THIS ACQUISITION AGREEMENT made as of the 30th day of June, 1997.
B E T W E E N:
EIF HOLDINGS, INC.
a corporation formed under the laws of Hawaii
(the "Shareholder")
OF THE FIRST PART
- and -
REGAL OAK PROPERTIES, INC.
a corporation formed under the laws of Delaware
("Buyer")
OF THE SECOND PART
WHEREAS the Shareholder is the owner of 100% of the issued and outstanding
shares in the capital of Kelar Controls, Inc., a California corporation
("Kelar") and the Shareholder seeks to sell Kelar Shares (as hereinafter
defined) for the consideration set forth hereinbelow and Buyer seeks to acquire
Kelar Shares from the Shareholder, all on and subject to the terms and
conditions of this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual
covenants, agreements and premises herein contained and other good and valuable
consideration (the receipt and sufficiency whereof being hereby acknowledged by
each party), the parties hereto do hereby covenant and agree as follows:
1. DEFINITIONS AND SCHEDULES
1.1 Definitions. In this Agreement:
"Accounts Receivable" means all accounts receivable and other book
debts due or accruing to Kelar as at the Reference Date and the full
benefit of all security, if any, for such accounts or debts.
"Agreement", "this Agreement", "hereto" and "herein" means this
Agreement and all schedules attached hereto, as may be amended from
time to time.
"Best Knowledge" or "known" means actual knowledge or awareness of the
Party.
"Business Day" means a day other than a Saturday or a Sunday or any
other day which is a statutory holiday in the State of Texas.
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"Closing" means the consummation of the Transaction as herein
contemplated.
"Closing Date" means June 30, 1997 or such earlier or later date
as may be agreed to in writing by the Parties.
"Contract" means any agreement, indenture, contract, bond, debenture,
security agreement, lease, deed of trust, license, option, instrument
or other legally binding commitment, whether written or oral.
"Direct Claim" has the meaning ascribed thereto in section 6.3.
"Encumbrances" means any and all claims, liens, security interests,
mortgages, pledges, pre-emptive rights, charges, options, equity
interests, encumbrances, proxies, voting agreements, voting trusts,
leases, tenancies, easements or other interests of any nature or kind
whatsoever, howsoever created.
"Indemnified Party" has the meaning ascribed thereto in section 6.3.
"Indemnifying Party" has the meaning ascribed thereto in section 6.3.
"Indemnification Claim" has the meaning ascribed thereto in section
6.3.
"Intellectual Property" means all patents, copyrights, trademarks and
trade names, service marks and all software, data bases, trade secrets,
know how and other proprietary rights as at the Reference Date.
"Kelar" means Kelar Controls, Inc., a California corporation.
"Kelar Contracts" has the meaning ascribed thereto in section 4.1(aa).
"Kelar Shares" means 100% of the issued and outstanding shares of
capital stock of Kelar, registered in the name of the Shareholder, as
set forth on Schedule 4.2(f), hereto.
"Kelar Financial Statements" has the meaning attributed thereto in
section 4.1(p).
"Losses" means any and all claims, demands, debts, suits, actions,
obligations, proceedings, losses, damages, liabilities, deficiencies,
costs and expenses (including without limitation, all reasonable legal
and other professional fees and disbursements, interest, penalties and
amounts paid in settlement).
"Material Adverse Effect" means a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise),
operations or prospects of the Party in question or upon such Party's
ability to perform its obligations under this Agreement or to
consummate the Transaction.
"Parties" means collectively, the parties to this Agreement.
"Purchase Note" shall have the meaning ascribed to it in Section 2.2 of
this Agreement.
"Person" means any individual, partnership, company, corporation,
unincorporated association, joint venture, trust, the Crown or any
other agency or instrumentality thereof or any other judicial entity or
person, government or governmental agency, authority or entity
howsoever designated or constituted.
"Reference Date" means May 31, 1997.
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"Security Agreement - Pledge" shall have the meaning ascribed to it in
Section 2.2 of this Agreement.
"Security Documents" shall mean the Purchase Note and the Security
Agreement - Pledge, collectively.
"Survival Period" has the meaning ascribed thereto in section 5.1
"Taxes" means all income, profits, franchise, royalty, withholding,
payroll, excise, sales, value added, use, occupation and property taxes
and any liability, whether disputed or not, imposed by the U.S. or any
state, municipality, country or foreign government or subdivision or
agency thereof.
"Third Party" has the meaning ascribed thereto in section 6.3.
"Third Party Claim" has the meaning ascribed thereto in section 6.3.
"Time of Closing" means 11:00 a.m. (Houston time) on the Closing Date
or if the Transaction is not completed at such time, then such other
time on the Closing Date on which the Transaction is completed.
"Transaction" means the transfer and sale of Kelar Shares in exchange
for consideration as contemplated by this Agreement.
1.2 Disclosure. Any fact or circumstance or combination of facts and/or
circumstances disclosed in this Agreement or in any schedules hereto shall be
deemed to be disclosed for all purposes of this Agreement.
1.3 Act. Any reference in this Agreement to any act, by-law, rule or regulation
or to a provision thereof shall be deemed to include a reference to any act,
by-law, rule or regulation or provision enacted in substitution or amendment
thereof.
1.4 Houston Time. Except where otherwise expressly provided in this Agreement
any reference to time shall be deemed to be a reference to Houston, Texas time.
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1.5 Gender and Extended Meanings. In this Agreement words and personal pronouns
relating thereto shall be read and construed as the number and gender of the
party or parties referred to in each case require and the verb shall be
construed as agreeing with the required word and pronoun. For greater certainty
and without limitation, in this Agreement the word "shall" has the same meaning
as the word "will".
