AGREEMENT FOR PURCHASE
AND SALE OF ASSETS
BETWEEN
JEAN CHARLES INCORPORATED
A UTAH Corporation
("BUYER")
AND
SURREY, INC.,
A TEXAS Corporation
("SELLER")
April 2, 2001
SURREY: Asset Sale and Purchase Agreement April 5, 2001
TABLE OF CONTENTS
PAGE
1 TRANSFER OF ASSETS.....................................................-2-
1.1 Equipment............................................-2-
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1.2 Inventories..........................................-2-
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1.3 Intangibles..........................................-2-
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1.4 Books and Records....................................-2-
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1.5 Other Assets.........................................-3-
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2 PURCHASE PRICE.........................................................-3-
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3 THE CLOSING............................................................-3-
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3.1 Seller's Obligations at the Closing..................-3-
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3.2 Buyer's Obligations at the Closing...................-4-
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4 ASSUMPTION OF LIABILITIES..............................................-4-
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5 INTERIM PRE-CLOSING AGREEMENT..........................................-4-
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5.1 Operation of Business................................-5-
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5.2 Employees............................................-5-
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5.3 Lease of Real Property...............................-5-
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5.4 Payments to Chase Bank...............................-6-
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5.5 Payments to Trade Creditors..........................-6-
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5.6 Payments for Inventory...............................-6-
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5.7 Sale of Real Property................................-7-
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5.8 Insurance............................................-7-
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5.9 Approvals............................................-7-
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6 OPTIONS CONCERNING COMPETING OFFERS....................................-7-
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7 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.....................-7-
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7.1 Organization, Good Standing and Qualification........-8-
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7.2 Binding Agreement....................................-8-
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7.3 Stock of Corporation.................................-8-
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7.4 Financial Statements.................................-8-
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7.5 Absence of Specified Changes.........................-8-
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7.6 Tax Returns and Audits...............................-9-
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7.7 Real Property........................................-9-
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7.8 Other Tangible Personal Property.....................-9-
--------------------------------
7.9 Trade Names, Trademarks and Copyrights...............-9-
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
7.10 Trade Secrets........................................-9-
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7.11 Title to Assets......................................-10-
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7.12 Insurance Policies...................................-10-
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7.13 Compliance with Laws.................................-10-
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7.14 Litigation...........................................-10-
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7.15 Hazardous Materials..................................-10-
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7.16 Authority and Consents...............................-11-
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7.17 Full Disclosure......................................-11-
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8 BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS......................-11-
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8.1 Organization, Good Standing and Qualification........-11-
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8.2 Binding Agreement....................................-11-
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8.3 Chase Bank...........................................-11-
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8.4 Real Property........................................-11-
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8.5 Tender for Shares....................................-11-
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9 SELLER'S OBLIGATIONS BEFORE CLOSING....................................-12-
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9.1 Buyer's Access to Premises and Information...........-12-
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9.2 Conduct of Business in Normal Course.................-12-
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9.3 Preservation of Business and Relationships...........-12-
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9.4 New Transactions.....................................-12-
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9.5 Existing Agreements..................................-12-
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9.6 Representations and Warranties True at Closing.......-12-
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9.7 Sales and Use Tax on Prior Sales.....................-12-
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10 BUYER'S OBLIGATIONS BEFORE CLOSING.....................................-12-
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10.1 Information to Be Held in Confidence.................-13-
------------------------------------
10.2 Employment Agreements................................-13-
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11 CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE...........................-13-
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11.1 Accuracy of Buyer's Representations and Warranties...-13-
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11.2 Buyer's Performance..................................-13-
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11.3 Buyer's Corporate Approval...........................-13-
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12 CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE............................-13-
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12.1 Accuracy of Seller's Representations and Warranties..-14-
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12.2 Performance by Seller................................-14-
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12.3 Certification by Seller..............................-14-
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12.4 Absence of Litigation................................-14-
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12.5 Consents.............................................-14-
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12.6 Approval of Documentation............................-14-
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12.7 Consulting Agreement.................................-14-
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12.8 Employment Agreement.................................-14-
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12.9 Cancellation of Shares...............................-14-
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
13 SELLER'S OBLIGATIONS AFTER THE CLOSING.................................-14-
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13.1 Seller's Indemnities.................................-15-
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13.2 Use of Seller's Name.................................-15-
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14 COSTS..................................................................-15-
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14.1 Finder's or Broker's Fees............................-15-
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14.2 Expenses.............................................-15-
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15 FORM OF AGREEMENT......................................................-15-
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15.1 Effect of Headings...................................-15-
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15.2 Entire Agreement; Modification; Waiver...............-15-
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15.3 Counterparts.........................................-16-
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16 PARTIES................................................................-16-
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16.1 Parties in Interest..................................-16-
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16.2 Assignment...........................................-16-
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16.3 Legal Counsel........................................-16-
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17 REMEDIES...............................................................-16-
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17.1 Recovery of Litigation Costs.........................-16-
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17.2 Defaults Permitting Termination......................-16-
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18 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES..................-17-
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19 NOTICES................................................................-17-
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20 GOVERNING LAW..........................................................-17-
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iii
SURREY: Asset Sale and Purchase Agreement April 5, 2001
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS (the "Agreement") is
made effective as of April 2, 2001, at Palm Springs, California, by and between
JEAN CHARLES INCORPORATED (the "Buyer"), a Utah corporation with an address at
82449 61st Avenue, Thermal, California 92274, and SURREY, INC. (the "Seller"), a
Texas corporation with an address at 13110 Trails End Road, Leander, Texas
78641, and is made with reference to the following facts:
RECITALS
A. Seller is engaged in the buying in bulk, manufacturing, repackaging,
and sale of products to various wholesale and retail stores. Seller has been
operating at a loss for some time. The financial reports for Seller for the year
ending December 31, 2000, are expected to reflect a loss of approximately
$1,700,000 for the year. As of September 30, 2000, the reported losses had been
$261,000.00. The amount of the loss for the first quarter of year 2001 is not
currently available but a further substantial loss is projected.
