatives and successors of each
Stockholder.
(f) All fees and expenses incurred by the Non-ESOT Stockholders'
Representative shall be paid by the Stockholders.
1.9 Escrow Deposit. At the Closing, Buyer shall deposit the sum of
$500,000 (the "Escrow Deposit") with the Escrow Agent pursuant to a Purchase
Agreement Escrow substantially in the form attached hereto as Exhibit B-1 (the
"Purchase Agreement Escrow") in order to satisfy any payment required by Section
7.2(b) hereof.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND STOCKHOLDERS OTHER
THAN THE ESOT.
2.1 Making of Representations and Warranties. As a material inducement
to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of the Stockholders other than the
ESOT jointly and severally hereby make to Buyer the representations and
warranties contained in this Section 2. For the purposes of this Agreement, to
the extent that any disclosure made by the Company or any Stockholder would be
required to be made on more than one Schedule delivered hereunder, the Company
and each Stockholder may make such disclosure by a cross-reference to
information set forth on any other Schedule delivered hereunder. Capitalized
terms used and not otherwise defined in the Schedules shall have the meanings
ascribed thereto in this Agreement.
2.2 Organization and Qualifications of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Indiana with full corporate power and authority to own or lease
its properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such
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business is currently conducted or proposed to be conducted. The copies of the
Company's Articles of Incorporation, as amended to date, certified by the
Secretary of State of the State of Indiana, and of the Company's By-laws, as
amended to date, certified by the Company's Secretary, and heretofore delivered
to Buyer's counsel, are complete and correct, and no amendments thereto are
pending. Except as set forth in Schedule 2.2 attached hereto, the Company is not
in violation of any term of its Articles of Incorporation or By-laws. The
Company is qualified to do business as a foreign corporation in all
jurisdictions in which the nature of the business conducted by the Company or
the characters of the assets owned or leased by it make such qualification
necessary or prudent except for those jurisdictions wherein a failure to be so
qualified could not have a Material Adverse Effect. A "Material Adverse Effect"
shall mean an effect that is or would be materially adverse to the business,
results of operations, condition (financial or otherwise), assets or prospects
of the Company and its subsidiaries taken as a whole.
2.3 Capital Stock of the Company; Beneficial Ownership.
(a) The authorized capital stock of the Company consists of (i)
300,000 shares of Common Stock, of which 92,945 shares are duly and validly
issued, outstanding, fully paid and non-assessable and of which 56,860 shares
are authorized but unissued. The Company holds 150,195 shares of Common Stock in
its treasury. Upon the close of the Redemption, 71,288.815 shares of Common
Stock will be duly and validly issued, outstanding, fully paid and
non-assessable and the Company will hold 171,851.19 shares of Common Stock in
its treasury. Except as disclosed on Schedule 2.3 attached hereto, no person or
entity other than the Stockholders holds any shares of the capital stock of the
Company and there are no outstanding subscriptions, calls, options, warrants,
rights, commitments, preemptive rights, arrangements or agreements of any kind
for or relating to the issuance sale transfer, registration or voting of, or
outstanding securities convertible into, exchangeable for or carrying the right
to purchase, subscribe for or otherwise acquire, any shares of capital stock of
any class or any other equity security of the Company or outstanding warrants,
options or other rights to acquire any such convertible securities. None of the
Company's capital stock has been issued in violation of any applicable federal
or state securities law. Except as set forth in the Schedule 2.3 attached
hereto, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or undertakings with respect to the voting of the
Company Shares to which the Company or any of the Stockholders is a party.
(b) Except as disclosed in Schedule 2.3 attached hereto, each of
the Stockholders owns beneficially and of record the Company Shares set forth
opposite such Stockholder's name on Exhibit A hereto free and clear of any lien,
security interest, charge, pledge, restriction, encumbrance or adverse interest
of any kind or nature (collectively, "Liens").
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2.4 Subsidiaries; Acquisitions.
(a) The Company's subsidiaries and investments in any other
corporation or business organization are listed in Schedule 2.4(a)
(collectively, but excluding Prism Partners and Prism Merchandising Group, the
"Subsidiaries" or individually, a "Subsidiary"). Except as set forth in Schedule
2.4(a), each Subsidiary of the Company is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation with
full corporate, or partnership, as the case may be, power and authority to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. Except as disclosed in Schedule 2.4(a),
all of the outstanding shares of capital stock or other equity interests of each
Subsidiary are owned beneficially and of record by the Company free of any Lien
and said shares or other equity interests have been duly and validly issued and
are outstanding, fully paid and non-assessable. The copies of the articles of
incorporation (or comparable document) as amended to date, of each Subsidiary
certified by the Secretary of State of the jurisdiction in which each Subsidiary
is organized and of each Subsidiary's by-laws, as amended to date, certified by
the Company's Secretary, and heretofore delivered to Buyer's counsel, are
complete and correct, and no amendments thereto are pending. None of the
Subsidiaries is in violation of any term of its articles of incorporation (or
comparable document) or by-laws (or comparable document). Each Subsidiary is
duly qualified to do business as a foreign corporation , or partnership, as the
case may be, where the nature of the conduct of its business makes its
qualification so necessary, except where the failure to be so qualified could
not, individually or in the aggregate, have a Material Adverse Effect. Except as
disclosed in Schedule 2.4(a), there are no outstanding, subscriptions, calls,
warrants, options, rights, commitments, preemptive rights or arrangements or
agreements to purchase or acquire any of the shares of capital stock of any
Subsidiary, or any outstanding securities convertible into such shares or
outstanding warrants, options or other rights to acquire any such convertible
securities.
(b) Except as set forth in Schedule 2.4(b) attached hereto, the
Company does not have any rights, warrants or options (the "Acquisition Rights")
to purchase or acquire the capital stock or all or substantially all of the
assets of any other corporation or business organization (an "Acquisition").
Schedule 2.4(b) attached hereto sets forth the name of each of the entities
subject to any Acquisition Rights, the type of transaction contemplated by the
parties in each Acquisition, the termination rights, if any, associated with
such Acquisition Rights, and whether or not the consummation of the transactions
contemplated by this Agreement requires the consent of any other party to such
transaction. Each of the Acquisition Rights is fully enforceable, and will
remain so, after the Closing.
2.5 Authority of the Company and the Stockholders. The Company has full
right, authority and corporate power, and each Stockholder has full right,
power, authority and capacity, to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by the Company or any
Stockholder pursuant to this Agreement and to carry out the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company and each Stockholder of this Agreement and each such other
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agreement, document and instrument have been duly authorized by all necessary
action of the Company and/or such Stockholder and no other action on the part of
the Company or any Stockholder is required in connection therewith.
2.6 No Conflicts. This Agreement and each agreement, document and
instrument executed and delivered by the Company and/or any Stockholder pursuant
to this Agreement constitutes, or when executed and delivered will constitute,
valid and binding obligations of the Company and/or such Stockholder enforceable
in accordance with their terms. Except as disclosed in Schedule 2.6 attached
hereto, the execution, delivery and performance by the Company of this Agreement
and each other agreement, document or instrument to be executed, delivered or
performed by the Company or any Stockholder (the "Transaction Documents") does
not and will not, with or without the giving of notice or the lapse of time or
both, (i) does not and will not violate any provision of the Articles of
Incorporation or By-laws of the Company or any Subsidiary; and (ii) does not and
will not violate any laws of the United States or any state or other
jurisdiction applicable to the Company or any Stockholder or require the
Company, any Subsidiary or any Stockholder to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made. Except as disclosed in Schedule
2.6 attached hereto, neither the course of conduct of the Company or any
Stockholder in connection with the negotiation, execution and delivery of this
Agreement or any other Transaction Document nor the execution, delivery or
performance by the Company or any Stockholder of this Agreement or any
Transaction Document does or will result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the Company, any
Subsidiary or any Stockholder is a party or by which the property of the
Company, any Subsidiary or any Stockholder is bound or affected, or result in
the creation or imposition of any mortgage, pledge, or other Lien in any of the
Company's assets or the Company Shares.
2.7 Real and Personal Property.
(a) Real Property. Neither the Company nor any of its Subsidiaries
owns, or has ever owned, any real property. All of the real property leased by
the Company or any of its Subsidiaries is identified on Schedule 2.7(a) (herein
referred to as the "Real Property"). Copies of each lease as currently in effect
with respect to the Real Property have been delivered to Buyer.
(i) Title. Each of the Company and its Subsidiaries has
enforceable leasehold interests in the Real Property, in
each case free and clear of all easements, covenants,
restrictions, leases, mortgages, liens, assessments,
claims, rights, judgments, encroachments or other matters
affecting title (collectively, "Encumbrances"), other
than:
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(x) easements, covenants, restrictions and similar
encumbrances that do not and could not interfere with the
use of the Real Property as currently used and improved,
(y) minor encroachments that do not and could not materially
adversely affect the value or use of the Real Property as
currently used and improved and that could be removed
without material cost, and
(z) liens for Taxes (as defined below) not yet due or
delinquent or being contested in good faith pursuant to
appropriate proceedings and statutory liens arising in
the ordinary course of business by operation of law that
are not yet due or delinquent.
((x), (y) and (z) are collectively referred to as "Permitted Encumbrances"),
except as set forth on Schedule 2.7(a). To the Knowledge of the Company, the
Lessors of the Real Property have good, clear, record and marketable title to
the Real Property.
(ii) Status of Leases. All leases relating to Leased Real
Property are identified on Schedule 2.7(a), and true and
complete copies thereof have been delivered to Buyer.
Each of said leases has been duly authorized and executed
by the parties and is in full force and effect. Neither
the Company nor any of its Subsidiaries is in default
under any of said leases, nor has any event occurred
which, with notice or the passage of time, or both, would
give rise to such a default. To the Company's Knowledge,
the other party to each of said leases is not in default
under any of said leases and there is no event which,
with notice or the passage of time, or both, would give
rise to such a default. For purposes of this Agreement,
the "Knowledge" of any person other than the Company
shall mean that such person had actual knowledge of the
facts at issue and the Knowledge of the Company shall
mean that the President, Chief Executive Officer or Chief
Financial Officer or any other corporate executive
officer of the Company knew or should have known the
facts at issue after inquiry of the officers or employees
of the Company who would reasonably be expected to know
the matters covered by the statement in question.
(iii) Consents. Except as set forth in Schedule 2.7(a), no
consent or approval is required with respect to the
transactions contemplated by this Agreement from the
other parties to any lease of Real Property, from the
holder of any Encumbrance on any Real Property, or from
any regulatory authority, no filing with any regulatory
authority is required in connection therewith, and to the
extent that any such consents, approvals or filings are
required, the Company or the Stockholders will obtain or
complete them before the Closing.
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(iv) Condition of Real Property. Except as set forth in
Schedule 2.7(a), there are no material defects in the
physical condition of any land, buildings or improvements
constituting part of the Real Property, including without
limitation, structural elements, mechanical systems,
parking and loading areas, and all such buildings and
improvements are in good operating condition and repair,
have been well maintained and are free from infestation
by rodents or insects. To the Company's Knowledge, none
of the Real Property is located in an area designated by
any governmental authority as being within a flood plain
or subject to special flood or other hazards. Access to
the Real Property is by a public way or public street. To
the Company's Knowledge, all water, sewer, gas, electric,
telephone, drainage and other utilities required by law
or necessary for the current or planned operation of the
Real Property have been connected under valid permits and
pursuant to valid easements where required, and are
sufficient to service the Real Property and in good
operating condition.
(v) Compliance with the Law. Neither the Company nor any
Subsidiary has received any notice from any governmental
authority of any violation of any law, ordinance,
regulation, license, permit or authorization issued with
respect to any Real Property that has not been heretofore
corrected and no such violation exists which,
individually or in the aggregate, could have a material
adverse effect on the operation or value of any Real
Property. To the Company's Knowledge, all improvements
located on or constituting part of the Real Property and
their use and operation by the Company and its
Subsidiaries were and are now in compliance in all
respects with all applicable laws, ordinances,
regulations, licenses, permits and authorizations, expect
as set forth in Schedule 2.7(a). To the Company's
Knowledge, no approval or consent to the transactions
contemplated by this Agreement is required of any
governmental authority with jurisdiction over any aspect
of the Real Property or its use or operations. Neither
the Company nor any Subsidiary has received any notice of
any real estate tax deficiency or assessment or is aware
of any proposed deficiency, claim or assessment with
respect to any of the Real Property, or any pending or
threatened condemnation thereof.
(b) Personal Property. A complete description of the material items
of machinery and equipment of the Company and each of its Subsidiaries is
contained in Schedule 2.7(b) hereto. The material terms of each lease pursuant
to which the Company leases personal property, as in effect on the date hereof,
are set forth on Schedule 2.7(b). The Company's total obligation with respect to
automobile leases is set forth on Schedule 2.7(b). Except as specifically
disclosed in said Schedule or in the Base Balance Sheet (as defined in Section
2.8(a)), the Company and each of its Subsidiaries has good and marketable title
to all of its owned personal property. None of such personal property or assets
is subject to any mortgage, pledge, conditional sale agreement or Lien except as
specifically disclosed in said Schedule or in the Base Balance Sheet. The Base
Balance Sheet reflects all material items of personal property owned by the
Company and each of its Subsidiaries. Except as otherwise
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specified in Schedule 2.7(b) hereto, all leasehold improvements, furnishings,
machinery and equipment of the Company and each of its Subsidiaries are in good
repair (ordinary wear and tear excepted), have been well maintained, and
substantially comply with all applicable laws, ordinances and regulations, and
such machinery and equipment is in good working order. Neither the Company nor
any of the Stockholders has Knowledge of any pending or threatened change of any
such law, ordinance or regulation which could adversely affect the Company, any
of its Subsidiaries or any of their businesses.