1.6 U.S. Dollars and Payment. All dollar amounts referred to in this
Agreement are in U.S. funds, unless otherwise expressly specified.
1.7 Section Headings. The division of this Agreement into sections is for
convenience of reference only and shall not effect the interpretation or
construction of this Agreement.
1.8 Business Day. In the event that the date for the taking of any action under
this Agreement falls on a day which is not a Business Day, then such action
shall be taken on the next following Business Day.
2. AGREEMENT TO PURCHASE
2.1 Purchase. Subject to the terms and conditions hereof, on the Closing Date at
the Time of Closing, the Shareholder shall transfer to Buyer and Buyer shall
accept from the Shareholder Kelar Shares and the Shareholder shall deliver to
Buyer certificates representing Kelar Shares, duly endorsed in blank for
transfer together with new certificates therefor.
2.2 Purchase Price. The purchase price for Kelar Shares shall be the aggregate
sum of U.S. $2,500,000 and shall be satisfied by the execution and delivery by
Buyer to Shareholder at closing of Buyer's one certain Secured Promissory Note
(the "Purchase Note"), in the original principal amount of the Purchase Price.
The Purchase Note shall be in the form of Schedule 2.2 attached hereto, and the
Purchase Note shall be secured by certain assets more fully described within
that certain Security Agreement - Pledge, which shall be in the form of Schedule
2.2 (a) attached hereto. The Purchase Note and the Security Agreement - Pledge
are hereinafter referred to as the "Security Documents".
2.3 Closing. Closing shall occur at the Time of Closing on the Closing Date at
the offices of EIF Holdings, Inc. in Houston, Texas, or at such other place or
other time and date as the Parties may agree.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF BUYER
3.1 Covenants, Representations and Warranties. Buyer hereby covenants,
represents and warrants to the Shareholder as follows and acknowledges and
confirms that the Shareholder is relying upon such covenants, representations
and warranties in connection with the Transaction and that unless otherwise
indicated herein, such covenants, representations and warranties shall be true
and correct as at the Closing Date:
(a) Organization. Buyer is duly incorporated and validly
subsisting under the laws of Delaware and has the corporate
power to own or lease its property and to carry on its
business as it is now being conducted and will have the
corporate power to execute, deliver and perform its
obligations under this Agreement.
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(b) Corporate Authority. On the Closing Date Buyer will have taken
all requisite corporate action to authorize the valid
execution, delivery and performance of this Agreement and the
consummation of the Transaction.
(c) Agreement Enforceable. This Agreement constitutes a valid and
legally binding obligation of Buyer enforceable against Buyer
in accordance with its terms.
(d) No Violations. The execution and delivery of this Agreement and
all other agreements contemplated herein by Buyer and the observance
and performance of the terms and provisions of this Agreement and any
such agreements; (i) does not and will not require Buyer to obtain or
make any consent, authorization, approval, filing or registration
under any law, by-law, rule, regulation, judgment, order, writ,
injunction or decree which is binding upon Buyer; (ii) does not and
will not constitute a violation or breach of the charter documents or
bylaws of Buyer; (iii) does not and will not constitute a violation or
breach of applicable law, any material provision of any Contract to
which Buyer is a party or by which Buyer is bound or any law, by-law,
rule, regulation, judgment, order, writ, injunction or decree
applicable to Buyer; and (iv) does not and will not constitute a
material default (nor would with the passage of time or the giving of
notice or both or otherwise, constitute a material default) under any
Contract, to which Buyer is a party or by which Buyer is bound.
(e) Brokers. Buyer shall be responsible for the payment of all
brokerage commissions, and finder's fees or other like payment
incurred by Buyer in connection with this transaction, and
Buyer will indemnify and save harmless the Shareholder of and
from any such claims.
(f) Release from Guarantees. Buyer shall use its best efforts to
have the Shareholder released from any and all outstanding
guarantees of indebtedness of Kelar with all such guarantees
being assumed by Buyer. In the event Buyer cannot obtain such
releases from the lenders of any such guaranteed indebtedness,
Buyer shall indemnify and save harmless the Shareholder of and
from any loss resulting from such guaranteed indebtedness.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
4.1 Covenants, Representations and Warranties. The Shareholder hereby covenants,
represents and warrants to Buyer as follows and acknowledges and confirms that
Buyer is relying upon such covenants, representations and warranties in
connection with the Transaction and that unless otherwise indicated herein, such
covenants, representations and warranties shall be true and correct as at the
Closing Date:
(a) Legal Capacity. The Shareholder has the legal capacity and
corporate power to execute, deliver and perform its
obligations under this Agreement.
Page 19
(b) Organization. The Shareholder is duly incorporated and validly
subsisting under the laws of Hawaii and has the corporate
power to own or lease its property and to carry on its
business as it is now being conducted and has the corporate
power to execute, deliver and perform its obligations under
this Agreement. Kelar is duly incorporated and validly
subsisting under the laws of California and has the corporate
power to own or lease its property and to carry on its
business as it is now being conducted, and it is qualified to
do business in those jurisdictions wherein the failure to so
qualify could have a Material Adverse Effect on Kelar.
(c) Corporate Authority. The Shareholder and Kelar have taken all
requisite corporate action to authorize the valid execution,
delivery and performance of this Agreement and the
consummation of the Transaction.