B. Pursuant to its business operations, Seller owns real property,
improvements and fixtures located at 13110 Trails End Road, Leander, Texas 78641
(the "Real Property"). Seller has executed one or more deeds of trust on the
Real Property to secure the repayment of its various promissory notes payable to
the Chase Manhattan Bank ("Chase Bank"), P.O. Box 2558, Houston, Texas
77252-8074. Seller has also granted a security interest to Chase Bank in
substantially all of its personal property, including without limitation
receivables and inventory, to secure the repayment of its various promissory
notes payable to Chase Bank. Recently, Chase Bank sent Seller a demand letter
for the entire approximately $5,700,000.00 principal owed, plus accrued
interest. Seller lacks sufficient revenues to repay the debt and to thereafter
continue in business.
C. Buyer has been, and is now, operating a buy/sell business that has
many similarities to that operated by Seller. Buyer believes that some of
Seller's assets would be of value to Buyer's business operations. Buyer is also
interested in retaining the services of Marty van der Hagen and John van der
Hagen (the "van der Hagens") -- who are current shareholders of the Seller --
for employment and/or consulting as Buyer expands its business operations in the
United States and into Mexico. Therefore, Buyer has made to Seller an offer to
purchase certain of the assets of Seller on the terms set forth in full below.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
D. The Board of Directors of Seller (the "Board") has conducted an
evaluation of Seller's options with representatives of Chase Bank, bankruptcy
counsel, and securities counsel. Given the circumstances including the options
available to the Seller, the Board believes that this Agreement is in the best
interests of the Seller.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
1 TRANSFER OF ASSETS
Subject to the terms and conditions set forth in this Agreement, Seller
agrees to sell, convey, transfer, assign and deliver to Buyer, and Buyer agrees
to purchase from Seller at the Closing described in Article 3 hereof, all the
assets, properties and business of Seller of every kind, character and
description whether tangible, intangible, real, personal or mixed and wherever
located (but excluding the Real Property and any assets specifically excluded in
the following Sections of this Article 1), all of which are sometimes
collectively referred to in this Agreement as the "Assets," including, but
without limitation to, the following:
1.1 Equipment. All the machinery, tools, dies, appliances, vehicles,
furniture, equipment (including essential replacement parts) and other tangible
personal property of every kind and description that are located upon or within
the Real Property, are owned or leased by Seller, and are utilized in connection
with Seller's operations upon or within the Real Property, a current list of
which is attached hereto as SCHEDULE 1.1 (hereinafter referred to collectively
as the "Equipment");
1.2 Inventories. All of Seller's finished goods and raw materials
(whether expensed or not), including work in process, consumable manufacturing
supplies, spare parts and repair materials that are actually on hand as of the
Closing Date, whether on or within the Real Property or en route thereto or
elsewhere, and any rights and claims to refunds and adjustments of any kind with
respect to the inventory, an approximate summary of which items currently on
hand is attached hereto as SCHEDULE 1.2 (hereinafter referred to collectively as
the "Inventories");
1.3 Intangibles. All trade names, trademarks, service marks,
copyrights, patents, patent rights, trade secrets, technical know-how, goodwill
and other intangibles (including all contracts to be assumed by Buyer pursuant
to Article 4) used by Seller in (or owned by Seller and useful in) the operation
of the business located upon or within the Real Property, but excluding accounts
receivable, accounts payable, contracts not assumed by Buyer pursuant to Article
4, bank accounts, and tax deposits;
1.4 Books and Records. All papers and records in Seller's care, custody
or control relating to any or all of the above described Assets and the
operation thereof, including but not limited to all personnel and labor
relations records, environmental control records, sales records, accounting and
financial records, maintenance and production records, and plans and designs of
equipment; and
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
1.5 Other Assets. All prepaid expenses relating to any of the Assets
and the operation of Seller's business.
2 PURCHASE PRICE
--------------
In consideration for the transfer and assignment by Seller of the
Assets and inconsideration of the representations, warranties and covenants of
Seller set forth herein, Buyer on the conditions set forth herein,
2.1 shall have performed all of its obligations to be performed under
this Agreement to and including the Closing Date;
2.2 shall perform all of its obligations to be performed under this
Agreement after the Closing Date;
2.3 shall assume and discharge, and shall indemnify Seller against,
liabilities and obligations of Seller under the leases or other agreements, if
any, specified on SCHEDULE 4 but only to the extent that such liabilities or
obligations accrue on or after the Closing Date.