2.8 Financial Statements.
(a) The Company has delivered to Buyer the following financial
statements, copies of which are attached hereto as Schedule 2.8:
(i) consolidated balance sheets of the Company and its
Subsidiaries for its fiscal years ended October 31, 1996,
1997 and 1998 and statements of income, retained earnings
and cash flows for the three years then ended, which
consolidated statements have been audited by Xxxxx
Xxxxxxxx LLP, independent public accountants (such
financial statements, the "Audited Financial
Statements"). The Company's audited consolidated balance
sheet as of October 31, 1998, is sometimes referred to
herein as the "Base Balance Sheet."
(ii) consolidated balance sheets of the Company and its
Subsidiaries as of November 30, 1999 (herein the "Interim
Balance Sheet") and statements of income, retained
earnings and cash flows for the one-month period then
ended, certified by the Company's Chief Financial Officer
(the "Interim Financial Statements"). The Audited
Financial Statements and the Interim Financial Statements
are referred to herein, collectively, as the "Financial
Statements."
Said Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied consistently during
the periods covered thereby, are complete and correct in all material respects
and present fairly the financial condition of the Company and each of its
Subsidiaries at the dates of said statements and the results of its operations
for the periods covered thereby.
(b) As of the date of the Base Balance Sheet, neither the Company
nor any Subsidiary had any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown (including
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others, liabilities for taxes due or then accrued or to become
due, or contingent or potential liabilities relating to activities of the
Company or any Subsidiary or the conduct of their business prior to the date of
the Base Balance Sheet regardless of whether claims in respect thereof had been
asserted as of such date), except: (i) liabilities stated or adequately reserved
against on the Base Balance Sheet, (ii)
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reflected in Schedules furnished to Buyer hereunder as of the date hereof, or
(iii) liabilities not required by GAAP to be disclosed on the Base Balance
Sheet.
(c) As of the date hereof and as of the Closing, neither the
Company nor any Subsidiary has had and will have any liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
then accrued or to become due or contingent or potential liabilities relating to
activities of the Company or any Subsidiary or the conduct of their business
prior to the date hereof or the Closing, as the case may be, regardless of
whether claims in respect thereof had been asserted as of such date), except
liabilities (i) stated or adequately reserved against on the Interim Balance
Sheet or the notes thereto, (ii) reflected in Schedules furnished to Buyer
hereunder on the date hereof, or (iii) incurred after September 30, 1999 in the
ordinary course of business of the Company or any Subsidiary consistent with the
terms of this Agreement and which would not be required to be disclosed on a
balance sheet of the Company prepared in accordance with GAAP.
(d) The itemized projections of commission revenues for the 12
months ending September 30, 2000 which have been separately prepared by the
Company and presented to the Buyer are attached hereto as Schedule 2.8(d) and
have been based upon assumptions which are set forth therein and which were
reasonable when made and continue to be reasonable as of the date hereof and
give effect to the gains and losses of or other changes in, or with respect to,
principal accounts disclosed on Schedule 2.31(e) and 2.31(f) hereto.
(e) Schedule 2.8(e) attached hereto sets forth, on an
individualized basis, the monthly and annualized obligations of the Company for
the fiscal year ending October 31, 1999 to make lease payments with respect to
automobiles. Schedule 2.8(e) also sets forth on an aggregate basis for such
fiscal year, the annualized obligations of the Company to reimburse officers and
employees for expenses related to the use and operation of an automobile,
including gas, insurance, maintenance and mileage reimbursement.
(f) Schedule 2.8(f) attached hereto sets forth the aggregate annual
compensation of each officer, employee or consultant of the Company as of the
Closing Date.
(g) As of the Closing Date, each Stockholder other than the ESOT
shall have paid, or shall have caused or arranged for the payment of, all fees
and expenses incurred by or on behalf of any such party arising out of or in
connection with the transactions contemplated by this Agreement; provided that
the Company shall not have paid or reimbursed any party other than the ESOT or
on behalf of the ESOT for any such amount.
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2.9 Taxes.
(a) The Company and each of its Subsidiaries has paid or caused to
be paid all federal, state, local, foreign, and other taxes, including without
limitation, income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or in
part by net income, and all deficiencies, or other additions to tax, interest,
fines and penalties owed by it (collectively, "Taxes"), required to be paid by
it through the date hereof whether disputed or not.
(b) The Company and each of its Subsidiaries has in accordance with
applicable law filed all federal, state, local and foreign tax returns required
to be filed by it through the date hereof, and all such returns correctly and
accurately set forth the amount of any Taxes relating to the applicable period.
A list of all federal, state, local and foreign income tax returns filed with
respect to the Company and its Subsidiaries for taxable periods ended on or
after October 31, 1993 is set forth in Schedule 2.9 attached hereto, and said
Schedule indicates those returns that have been audited or currently are the
subject of an audit. For each taxable period of the Company and its Subsidiaries
ended on or after October 31, 1995, the Company has delivered to Buyer correct
and complete copies of all federal, state, local and foreign income tax returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company or any of its Subsidiaries.
(c) Neither the United States Internal Revenue Service (the "IRS")
nor any other governmental authority is now asserting or, to the Knowledge of
the Company or any Stockholder, has threatened to assert against the Company or
any Subsidiary any deficiency or claim for additional Taxes. To the Company's
Knowledge, no claim has ever been made by an authority in a jurisdiction where
the Company or any Subsidiary does not file reports and returns that the Company
or such Subsidiary is or may be subject to taxation by that jurisdiction. There
are no security interests on any of the assets of the Company or any Subsidiary
that arose in connection with any failure (or alleged failure) to pay any Taxes.
Neither the Company nor any Subsidiary has ever entered into a closing agreement
pursuant to Section 7121 of the United States Internal Revenue Code of 1986, as
amended (the "Code").
(d) Except as set forth in Schedule 2.9 attached hereto, there has
not been any audit of any tax return filed by the Company or any Subsidiary, no
such audit is in progress, and neither the Company nor any Subsidiary has been
notified by any tax authority that any such audit is contemplated or pending.
Except as set forth in Schedule 2.9, no extension of time with respect to any
date on which a tax return was or is to be filed by the Company or any
Subsidiary is in force, and no waiver or agreement by the Company or any
Subsidiary is in force for the extension of time for the assessment or payment
of any Taxes.
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(e) Neither the Company nor any Subsidiary has ever been (or
has ever had any liability for unpaid Taxes because it once was) a member of an
"affiliated group" (as defined in Section 1504(a) of the Code). Except as set
forth in Schedule 2.9, neither the Company nor any Subsidiary has ever filed,
and has ever been required to file, a consolidated, combined or unitary tax
return with any other entity. Except as set forth in Schedule 2.9, since October
31, 1993 neither the Company nor any Subsidiary owns or has owned a direct or
indirect interest in any trust, partnership, corporation or other entity. Except
as set forth in Schedule 2.9 attached hereto, neither the Company nor any
Subsidiary is a party to any tax sharing agreement.
(f) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.10 Collectibility of Accounts Receivable. Except as disclosed on
Schedule 2.10 attached hereto, all of the accounts receivable of the Company or
any Subsidiary shown or reflected on the Interim Balance Sheet or existing at
the date hereof (less the reserve therefor set forth on the Interim Balance
Sheet) are or will be at the Closing valid and enforceable claims, fully
collectible and subject to no set off or counterclaim. Neither the Company nor
any Subsidiary has any accounts or loans receivable from any person, firm or
corporation which is affiliated with the Company or any Subsidiary or from any
director, officer or employee of the Company or any Subsidiary, except as
disclosed on Schedule 2.10 hereto, and
all accounts and loans receivable from any such person, firm or corporation
shall be paid in cash prior to the Closing.
2.11 Inventories. Except as disclosed in Schedule 2.11, the Company has
no inventory.
2.12 Absence of Certain Changes. Except as disclosed in Schedule 2.12
attached hereto or as otherwise set forth in this Section 2.12, since the date
of the Base Balance Sheet and as of the date hereof there has not been:
(a) Any change in the condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects of the
Company or any of its Subsidiaries, which change by itself or in conjunction
with all other such changes, whether or not arising in the ordinary course of
business, could have a Material Adverse Effect.
(b) Any amendment or termination, or to the Knowledge of the
Company, proposed or threatened amendment or termination, whether written or
oral, of any Contract (as defined in Section 2.17) or material lease;
(c) Any contingent liability incurred by the Company or any of
its Subsidiaries as guarantor or otherwise with respect to the obligations of
others or any
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cancellation of any material debt or claim owing to, or waiver of any material
right of, the Company or any of its Subsidiaries;
(d) Any Encumbrance or Lien placed on any of the properties of
the Company or any of its Subsidiaries which remains in existence on the date
hereof or will remain on the Closing Date;
(e) Any cancellation of any material debt or claim owing to,
or waiver of a material right of, the Company or any Subsidiary;
(f) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (including without limitation liabilities for Taxes due or to become due
or contingent or potential liabilities relating to products or services provided
by the Company or any of its Subsidiaries or the conduct of the business of the
Company or any of its Subsidiaries since the date of the Base Balance Sheet
regardless of whether claims in respect thereof have been asserted), incurred by
the Company or any of its Subsidiaries other than obligations and liabilities
incurred in the ordinary course of business consistent with the terms of this
Agreement (it being understood that product or service liability claims shall
not be deemed to be incurred in the ordinary course of business);
(g) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business;
(h) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company or any of its Subsidiaries;
(i) Any declaration, setting aside or payment of any dividend
by the Company or any of its Subsidiaries, or the making of any other
distribution in respect of the capital stock of the Company or any of its
Subsidiaries, or any direct or indirect redemption, purchase or other
acquisition by the Company or any of its Subsidiaries of its own capital stock;
(j) Any labor trouble or claim of unfair labor practices
involving the Company or any of its Subsidiaries; any change in the compensation
payable or to become payable by the Company or any of its Subsidiaries to any of
its officers, employees, agents or independent contractors other than normal
merit increases in accordance with its usual practices; or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
(k) Any change with respect to the officers or management of
the Company or any of its Subsidiaries;
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(l) Any payment or discharge of a material lien or liability
of the Company or any of its Subsidiaries which was not shown on the Base
Balance Sheet or incurred in the ordinary course of business thereafter;
(m) Any obligation or liability incurred by the Company or any
of its Subsidiaries to any of its officers, directors, stockholders or
employees, or any loans or advances made by the Company or any of its
Subsidiaries to any of its officers, directors, stockholders or employees,
except normal compensation and expense allowances payable to officers or
employees or as disclosed in Schedule 2.10;
(n) Since December 31, l999 and prior to the date hereof, any
resignation or termination of the Company's representation of any of the
Company's top 50 Principals (determined by commissions paid to the Company in
fiscal 1999) (with respect to all or any of the products of such Principal or
with respect to any Customers), or any change in the commission rate paid by any
Principal, or any notice of same (for purposes of this Agreement, "Principal"
shall mean any manufacturer, grower, processor, producer, distributor or other
wholesaler, or any supplier whose goods, products or lines are offered for sale
or for retail merchandising by the Company, and "Customer" shall mean any
individual, firm, corporation or other business entity from which the Company
obtains product orders on behalf of its Principals);
(o) Any change in accounting methods or practices, credit
practices or collection policies used by the Company or any of its Subsidiaries
except as disclosed in Schedule 2.12;
(p) Any other transaction entered into by the Company or any
of its Subsidiaries other than transactions in the ordinary course of business;
or
(q) Any agreement or understanding whether in writing or
otherwise, for the Company or any of its Subsidiaries to take any of the actions
specified in paragraphs (a) through (p) above.
2.13 Ordinary Course. Since the date of the Base Balance Sheet, the
Company and each of its Subsidiaries has conducted its business only in the
ordinary course and consistently with its prior practices in all material
respects.
2.14 Approvals; Consents. Except as set forth on Schedule 2.14 attached
hereto, no approval, consent, authorization or exemption from or filing with any
person or entity not a party to this Agreement is required to be obtained or
made by the Company or any Subsidiary in connection with the execution and
delivery of this Agreement and the Transaction Documents or the consummation of
the transactions contemplated hereby and thereby.
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2.15 Banking Relations. All of the arrangements which the Company or
any of its Subsidiaries has with any banking institution are completely and
accurately described in Schedule 2.15 attached hereto, indicating with respect
to each of such arrangements the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the person
or persons authorized in respect thereof.