(d) No Violations. The execution and delivery of this Agreement and
all other agreements contemplated herein by the Shareholder and the
observance and performance of the terms and provisions of this
Agreement and any such agreements; (i) does not and will not require
the Shareholder or Kelar to obtain or make any consent, authorization,
approval, filing or registration under any law, by-law, rule,
regulation, judgment, order, writ, injunction or decree which is
binding upon the Shareholder or Kelar; (ii) does not and will not
constitute a violation or breach of the charter documents or bylaws of
Kelar; (iii) does not and will not constitute a violation or breach of
applicable law, any material provision of any Contract to which the
Shareholder or Kelar is a party or by which the Shareholder or Kelar
is bound or any law, by-law, rule, regulation, judgment, order, writ,
injunction or decree applicable to the Shareholder or Kelar; (iv) does
not and will not constitute a default (nor would with the passage of
time or the giving of notice or both or otherwise, constitute a
default) under any Contract, to which the Shareholder or Kelar is a
party or by which the Shareholder or Kelar is bound; and (v) does not
and will not result in the creation or imposition of any Encumbrance
on Kelar Shares or any property or assets of the Shareholder or Kelar.
(e) Issued Shares. All of the Kelar Shares have been duly
authorized, created and issued as fully paid and
non-assessable shares. There are outstanding no other shares,
warrants, rights or securities convertible into shares or any
other evidence whatsoever of an interest in Kelar.
(f) Owner of Kelar Shares. The Shareholder is the owner
beneficially and of record of Kelar Shares in the amounts and
proportions identified on Schedule 4.1(f), hereto, and has
good and marketable title thereto, free and clear of any
Encumbrances and/or pre-emptive rights. The Shareholder has
the exclusive right and full power to transfer Kelar Shares to
Buyer as herein contemplated, free and clear of any
Encumbrances.
(g) Subsidiaries. Kelar has no Subsidiaries nor owns any shares of
any other corporation or entity nor any rights, warrants or
other securities convertible into shares of any other
corporation or entity. Kelar is not bound by or a party to any
Contract which contemplates their amalgamation, merger,
consolidation or other acquisition with or by any other
entity.
Page 20
(h) Acts of Bankruptcy. Neither the Shareholder nor Kelar is
insolvent, has proposed a compromise or arrangement to its or
their creditors generally, has taken any proceeding with
respect to a compromise or arrangement, has taken any
proceeding to have itself declared bankrupt or wound-up, has
taken any proceeding to have a receiver appointed of any part
of their assets and at present, no encumbrancer or receiver
has taken possession of any of their property and no execution
or distress is enforceable or levied upon any of its property
and no petition for a receiving order in bankruptcy is filed
against them.
(i) Private Companies. Kelar does not distribute its securities
to the public.
(j) Residents. Kelar's principal place of business is within the
United States.
(k) Actions - Kelar Shares. There is not pending or, to the Best
Knowledge of the Shareholder, threatened or contemplated, any
suit, action, legal proceeding, litigation or governmental
investigation of any sort which would; (i) in any manner
restrain or prevent the Shareholder from effectually and
legally transferring Kelar Shares to Buyer in accordance with
this Agreement; (ii) cause an Encumbrance to attach to Kelar
Shares; (iii) divest title to Kelar Shares in any manner
whatsoever; or (iv) make Buyer liable for damages in
connection with the Transaction.
(l) Litigation. There is not pending, or, to the Best Knowledge of
the Shareholder, threatened or contemplated, any suit, action,
legal proceeding, litigation or governmental investigation of
any sort relating to the Shareholder, Kelar or the Transaction
nor is there any present state of facts or circumstances which
can be reasonably anticipated to be a basis for any such suit,
action, legal proceeding, litigation or governmental
investigation nor is there presently outstanding against the
Shareholder or Kelar any judgment, decree, injunction, rule or
order of any court, governmental department, commission,
agency, instrumentality or arbitrator.
(m) Minute Books. The minute books of Kelar contain accurate and
complete copies of their organizational documents together
with minutes of all meetings of directors, committees and
shareholders of Kelar. The articles and the bylaws of Kelar
are attached as Schedule 4.1(m). There are outstanding no
applications or filings which would alter in any way the
organizational documents or corporate status of Kelar. No
resolutions or bylaws have been passed, enacted, consented to
or adopted by the directors or shareholders of Kelar except as
are contained in the minute books of Kelar.
(n) Books of Account. The books of account and financial records
of Kelar fairly set out and disclose in all material respects,
the current financial position of Kelar. All material
transactions involving Kelar have been accurately recorded in
such books and records. All bonuses, commissions and other
payments relating to the employees of Kelar are reflected in
the books of Kelar in a manner consistent with past record
keeping practices and none of such payables are in arrears.
Page 21
(o) Permits and Licenses. Kelar has all necessary permits,
certificates, licenses, approvals, consents and other
authorizations required to carry on and conduct business and
to own, lease or operate their assets at the places and in the
manner in which such businesses are conducted.
(p) Financial Statements. A true copy of Kelar's most recently
audited financial statements, and its unaudited financial
statements as of May 31, 1997 (the "Kelar Financial
Statements"), are annexed hereto as Schedule 4.1(p). Kelar
Financial Statements:
(1) Have been prepared in accordance with U.S. generally
accepted accounting principles applied on a basis
consistent with those of the preceding fiscal period,
except for the elimination of applicable intercompany
accounts.