3 THE CLOSING
-----------
The Closing of the purchase and sale of the Assets by Seller to Buyer
(the "Closing") shall take place at the offices of Seller, 13110 Trails End
Road, Leander, Texas 78641, at 10:00 a.m. local time, on July 31, 2001, with
close of business to be 5:00 p.m. local time on that date, or at such other
place and/or time as the parties may agree in writing (the "Closing Date"). In
the event that the conditions specified in this Agreement have not been
fulfilled by such date, Buyer may extend the Closing for a period or periods not
exceeding an aggregate of 15 days by written notice to Seller. If, on the
original or any postponed Closing Date Seller shall have been unable to obtain
all waivers and consents of shareholders, private parties and governmental
agencies required by this Agreement, then either Buyer or Seller, on written
notice, may postpone the Closing to a time not later than 10:00 a.m. local time,
on September 29, 2001. Buyer and Seller acknowledge and agree that Chase Bank
will not be required to release any of its liens, security interest or
assignments against Seller's Assets or the Real Property, except upon repayment
in full of the Chase Bank debt, except with respect to inventory and accounts
receivable as provided in that certain Consent Letter dated on or about the date
hereof executed buy Buyer, Seller and Chase Bank.
3.1 Seller's Obligations at the Closing. At the Closing, Seller shall
deliver or cause to be delivered to Buyer:
3.1.1 Instruments of assignment and transfer (including a Bill
of Sale) of all of the Assets of Seller to be transferred hereunder.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
Simultaneously with the consummation of the transfer, Seller,
through its officers, agents and employees, shall put Buyer into full
possession and enjoyment of all of the Assets to be conveyed and
transferred by this Agreement.
Seller, at any time before or after the Closing Date, will
execute, acknowledge, and deliver any further assignments, conveyances,
and other assurances, documents, and instruments of transfer,
reasonably requested by Buyer and will take any other action consistent
with the terms of this Agreement that may reasonably be requested by
Buyer for the purpose of assigning, transferring, granting, conveying,
and confirming to Buyer, or reducing to possession, any or all property
and assets to be conveyed and transferred by this Agreement. If
requested by Buyer, Seller further agrees to prosecute or otherwise
enforce in its own name for the benefit of Buyer any claims, rights, or
benefits that are transferred to Buyer by this Agreement and that
require prosecution or enforcement in Seller's name. Any prosecution or
enforcement of claims, rights, or benefits under this Section shall be
solely at Buyer's expense, unless the prosecution or enforcement is
made necessary by a breach of this Agreement by the Seller.
3.1.2 Seller shall pay all sales and use taxes arising out of
the transfer of the Assets and shall pay its portion, prorated as of
the Closing Date, of state and local real and personal property taxes
of the business. Buyer shall not be responsible for any business,
occupation, withholding, or similar tax, or any taxes of any kind
related to any period before the Closing Date.
3.1.3 Seller shall cancel all outstanding shares of its stock
owned, directly or indirectly, by John van der Hagen.
3.2 Buyer's Obligations at the Closing. At the Closing, Buyer shall
deliver to Seller the following instruments and documents against delivery of
the items specified in Section 3.1:
3.2.1 Buyer hereby covenants to perform all of its obligations
accruing or to be performed after the Closing Date, as provided in this
Agreement.
4 ASSUMPTION OF LIABILITIES
-------------------------
Buyer is not assuming any debt, liability or obligation of Seller,
whether known or unknown, fixed or contingent, except as herein specifically
otherwise provided. Buyer shall have the benefit of and shall perform all
contracts and commitments, if any, specifically disclosed on SCHEDULE 4, in
accordance with the terms and conditions thereof, except to the extent
modifications are specifically disclosed on such SCHEDULE 4.
5 INTERIM PRE-CLOSING AGREEMENT
-----------------------------
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
5.1 Operation of Business. Seller hereby designates and appoints Buyer
as Seller's agent and Buyer hereby accepts appointment as Seller's agent for the
administration, management and operation in all respects of Seller's business,
during the period commencing on the date of this Agreement and continuing until
the Closing or earlier termination of this Agreement. During Buyer's operation
of Seller's business:
5.1.1 Buyer shall pay all general, administrative and operating
expenses associated with the operation of Seller's business (including,
without limitation, operating costs and expenses, costs associated with
goods sold and the acquisition of additional raw materials, but
excluding costs of Seller's December 31, 2000 year end audit and costs
of filings with the Securities and Exchange Commission);
5.1.2 Buyer shall pay all amounts payable on Seller's operating
and capital leases for the use of the Assets;
5.1.3 Buyer shall pay all other expenses incurred by Seller,
subject to prior approval of such expense by Buyer;
5.1.4 Buyer shall loan funds and/or inventory items to Seller so
that Inventories will be maintained at a minimum value of not less than
$2,000,000.00 at all times from the date of this Agreement until the
Closing Date or earlier termination of this Agreement.
During Buyer's operation of Seller's business, Buyer shall be
entitled to all sales revenues, receivables and collections from such
revenues and shall pay to or for the benefit of Seller as provided
elsewhere in this Agreement, for cost of goods sold, 35% of gross sales
revenues, less returns and allowances, (this percentage having been
determined by agreement of the parties because of inconsistencies in
the inventory system).