2.16 Intellectual Property.
(a) Except as described in Schedule 2.16, the Company and each
of its Subsidiaries has exclusive ownership of, or exclusive license to use, all
material patent, copyright, trade secret, trademark, or other proprietary rights
(collectively, "Intellectual Property") used or to be used in the business of
the Company or such Subsidiary as presently conducted or contemplated. Except as
disclosed on Schedule 2.16 attached hereto, all of the rights of the Company and
each Subsidiary in such Intellectual Property are freely transferable. There are
no claims or demands of any other person pertaining to any of such Intellectual
Property and no proceedings have been instituted, or are pending or threatened,
which challenge the rights of the Company or any Subsidiary in respect thereof.
Except as described in Schedule 2.16, the Company and each of its Subsidiaries
has the right to use, free and clear of claims or rights of other persons, all
customer lists, designs, manufacturing or other processes, computer software,
systems, data compilations, research results and other information required for
or incident to its products or its business as presently conducted or
contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or any of its Subsidiaries or used or to be used by the
Company or any of its Subsidiaries in their businesses as presently conducted or
contemplated, and all other items of Intellectual Property which are material to
the business or operations of the Company or any of its Subsidiaries, are listed
in Schedule 2.16. To the Knowledge of the Company, all of such patents, patent
applications, trademark registrations, trademark applications and registered
copyrights have been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of Copyrights, or the
corresponding offices of other jurisdictions as identified on said Schedule, and
have been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations of the United States and each
such jurisdiction.
(c) All licenses or other agreements under which the Company
or any of its Subsidiaries is granted rights in Intellectual Property are listed
in Schedule 2.16. All said licenses or other agreements are in full force and
effect, there is no material default by any party thereto, and, except as set
forth on Schedule 2.16, all of the rights of the Company or any Subsidiary
thereunder will continue in full force and effect upon consummation of the
transactions contemplated hereby. To the Knowledge of the Company, the licensors
under said licenses and other agreements have and had all requisite power and
authority to grant the rights
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purported to be conferred thereby. True and complete copies of all such licenses
or other agreements, and any amendments thereto, have been provided to Buyer.
(d) All licenses or other agreements under which the Company
or any of its Subsidiaries has granted rights to others in Intellectual Property
owned or licensed by the Company or such Subsidiary are listed in Schedule 2.16.
All of said licenses or other agreements are in full force and effect, there is
no material default by any party thereto, and, except as set forth on Schedule
2.16, all of the rights of Company or any Subsidiary thereunder will continue in
full force and effect upon consummation of the transactions contemplated hereby.
True and complete copies of all such licenses or other agreements, and any
amendments thereto, have been provided to Buyer.
(e) The Company and each of its Subsidiaries has taken all
steps required in accordance with sound business practice to establish and
preserve its ownership of all material Intellectual Property rights with respect
to its products, services and technology. Neither the Company nor any of its
Subsidiaries has made any valuable non-public information of the Company and its
Subsidiaries available to any person other than employees of Company and its
Subsidiaries except pursuant to written agreements requiring the recipients to
maintain the confidentiality of such information and appropriately restricting
the use thereof. The Company has no Knowledge of any infringement by others of
any material Intellectual Property rights of the Company or any Subsidiary.
(f) To the Knowledge of the Company, the present and
contemplated business, activities and products of the Company and its
Subsidiaries do not infringe any Intellectual Property of any other person. No
proceeding charging the Company or any of its Subsidiaries with infringement of
any adversely held Intellectual Property has been filed or is threatened to be
filed. To the Company's Knowledge, there exists no unexpired patent or patent
application which includes claims that would be infringed by or otherwise
adversely affect the products, activities or business of the Company or any
Subsidiary. Neither the Company nor any of its Subsidiaries is making
unauthorized use of any confidential information or trade secrets of any person,
including without limitation, to the Company's Knowledge, any former employer of
any past or present employee of Company or any of its Subsidiaries. Except as
set forth in Schedule 2.16, neither the Company or any Subsidiary nor, to the
Knowledge of the Company, any of their employees have any agreements or
arrangements with any persons other than the Company or its Subsidiaries related
to confidential information or trade secrets of such persons or restricting any
such employee's ability to engage in business activities of any nature. The
activities of their employees on behalf of the Company or any Subsidiary do not
violate any such agreements or arrangements known to the Company.
2.17 Year 2000.
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(a) (i) The Company has (x) undertaken a comprehensive and
detailed inventory, review and assessment of all areas within its
business and operations to address the "Year 2000 Problem" (i.e., the
risk that applications and/or hardware used by the Company or its
suppliers and/or providers may be unable to recognize and properly
perform date-sensitive functions involving certain dates prior to and
any date on or after January 1, 2000), (y) developed a detailed plan
and time line for becoming Year 2000 Compliant on a timely basis, and
(z) to date, implemented that plan in accordance with its timetable in
all material respects;
(ii) The Company's Year 2000 program includes feasible
contingency plans to ensure uninterrupted and unimpaired business
operation, including liquidity needs, in the event of its own or a
third party's failure to be Year 2000 Compliant;
(iii) To the Knowledge of the Company none of the
Company's Key Manufacturers and Key Principals will fail to be Year
2000 Compliant in any material respect; and
(iv) The Company reasonably believes that the Year 2000
Problem will not have a Material Adverse Effect.
(b) For purposes of this Section:
(i) "Key Manufacturers" means manufacturers whose business
failure, individually or in the aggregate, could result in a Material
Adverse Effect;
(ii) "Key Principals" means principals whose business
failure, individually or in the aggregate, could result in a Material
Adverse Effect;
(iii) "Year 2000 Compliant" means with respect to the
operations of the Company and its Subsidiaries or third parties, that
all computer-controlled processes, electronic communications
interfaces, software, hardware, machinery, equipment, programs, and
tools operate for all date-sensitive functions before, on or after
January 1, 2000 consistently, predictably, accurately and
unambiguously, without interruption or manual intervention.
2.18 Contracts. Except for contracts, commitments, plans, agreements
and licenses described in Schedule 2.18 (true and complete copies of which have
been delivered to Buyer), neither the Company nor any of its Subsidiaries is a
party to or subject to:
(a) any agreement for the sale, lease or other disposition of
products or other assets not made in the ordinary course of business;
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(b) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments, profit
sharing, collective bargaining or the like, or any contract or agreement with
any labor union;
(c) any employment contract or contract for services which
requires the payment of more than $10,000 annually or which is not terminable
within 30 days by the Company or a Subsidiary without liability for any penalty
or severance payment;
(d) any contract or agreement for the purchase of any
commodity, material or equipment except purchase orders in the ordinary course
for less than $2,500 each, such orders not exceeding $10,000 in the aggregate;
(e) any other contracts or agreements creating any obligations
of the Company or any of its Subsidiaries of $2,500 or more on an individual
basis or $10,000 or more on an aggregate basis, with respect to any such
contract or agreement not specifically disclosed elsewhere under this Agreement;
(f) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product from a
supplier;
(g) any contract or agreement which by its terms does not
terminate or is not terminable without penalty by the Company or a Subsidiary or
their successors within one year after the date hereof;
(h) any contract or arrangement with any sales agent or
distributor of products of the Company or any of its Subsidiaries;
(i) any contract containing covenants limiting the freedom of
the Company or any of its Subsidiaries to compete in any line of business or
with any person or entity;
(j) any contract or agreement for the purchase of any fixed
asset for a price in excess of $2,500 whether or not such purchase is in the
ordinary course of business;
(k) any license agreement (as licensor or licensee);
(l) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money; or
(m) any contract or agreement with any officer, employee,
director or stockholder of the Company or any of its Subsidiaries or with any
persons or organizations controlled by or affiliated with any of them.
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Except as set forth on Schedule 2.18, neither the Company nor any of
its Subsidiaries is in default under any such contracts, commitments, plans,
agreements or licenses described in said Schedule (individually a "Contract" and
collectively the "Contracts") and neither the Company nor any Subsidiary has any
Knowledge of conditions or facts which with notice or passage of time, or both,
would constitute a default, except where any such default could not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Contracts is valid and in full force and effect, and will be enforceable by the
Company against the other party thereto in accordance with its terms, except for
any non-competition provision or agreement limiting the freedom of any party
thereto to compete in any line of business or with any person or entity, the
benefits of which run to the Company or any Subsidiary, the enforceability of
which may be limited by the principles governing the availability of equitable
remedies.
2.19 Litigation. Schedule 2.19 hereto lists all currently pending
litigation and governmental or administrative proceedings or investigations to
which the Company or any of its Subsidiaries is a party. There is no litigation
or governmental or administrative proceeding or investigation pending or, to the
Knowledge of the Company or the Stockholders, threatened against the Company or
any of its Subsidiaries or their affiliates and there is no litigation or
governmental or administrative proceeding or investigation pending or, to the
Knowledge of the Company or the Stockholders, threatened against any Stockholder
relating to the business of the Company nor any Subsidiary which may have a
Material Adverse Effect or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement. With respect to each matter set
forth therein, Schedule 2.19 sets forth a description of the matter, the forum
(if any) in which it is being conducted, the parties thereto and the type and
amount of relief sought. There are no existing or threatened product liability,
warranty or other similar claims, or any facts upon which a material claim of
such nature could be based, against the Company or any of its Subsidiaries for
products or services which are defective or fail to meet any product or service
warranties except as disclosed in Schedule 2.19 hereto. Except as disclosed in
Schedule 2.19, no claim has been asserted against the Company or any of its
Subsidiaries for renegotiation or price redetermination of any business
transaction, and there are no facts upon which any such claim could be based.
2.20 Compliance with Laws. Except as set forth in Schedule 2.20 hereto,
the Company and each of its Subsidiaries is in compliance in all material
respects with all applicable statutes, ordinances, orders, judgements, decrees,
rules and regulations promulgated by any federal, state, municipal entity,
agency, court or other governmental authority which apply to the Company or any
Subsidiary or to the conduct of its business, and neither the Company nor any of
its Subsidiaries has received notice of a violation or alleged violation of any
such statute, ordinance, order, rule or regulation.
2.21 Insurance. The physical properties and assets of the Company and
each of its Subsidiaries are insured to the extent disclosed in Schedule 2.21
attached hereto and all such insurance policies and arrangements are disclosed
in said Schedule. Said insurance policies
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and arrangements are in full force and effect, all premiums with respect thereto
are currently paid, and the Company and each of its Subsidiaries is in
compliance in all material respects with the terms thereof. Said insurance is
adequate and customary for the business engaged in by the Company and each
Subsidiary and is sufficient for compliance by the Company and each Subsidiary
with all requirements of law and all agreements and leases to which the Company
or any Subsidiary is a party.
2.22 Powers of Attorney. Neither the Company nor any Subsidiary nor any
Stockholder has granted to any other person or entity any outstanding power of
attorney.
2.23 Finder's Fee. Neither the Company nor any of its Subsidiaries has
incurred or become liable for any broker's commission or finder's fee relating
to or in connection with the transactions contemplated by this Agreement.
2.24 Permits; Burdensome Agreements. Schedule 2.24 lists all permits,
registrations, licenses, franchises, certifications and other approvals required
from federal, state or local authorities in order for the Company and each of
its Subsidiaries to conduct its business other than Approvals the failure of
which to obtain could not, individually or in the aggregate have a Material
Adverse Effect (collectively, the "Approvals"). The Company and each of its
Subsidiaries has obtained all such Approvals, which are valid and in full force
and effect, and is operating in compliance therewith. Such Approvals include,
but are not limited to, those required under federal, state, or local statutes,
ordinances, orders, requirements, rules, regulations, or laws pertaining to
environmental protection, public health and safety, worker health and safety,
buildings, highways or zoning. Except as disclosed in Schedule 2.24, neither the
Company nor any of its Subsidiaries is subject to or bound by any agreement,
judgment, decree or order which could, individually or in the aggregate, have a
Material Adverse Effect.
2.25 Corporate Records; Copies of Documents. The corporate record books
of the Company and each of its Subsidiaries accurately record all corporate
action taken by their respective stockholders and board of directors and
committees. The copies of the corporate records of the Company and each of its
Subsidiaries, as made available to Buyer for review, are true and complete
copies of the originals of such documents. The Company has made available for
inspection and copying by Buyer and its counsel true and correct copies of all
documents referred to in this Section or in the Schedules delivered to Buyer
pursuant to this Agreement.
2.26 Transactions with Interested Persons. Except as set forth in
Schedule 2.26 hereto, neither the Company, any of its Subsidiaries, nor any
Stockholder, officer, supervisory employee or director of the Company or any of
its Subsidiaries nor, to the Knowledge of Company, any of their respective
spouses or family members, owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of Company or any of its
Subsidiaries,
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or any organization which has a material contract or arrangement with the
Company or any of its Subsidiaries. The terms of any such contract or
arrangement are set forth in Schedule 2.26.
2.27 Employee Benefit Programs.
(a) Schedule 2.27 sets forth a list of every Employee Program
that has been maintained by the Company or an Affiliate (including, without
limitation, any entity or business which the Company or any Subsidiary has
acquired by asset purchase, stock purchase, merger, consolidation or other
similar transaction) at any time during the six-year period ending on the
Closing Date.