(2) Present fairly the assets, liabilities and financial
position of Kelar as of May 31, 1997, and the results
of operations for the periods then ended. Other than
the liabilities specified in the balance sheet
forming part of Kelar Financial Statements or
incurred since the Reference Date in the ordinary
course of business (all of which is consistent with
past practice) or otherwise noted or disclosed in
this Agreement, to the Best Knowledge of the
Shareholder, there are no known liabilities or
obligations of Kelar (whether absolute, contingent or
otherwise) including without limitation, any Tax
liabilities due or to become due or contingent losses
for unasserted claims which are capable of assertion.
(3) Are substantially in accordance with the books and
records of Kelar.
(4) Contain and reflect all necessary adjustments for a
fair presentation of the results of operations and
financial position of Kelar for the periods covered
thereby.
(5) Contain and reflect adequate provision or allowance
for all reasonably anticipated liabilities, expenses
and losses of Kelar.
(q) Guarantees. Kelar does not have any outstanding guarantees or
has any outstanding security for any liability, debt or
obligation of any Person.
(r) Bonds, Debentures. Kelar does not have any outstanding bonds,
debentures or other indebtedness and are not under any
agreement to create or issue any bonds, debentures or other
indebtedness.
(s) No Further Expenditures. No capital expenditures or leasehold
improvements have been made by Kelar since the dates of Kelar
Financial Statements, other than in the ordinary course of
business.
Page 22
(t) Related Parties. Since the Reference Date, Kelar has not made
any payment or loan to or borrowed any moneys from and is not
otherwise indebted to, any officer, director, employee,
shareholder or any other Person not dealing at arm's length
with Kelar. Kelar is not a party to any Contract with any
officer, director, employee, shareholder or any other Person
not dealing at arm's length with Kelar. No officer, director
or shareholder of Kelar and no entity that is an Affiliate or
Associate of one or more of such individuals:
(1) Owns, directly or indirectly, any interest in (except
for shares representing less than 2% of the
outstanding shares of any class of securities of any
publicly traded company) or is an officer, director,
employee or consultant of, any Person which is or is
engaged in business as a competitor of Kelar or a
lessor, lessee, client or supplier of Kelar.
(2) Owns, directly or indirectly, in whole or in part,
any property that Kelar uses in the operation of its
business.
(3) Has any cause of action or any other claims
whatsoever against or owes any amount to Kelar.
(u) Dividends or Distributions. No dividends or other
distributions on any of the shares in the capital of Kelar
have been authorized, declared or paid since the date of Kelar
Financial Statements and there has not been any direct or
indirect redemption, purchase or acquisition of any such
shares.
(v) No Changes. Since the Reference Date, Kelar has carried on
business and conducted its operations and affairs only in the
ordinary and normal course consistent with past practice and
there has not been:
(1) Any material adverse change in the condition
(financial or otherwise), assets, liabilities,
operations, earnings, business or prospects of Kelar.
(2) Any damage, destruction or loss (whether or not
covered by insurance) affecting the property or
assets of Kelar or any failure to regularly maintain
and repair such property and assets in the ordinary
course of business.
(3) Any payment, discharge or satisfaction of any
Encumbrance, liability or obligation of Kelar
(whether absolute, accrued, contingent or otherwise
and whether due or to become due) greater than
$1,000.00 each, other than payment of accounts
payable and Tax liabilities incurred in the ordinary
course of business consistent with past practice.
(4) Any issuance or sale by Kelar or any Contract entered
into by Kelar for the issuance or sale by Kelar of
any shares in the capital of or securities
convertible into or exercisable into shares in the
capital of Kelar.
Page 23
(5) Any labor disturbances having a Material Adverse Affect on
Kelar.
(6) Any license, sale, assignment, transfer, disposition,
pledge, mortgage or granting of a security interest
or other Encumbrance on or over any property or
assets of Kelar other than in the ordinary course of
business.
(7) Any write-off as uncollectible of any Accounts
Receivable or any portion thereof Kelar in amounts
exceeding the allowance set out in Kelar Financial
Statements.
(8) Any cancellation of any other debts or claims or any
amendment, termination or waiver of any other rights
of value to Kelar in amounts exceeding $1,000.00 in
each instance or $5,000.00 in the aggregate.
(9) Any general increase in the compensation of employees
of Kelar (including without limitation, any increase
pursuant to any employee plan or commitment) or any
increase in any such compensation or bonus payable to
any officer, employee, consultant or agent thereof
(having an annual salary or remuneration in excess of
$30,000.00) or the making of any loan to or
engagement in any transaction with any employee,
officer or director thereof.
(10) Any material change in the accounting or tax
practices followed by Kelar.
(11) Any acquisition, transfer, assignment, sale or other
disposition of any of the assets shown in Kelar
Financial Statements other than in the ordinary
course of business.
(12) Any institution or settlement of any litigation,
action or proceeding before any court or governmental
body by or against Kelar.
(13) The creation of any debts and/or liabilities
whatsoever (whether accrued, absolute, contingent or
otherwise) than in the ordinary course of business.
(w) Taxes . Except as reserved for in the Kelar Financial
Statements:
(1) All returns, including reports of every kind with
respect to Taxes, which are due to have been filed by
Kelar in accordance with applicable law, have been
duly filed by the dates prescribed by law and are
complete and accurate.
(2) All Taxes, deposits or other payments for which Kelar
may have any liability arising prior to Closing have
been paid in full or accrued as liabilities for Taxes
on the books of Kelar.
(3) All installments for Taxes which Kelar may be
required to make have been made on a timely basis.
Page 24
(4) The amount so paid on or before the Reference Date
together with any amounts accrued as liabilities for
Taxes (whether accrued as currently payable or
deferred taxes) on the books and in the Kelar
Financial Statements will be adequate to satisfy all
liabilities for Taxes of Kelar in any jurisdiction in
respect of the periods covered.