5.2 Employees. Seller shall lay-off all of its employees effective the
date of this Agreement and shall pay all amounts owed to employees through and
including such date. All contracts and arrangements with employees are in full
force and effect, and neither Seller, nor any other party is in default under
any such contract or arrangement. Seller shall retain an accountant to maintain
the Seller's books of account, to assist the auditors with the completion of the
audit, and to assist with the preparation of filings with governmental agencies.
Buyer may hire such employees as it considers necessary for the operation of the
Seller's business.
5.3 Lease of Real Property. Seller hereby leases to Buyer and Buyer
leases from Seller the Real Property on a month-to-month basis commencing on the
date of this Agreement with a monthly rental of $10,000.00 per month, payable
directly to Chase Bank for the benefit of Seller as otherwise provided in this
Agreement, triple net, and Buyer agrees, in addition to the monthly rental, to
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
pay all taxes, insurance, maintenance and other expenses relating to the Real
Property during the term of the lease.
5.4 Payments to Chase Bank. Buyer guarantees the payment of
$3,000,000.00 to Chase Bank during the 180 days following the date of this
Agreement, such payment to be made as follows:
5.4.1 All collections of Seller's accounts receivables accruing
prior to the date of this Agreement shall be delivered to Chase Bank
within three business days after their receipt by Seller, until Chase
Bank has received $3,000,000.00 from payments under this Section 5.4.
EXHIBIT B to this Agreement is a complete and accurate schedule of the
accounts receivable of Seller as of April 1, 2001, as reflected in the
consolidated balance sheet as of that date, included in the financial
statements, together with an accurate aging of these accounts;
5.4.2 As described above, commencing on the date of this
Agreement, Buyer shall rent the Real Property from Seller, on a
month-to-month basis, at a rental of $10,000.00 per month and shall pay
all rental payments directly to Chase Bank, unless and until Chase Bank
has received payment in full of all debt of Seller to Chase Bank, in
which case rental payments will be paid directly to Seller;
5.4.3 Commencing on the date of this Agreement, Buyer shall pay
directly to Chase Bank 10% of gross sales revenues, less returns and
allowances, from sales of Seller's products, such payments to be made
on or before the third business day of each week for sales of the
preceding week until such time as Chase has received $3,000,000
pursuant to this Section 5.4; and
5.4.4 On or before the date which is 180 days after the date of
this Agreement, Buyer shall pay to Chase Bank an amount which together
with all other amounts paid to Chase Bank pursuant to this Section 5.4
shall equal $3,000,000.00.
5.5 Payments to Trade Creditors. Upon the payment of $3,000,000.00 to
Chase Bank pursuant to Section 5.4, Buyer shall pay directly to Seller's trade
creditors 10% of gross sales revenues, less returns and allowances, from sales
of Seller's products, such payments to be made on or before the third business
day of each week for sales of the preceding week until such time as all of
Seller's trade creditors have been paid in full.
5.6 Payments for Inventory. As of the Closing Date, the parties shall
jointly determine the value of the Inventories actually on hand as of the
Closing Date, which for purposes of this Agreement shall be the lesser of cost
or fair market value, as determined by a joint physical count and determination
of the parties, plus amounts owed by Buyer to Seller for Inventories sold by
Buyer pursuant to Section 5.1 above, and less amounts owed by Seller to Buyer
for all inventories purchased by Buyer and delivered to Seller and for all funds
advanced by Buyer to Seller to acquire inventories. Upon the payment of trade
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
creditors pursuant to Section 5.5, Buyer shall pay Seller 10% of gross sales
revenues, less returns and allowances, from sales of Seller's products, such
payments to be made on or before the third business day of each week for sales
of the preceding week until such time as the determined value of Seller's
Inventories has been paid in full.
5.7 Sale of Real Property. Upon signing this Agreement, Seller shall
cause the Real Property to be listed for sale at a price to be determined by the
Seller's Board of Directors. If the Real Property is sold, the proceeds shall be
paid in the following order and priority, to the extent of such proceeds, (i) to
pay in full the debt of Seller owed to Chase Bank, the repayment of which is
secured by the Real Property, (ii) to pay in full Seller's trade creditors,
(iii) to pay in full other creditors and indebtedness of Seller, and (iv) to the
Seller.
5.8 Insurance. Seller will continue to carry its existing insurance,
subject to variations in amounts required by the ordinary operations of its
business. At the request of Buyer and at Buyer's sole expense, the amount of
insurance against fire and other casualties that, at the date of this Agreement,
Seller carries on any of its properties or in respect of its operations shall be
increased by the amount or amounts Buyer shall specify. Seller shall cause Buyer
to be named as an additional insured on each existing insurance policy carried
by Seller.
5.9 Approvals. Messrs. John van der Hagen and Marty van der Hagen have
agreed to vote their stock in favor of the transactions contemplated by this
Agreement and shall use their best efforts to encourage other shareholders to
vote in favor of these transactions.
6 OPTIONS CONCERNING COMPETING OFFERS
-----------------------------------
Seller agrees not to solicit offers from any potential buyers. However,
if Seller receives a bona fide offer prior to the Closing Date to purchase its
assets which Seller desires to accept in lieu of the completion and performance
of this Agreement, Seller shall provide a copy of such offer to Buyer and Buyer
will, within fifteen calendar days after the receipt of such offer, either match
or better the material terms of such offer or cancel this Agreement.