(b) Each Employee Program which has ever been maintained by
the Company or an Affiliate and which has been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section and
has, in fact, been qualified under the applicable section of the Code from the
effective date of such Employee Program through and including the Closing Date
(or, if earlier, the date that all of such Employee Program's assets were
distributed). Except as set forth on Schedule 2.27, no event or omission has
occurred which would cause any such Employee Program to lose its qualification
or otherwise fail to satisfy the relevant requirements to provide tax-favored
benefits under the applicable Code Section (including without limitation Code
Sections 105, 125, 401(a) and 501(c)(9)). Except as set forth on Schedule 2.27,
each asset held under any such Employee Program may be liquidated or terminated
without the imposition of any redemption fee, surrender charge or comparable
liability. No partial termination (within the meaning of Section 411(d)(3) of
the Code) has occurred with respect to any Employee Program.
(c) Except as set forth on Schedule 2.27, neither the Company
nor any Affiliate knows, nor should any of them reasonably know, of any failure
of any party to comply with any laws applicable with respect to the Employee
Programs that have ever been maintained by the Company or any Affiliate. With
respect to any Employee Program ever maintained by the Company or any Affiliate,
there has been no (i) "prohibited transaction," as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Code
Section 4975, (ii) failure to comply with any provision of ERISA, other
applicable law, or any agreement, or (iii) non-deductible contribution, which,
in the case of any of (i), (ii), or (iii), could subject the Company or any
Affiliate to liability either directly or indirectly (including, without
limitation, through any obligation of indemnification or contribution) for any
damages, penalties, or taxes, or any other loss or expense. Except as disclosed
on Schedule 2.27, no litigation or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or threatened with respect to any such Employee
Program. All payments and/or contributions required to have been made (under the
provisions of any agreements or other governing documents or applicable law)
with respect to all Employee Programs ever maintained by the Company or any
Affiliate, for all periods prior to the Closing Date, either
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have been made or have been accrued (and all such unpaid but accrued amounts are
described on Schedule 2.27).
(d) Neither the Company nor any Affiliate has incurred any
liability under Title IV of ERISA which has not been paid in full prior to the
Closing. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program ever maintained by the Company or
any Affiliate and subject to Code Section 412 or ERISA Section 302. With respect
to any Employee Program maintained by the Company or any Affiliate and subject
to Title IV of ERISA, there has been no (nor will there be any as a result of
the transactions contemplated by this Agreement) (i) "reportable event," within
the meaning of ERISA Section 4043 or the regulations thereunder, for which the
notice requirement is not waived by the regulations thereunder, and (ii) event
or condition which presents a material risk of a plan termination or any other
event that may cause the Company or any Affiliate to incur liability or have a
lien imposed on its assets under Title IV of ERISA. Except as described in
Schedule 2.27, no Employee Program maintained by the Company or any Affiliate
and subject to Title IV of ERISA (other than a Multiemployer Plan) has any
"unfunded benefit liabilities" within the meaning of ERISA Section 4001(a)(18),
as of the Closing Date. Neither the Company nor any Affiliate has ever
maintained a Multiemployer Plan. Except as described on Schedule 2.27, none of
the Employee Programs ever maintained by the Company or any Affiliate has ever
provided health care or any other non-pension benefits to any employees after
their employment is terminated (other than as required by part 6 of subtitle B
of Title I of ERISA) or has ever promised to provide such post-termination
benefits.
(e) With respect to each Employee Program maintained by the
Company within the six years preceding the Closing Date, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to Buyer: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the date hereof; (ii) the most recent IRS determination or approval letter
with respect to such Employee Program under Code Section 401(a) or 501(c)(9),
and any applications for determination or approval subsequently filed with the
IRS; (iii) the six most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the six most recent
actuarial valuation reports completed with respect to such Employee Program; (v)
the summary plan description for such Employee Program (or other descriptions of
such Employee Program provided to employees) and all modifications thereto; (vi)
any insurance policy (including any fiduciary liability insurance policy or
fidelity bond) related to such Employee Program; (vii) any registration
statement or other filing made pursuant to any federal or state securities law
and (viii) all correspondence to and from any state or federal agency within the
last six years with respect to such Employee Program.
(f) Each Employee Program required to be listed on Schedule
2.27 may be amended, terminated, or otherwise modified by the Company to the
greatest extent permitted
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by applicable law, including the elimination of any and all future benefit
accruals under any Employee Program and no employee communications or provision
of any Employee Program document has failed to effectively reserve the right of
the Company or the Affiliate to so amend, terminate or otherwise modify such
Employee Program.
(g) Each Employee Program ever maintained by the Company
(including each non-qualified deferred compensation arrangement) has been
maintained in compliance with all applicable requirements of federal and state
securities laws including (without limitation, if applicable) the requirements
that the offering of interests in such Employee Program be registered under the
Securities Act of 1933, as amended, and/or state "Blue Sky" laws.
(h) Each Employee Program ever maintained by the Company or an
Affiliate has complied with the applicable notification and other applicable
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985,
Health Insurance Portability and Accountability Act of 1996, the Newborns' and
Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996 and
the Women's Health and Cancer Rights Act of 1998.
(i) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but
not limited to, multiple employer welfare arrangements (within
the meaning of ERISA Section 3(40)), plans to which more than
one unaffiliated employer contributes and employee benefit
plans (such as foreign or excess benefit plans) which are not
subject to ERISA; (B) all stock option plans, stock purchase
plans, bonus or incentive award plans, severance pay policies
or agreements, deferred compensation agreements, supplemental
income arrangements, vacation plans, and all other employee
benefit plans, agreements, and arrangements (including any
informal arrangements) not described in (A) above, including
without limitation, any arrangement intended to comply with
Code Section 120, 125, 127, 129 or 137; and (C) all plans or
arrangements providing compensation to employee and
non-employee directors. In the case of an Employee Program
funded through a trust described in Code Section 401(a) or an
organization described in Code Section 501(c)(9), or any other
funding vehicle, each reference to such Employee Program shall
include a reference to such trust, organization or other
vehicle.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides benefits
under or through such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or
provide benefits under or through such Employee Program, or
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if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents,
or beneficiaries).
(iii) An entity is an "Affiliate" of the Company if
it would have ever been considered a single employer with the
Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension
or welfare benefit plan to which more than one unaffiliated
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
(j) The Company's liabilities with respect to deferred
compensation as of the Closing Date do not exceed $160,000 in the aggregate.
(k) Schedule 2.27 accurately sets forth the current salaries
and hourly rates of the Company's employees as of the Closing Date together with
a reasonable estimate of the annualized salaries payable to the Company's
part-time employees. The aggregate amount of full-time salaries as of the
Closing is set forth on Schedule 2.27.
2.28 Environmental Matters.
(a) Except as set forth in Schedule 2.28 hereto, and except as
could not have a Material Adverse Effect, (i) neither the Company nor any of its
Subsidiaries has ever generated, transported, used, stored, treated, disposed
of, or managed any Hazardous Waste (as defined below); (ii) no Hazardous
Material has ever been or is threatened to be spilled, released, or disposed of
at any site presently or formerly owned, operated, leased, or used by the
Company or any of its Subsidiaries, or has ever been located in the soil or
groundwater at any such site; (iii) no Hazardous Material has ever been
transported from any site presently or formerly owned, operated, leased, or used
by the Company or any of its Subsidiaries for treatment, storage, or disposal at
any other place; (iv) neither the Company nor any of its Subsidiaries presently
owns, operates, leases, or uses, nor has it previously owned, operated, leased,
or used any site on which underground storage tanks are or were located; and (v)
no lien has ever been imposed by any governmental agency on any property,
facility, machinery, or equipment owned, operated, leased, or used by the
Company or any of its Subsidiaries in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Schedule 2.28 hereto, and except as
could not have a Material Adverse Effect, (i) neither the Company nor any of its
Subsidiaries has any liability under, nor has it ever violated, any
Environmental Law (as defined below); (ii) the Company and each of its
Subsidiaries, any property owned, operated, leased, or used by any of them, and
any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (iii) neither the Company or any of its
Subsidiaries has ever entered into
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or been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither the Company nor any of its Subsidiaries has
any reason to believe that any of the items enumerated in clause (iii) of this
subsection will be forthcoming.
(c) Except as set forth in Schedule 2.28 hereto, and except as
could not have a Material Adverse Effect, no site owned, operated, leased, or
used by the Company or any of its Subsidiaries contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) The Company has provided to Buyer copies of all documents,
records, and information available to the Company or any of its Subsidiaries
concerning any environmental or health and safety matter relevant to the Company
or any of its Subsidiaries, whether generated by the Company, its Subsidiaries,
or others, including without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 2.28, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or to
human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the foreign, federal, state, or local level, whether existing as of
the date hereof, previously enforced, or subsequently enacted; and (iv)
"Company" shall mean and include Company, each of its Subsidiaries and all other
entities for whose conduct the Company or any of its Subsidiaries is or may be
held responsible under any Environmental Law.
2.29 List of Directors and Officers. Schedule 2.29 hereto contains a
true and complete list of all current directors and officers of the Company and
each of its Subsidiaries. In addition, Schedule 2.29 hereto contains a list of
all managers, employees and consultants of the Company and any Subsidiary who,
individually, have received or are scheduled to receive compensation from the
Company or any of its Subsidiaries for the fiscal year ending October 31, 1999
in excess of $100,000 in each case such Schedule includes the current job title,
current compensation rate and aggregate compensation during the preceding twelve
(12) months of each such individual.
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2.30 Employees; Labor Matters. The Company and its Subsidiaries employ
a total of 399 full-time employees and 259 part-time employees. Neither the
Company nor any of its Subsidiaries is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for it to the date hereof or amounts
required to be reimbursed to such employees. Upon termination of the employment
of any of said employees, neither the Company, any Subsidiary nor Buyer will by
reason of the transactions contemplated under this Agreement or anything done
prior to the Closing be liable to any of said employees for so-called "severance
pay" or any other payments. Neither the Company nor any Subsidiary has any
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment. Except
as set forth on Schedule 2.30, the Company and each of its Subsidiaries is in
compliance with all applicable laws and regulations respecting labor,
employment, fair employment practices, work place safety and health, terms and
conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any other concerted interference with normal
operations which are existing, pending or, to the Knowledge of the Company or
any Stockholder, threatened against or involving the Company or any of its
Subsidiaries. No question concerning representation exists respecting any
employees of the Company or any of its Subsidiaries. There are no grievances,
complaints or charges that have been filed against the Company or any of its
Subsidiaries under any dispute resolution procedure (including, but not limited
to, any proceedings under any dispute resolution procedure under any collective
bargaining agreement) that could, individually or in the aggregate, have a
Material Adverse Effect and there is no arbitration or similar proceeding
pending and no claim therefor has been asserted. No collective bargaining
agreement is in effect or is currently being or is about to be negotiated by the
Company or any of its Subsidiaries. Except as set forth on Schedule 2.30,
neither the Company nor any of its Subsidiaries has received any information
indicating that any of its employment policies or practices is currently being
audited or investigated by any federal, state or local government agency. The
Company and each of its Subsidiaries is, and at all times since November 6, 1986
has been, in compliance in all material respects with the requirements of the
Immigration Reform Control Act of 1986.
2.31 Principals.
(a) The list of the Company's Principals and the aggregate
brokerage commission revenues received by the Company during the twelve-month
period ended October 31, 1999 from each such Principal, attached hereto as
Schedule 2.31, is, as of the date hereof, true, correct and complete. The
Company has delivered to Buyer true and complete copies of all written brokerage
agreements and/or letters of appointment with or from the Company's 25
Principals, which paid the greatest amount of commission revenues for the twelve
(12) months ended October 31, 1999, in effect as of the date of this Agreement.
Set forth on Schedule 2.31 is a list of all other agreements and documents with
or involving any person or entity and relating to financial obligations of the
Company with respect to commissions or other payments
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received by the Company (or an affiliate of the Company) from Principals. Except
as set forth on Schedule 2.31, since October 31, 1997, the Company has had no
commitment, understanding or agreement with any Principal or any other person or
entity relating to payments to be made by the Company to any person or entity
computed in whole or in part with respect to sales of or commissions paid or to
be paid by any Principal.
(b) Except as set forth on Schedule 2.31, the Company is not
currently, and since October 31, 1997 has not been, subject to any notice of
probation from any Principal. Except as set forth on Schedule 2.31, since
October 31, 1997, the Company has not received any oral or written communication
from any Principal which places the Company on probation or otherwise suggests,
threatens or implies possible termination of the Company's appointment as broker
for such Principal, any reduction in the commission rate paid to the Company or
any reduction as to the geographic area, Customers or products represented by
the Company, conditionally or unconditionally.
(c) To the Knowledge of the Company and the Stockholders, none
of the Company's 50 Principals which paid the greatest amount of commission
revenues for the twelve (12) months ended October 31, 1999 intends to, or is
considering, amending the terms of the Company's brokerage agreement with such
Principal in order or reappoint, or continue the appointment of, the Company as
broker with respect to a lesser portion of the applicable territory than the
greatest portion of such area in which, or with respect to fewer than the
greatest number of product items or Customers than, the Company acted as broker
for such Principal during the twelve-month period ended October 31, 1999, or at
a lower commission rate than the highest rate paid by such Principal to the
Company with respect to sales during such period. The relationships of the
Company with its 50 Principals which paid the greatest amount of commission
revenues for the twelve (12) months ended October 31, 1999 are good commercial
working relationships.