(5) There are not now any extensions of time in effect
with respect to the dates on which any returns,
including elections, reports of Taxes were or are due
to be filed by Kelar and there are no outstanding
requests therefor.
(6) All assessments or reassessments of Taxes asserted as
a result of any examination of any return or report
of Taxes have been paid, have been accrued on the
books of Kelar and in the Kelar Financial Statements
or finally settled and no issue has been raised in
any such examination which, by application of the
same or similar principles, reasonably could be
expected to result in a proposed deficiency for any
other period not so examined.
(7) No payments are or will be required to be made by
Kelar pursuant to any tax indemnity, allocation or
sharing agreement and all such agreements will be
terminated with respect to Kelar as of the Reference
Date;
(8) No claims, proposals, assessments or reassessments
for any Taxes are being asserted or, to the Best
Knowledge of the Shareholder, proposed or threatened
and, to the Best Knowledge of the Shareholder, no
audit or investigation of any return or report of
Taxes is currently under way, pending or threatened.
(9) There are no outstanding waivers or agreements by
Kelar for the extension of time for the assessment or
reassessment of any Taxes or deficiency thereof nor
are there any requests for rulings, outstanding
subpoenas or requests for information, notice of
proposed reassessment of any property owned or leased
by Kelar or any other matter pending between Kelar
and any taxing authority.
(10) There are no liens for Taxes upon Kelar shares or
upon any property or assets of Kelar except liens for
current Taxes not yet due.
(11) To the Best Knowledge of the Shareholder there are no
facts which exist or have existed which would
constitute grounds for the assessment of any Taxes of
Kelar with respect to the periods which have not been
audited by the Internal Revenue Service or other
taxing authorities.
Page 25
(12) Kelar has withheld from each payment made to its
officers, directors and employees and former
officers, directors and employees, the amount of all
Taxes and other deductions required to be withheld
therefrom and has paid the same to the proper tax and
other receiving officers within the time required
under applicable legislation.
(13) Adequate provision, including provision in the
deferred tax account has been made for all deferred
and accrued Tax liabilities with respect to
operations of Kelar for the period ending on the
Reference Date.
(x) Assets. Kelar has good and marketable title to all of its
assets as reflected on the Kelar Financial Statements, free
and clear of all Encumbrances save and except for those assets
sold, assigned, transferred or disposed of in the ordinary
course of business and save and except for the encumbrances
identified in Schedule 4.1(x), hereto.
(y) Certain Contracts and Commitments. The enforceability of all
contracts, leases and licenses of Kelar (the "Kelar
Contracts") will not be affected in any manner by the
execution and delivery of this Agreement or the consummation
of the Transaction. Kelar is not in default and there does not
exist any event that, with notice or lapse of time or both,
would constitute an event of default by Kelar under any of
Kelar Contracts. A true and complete copy of each such Kelar
Contract has been delivered to Buyer or will be delivered to
Buyer prior to the Closing Date.
(z) No Other Contracts. Kelar is not a party to or bound by any
Contract which in any way has or could have a Material Adverse
Effect on Kelar. The Contracts set forth in the Schedules
hereto are not subject to renegotiation or cancellation
resulting from the Transaction. Except as described in the
Schedules, Kelar is not a party to or bound by:
(1) Any Contract for the purchase of materials, supplies,
equipment or services which involves the payment of
$1,000.00 or more.
(2) Any Contract for the sale, license or provision of
any assets or services which involve the receipt of
$1,000.00 or more.
(3) Any trust indenture, mortgage, promissory note, loan
agreement, guarantee or other Contract for the
borrowing of money or a leasing transaction of the
type required to be capitalized in accordance with
generally accepted accounting principles.
(4) Any Contract for charitable contributions in excess
of $500.00 in the aggregate.
Page 26
(5) Any Contract relating to a distributorship, sales
representative or sales agency agreement.
(6) Any Contract which involves the sharing of profits, a
joint venture, partnership, joint development or
bidding arrangement or any material advertising
contracts.
(7) Any Contract not made in the ordinary course of
business.
(8) Any Contract restricting in any manner the conduct
of Kelar or the ownership or use of the assets
thereof.
(9) Any material warranties relating to products
distributed or services provided by Kelar.
(10) Any Contract involving the payment or receipt of
$5,000.00 or more in any 12 month period.
(11) Any Contract required to be disclosed on a Schedule
to this Agreement that is not so disclosed.
(aa) Default of Contracts. Kelar has performed all of the
obligations required to be performed by it to the extent
performance is due and is entitled to all benefits under and
is not in default or alleged to be in default in respect of,
any Contract to which it is a party or by which it is bound.
No event, condition or occurrence exists that, after notice or
lapse of time or both, would constitute a default under any of
such Contracts. Kelar has the capacity, including the
necessary personnel, equipment and supplies, to materially
perform all its obligations under all such Contracts.
(ab) Compliance with Laws. Kelar has conducted and is now conducting
business in compliance with all statutes, regulations, bylaws, orders,
covenants, restrictions or plans of all federal, state or municipal
authorities, agencies or boards applicable to such business. Kelar is
not in default under any such statutes, regulations, bylaws, orders,
covenants, restrictions or plans applicable to it. Kelar nor any of
its directors, officers, agents, employees or other Persons acting on
behalf of Kelar has, directly or indirectly, used any corporate funds
of Kelar for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, made any unlawful
payments on behalf of Kelar to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, knowingly made any false or fictitious
entry on the books or records of Kelar or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment on
behalf of Kelar.