If this Agreement is canceled, Buyer shall be entitled to receive from
Seller compensation equal to the sum of (i) 2% of the net fair market value of
assets of Seller that would have been acquired by Buyer pursuant to this
Agreement, and (ii) Buyer's net out-of-pocket expenses (direct or indirect)
incurred in the negotiation and performance of this Agreement. Payment of such
compensation shall be made upon the closing of the sale under such other offer.
In addition, Seller and the new buyer shall arrange for the unconditional
release of all commitments that Buyer has made pursuant to this Agreement
including, without limitation, commitments made to any banks, leasing companies,
creditors, shareholders, and/or employees.
7 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
--------------------------------------------------
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
Seller hereby represents and warrants that:
7.1 Organization, Good Standing and Qualification. Seller is a
corporation duly organized, existing, and in good standing under the laws of
Texas. The execution and delivery of this Agreement and the consummation of this
transaction by Seller have been, or prior to the Closing will have been, duly
authorized, and no further corporate authorization is or will be necessary on
the part of Seller.
7.2 Binding Agreement. At the Closing, this Agreement shall constitute
a binding obligation of Seller.
7.3 Stock of Corporation. The authorized capital stock of Seller
consists of 10,000,000 shares of common stock, no par value, of which 2,472,727
shares are issued and outstanding as of the date of this Agreement. All the
shares are validly issued, fully paid, and nonassessable, and such shares have
been so issued in full compliance with all federal and state securities laws.
There are no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating Seller to issue or to
transfer from treasury any additional shares of its capital stock of any class.
7.4 Financial Statements. SCHEDULE 7.4 to this Agreement sets forth a
balance sheet of Seller as of December 31, 2000, and the related statement of
income and expense for the year then ended. The financial statements in SCHEDULE
7.4 are referred to as the "Financial Statements." The Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently followed by Seller throughout the periods indicated, and fairly
present the financial position of Seller as of the date of the Financial
Statements, and the results of its operations for the period indicated.
7.5 Absence of Specified Changes. Since December 31, 2000 there has not
been any:
7.5.1 Transaction by Seller except in the ordinary course of
business as conducted on that date;
7.5.2 Destruction, damage to, or loss of any assets of Seller
(whether or not covered by insurance) that materially and adversely
affects the financial condition, business, or prospects of Seller's
business;
7.5.3 Sale or transfer of any asset of Seller except in the
ordinary course of business;
7.5.4 Amendment or termination of any material contract,
agreement, or license to which Seller is a party, except in the
ordinary course of business; 1.1.1
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
7.5.5 Waiver or release of any right or claim of Seller, except
in the ordinary course of business;
7.5.6 Other event or condition of any character that has or
might reasonably have a material and adverse effect on the financial
condition, business, assets, or prospects of Seller;
7.6 Tax Returns and Audits. Within the times and in the manner
prescribed by law, Seller has filed all federal and state tax returns required
by law and have paid all taxes, assessments, and penalties due and payable.
There are no present disputes as to taxes of any nature payable by Seller.
7.7 Real Property. SCHEDULE 7.7 to this Agreement is a complete and
accurate legal description of the Real Property owned by Seller. SCHEDULE 7.7
contains a description of the buildings, fixtures, and other improvements
located on the Real Property.
7.8 Other Tangible Personal Property. SCHEDULE 1.1 to this Agreement is
a complete and accurate schedule describing and specifying the location of, all
machinery, equipment, furniture, supplies, tools, and all other tangible
personal property owned by, in the possession of, or used by Seller in
connection with their business. The property listed in SCHEDULE 1.1 constitutes
all such tangible personal property necessary for the conduct by Seller of its
business as now conducted. Buyer shall have the right to negotiate with
equipment lenders to assume those equipment leases. Such leases are shown on
SCHEDULE 4.
Except as shown herein, no personal property being transferred to Buyer
is held under any lease, security agreement, conditional sales contract, or
other title retention or security arrangement, or is located other than in the
possession of Seller.
7.9 Trade Names, Trademarks and Copyrights. Seller does not use any
registered trademark, service mark, trade name, or copyright in its respective
business, and does not own any trademarks, trademark registrations or
applications, trade names, service marks, copyrights, or copyright registrations
or applications. No person owns any trademark, trademark registration or
application, service mark, trade name, copyright, or copyright registration or
application the use of which is necessary or contemplated in connection with the
operation of Seller's business or in connection with the performance of any
contract to which Seller is a party. To the extent Seller has ownership of such
intangibles, they are assigned to Buyer at Closing.
7.10 Trade Secrets. SCHEDULE 7.10 to this Agreement is a true and
complete list, without extensive or revealing descriptions, of Seller's trade
secrets, including all customer lists. The specific location of each trade
secret's documentation, including its complete description and other material
relating to it, is also set forth with it in such SCHEDULE. Seller believes that
it is the sole owner of each of these trade secrets. To the best of Seller's
knowledge, these trade secrets are not part of the public knowledge nor have
they been used by present employees or other persons or to the detriment of
Seller's business.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
7.11 Title to Assets. Seller has good and marketable title to all of
its assets and interests in assets, whether real, personal, mixed, tangible, and
intangible, which constitute all the assets and interests in assets that are
used in the business of Seller. These assets are subject to mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions, or restrictions, only to the extent previously described
to Buyer, including security interests perfected through filing, current taxes
not yet due and payable and other matters which could be discovered by Buyer
through reasonable diligence and inspection. All tangible personal property of
Seller is in good operating condition and repair, ordinary wear and tear
excepted.