(d) Except as set forth on Schedule 2.31, there are, and since
October 31, 1998 there have been, no disputes or claims involving individually
in excess of $2,500 or in the aggregate in excess of $10,000, (i) between the
Company and any Principal, (ii) between the Company and any Customer, or (iii)
to the Knowledge of the Company, between any Principal and any Customer. As used
in this Section 2.30(d), the terms "disputes" or "claims" shall mean (A) matters
which, to the Knowledge of the Company, have been referred to counsel or are the
subject of litigation, or (B) matters as to which a Principal has threatened to
seek recourse against the Company, or may be reasonably expected to seek
recourse against the Company, if such matter is not resolved to the satisfaction
of such Principal.
(e) Since October 31, 1998, with respect to all Principals (i)
which have terminated such party's brokerage relationship with the Company or
(ii) which have reduced or otherwise adversely modified the geographic territory
in which the Company acts as broker or the product item(s) represented by the
Company or (iii) from which the Company has resigned,
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in whole or in part, its representation as a food broker, Schedule 2.31(e) sets
forth the name of such Principal and the effective date of such termination,
reduction or resignation.
(f) Since October 31, 1998, with respect to all Principals
which have entered into a brokerage relationship with the Company, or which have
substantially increased an existing brokerage relationship with the Company,
Schedule 2.31(f) sets forth (i) the name of such Principal and the date on which
such Principal entered into a brokerage agreement with the Company and (ii) the
Company's estimated annualized commission revenues attributable to such
Principal for the twelve months ending September 30, 2000, which estimates were
reasonable when made and continue to be reasonable.
2.32 Absence of Improper Payments.
(a) Since October 31, 1989 the Company: (i) has not made any
contributions, payments or gifts of its property to or for the private use of
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payments or gift is illegal under the laws of the
United States, any state thereof or any other jurisdiction (foreign or
domestic), (ii) has not established or maintained any unrecorded fund or asset
for any purpose, or made any false or artificial entries on its books or records
for any reason, (iii) has not made any payments to any person where the Company
intended or understood that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the payment,
(iv) has not made any contribution, or reimbursed any political gift or
contribution made by any other person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law or (v) has not misused, misapplied or improperly handled,
administered or managed market development or promotional funds or market
development or promotional fund accounts in any material respect.
(b) Schedule 2.32 sets forth each of the Company's promotional
funds.
2.33 Transfer of Shares. Since October 31, 1993, to the Knowledge of
the Company, no holder of stock of the Company or any Subsidiary has at any time
transferred any of such stock to any employee of the Company or any Subsidiary,
which transfer constituted or could be viewed as compensation for services
rendered to the Company or any Subsidiary by said employee.
2.34 Stock Repurchase. Since October 31, 1993, except as set forth on
Schedule 2.34, neither the Company nor any Subsidiary has redeemed or
repurchased, or entered into any written or oral agreement to redeem or
repurchase, any of its capital stock.
2.35 Disclosure. The representations, warranties and statements
contained in this Agreement and in the agreements, documents, instruments,
certificates, Exhibits and Schedules delivered by the Company pursuant to this
Agreement to Buyer do not contain any untrue
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statement of a material fact, and, when taken together, do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made.
SECTION 3. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS.
3.1 Making of Covenants and Agreements. The Company, each Subsidiary
and each Stockholder jointly and severally hereby make the covenants and
agreements set forth in this Section 3 and the Stockholders agree to cause the
Company and its Subsidiaries to comply with such agreements and covenants.
3.2 Cooperation. The Company, each Subsidiary and each Stockholder
shall cooperate with all reasonable requests of the Buyer or any of its
representatives and agents to more effectively consummate the transactions
contemplated hereby and the transactions referred to herein.
3.3 Consents. The Company, each Subsidiary and each Stockholder shall
use commercially reasonable efforts to obtain or cooperate with the Buyer in
obtaining all consents, authorizations and approvals of third parties including,
without limitation, any requisite consent of any governmental authorities,
regulatory agencies and other entities necessary in connection with the
consummation of the transactions contemplated hereby or referred to herein.
3.4 Notice of Default. Promptly upon the occurrence of, or promptly
upon the Company, any Subsidiary or any Stockholder becoming aware of the
impending or threatened occurrence of, any event which would cause or constitute
a breach or default, or would have caused or constituted a breach or default had
such event occurred or been known to the Company, any Subsidiary or any
Stockholder prior to the date hereof, of any of the representations, warranties
or covenants of the Company or any Stockholder contained in or referred to in
this Agreement or in any Schedule or Exhibit referred to in this Agreement, the
Company, any Subsidiary or any Stockholder shall give detailed written notice
thereof to the Buyer and the Company, such Subsidiary or each Stockholder shall
use its or his reasonable best efforts to prevent or promptly remedy the same.
3.5 Conduct of Business. Except as contemplated by this Agreement or as
is necessary to effectuate the transactions contemplated hereby, between the
date of this Agreement and the Closing Date, the Company and each Subsidiary
shall, and each Stockholder shall cause the Company and each Subsidiary to:
(a) Conduct its business in the ordinary course and refrain
from changing or introducing any method of management or operations except in
the ordinary course of business consistent with prior practices;
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(b) Refrain from making any change or incurring any obligation
to make a change in its Articles of Incorporation, By-laws or authorized or
issued capital stock;
(c) Refrain from declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock or
making any direct or indirect redemption, purchase or other acquisition of its
stock except in the ordinary course of the administration of the ESOT;
(d) Refrain from making any purchase, sale or disposition of
any asset or property costing more than $10,000 other than in the ordinary
course of business, from purchasing any capital asset for use in the business
costing more than $10,000 and from mortgaging, pledging, subjecting to a lien or
otherwise encumbering any of the assets of the Company or any Subsidiary other
than in the ordinary course of business;
(e) Refrain from incurring or assuming any liability,
obligation or indebtedness for borrowed money in an aggregate amount in excess
of $50,000 incurring or assuming any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(f) Refrain from canceling any material indebtedness owed to
the Company or any Subsidiary or waiving any claims or rights of substantial
value, other than in the ordinary course of business consistent with past
practice;
(g) Refrain from making any change in the compensation payable
or to become payable to any of its officers, employees, agents or independent
contractors except in connection with promotions made, or bonuses paid, in the
ordinary course of business consistent with past practices;
(h) Refrain from adopting or amending any Employee Program or
collective bargaining agreement, except as may be required by law;
(i) Refrain from prepaying loans (if any) from its
Stockholders, officers or directors or making any change in such borrowing
arrangements;
(j) Refrain from making any change in any method of accounting
or accounting practice or policy other than those required by GAAP;
(k) Use its commercially reasonable efforts consistent with
its prior business practices to prevent any change with respect to its
management and supervisory personnel and banking arrangements;
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(l) Use its commercially reasonable efforts consistent with
its past practices to keep intact its business organizations, to keep available
its present employees and to preserve the goodwill of all suppliers, customers
and others having business relations with it in connection with the Company or
any Subsidiary;
(m) Have in effect and maintain at all times all insurance of
the kind described in Section 2.21 above or equivalent insurance with any
substitute insurers;
(n) Maintain its properties, facilities, equipment and other
assets in as good working order and condition as of the date of this Agreement,
ordinary wear and tear excepted;
(o) Perform all its material obligations under debt and lease
instruments and all other agreements relating to or affecting its assets,
properties, equipment and rights;
(p) Refrain from entering into any new lease agreements other
than in the ordinary course of business without the prior knowledge and written
consent of Buyer; and
(q) Maintain compliance with all applicable permits, rules,
laws, regulations, consent orders and the like.
3.6 Acquisition Proposals. Except in connection with the transactions
contemplated hereby, unless and until this Agreement shall have been terminated
in accordance with its terms, neither the Company, nor any Subsidiary nor any
Stockholder shall cause the Company to (a) take any action to solicit, initiate
submission of or encourage any Acquisition Proposal (as defined below), (b)
participate in any substantive discussions or negotiations regarding an
Acquisition Proposal with any person other than the Buyer and Buyer's
representatives or (c) furnish any information with respect to or afford access
to the properties, books or records of the Company or any Subsidiary to any
person who is known by the Company, such Subsidiary or the Stockholder to be
considering making or has made an offer with respect to an Acquisition Proposal
other than the Buyer or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any person
other than by the Buyer and its representatives to do or seek any of the
foregoing. The Company and each Stockholder shall promptly notify the Buyer upon
receipt of any offer or notice that any person is considering making an offer
with respect to an Acquisition Proposal and shall not accept any such offer for
so long as this Agreement remains in effect. For purposes hereof, an
"Acquisition Proposal" shall include any offer or other proposal to acquire or
purchase all or a portion of the capital stock or any assets of, or any equity
interest in, the Company or any Subsidiary, any merger or business combination
with the Company or any Subsidiary, any public or private offering of shares of
the capital stock of the Company or any Subsidiary, or any other acquisition or
financing involving the Company or any Subsidiary.
3.7 Transfers of Shares; Voting. Unless and until this Agreement shall
have been terminated, none of the Stockholders shall directly or indirectly
exchange, deliver, assign,
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pledge, encumber or otherwise transfer or dispose of any of the Company Shares
which he holds of, nor shall any Stockholder directly or indirectly grant any
right of any kind to acquire, dispose of, vote or otherwise control in any
manner any Company Shares.
3.8 Confidentiality. The Company, each Subsidiary and the Stockholders
shall hold in strict confidence, and will not use, any confidential or
proprietary data or information obtained from Buyer with respect to the Buyer's
business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in the Buyer's industry or which has been disclosed to the
Company, any Subsidiary or any Stockholder by third parties which have a right
to do so shall not be deemed confidential or proprietary information for
purposes of this Agreement. If the transaction contemplated by this Agreement is
not consummated, the Company, each Subsidiary and each Stockholder will return
to the Buyer all copies of such data and information, including but not limited
to financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
prepared by or made available to the Company, any Subsidiary or any Stockholder
in connection with the transaction.
3.9 Tax Returns. The Company, each Subsidiary and each Stockholder
shall use its or his best efforts to cause the Company and each Subsidiary, in
accordance with applicable law, (i) to promptly prepare and file on or before
the due date or any extension thereof all federal, state and local tax returns
required to be filed by them with respect to taxable periods of the Company that
include any period ending on or before the Closing Date and (ii) to pay all
Taxes of the Company shown on such returns attributable to periods ending on or
before the Closing Date.
3.10 Options and Other Rights. The Company, each Subsidiary and each
Stockholder shall use its or his best efforts to cause each person or entity
which holds options, warrants or other rights or securities exercisable for or
convertible into shares of any class of equity security of the Company or any
Subsidiary to agree to the termination or cancellation of such rights or
securities pursuant to a written agreement in form and substance satisfactory to
the Buyer and its counsel.
3.11 Consummation of Agreement. The Company, each Subsidiary and each
Stockholder shall use its or his best efforts to perform and fulfill all
conditions and obligations on his part to be performed and fulfilled under this
Agreement to the end that the transactions contemplated by this Agreement be
fully carried out.
3.12 Fees and Expenses. As of the Closing Date, each Stockholder other
than the ESOT shall have paid, or shall have caused or arranged for the payment
of, all fees and expenses incurred by or on behalf of any such party arising out
of or in connection with the transactions contemplated by this Agreement;
provided that the Company shall not have paid or reimbursed any party other than
the ESOT or on behalf of the ESOT for any such amount. The Company shall pay the
ESOT's expenses arising out of or in connection with the transactions
contemplated by this Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
4.1 Making of Representations and Warranties. As a material inducement
to the Company and the Stockholders to enter into this Agreement and consummate
the transactions contemplated hereby, Buyer hereby makes the representations and
warranties to the Company and the Stockholders contained in this Section 4.
4.2 Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas with
full corporate power to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is conducted by it.
4.3 Authority of Buyer. Buyer has full right, authority and power to
enter into this Agreement, the Notes and each agreement, document and instrument
to be executed and delivered by Buyer pursuant to this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery and
performance by Buyer of this Agreement, the Notes and each such other agreement,
document and instrument have been duly authorized by all necessary corporate
action of Buyer and no other action on the part of Buyer is required in
connection therewith. This Agreement, the Notes and each other agreement,
document and instrument executed and delivered by Buyer pursuant to this
Agreement constitute, or when executed and delivered will constitute, valid and
binding obligations of Buyer enforceable in accordance with their terms.
4.4 Litigation. There is no litigation pending or, to the Buyer's
Knowledge, threatened against Buyer which would prevent or hinder the
consummation of the transactions contemplated by this Agreement or the payment
of the Notes.
4.5 Finder's Fee. Except for the arrangements between the Buyer and
Monroe & Company, LLC and between the Buyer and Richmont Capital Partners I,
L.P. as previously disclosed to the Company, Buyer has not incurred or become
liable for any broker's commission or finder's fee relating to or in connection
with the transactions contemplated by this Agreement.