Page 27
(ac) Leased Premises. The occupation and use to which the leased
premises of Kelar has been put by Kelar is not in breach of
any applicable statute, by-law, regulation, covenant or
restriction applicable to the leased premises. The zoning
bylaws applicable to the leased premises permit the operation
of business and the intended use to be made of the leased
premises. There are no outstanding work orders against the
leased premises of Kelar or any part thereof nor are there any
matters under discussion between Kelar and any governmental or
municipal authority which may give rise to work orders.
(ad) Environmental Matters. To the Best Knowledge of the Shareholder,
the buildings and premises at which Kelar carries on business does not
contain any material quantities of noxious substances including
without limitation, urea formaldehyde foam insulation, aluminum
wiring, asbestos, materials containing asbestos, polychlorinated
byphenyls or substances containing polychlorinated byphenyls or radon
at levels deemed unacceptable by any health, labor or environmental
authority or any federal, state or municipal government. The
operations of Kelar in all material respects comply with all
applicable environmental statutes, regulations and decrees, whether
federal, state or municipal. Kelar has not received any notices to the
effect that the business carried on by Kelar is not in compliance with
the requirements of applicable environmental statutes, regulations or
decrees or is subject to any remedial control or action or any
investigation or evaluation as to whether any remedial action is
required to respond to a release or threatened release of any
contaminant into the environment or into any facility or structure
which forms part of or is adjacent to the leased premises at which the
business is carried on.
(ae) Employee Plans and Arrangements. All of Kelar's employee
contracts, plans and arrangements are in good standing and Kelar has
made all payments required to be made by it in connection therewith.
All employee plans requiring funding on the part of Kelar are fully
funded. ▇▇▇▇▇▇ does not have any employees receiving or claiming long
term disability benefits or workers' compensation benefits. No notice
has been received by Kelar of any complaints filed by any employees
claiming that Kelar has violated any applicable employee or human
rights or similar legislation in any other jurisdiction in which Kelar
carries on business or of any complaints or proceedings of any kind
involving Kelar or any employees of Kelar before any labor relations
board. There are no outstanding orders or charges against Kelar under
any applicable health and safety legislation in the jurisdictions in
which Kelar carries on business. All levies, assessments and penalties
made against Kelar pursuant to any applicable workers' compensation
legislation in any jurisdictions in which Kelar carries on business
has been paid by Kelar and Kelar has been reassessed under any such
legislation during the past 3 years. Kelar has not made any agreements
with any labor union or employee association or made commitments to or
conducted negotiations with any labor union or employee association
with respect to any future agreements and the Shareholder is not aware
of any current attempts to organize or establish any labor union or
employee association relating to Kelar. Kelar has not entered into any
agreement or made any arrangements with any employees an consultants
which would have the effect of depriving Kelar of the continued
services of any such employees and consultants following the Closing.
Page 28
(af) No Brokers. All negotiations relating to this Agreement and
the Transaction have been carried on by the Shareholder
directly with Buyer without the intervention of any other
Person on behalf of the Shareholder in such manner as to give
rise to any valid claim against Buyer for a brokerage
commission, finder's fee or other like payment and the
Shareholder will indemnify and save harmless Buyer of and from
any such claim.
(ag) Omissions and Misrepresentations. None of the foregoing
covenants, representations and warranties knowingly contains
any untrue statement of material fact or knowingly omits to
state any material fact necessary to make any such covenant,
warranty or representation not misleading to a prospective
purchaser of Kelar Shares and the Assets seeking full
information as to Kelar.
5. SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
5.1 Survival. No investigations made by or on behalf of any Party at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any covenant, representation or warranty made by any Party. No waiver
by any Party of any condition, in whole or in part, shall operate as a waiver of
any other condition. The covenants, representations and warranties contained in
Article 3 and 4 respectively or in any certificate or other document delivered
in connection with the Closing shall survive the making of this Agreement and
the Closing for a period of 2 years and only 2 years. The period of survival
being herein referred to as the "Survival Period"); provided, however, that if a
claim for a breach of any such covenant, representation or warranty is brought
prior to the expiration of the Survival Period such covenant, representation or
warranty shall, for the purposes of such claim, survive the Survival Period
until such claim is finally resolved and all obligations with respect thereto
have been fully satisfied.
6. INDEMNITY
6.1 Indemnity by Buyer. Buyer agrees to indemnify and save harmless the
Shareholder from all Losses actually incurred by the Shareholder as a result of
any breach by Buyer or any inaccuracy of any covenant, representation or
warranty contained in this Agreement.
6.2 Indemnity by the Shareholder. The Shareholder agrees to indemnify and save
harmless Buyer from all Losses actually incurred by Buyer as a result of:
(a) Any breach by the Shareholder or any inaccuracy of any
covenant, representation or warranty contained in this
Agreement.
(b) All debts, liabilities and claims whatsoever (whether accrued,
absolute, contingent or otherwise) of Kelar as at the
Reference Date which are not disclosed on, provided for,
reserved for or included in the balance sheets forming part of
Kelar Financial Statements or which did not arise in the
ordinary course of business since the date of Kelar Financial
Statements up to the Time of Closing.
Page 29
(c) Any assessment or reassessment of Taxes, interest and/or
penalties for any period up to the Reference Date for which no
adequate reserve has been provided and disclosed in the Kelar
Financial Statement.