7.12 Insurance Policies. SCHEDULE 7.12 to this Agreement is a
description of all insurance policies held by Seller concerning their business
and property.
7.13 Compliance with Laws.
---------------------
7.13.1 To Seller's best knowledge, Seller has complied in all
material respects with, and has not been cited for any violation of
federal, state, or local environmental protection laws and/or
regulations, and no material capital expenditures will be required for
compliance with any federal, state, or local laws or regulations now in
force relating to the protection of the environment.
7.13.2 To Seller's best knowledge, Seller has not at any time
operated, or provided for any of its employees, any pension or profit
sharing or similar retirement plan or any employer welfare or benefit
plan qualified pursuant to the Internal Revenue Code of 1986, as
amended, and subject to the Employee Retirement Income Security Act of
1974.
7.13.3 To Seller's best knowledge, Seller has complied with all
requirements of any Texas Occupational Safety laws and regulations
promulgated under this legislation, the consequences of a violation of
which could have a material adverse effect on their operations, and
with all orders, judgments and decrees of any tribunal pursuant to this
legislation applicable to their business or properties.
7.13.4 To Seller's best knowledge, Seller has complied with, and
is not in violation of, any other applicable material federal, state,
or local statute, law, or regulation affecting their properties or the
operation of their business.
7.14 Litigation. To Seller's best knowledge, there is no suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or, to the best knowledge of Seller, threatened against or
affecting Seller or its business, assets, or financial condition. 1.1
7.15 Hazardous Materials. To Seller's best knowledge, there are no
underground storage tanks located on the Property in which any Hazardous
Material, as defined below, has been in the past thirty years or is being
10
SURREY: Asset Sale and Purchase Agreement April 5, 2001
stored, nor has there been any spill, disposal, discharge, or release of any
Hazardous Material into, upon, from, or over that Property or into or upon
ground or surface water on that Property. To Seller's best knowledge, there are
no asbestos-containing materials incorporated into the buildings or interior
improvements that are part of that Property, or into other assets of Seller, nor
is there any electrical transformer, fluorescent light fixture with ballasts, or
other equipment containing PCB's on that Property. As used in this Section,
"Hazardous Material" means any hazardous or toxic substance, material, or waste
that is regulated by any federal authority or by any state or local governmental
authority where the substance, material, or waste is located.
7.16 Authority and Consents. Seller has the right, power, legal
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and no approvals or consents of any persons other than
Seller and its shareholders are necessary in connection with it.
7.17 Full Disclosure. To Seller's best knowledge, none of the
representations and warranties made by Seller or made in any certificate or
memorandum furnished or to be furnished by it, or on its behalf, contains or
will contain any untrue statement of a material fact, or omits any material fact
the omission of which would be misleading.
8 BUYER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------
Buyer hereby represents and warrants that:
8.1 Organization, Good Standing and Qualification. Buyer is a
corporation duly organized, existing, and in good standing under the laws of
Utah. The execution and delivery of this Agreement and the consummation of this
transaction by Buyer have been, or prior to the Closing will have been, duly
authorized, and no further corporate authorization is or will be necessary on
the part of Buyer.
8.2 Binding Agreement. At the Closing, this Agreement shall constitute
a legal, valid and binding obligation of Buyer, enforceable in accordance with
its terms.
8.3 Chase Bank. Buyer represents that it has reached an agreement with
Chase Bank with respect to the issues herein described involving Chase Bank.
8.4 Real Property. Buyer hereby covenants that it will hold Seller
harmless from any liability arising from Buyer's use and occupancy of the Real
Property as provided in this Agreement.
8.5 Tender for Shares. Buyer hereby covenants that prior to the date
which is 18 months after the date of this Agreement, Buyer shall make a tender
offer to the shareholders of Seller to purchase all of the shares of the common
stock of Seller that are issued and outstanding on the date of this Agreement
less the shares to be canceled as provided in this Agreement, for a cash
consideration per share of $.80, less distributions, if any, made to
shareholders of Seller after the date of this Agreement. The parties acknowledge
and agree that the consideration for this tender will be adjusted to reflect all
issuances, splits, combinations and any other transaction affecting the capital
stock of Seller. The parties further acknowledge and agree that the shareholders
of Seller are intended beneficiaries of this covenant.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
9 SELLER'S OBLIGATIONS BEFORE CLOSING
-----------------------------------
Seller covenants that, except as otherwise agreed in writing by Buyer,
from the date of this Agreement until the Closing:
9.1 Buyer's Access to Premises and Information. Buyer and its counsel,
accountants, and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, contracts and
documents of or relating to Seller. Seller shall furnish or cause to be
furnished to Buyer and its representatives all data and information concerning
the business, finances, and properties of Seller that may reasonably be
requested.
9.2 Conduct of Business in Normal Course. Seller will carry on its
business and activities diligently and in substantially the same manner as they
previously have been carried out.