4.6 No Conflicts. The execution, delivery and performance by Buyer of
this Agreement and each other agreement contemplated by this Agreement to which
such entity is a party does not and will not with or without the giving of
notice or the lapse of time or both, (a) violate any provision of Buyer's
Certificate of Incorporation, as amended to date, (b) constitute a violation of,
or conflict with or result in any breach of, acceleration of any obligation
under, right of termination under, or default under, any agreement or instrument
to which Buyer is a party or by which either of them is bound, (c) to the
Knowledge of Buyer violate any judgment, decree, order, statute, law, rule or
regulation applicable to Buyer (d) except as set forth on Schedule 4.6 attached
hereto, require Buyer to obtain any approval, consent or waiver
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of, or to make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made or (e) result in the creation or imposition
of any Lien on any of property or assets of Buyer.
4.7 Reports and Financial Statements. From January 1, 1999 to the date
hereof, except where failure to have done so did not and would not have a
Material Adverse Effect on Buyer, Buyer has filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the Securities and Exchange Commission (the "SEC"), including, but
not limited to, Forms 10-K, Forms 10-Q, Forms 8-K and proxy statements
(collectively, the "Buyer Reports"). As of their respective dates (but taking
into account any amendments filed prior to the date of this Agreement), the
Buyer Reports complied in all material respects with all the rules and
regulations promulgated by the SEC and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Since the date of the most recent
Buyer Report, there has been no event that Buyer is required to disclose on Form
8-K, other than as may be required with respect to the transactions contemplated
hereby.
SECTION 5. COVENANTS OF BUYER.
5.1 Making of Covenants and Agreements. Buyer hereby makes to the
Company and the Stockholders the covenants and agreements set forth in this
Section 5, and agrees to comply with and perform all covenants and agreements
contained in this Section 5.
5.2 Consents. Buyer shall use commercially reasonable efforts to obtain
all consents, authorizations and approvals of third parties including, without
limitation, any requisite consent of any governmental authorities, regulatory
agencies and other entities necessary in connection with the consummation of the
transactions contemplated hereby or referred to herein.
5.3 Competitor Proposals. Except in connection with the transactions
contemplated hereby, unless and until this Agreement shall have been terminated
in accordance with its terms, neither the Buyer nor any of the Buyer's
directors, officers, employees, affiliates, agents or representatives (each, a
"Buyer Representative") will, nor will Buyer nor any Buyer Representative permit
any third party to, directly or indirectly, (a) take any action to solicit,
initiate submission of or encourage or entertain, any proposal or offer from any
person relating to any acquisition or purchase of any of the assets of, or any
capital stock or other equity interest in, any company engaged in the food
brokerage business principally in the same geographic area in which the Company
engages in the food brokerage business (a "Competitor"), any merger, business
combination or similar transaction with a Competitor (a "Competitor Proposal")
(b) participate in any discussions or negotiations regarding a Competitor
Proposal with any person or entity other than the Company and its
representatives, or (c) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do any of the foregoing.
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5.4 Cooperation. Buyer shall cooperate with all reasonable requests of
the Company or any of its representatives and agents to more effectively
consummate the transactions contemplated hereby and the transactions referred to
herein.
5.5 Notice of Default. Promptly upon the occurrence of, or promptly
upon Buyer becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to
Buyer prior to the date hereof, of any of the representations, warranties or
covenants of Buyer contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, Buyer shall give detailed
written notice thereof to the Company and shall use its or his reasonable best
efforts to prevent or promptly remedy the same.
5.6 Confidentiality. Buyer shall hold in strict confidence, and will
not use, any confidential or proprietary data or information obtained from the
Company with respect to the Company's business or financial condition except for
the purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the Company's industry or
which has been disclosed to Buyer by third parties which have a right to do so
shall not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not consummated
Buyer will return to the Company all copies of such data and information,
including but not limited to financial information, customer lists, business and
corporate records, worksheets, test reports, tax returns, lists, memoranda, and
other documents prepared by or made available to Buyer in connection with the
transaction.
SECTION 6. CONDITIONS.
6.1 Conditions to the Obligations of Buyer. The obligation of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company and the Stockholders contained in
Section 2 shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing; and the Company and
each of the Stockholders shall, on or before the Closing, have performed all of
their obligations hereunder which by the terms hereof are to be performed on or
before the Closing; each of the conditions specified in this Section 6.1 shall
have been satisfied or waived (in whole or in part) in writing by the Buyer; and
on the Closing Date a certificate to such effect executed on behalf of each the
Company and the Stockholder Representative on behalf of each Stockholder shall
be delivered to the Buyer.
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(b) Authorization. The Board of Directors of the Company shall
have duly adopted resolutions in form reasonably satisfactory to the Buyer and
shall have taken all action necessary for the purpose of authorizing the Company
to consummate the transactions contemplated by this Agreement in accordance with
the terms thereof.
(c) Certificate from Officers. The Company shall have
delivered to Buyer a certificate of the Company's President and Chief Financial
Officer dated as of the Closing to the effect that the statements set forth in
paragraph (a) and (b) above in this Section 6.1 are true and correct.
(d) No Material Adverse Change. There shall have been no
material adverse change in the financial condition, prospects, properties,
assets, liabilities, operations, business or prospects of the Company or any
Subsidiary since the date of the Base Balance Sheet, whether or not in the
ordinary course of business, provided, however, that for purposes of this
Section 6.1(d) a net loss (i.e., new business less lost business, all calculated
on an annualized basis) of less than $3.4 million in annualized commission
revenues (excluding lost revenues attributable to XxXxxxxxx) shall not be
considered to be such a material adverse change. For purposes of this Section
6.1(d), lost business shall be measured as of December 31, 1999.
(e) Approval of Buyer's Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Xxxxxxx, Procter & Xxxx LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates and other documents in form satisfactory to such counsel, as
Buyer may reasonably require from the Company and the Stockholders to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of the
Stockholders and the Company and the fulfillment of their respective covenants.
(f) Indemnification Escrow Agreement. The ESOT and the Escrow
Agent shall have executed and delivered the Indemnification Escrow Agreement,
substantially in the form attached hereto as Exhibit B.
(g) Opinions of Counsel.
(i) On the Closing Date, Buyer shall have received from
Xxxxxxxx & Xxxxxxx, counsel for the Company and the Stockholders other than the
ESOT, an opinion as of said date, substantially in form attached hereto as
Exhibit D.
(ii) On the Closing Date, Buyer shall have received from
XxXxxxxxx, Will & Xxxxx, counsel for the ESOT, an opinion as of said date,
substantially in the form attached hereto as Exhibit E.
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(h) No Litigation. There shall have been no determination by
the Company, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state, or other
governmental authority of litigation, proceedings or other action against Buyer,
the Company, any Subsidiary or any Stockholder. The transactions contemplated
hereby shall not be in violation of any law or regulation and shall not be
subject to any injunction, stay or restraining order.
(i) Consents. The Company or the Stockholders shall have made
all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by the Company, its Subsidiaries
or the Stockholders in connection with the execution and delivery of this
Agreement, the performance of the transactions contemplated hereby and the
continued operation of the business of the Company and its Subsidiaries by Buyer
subsequent to the Closing; and the Company, the Stockholders and Buyer shall
have received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to Buyer, from all third parties, including,
without limitation, the expiration or early termination of all applicable
premerger waiting periods pursuant to the Xxxx-Xxxxx-Xxxxxx Anti-Trust
Improvement Act of 1976, as amended (the "HSR Act"), and those approvals by all
other applicable governmental authorities, regulatory agencies, lessors, lenders
and contract parties, required to permit the continuation of the business of the
Company and each Subsidiary and the consummation of the transactions
contemplated by this Agreement, and to avoid a breach, default, termination,
acceleration or modification of any indenture, loan or credit agreement or any
other agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award as a result of, or in connection with, the execution and
performance of this Agreement.
(j) Compensation Expense. The aggregate compensation expense
of the Company (including, without limitation, expenses for salary, wages,
benefits, bonuses and commissions) shall be in an amount not in excess of $25.0
million on an annualized basis.
(k) Employment Agreements. Each of the persons identified in
Schedule 6.1 (k) shall have executed and delivered to Buyer an Employment and
Noncompetition Agreement in substantially the form of Exhibit F attached hereto.
(l) Business Relations. Buyer shall be reasonably satisfied
based on personal interviews with the Principals and Customers that such
Principals and Customers intend to continue their current level of business with
the Company and its Subsidiaries after the closing.
(m) Employee Programs. The Company shall have taken all steps
necessary under the relevant documents and applicable law to maintain the
qualification of each
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Employee Program identified on Schedule 2.27 notwithstanding the purchase of the
Company Shares by Buyer.
(n) Resignations. The Company shall have delivered to Buyer
the resignations of all of the Directors (including Advisory Directors) and
Officers of the Company and each Subsidiary, such resignations to be effective
at the Closing.
(o) Releases. The Company shall have delivered to Buyer
general releases signed by each of the Stockholders of all claims which any of
them have against the Company and any Subsidiary in the form attached here to as
Exhibit G.
(p) Due Diligence and Disclosure Schedules. Buyer, in its sole
discretion, shall be satisfied with the results of its legal, accounting,
business, environmental, title and other due diligence review of the Company and
the Subsidiaries. Buyer, in its sole discretion, shall, be satisfied with the
form and substance of the Disclosure Schedules to this Agreement which shall
have been delivered to Buyer by the Company and the Stockholders on or prior to
the date hereof.
(q) Good Standing. At or prior to the Closing, Buyer shall
have received from the Company and each non-dissolved Subsidiary a certificate
of good standing from the Secretary of State of the state of their respective
incorporation and each other jurisdiction in which the Company or any
non-dissolved Subsidiary is qualified to do business.
(r) Financing and Related Approval. Buyer shall have received
the approval and consent of the lenders under that certain Amended and Restated
Credit Agreement, dated as of August 18, 1999 (the "Credit Agreement"), among
Buyer, the lenders party thereto and First Union National Bank, as agents for
the lenders, as amended from time to time thereafter, necessary for the Buyer to
consummate the transactions contemplated by this Agreement in compliance with
such Credit Agreement. In addition, Buyer shall have such amounts available for
borrowing under such Credit Agreement as may be required to pay the portion of
the Purchase Price payable at Closing.
6.2 Conditions to Obligations of the Company and the Stockholders. The
obligation of the Company and the Stockholders to consummate this Agreement and
the transactions contemplated hereby is subject to the fulfillment, prior to or
at the Closing, of the following conditions precedent:
(a) Representations; Warranties; Covenants. The
representations and warranties of the Buyer contained in this Agreement shall be
true and correct on the date hereof and as of the Closing Date; each of the
conditions specified in this Section 6.2 shall have been satisfied or waived (in
whole or in part) in writing by the Company.
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(b) Approval of the Company's Counsel. All actions,
proceedings, instruments and documents required to carry out this Agreement and
the transactions contemplated hereby and all related legal matters contemplated
by this agreement shall have been approved by Xxxxxxxx & Xxxxxxx as counsel for
the Company and the Stockholders, and XxXxxxxxx, Will & Xxxxx as counsel for the
ESOT, and such counsel shall have received on behalf of the Company and the
Stockholders such certificates and other documents, in form satisfactory to such
counsel as the Company may reasonably require from Buyer to evidence compliance
with the terms and conditions hereof as of the Closing and the correctness as of
the Closing of the representations and warranties of Buyer and the fulfillment
of its covenants.
(c) Fairness Opinion. The ESOT shall have received from Duff
and Xxxxxx LLC an opinion, dated as of the Closing Date, to the effect that, in
the opinion of such firm, the consideration to be received by the ESOT in the
transaction for its Company Shares is not less than the Closing Date fair market
value of such Company Shares and that the transaction is fair, from a financial
point of view, to the ESOT.
(d) No Litigation. There shall have been no determination by
Buyer, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state, or other
governmental authority of litigation, proceedings or other action against Buyer,
the Company, any Subsidiary or any Stockholder. The transactions contemplated
hereby shall not be in violation of any law or regulation and shall not be
subject to any injunction, stay or restraining order.
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
7.1 Termination. At any time prior to the Closing, this Agreement may
be terminated as follows:
(a) by mutual written consent of all of the parties to this
Agreement;
(b) by Buyer, pursuant to written notice by Buyer to the
Company, if any of the conditions set forth in Section 6.1 of this Agreement
have not been satisfied at or prior to the Closing, or if it has become
reasonably and objectively certain that any of such conditions, other than a
condition within the control of Buyer, will not be satisfied at or prior to the
Closing, such written notice to set forth such conditions which have not been or
will not be so satisfied;
(c) by Company, pursuant to written notice by the Company to
Buyer, if any of the conditions set forth in Section 6.2 of this Agreement have
not been satisfied at or prior to the Closing, or if it has become reasonably
and objectively certain that any of such conditions, other than a condition
within the control of the Company, will not be satisfied at or
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prior to the Closing, such written notice to set forth such conditions which
have not been or will not be so satisfied;
(d) by Buyer in its sole discretion, if either the Company or
any representative of the Company solicits, encourages, entertains or discusses
any Acquisition Proposal from any person or any entity other than Buyer; or
(e) by Buyer or the Company, if the Closing has not occurred
on or prior to April 14, 2000 and all of the conditions set forth in Section 6.1
other than Sections 6.1(e), 6.1(f), 6.1(i), 6.1(l), 6.1(p) and 6.1(r) have been
satisfied at or prior to the Closing.