6.3 Notice of Claims
(a) In the event that a Party (the "Indemnified Party") shall become
aware of any Loss in respect of which another Party (the "Indemnifying
Party") agreed to indemnify the Indemnified Party pursuant to this
Agreement (the "Indemnification Claim"), the Indemnified Party shall
promptly give written notice thereof to the Indemnifying Party. Such
notice shall specify whether the Indemnification Claim arises as a
result of a claim by a Person against the Indemnified Party (a "Third
Party Claim") or whether the Loss does not so arise (a "Direct Claim")
and shall also specify with reasonable particularity (to the extent
that the information is available) the factual basis for the
Indemnification Claim and the amount of the Loss if known.
(b) If through the fault of the Indemnified Party the Indemnifying
Party does not receive notice of any Indemnification Claim in
time to contest effectively the determination of any liability
susceptible of being contested, the Indemnifying Party shall
be entitled to set off against the amount claimed by the
Indemnified Party the amount of any Losses incurred by the
Indemnifying Party resulting from the Indemnified Party's
failure to give such notice on a timely basis.
6.4 Investigation of Claims. With respect to any Direct Claim, following receipt
of notice from the Indemnified Party of the Indemnification Claim, the
Indemnifying Party shall have 60 days to make such investigation of the
Indemnification Claim as is considered necessary or desirable. For the purpose
of such investigation, the Indemnified Party shall make available to the
Indemnifying Party the information relied upon by the Indemnified Party to
substantiate the Indemnification Claim, together with all such other information
as the Indemnifying Party may reasonably request. If all Parties agree at or
prior to the expiration of such 60 day period (or any mutually agreed upon
extension thereof) to the validity and amount of such Indemnification Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party the full
agreed upon amount of the Indemnification Claim, failing which the matter shall
be determined by a court of competent jurisdiction.
6.5 Supplemental Rights. The rights and benefits provided in this Article are
supplemental to and are without prejudice to any other rights, actions or causes
of action which may arise pursuant to any other section of this Agreement or
pursuant to applicable law.
7. PRE-CLOSING COVENANTS
7.1 Operations Before Closing. For greater certainty and without limitation,
without the prior written consent of Buyer during the period commencing on the
Reference Date and terminating at the close of business on the Closing Date, the
Shareholder: (i) shall not make nor shall the Shareholder permit to be made any
material change in the way that Kelar is being operated; and (ii) shall comply
with all laws in connection with the business of Kelar.
Page 30
8. CONDITIONS PRECEDENT TO SHAREHOLDER'S OBLIGATIONS AT CLOSING
8.1 Conditions Precedent. All obligations of Shareholder to deliver Kelar Shares
this Agreement are subject to the fulfillment (or waiver in writing by
Shareholder) prior to or at the Closing of each of the following conditions:
(a) Covenants, Representations and Warranties. The covenants,
representations and warranties made by the Buyer in or under
this Agreement shall be true in all material respects on and
as of the Closing Date and Shareholder shall have received
from the Buyer a certificate signed as of the Closing Date and
to such effect.
(b) Actions, Etc. All actions, proceedings, instruments and
documents required to carry out the Transaction including
without limitation the issue and delivery of the Security
Documents as contemplated in this Agreement and all other
related legal matters shall have been approved by the
Shareholder and the Shareholder shall have been furnished with
such certified copies of actions and proceedings and other
such instruments and documents as the Shareholder shall have
requested.
(c) Approvals. Buyer shall have received all requisite regulatory
approvals and board of director approvals in connection with
the Transaction.
(d) Compliance with Covenants. Buyer shall have complied with all
covenants and agreements herein agreed to be performed or
caused to be performed by Buyer.
(e) Approvals and Consents. At or before Closing there shall have
been obtained from all appropriate federal, state, provincial,
municipal or other governmental or administrative bodies all
such approvals and consents, if any, in form and on terms
satisfactory to the Shareholder as may be required in order to
permit the completion of the Transaction as provided in this
Agreement.
(f) Corporate Authorizations. Buyer shall have delivered to the
Shareholder evidence satisfactory to the Shareholder that all
necessary corporate authorizations by authorizing and
approving the Transaction have been obtained.
(g) No Orders. No order of any court or administrative agency
shall be in effect which restrains or prohibits the
Transaction and no suit, action, inquiry, investigation or
proceeding in which it will be or it is sought to restrain,
prohibit or change the terms of or obtain damages or other
relief in connection with the Transaction and which in the
reasonable judgment of the Shareholder makes it inadvisable to
proceed with the consummation of the Transaction shall have
been made, instituted or threatened by any Person.
Page 31
In case any of the foregoing conditions cannot be fulfilled at or
before the Time of Closing to the reasonable satisfaction of the Shareholder,
the Shareholder may rescind this Agreement by notice to Buyer and in such event
all of the Parties shall be released from all obligations hereunder. Provided
however that any such conditions may be waived in whole or in part by the
Shareholder without prejudice to the Shareholder's rights of rescission in the
event of the non-fulfillment of any other condition or conditions, any such
waiver to be binding on the Shareholder only if the same is in writing.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT CLOSING
9.1 Conditions Precedent. All obligations of Buyer to purchase Kelar Shares this
Agreement are subject to the fulfillment (or waiver in writing by Buyer) prior
to or at the Closing of each of the following conditions:
(a) Covenants, Representations and Warranties. The covenants,
representations and warranties made by the Shareholder in or
under this Agreement shall be true in all material respects on
and as of the Closing Date and Buyer shall have received from
the Shareholder a certificate signed as of the Closing Date
and to such effect.