9.3 Preservation of Business and Relationships. Seller will use its
best efforts, without making any commitments on behalf of Buyer, to preserve its
business organization intact, to keep available to Seller its present
relationships with suppliers, customers, and others having business
relationships with it.
9.4 New Transactions. The Seller will not, without Buyer's written
consent, enter into any contract, commitment, or transaction not in the usual
and ordinary course of its business.
9.5 Existing Agreements. Seller will not modify, amend, cancel, or
terminate any of its existing contracts or agreements, or agree to do any of
those acts.
9.6 Representations and Warranties True at Closing. All representations
and warranties of Seller set forth in this Agreement and in any written
statements delivered to Buyer by Seller under this Agreement will also be true
and correct as of the closing date as if made on that date.
9.7 Sales and Use Tax on Prior Sales. Seller agrees to furnish to Buyer
a clearance certificate from the State of Texas and any related certificates
that Buyer may reasonably request as evidence that all sales and use tax
liabilities of Seller accruing before the closing date have been fully satisfied
or provided for. If such certificate is not available by the closing date,
Seller will use best good faith efforts to obtain it thereafter.
10 BUYER'S OBLIGATIONS BEFORE CLOSING
----------------------------------
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
10.1 Information to Be Held in Confidence. Prior to the Closing Date
(or, in the event the Closing does not occur, for a period of two years
following the date of this Agreement) Buyer shall use its best efforts to
preserve the confidentiality of any commercial information which is confidential
and which is disclosed to Buyer or to its representatives by Seller; provided
that Buyer at all times shall not be materially restricted in its investigation
of the Assets or matters relating thereto. Whether or not the Closing shall take
place, Seller waives any cause of action, right, or claim arising out of the
access of Buyer or its representatives to any trade secrets or other
confidential business information of Seller from the date of this Agreement
until the Closing Date, except for the intentional competitive misuse by Buyer
or its representatives of such trade secrets or other confidential business
information if the Closing does not take place.
10.2 Employment Agreements. Buyer shall negotiate in good faith with
John van der Hagen for the purpose of entering into a Consulting Agreement on
terms mutually agreeable to Buyer and John van der Hagen. Buyer shall negotiate
in good faith with Marty van der Hagen for the purpose of entering into an
Employment Agreement on terms mutually agreeable to Buyer and Marty van der
Hagen.
11 CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
--------------------------------------------
The obligations of Seller to sell and transfer the Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all of
the following conditions. Seller may waive any or all of these conditions in
whole or in part without prior notice; provided, however, that no such waiver of
a condition shall constitute a waiver by Seller of any of its other rights or
remedies, at law or in equity, if Buyer should be in default of any of its
representations, warranties or covenants under this Agreement.
11.1 Accuracy of Buyer's Representations and Warranties. All
representations and warranties by Buyer contained in this Agreement or in any
written statement delivered by Buyer under this Agreement shall be true on and
as of the Closing as though such representations and warranties were made on and
as of that date.
11.2 Buyer's Performance. Buyer shall have performed and complied with
all covenants and agreements, and satisfied all conditions that it is required
by this Agreement to perform, comply with, or satisfy, before or at the Closing.
11.3 Buyer's Corporate Approval. The Board of Directors of Buyer shall
have duly authorized and approved the execution and delivery of this Agreement
and all corporate action necessary or proper to fulfill the obligations of Buyer
to be performed under this Agreement on or before the Closing Date.
12 CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
-------------------------------------------
13
SURREY: Asset Sale and Purchase Agreement April 5, 2001
The obligations of Buyer to purchase the Assets under this Agreement
are subject to the satisfaction, at or before the Closing, of all the conditions
set out below in this Section 12. Buyer may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by Buyer of any of its other rights or
remedies, at law or in equity, if Seller shall be in default of any of its
representations, warranties, or covenants under this Agreement.
12.1 Accuracy of Seller's Representations and Warranties. Except as
otherwise permitted by this Agreement, all material representations and
warranties by the Seller in this Agreement or in any written statement that
shall be delivered to Buyer by any of them under this Agreement shall be true on
and as of the closing date as though made at that time.
12.2 Performance by Seller. Seller shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them it on or before the Closing
Date.
12.3 Certification by Seller. Buyer shall have received a certificate,
dated the Closing Date, signed and verified by Seller's president, certifying,
in such detail as Buyer and its counsel may reasonably request, that the
conditions specified in Sections 12.1 and 12.2 have been fulfilled.
12.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
12.5 Consents. All necessary agreements and consents of any parties to
the consummation of the transaction contemplated by this Agreement, or otherwise
pertaining to the matters covered by it, shall have been obtained by Seller and
delivered to Buyer.
12.6 Approval of Documentation. The form and substance of all
certificates, instruments, and other documents delivered to Buyer under this
Agreement shall be satisfactory in all reasonable respects to Buyer and its
counsel.
12.7 Consulting Agreement. Buyer shall have received a signed
Consulting Agreement, in form satisfactory to Buyer, between Buyer and John van
der Hagen.
12.8 Employment Agreement. Buyer shall have received a signed
Employment Agreement, in form satisfactory to Buyer, between Buyer and Marty van
der Hagen.
12.9 Cancellation of Shares. John van der Hagen shall have delivered
certificates, duly endorsed for transfer, representing all of their shares of
stock of the Seller to the Seller and such certificates and such shares are duly
canceled at or prior to the Closing.