(f) by the Company in its sole discretion, if either Buyer or
any representative of Buyer solicits, encourages, entertains or discusses any
Competitor Proposal from any person or entity other than the Company.
7.2 Effect of Termination.
(a) All obligations of the parties hereunder shall cease upon
any termination pursuant to Section 7.1, provided, however, that (i) the
provisions of Section 3.8, Section 5.6 this Section 7, Section 11.1 and Section
11.9 hereof shall survive any termination of this Agreement.
(b) If this Agreement is terminated pursuant to Section 7.1(e)
hereof, Buyer shall concurrently pay to the Company an amount in cash equal to
$500,000 (the "Termination Fee"). Any payment required by this Section 7.2 (b)
shall be payable from the Escrow Deposit and paid to the Company by wire
transfer of immediately available funds to an account designated by the Company
in accordance with the terms of the Purchase Agreement Escrow.
7.3 Right to Proceed. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 6.1 hereof have
not been satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 6.2 hereof have not been satisfied, the
Company shall have the right to proceed with the transactions contemplated
hereby without waiving any of their rights hereunder.
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SECTION 8. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
8.1 Survival of Warranties. Each of the representations, warranties,
agreements, covenants and obligations herein or in any Schedule, Exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing
regardless of any investigation and shall not merge in the performance of any
obligation by either party hereto.
SECTION 9. INDEMNIFICATION.
9.1 Indemnification by the Stockholders. The Stockholders jointly and
severally, subject to the last sentence of Section 9.6, agree subsequent to the
Closing to indemnify and hold the Company, the Subsidiaries, Buyer and their
respective subsidiaries and affiliates and persons serving as officers,
directors, partners or employees of any of the foregoing (individually a "Buyer
Indemnified Party" and collectively the "Buyer Indemnified Parties") harmless
from and against any damages, liabilities, losses, taxes, fines, penalties,
costs, and expenses (including, without limitation, reasonable fees of counsel)
of any kind or nature whatsoever (whether or not arising out of third-party
claims and including all amounts paid in investigation, defense or settlement of
the foregoing) which may be sustained or suffered by any of them arising out of
or based upon any of the following matters:
(a) fraud, intentional misrepresentation or a deliberate or
wilful breach by the Company or any Stockholder of any of their representations,
warranties, agreements or covenants under this Agreement or in any agreement,
document, instrument, certificate, schedule or exhibit delivered pursuant
hereto;
(b) any other breach of any representation or warranty of the
Company or any Stockholder under this Agreement or in any agreement, document,
instrument, certificate, schedule or exhibit delivered pursuant hereto, or by
reason of any claim, action or proceeding asserted or instituted arising out of
any matter or thing constituting a breach of such representations or warranties;
(c) any other breach of any agreement or covenant of the
Company or any Stockholder under this Agreement or in any agreement, document,
instrument, certificate, schedule or exhibit delivered pursuant hereto, or by
reason of any claim, action or proceeding asset or instituted arising out of any
matter or thing constituting a breach of any such agreement or covenant;
(d) any liability of the Company or any Subsidiary for Taxes
arising from an event or transaction prior to the Closing or as a result of the
Closing which have not been paid or provided for or adequately reserved against
by the Company or a Subsidiary, including the
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Spin-Off Sale and the Deliverance Liquidation, and including without limitation,
any increase in Taxes due to the unavailability of any loss or deduction claimed
by the Company or a Subsidiary;
(e) any liability relating to the operation, activities or
conduct of the business of the Company or any of its Subsidiaries on or prior to
the Closing Date, including the Spin-Off Sale and the Deliverance Liquidation,
other than (i) liabilities or obligations of the Company or any Subsidiary
reflected on the Base Balance Sheet or incurred thereafter in the ordinary
course of business (except for any such liability required to be disclosed on a
Schedule to this Agreement that is not so disclosed), (ii) liabilities under the
Contracts or any contract, agreement or arrangement not required to be disclosed
on any Schedule to this Agreement and (iii) other liabilities disclosed in this
Agreement or any Schedule furnished pursuant hereto; and
(f) any liability of the Company or any Subsidiary in respect
of any claim made by any third party and relating to, arising out of or in
connection with any event occurring on or prior to the Closing Date, including
the Spin-Off Sale and the Deliverance Liquidation.
(g) Each Stockholder hereby acknowledges and agrees that no
Stockholder shall have any right of indemnity or contribution from the Company
with respect to any breach of any representation, warranty, covenant or
agreement hereunder.
9.2 Limitations on Indemnification by the Stockholders.
(a) Threshold. Subject to the exceptions set forth in Section
9.2(b) below, no indemnification shall be payable by the Stockholders with
respect to claims except to the extent that the cumulative amount of all such
claims first exceed $310,000 in the aggregate (the "Threshold Amount"),
whereupon the Buyer Indemnified Parties shall be entitled to dollar-for-dollar
indemnification from the first dollar in accordance with the terms hereof.
(b) Maximum Indemnification. Subject to the exceptions set
forth in Section 9.2(c) and 9.2(e) below, the Stockholders shall not be
obligated to indemnify any Buyer Indemnified Party for any amount of otherwise
indemnifiable losses in excess of Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Maximum Indemnification").
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(c) No Limitation on Certain Claims. Subject to the exceptions
set forth in Section 9.2(e) below, notwithstanding anything herein to the
contrary, Buyer Indemnified Parties (i) shall be entitled to dollar-for-dollar
indemnification from the first dollar, (ii) shall not be subject to the
Threshold Amount, and (iii) shall not be subject to the Maximum Indemnification
in seeking indemnification from the Stockholders with respect to any of the
following:
(i) Losses involving a breach by the Company or any
Stockholder of any of the representations and warranties contained in
Section 2.3, 2.5, 2.9, 2.27, 2.28 or 2.32; or
(ii) Losses described in Sections 9.1(a) or 9.1(d).
(d) Time Limitation. No indemnification shall be payable to a
Buyer Indemnified Party with respect to claims asserted pursuant to Subsection
9.1(b) (other than any claims for indemnification for Taxes or based upon or
related to a breach of any representation, warranty or covenant with respect to
title to the Company Shares, authorization, Taxes or tax related matters ERISA
or environmental matters after the date which is eighteen months after the
Closing Date (the "Indemnification Cut-Off Date"); provided that (i) any claim
as to which notice is given by a Buyer Indemnified Party to the Stockholders
prior to the Indemnification Cut-Off Date shall survive the Indemnification Cut-
Off Date until final resolution of such claim; (ii) claims based upon or related
to a breach of any representation or warranty contained in Sections 2.5, 2.8(b)
or (c), 2.9, 2.27 or 2.28 or in Sections 9.1(c)-9.1(f), inclusive may be
asserted until the 60th day following expiration of the statute of limitations
(if any) applicable to such claim; and (iii) claims based upon a breach of any
representation or warranty contained in Section 2.3 or pursuant to Section
9.1(a) shall continue without limitation as to time.
(e) Notwithstanding anything herein to the contrary, the ESOT
shall not be required to indemnify Buyer Indemnified Parties with respect to
claims asserted pursuant to Section 9.1 to the extent that such claims:
(i) are asserted after the Indemnification Cut-Off
Date or
(ii) in the aggregate exceed the Escrow Amount;
provided, however, with respect to any indemnification obligation of the ESOT
under this Agreement, Buyer shall be entitled to proceed against the Escrow
Amount, only as provided in and subject to the terms and conditions set forth in
the Indemnification Escrow Agreement, and only to the extent of the ESOT's pro
rata share of any indemnification claim by Buyer which pro rata share shall be
equal to the percentage of the outstanding Company shares owned by the ESOT as
of the Closing Date multiplied by the total amount of such indemnification claim
with respect to all Stockholders in the aggregate.
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9.3 Indemnification by Buyer. Buyer agrees to indemnify and hold the
Stockholders (individually a "Stockholder Indemnified Party" and collectively
the "Stockholder Indemnified Parties") harmless from and against any damages,
liabilities, losses and expenses (including, without limitation, reasonable fees
of counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon any breach of any representation, warranty or
covenant made by Buyer in this Agreement or in any certificate delivered by
Buyer hereunder, or by reason of any claim, action or proceeding asserted or
instituted growing out of any matter or thing constituting such a breach.
9.4 Limitation on Indemnification by Buyer. Notwithstanding the
foregoing, no indemnification shall be payable to the Stockholders with respect
to claims asserted pursuant to Section 9.3 above after the Indemnification
Cut-Off Date.
9.5 Notice; Defense of Claims. An indemnified party may make claims for
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not relieve the indemnifying party from
any liability except to the extent that it is prejudiced by the failure or delay
in giving such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within 20 days after receiving such notice the indemnifying party shall give
written notice to the indemnified party stating whether it disputes the claim
for indemnification and whether it will defend against any third party claim or
liability at its own cost and expense. If the indemnifying party fails to give
notice that it disputes an indemnification claim within 20 days after receipt of
notice thereof, it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake
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the defense of such claim or liability (with counsel selected by the indemnified
party), and to compromise or settle it, exercising reasonable business judgment.
If the third party claim or liability is one that by its nature cannot be
defended solely by the indemnifying party, then the indemnified party shall make
available such information and assistance as the indemnifying party may
reasonably request and shall cooperate with the indemnifying party in such
defense, at the expense of the indemnifying party.
9.6 Satisfaction of Stockholder Indemnification Obligations. In order
to satisfy the indemnification obligations of the Stockholders pursuant to
Section 9.1 above and without limiting any right of any Buyer Indemnified Party
with respect to any claim for indemnification thereunder, subject to the
limitations set forth in Section 9.2, a Buyer Indemnified Party shall have the
right (in addition to collecting directly from the Stockholders) to (i) proceed
directly against the Escrow Amount as further set forth in the Indemnification
Escrow Agreement, or (ii) set off its indemnification claims against any and all
amounts of interest and principal under the Notes (whether or not then due and
payable) (the "Setoff Right") in accordance with the terms of the Notes or (iii)
exercise both of such remedies. Any such setoff shall be pro-rated among the
Notes, based on the remaining principal of the Notes or replacement Notes at the
time of the setoff. Notwithstanding anything in this Agreement to the contrary,
with respect to any indemnification obligation of the ESOT under this Agreement,
Buyer shall be entitled to proceed against the Escrow Amount, only as provided
in and subject to the terms and conditions set forth in the Indemnification
Escrow Agreement, and only to the extent of the ESOT's pro rata share of any
indemnification claim by Buyer, which pro rata share shall be equal to the
percentage of the outstanding Company Shares owned by the ESOT as of the Closing
Date multiplied by the total amount of such indemnification claim with respect
to all Stockholders in the aggregate.
SECTION 10. DEFINITIONS.
For the purposes of this Agreement, the capitalized terms set forth
below shall have the meanings indicated.
"Accumulated Funding Deficiency" shall have the meaning set forth in
Section 2.27 hereof.
"Acquisition" shall have the meaning set forth in Section 2.4 hereof.
"Acquisition Proposal" shall have the meaning set forth in Section 3.6
hereof.
"Acquisition Rights" shall have the meaning set forth in Section 2.4
hereof.
"Affiliate" shall have the meaning set forth in Section 2.27 hereof.
"Affiliated Group" shall have the meaning set forth in Section 2.9
hereof.
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"Agreement" shall have the meaning set forth in the Recitals hereto.
"Approvals" shall have the meaning set forth in Section 2.24 hereof.
"Audited Financial Statements" shall have the meaning set forth in
Section 2.8 hereof.
"Base Balance Sheet" shall have the meaning set forth in Section 2.8
hereof.
"Blue Sky" shall have the meaning set forth in Section 2.27 hereof.
"Buyer" shall have the meaning set forth in the Recitals hereto.
"Buyer Indemnified Party" and "Buyer Indemnified Parties" shall have
the meaning set forth in Section 9.1 hereof.
"Buyer Reports" shall have the meaning set forth in Section 4.7 hereof.
"Buyer Representative" shall have the meaning set forth in Section 5.3
hereof.
"Closing" shall have the meaning set forth in Section 1.3 hereof.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall have the meaning set forth in Section 2.9 hereof.
"Common Stock" shall have the meaning set forth in the Recitals hereto.
"Company" shall have the meaning set forth in the Recitals hereto.
"Company Shares" shall have the meaning set forth in the Recitals
hereto.
"Competitor" shall have the meaning set forth in Section 5.3 hereof.
"Competitor Proposal" shall have the meaning set forth in Section 5.3
hereof.
"Contract" and "Contracts" shall have the meaning set forth in Section
2.18 hereof.
"Controlled Group" shall have the meaning set forth in Section 2.27
hereof.
"CPR Rules" shall have the meaning set forth in Section 11.9 hereof.
"Credit Agreement" shall have the meaning set forth in Section 6.1
hereof.
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"Customers" shall have the meaning set forth in Section 2.12 hereof.
"Deferred Payment Obligation" shall have the meaning set forth in
Section 1.6 hereof.
"Deliverance" shall have the meaning set forth in Section 1.6 hereof.
"Deliverance Liquidation" shall have the meaning set forth in Section
1.6 hereof.