(b) Actions, Etc. All actions, proceedings, instruments and
documents required to carry out the Transaction including
without limitation, the transfer of Kelar Shares and all other
related legal matters shall have been approved by Buyer and
Buyer shall have been furnished with such certified copies of
actions and proceedings and other such instruments and
documents as Buyer shall have requested.
(c) Approvals. Shareholder shall have received all requisite
regulatory approval including without limitation board of
director approvals in connection with the Transaction.
(d) Resignations. All of the directors and officers of Kelar shall
have resigned as directors and officers of Kelar in favor of
nominees of Buyer and the resigning directors and officers of
Kelar shall have delivered releases to Kelar and Buyer in form
and substance reasonably satisfactory to Buyer.
(e) Compliance with Covenants. The Shareholder shall have complied
with all covenants and agreements herein agreed to be
performed or caused to be performed by the Shareholder.
(f) Approvals and Consents. At or before Closing there shall have
been obtained from all appropriate federal, state, municipal
or other governmental or administrative bodies all such
approvals and consents, if any, in form and on terms
reasonably satisfactory to Buyer as may be required in order
to transfer Kelar Shares at Closing as herein provided.
Page 32
(g) Permits and Licenses. Buyer shall have been furnished with
evidence that Kelar holds all valid permits and licenses as
may be requisite for carrying on business.
(h) Corporate Authorizations. Shareholder shall have delivered to
Buyer evidence satisfactory to Buyer that all necessary
corporate authorizations by the Shareholder and Kelar
authorizing and approving the Transaction have been obtained.
(i) No Orders. No order of any court or administrative agency
shall be in effect which restrains or prohibits the
Transaction and no suit, action inquiry, investigation or
proceeding in which it will be or it is sought to restrain,
prohibit or change the terms of or obtain damages or other
relief in connection with the Transaction and which in the
judgment of Buyer makes it inadvisable to proceed with the
consummation of the Transaction shall have been made,
instituted or threatened by any person.
In case any of the foregoing conditions cannot be fulfilled at or
before the Time of Closing to the satisfaction of Buyer, Buyer may rescind this
Agreement by notice to the Shareholder and in such event the Parties shall be
released from all obligations hereunder. Provided however that any such
conditions may be waived in whole or in part by Buyer without prejudice to
buyer's rights of rescission in the event of the non-fulfillment of any other
condition or conditions, any such waiver to be binding on Buyer only if the same
is in writing.
MISCELLANEOUS
10.1 Tender. Any tender of documents or money hereunder may be made upon the
Parties or under their respective solicitors as set forth herein.
10.2 Notice. All notices, requests, demands or other communications by the
Parties required or permitted to be given by one Party to another shall be given
in writing by personal delivery, telecopy or by registered or certified mail,
postage prepaid, addressed, telecopied or delivered to such other Party as
follows:
(a) if to the Shareholder, to:
EIF Holdings, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(b) if to Buyer, to:
Regal Oak Properties, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Page 33
Or at such other address or telecopier number as may be given by any of them to
the others in writing from time to time and such notices, requests, demands or
other communications shall be deemed to have been received when delivered, if
personally delivered, on the date telecopied (with receipt confirmed) if
telecopied and received at or prior to 5:00 p.m. local time and, if not, on the
next Business Day, and if mailed, on the date received as certified.
10.3 Further Assurances. The Parties shall sign such other papers, cause such
meetings to be held, resolutions passed and bylaws enacted and exercise their
vote and influence, do and perform and cause to be done and performed such
further and other acts and things as may be necessary or desirable in order to
give full effect to this Agreement and every part hereof.
10.4 Laws. This agreement shall be governed by the laws of Texas and the Parties
hereby irrevocably attorn to the Courts of ▇▇▇▇▇▇ County, Texas.
10.5 Expenses. All out-of-pocket expenses (including legal and accounting
expenses) incurred in connection with the Transaction shall be borne by the
respective Parties.
10.6 Time of the Essence. Time shall be of the essence of this Agreement and of
every part hereof and no extension or variation of this Agreement shall operate
as a waiver of this provision.
10.7 Entire Agreement. This Agreement constitutes the entire agreement between
the Parties with respect to all of the matters herein. This Agreement supersedes
any and all agreements, understandings and representations made between the
Parties prior to the date hereof. This Agreement shall not be amended except by
a memorandum in writing signed by all of the Parties and any amendment hereof
shall be null and void and shall not be binding upon any Party which has not
given its consent as aforesaid.
10.8 Assignment. No Party may assign this Agreement or any part hereof without
the prior written consent of the other Parties which consent may be unreasonably
withheld. Subject to the foregoing, this Agreement shall enure to the benefit of
and be binding upon the Parties and their respective successors and permitted
assigns, but no other Person.
10.9 Invalidity. In the event that any of the covenants, representations and
warranties or any portion of them contained in this Agreement are unenforceable
or are declared invalid for any reason whatsoever, such unenforceability or
invalidity shall not affect the enforceability or validity of the remaining
terms or portions thereof contained in this Agreement and such unenforceable or
invalid, covenant, representation and warranty or covenant or portion thereof
shall be severable from the remainder of this Agreement.
* * * * *
Page 34
IN WITNESS WHEREOF the Parties have duly executed this Agreement as of
the date and year first above written.
EIF HOLDINGS, INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ J, ▇▇▇▇▇▇▇▇
---------------------------------
Title: President
--------------------------------
Date: June 30, 1997
---------------------------------
REGAL OAK PROPERTIES, INC.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title: Authorized Rep
--------------------------------
Date: June 30, 1997
---------------------------------
Page 35