13 SELLER'S OBLIGATIONS AFTER THE CLOSING
--------------------------------------
14
SURREY: Asset Sale and Purchase Agreement April 5, 2001
13.1 Seller's Indemnities. Seller shall indemnify, defend, and hold
harmless Buyer against and in respect of any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, and reasonable attorneys' fees, that Buyer shall
incur or suffer, which arise, result from, or relate to any breach of, or
failure by Seller to perform any of its representations, warranties, covenants
or agreements in this Agreement or in any schedule, certificate, exhibit, or
other instrument furnished or to be furnished by Seller under this Agreement.
Notwithstanding the foregoing, Seller's liability under this Section shall not
in any event exceed the aggregate amount of $100,000.00. Notwithstanding any
other provision of this Agreement, Seller shall not be liable to Buyer on any
warranty, representation, or covenant made by Seller in this Agreement, or under
any of its indemnities in this Agreement, regarding any single claim, loss,
expense, obligation, or other liability that does not exceed $2,500.00.
13.2 Use of Seller's Name. Seller agrees that after the Closing Date it
shall not use or employ in connection with any business or product, directly or
indirectly, the name "SURREY, INC." Notwithstanding the foregoing, Seller shall
not be required to change its corporate name.
14 COSTS
-----
14.1 Finder's or Broker's Fees. Each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of
the transactions contemplated by this Agreement, and, insofar as it knows, no
broker or other person is entitled to any commission or finder's fee in
connection with any of these transactions.
14.2 Expenses. Each of the parties shall pay all costs and expenses
incurred or to be incurred by it in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this Agreement.
15 FORM OF AGREEMENT
-----------------
15.1 Effect of Headings. The subject headings of the Articles, Sections
and subsections of this Agreement are included for purposes of convenience only,
and shall not affect the construction or interpretation of any of its
provisions.
15.2 Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
15.3 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
16 PARTIES
-------
16.1 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement.
16.2 Assignment. This Agreement shall be binding on and shall inure to
the benefit of the parties to it and their respective heirs, legal
representatives, successors, and assigns; provided, however, Buyer may assign
any of its rights under it to a wholly owned subsidiary corporation of Buyer. No
such assignment by Buyer to its wholly owned subsidiary shall relieve Buyer of
any of its obligations or duties under this Agreement.
16.3 Legal Counsel. Legal counsel for Buyer has prepared this
Agreement. Seller has retained separate counsel to assist it in the evaluation
of this Agreement, assist in determining whether the provisions contained in
this Agreement are in its best interests and consistent with its economic
objectives, and advise it regarding its position with respect to this Agreement
from an economic and tax standpoint.
17 REMEDIES
--------
17.1 Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
17.2 Defaults Permitting Termination. If either Buyer or Seller
materially default in the due and timely performance of any of its warranties,
covenants, or agreements under this Agreement, the non-defaulting party may on
the Closing Date give notice of termination of this Agreement, in the manner
provided in Section 19. The notice shall specify with particularity the default
or defaults on which the notice is based. The termination shall be effective ten
days after the closing date, unless the specified default or defaults have been
cured on or before this effective date for termination.
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SURREY: Asset Sale and Purchase Agreement April 5, 2001
18 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
All representations, warranties, covenants, and agreements of the
parties contained in this Agreement, or in any instrument, certificate, opinion,
or other writing provided for in it, shall survive the Closing.
19 NOTICES
-------
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the fifth day after mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
To Seller at: SURREY, INC.
Attn: President
13110 Trails End Road
Leander, Texas 78641
Facsimile (512) 267-4864
To Buyer at: JEAN CHARLES INCORPORATED
Attn: President
82449 61st Avenue
Thermal, California 92274
Facsimile (760) 399-1187
Any party may change its address for purposes of this Section by giving
the other parties written notice of the new address in the manner set forth
above.
20 GOVERNING LAW
-------------
This Agreement shall be construed in accordance with, and governed by,
the laws of the State of Texas.
17
SURREY: Asset Sale and Purchase Agreement April 5, 2001
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives as of the day and year
first above written.
"SELLER" "BUYER"
------ -----
SURREY, INC. JEAN CHARLES INCORPORATED
By_________________________________ By _________________________________
MARTY VAN DER HAGEN, STEVE YEOMAN,
President & CEO President
By_________________________________ By _________________________________
MARY VAN DER HAGEN, SUZANNE K. BORCHERDS,
Secretary Secretary
18
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 1.1 - EQUIPMENT
(To be provided)
19
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 1.2 - INVENTORIES
(To be provided)
20
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 3.2.1 - INVENTORIES
(To be completed prior to Closing)
21
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 4 - LIABILITIES ASSUMED BY BUYER
(To be completed prior to Closing)
22
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 7.4 - FINANCIAL STATEMENTS OF SURREY, INC.
(To be provided)
23
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 7.7 - REAL PROPERTY
(To be provided)
24
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 7.10 - TRADE SECRETS
(To be provided)
25
SURREY: Asset Sale and Purchase Agreement April 5, 2001
SURREY, INC.
SCHEDULE 7.12 - INSURANCE POLICIES
(To be provided)
26
SURREY: Asset Sale and Purchase Agreement April 5, 2001