"Employee Program" shall have the meaning set forth in Section 2.27
hereof.
"Encumbrances" shall have the meaning set forth in Section 2.7 hereof.
"Environmental Law" shall have the meaning set forth in Section 2.28
hereof.
"ERISA" shall have the meaning set forth in Section 2.27 hereof.
"Escrow Agent" shall have the meaning set forth in Exhibit B to this
Agreement.
"Escrow Amount" shall have the meaning set forth in Section 1.2 hereof.
"Escrow Deposit" shall have the meaning set forth in Section 7.1
hereof.
"ESOT" shall have the meaning set forth in Section 1.2 hereof.
"Financial Statements" shall have the meaning set forth in Section 2.8
hereof.
"GAAP" shall have the meaning set forth in Section 2.8 hereof.
"Hazardous Material" shall have the meaning set forth in Section 2.28
hereof.
"Hazardous Waste" shall have the meaning set forth in Section 2.28
hereof.
"HSR Act" shall have the meaning set forth in Section 6.1 hereof.
"Indemnification Cut-Off Date" shall have the meaning set forth in
Section 9.2 hereof.
"Indemnification Escrow Agreement" shall have the meaning set forth in
Section 1.2 hereof.
"Intellectual Property" shall have the meaning set forth in Section
2.16 hereof.
"Interim Balance Sheet" shall have the meaning set forth in Section 2.8
hereof.
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"Interim Financial Statements" shall have the meaning set forth in
Section 2.8 hereof.
"IRS" shall have the meaning set forth in Section 2.9 hereof.
"Key Manufacturers" shall have the meaning set forth in Section 2.17
hereof.
"Key Principals" shall have the meaning set forth in Section 2.17
hereof.
"Knowledge" shall have the meaning set forth in Section 2.7 hereof.
"Liabilities" shall have the meaning set forth in Section 1.2 hereof.
"Liens" shall have the meaning set forth in Section 2.3 hereof.
"Loss Customer Revenues" shall have the meaning set forth in Section
1.6 hereof.
"Maintains" shall have the meaning set forth in Section 2.27 hereof.
"Material Adverse Effect" shall have the meaning set forth in Section
2.2 hereof.
"Maximum Indemnification" shall have the meaning set forth in Section
9.2 hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 2.27
hereof.
"Non-ESOT Stockholders' Representative" shall have the meaning set
forth in Section 1.8 hereof.
"Notes" shall have the meaning set forth in Section 1.2 hereof.
"Obligor" shall have the meaning set forth in Section 1.6 hereof.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.7 hereof.
"PMG" shall have the meaning set forth in Section 1.6 hereof.
"Prism" shall have the meaning set forth in Section 1.6 hereof.
"Prism Customers" shall have the meaning set forth in Section 1.6
hereof.
"Prism Tax Reserve" shall have the meaning set forth in Section 1.7(h)
hereof.
"Principal" shall have the meaning set forth in Section 2.12.
"Products" shall have the meaning set forth in Section 2.16 hereof.
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"Prohibited Transaction" shall have the meaning set forth in Section
2.27 hereof.
"Purchase Price" shall have the meaning set forth in Section 1.2
hereof.
"Real Property" shall have the meaning set forth in Section 2.7 hereof.
"Redemption" shall have the meaning set forth in Section 1.6 hereof.
"Reportable Event" shall have the meaning set forth in Section 2.27
hereof.
"SEC" shall have the meaning set forth in Section 4.7 hereof.
"Setoff Right" shall have the meaning set forth in Section 9.6 hereof.
"Severance Pay" shall have the meaning set forth in Section 2.30
hereof.
"Spin-Off Sale" shall have the meaning set forth in Section 1.6 hereof.
"Stockholder" and "Stockholders" shall have the meaning set forth in
the Recitals hereto.
"Stockholder Indemnified Party and "Stockholder Indemnified Parties"
shall have the meaning set forth in Section 9.3 hereof.
"Subsidiary" and "Subsidiaries" shall have the meaning set forth in
Section 2.4 hereof.
"Taxes" shall have the meaning set forth in Section 2.9 hereof.
"Termination Fee" shall have the meaning set forth in Section 7.2
hereof.
"Threshold Amount" shall have the meaning set forth in Section 9.2
hereof.
"Transaction Documents" shall have the meaning set forth in Section 2.6
hereof.
"Unfunded Benefit Liabilities" shall have the meaning set forth in
Section 2.27 hereof.
"Working Capital" shall have the meaning set forth in Section 1.2
hereof.
"Year 2000 Compliant" shall have the meaning set forth in Section 2.17
hereof.
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SECTION 11. MISCELLANEOUS.
11.1 Fees and Expenses. Buyer and the Company shall each pay its own
expenses in connection with the transactions contemplated by this Agreement.
Each Stockholder other than the ESOT will pay all of its expenses in connection
with the transactions contemplated by this Agreement, whether or not the Closing
occurs. The Company shall pay the ESOT's expenses in accordance with Section
3.12 of this Agreement.
11.2 Governing Law. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
11.3 Notices. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, if sent
by a nationally recognized overnight courier for next day delivery, on the next
business day following delivery to such overnight courier, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO BUYER: Marketing Specialists Sales Company
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Chief Executive Officer
With a copy to: Marketing Specialists Sales Company
00000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
TO COMPANY: The Sales Force Companies, Inc.
000 Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000-0000
Attn: Chief Executive Officer
With a copy to: Xxxxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxx, Esq.
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TO ANY STOCKHOLDER
OTHER THAN THE ESOT: Xxxxxxx X. Xxx
The Sales Force Companies, Inc.
000 Xxxxxx Xxxxx
Xxxx Xxxx, XX 00000-0000
TO ESOT: Xxxxxx Xxxxxx
First Bankers Trust Company, N.A.
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to: XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11.4 Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement relied upon
by either party hereto have been expressed herein or in such Schedules or
Exhibits or in such other writings.
11.5 Assignability; Binding Effect. This Agreement shall only be
assignable by Buyer to a corporation, partnership or other entity controlling,
controlled by or under common control with Buyer upon written notice to the
Company and the Stockholders. This Agreement may not be assigned by the
Stockholders or the Company without the prior written consent of Buyer. This
Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
11.6 Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
11.7 Amendments. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by Buyer, the Company and Stockholders
holding a majority of the Company Shares, or in the case of a waiver, the party
waiving compliance. The waiver by the Stockholders of any condition or covenant
contained herein shall require the consent of Stockholders holding a majority of
the Company Shares.
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11.8 Publicity and Disclosures. Except as otherwise required by law, no
press releases or public disclosure, either written or oral, of the transactions
contemplated by this Agreement, shall be made by a party to this Agreement
without the prior knowledge and written consent of Buyer and the Company.
Notwithstanding the foregoing sentence, the Company and each Stockholder
acknowledges that the Buyer issued a press release, a copy of which was
delivered to the Company, disclosing the existence but not the terms of the
proposed transaction.
11.9 Dispute Resolution; Consent to Jurisdiction.
(a) Except as provided below, any dispute arising out of or
relating to this Agreement or the breach, termination or validity hereof shall
be finally settled by arbitration conducted expeditiously in accordance with the
Center for Public Resources Rules for Nonadministered Arbitration of Business
Disputes (the "CPR Rules"). The Center for Public Resources shall appoint a
neutral advisor from its National CPR Panel. The arbitration shall be governed
by the United States Arbitration Act, 9 U.S.C. ss.ss.1-16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. Such arbitration shall take place in: (A) Boston,
Massachusetts, if one or more Stockholders shall have made a claim against Buyer
under or with respect to this Agreement or (B) Chicago, Illinois, if Buyer shall
have made a claim against one or more Stockholders under or with respect to this
Agreement. Regardless of the location of such arbitration, the prevailing party
shall be entitled to enforce any award or decision of such proceeding in either
Chicago, Illinois or Boston, Massachusetts, in its sole discretion.
(b) Any such arbitration shall be conducted in accordance with
the following:
(i) The arbitrator shall be authorized, but not
required, award to the prevailing party the costs of arbitration,
including the reasonable fees and expenses of attorneys and
accountants.
(ii) The arbitrator shall not be authorized or empowered
to award damages in excess of compensatory damages.
(iii) The arbitrator shall enforce the following agreed
upon procedures: (A) mandatory exchange of all relevant documents to be
accomplished within 30 days of the initiation of the arbitration
procedure; (B) hearings before the arbitrator shall be limited to a
summary presentation by each party not to exceed three hours for each
party; (C) all hearings shall have concluded not more than 60 days
after the initiation of the arbitration procedure; and (D) the
arbitrator's decision shall be rendered not more than 10 days after the
conclusion of such hearings.
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(c) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 11.9 shall not apply with regard to (i) any
equitable remedies to which any party may be entitled hereunder or (ii) any
dispute arising out of any failure by Buyer to pay when due any amount payable
under the Notes or the Replacement Notes except to the extent that Buyer
notifies the Stockholders that Buyer is exercising the Setoff Right.
(d) Each of the parties hereto (i) hereby irrevocably submits
to the jurisdiction of any state or federal court sitting in Boston,
Massachusetts or Chicago, Illinois for the purpose of enforcing the award or
decision in any such proceeding, (ii) hereby waives, and agrees not to assert,
by way of motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and (iii) hereby waives and agrees not to seek any review by any court of any
other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its submission to jurisdiction and
its consent to service of process by mail is made for the express benefit of the
other parties hereto. Final judgment against any party hereto in any such
action, suit or proceeding may be enforced in other jurisdictions by suit,
action or proceeding on the judgment, or in any other manner provided by or
pursuant to the laws of such other jurisdiction; provided, however, that any
party hereto may at its option bring suit, or institute other judicial
proceedings, in any state or federal court of the United States or of any
country or place where the other parties or their assets, may be found.
11.10 Consent to Jurisdiction. Each of the parties hereby consents to
the personal jurisdiction, service of process and venue in any federal or state
court sitting in Boston, Massachusetts or Chicago, Illinois for any claim, suit
or proceeding arising under this Agreement, or in the case of a third party
claim subject to indemnification hereunder, in the court where such claim is
brought.
11.11 Specific Performance. The parties agree that it would be
difficult to measure damages which might result from a breach of this Agreement
by the Company or the Stockholders and that money damages would be an inadequate
remedy for such a breach. Accordingly, if there is a breach or proposed breach
of any provision of this Agreement by the Company or the Stockholders, and Buyer
does not elect to terminate under Section 7, Buyer shall be entitled, in
addition to any other remedies which it may have, to an injunction or other
appropriate equitable relief to restrain such breach without having to show or
prove actual damage to Buyer.
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11.12 No Third-Party Beneficiaries. This Agreement is intended solely
for the benefit of the parties hereto. Neither this Agreement nor any of the
transactions contemplated hereby shall be deemed to create or enlarge any rights
in any party not a party hereto.
11.13 Severability. The parties agree that, in the event that any
provision of this Agreement or the application of any such provision to any
party is held by a court of competent jurisdiction to be contrary to law, the
provision in question shall be construed so as to be lawful and the remaining
provisions of this Agreement shall remain in full force and effect.
11.14 No Stock Restrictions. The Company and each Stockholder hereby
waives the application of any Stock Purchase Agreement or Voting Agreement or
similar agreement between the Company and such Stockholder to the transactions
contemplated hereby.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
MARKETING SPECIALISTS
SALES COMPANY
By:
-------------------------------
Name:
Title:
THE SALES FORCE COMPANIES,
INC.
By:
-------------------------------
Name:
Title:
TRUSTEE OF THE SALES FORCE
COMPANIES, INC. EMPLOYEE STOCK
OWNERSHIP TRUST
By: First Bankers Trust Company, N.A.,
By:
-------------------------------
Name:
Title:
STOCKHOLDERS:
------------------------------------
Xxxx Xxxxxx
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Xxx Xxxxxx
------------------------------------
Xxxxxx Xxxx
------------------------------------
Xxxx Xxxx
65
------------------------------------
Xxxxxx X Xxxxxx
------------------------------------
Xxxx Xxxxx
------------------------------------
Xxxxxx Xxxx
------------------------------------
Xxxxxx X. Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxx
------------------------------------
Xxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxx
------------------------------------
Xxxx Halls
------------------------------------
Xxx Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxx, Xx.
------------------------------------
Xxxxxxx X. Xxx
------------------------------------
Xxxxx XxXxxxxx
------------------------------------
Xxxxx XxXxxxxxx
66
------------------------------------
Xxxx X. Xxxxx
------------------------------------
Xxxx Xxxxxx
------------------------------------
Xxxxx Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
------------------------------------
Xxxxx Xxxxxx
------------------------------------
Xxxxx X'Xxxx
------------------------------------
Xxxxxx Xxxxxxxx
------------------------------------
Xxxx Xxxxxx
------------------------------------
Xxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxx
------------------------------------
Xxxx X. Xxxxxxx
------------------------------------
Xxxx X. Scissors
------------------------------------
Xxxxx Xxxxxxxx
------------------------------------
Xxxxxx X. Xxxx
67
------------------------------------
Xxxxxxx X. Xxxxx
------------------------------------
Xxxx Xxxxxxxx
------------------------------------
Xxxxxxx Xxxxxx
------------------------------------
Xxxx Xxxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxx
