EXHIBIT 10.40
STOCK PURCHASE AGREEMENT
DATED AS OF MAY 19, 2006
AMONG
DOVER SADDLERY, INC.
DOVER SADDLERY RETAIL, INC.
OLD DOMINION ENTERPRISES, INC.
AND
REYNOLDS YOUNG
TABLE OF CONTENTS
Page
Definitions 1
1.0 Purchase and Sale of Stock 5
1.1 Inventory 5
2.0 Consideration 5
2.1 Adjustment of Purchase Price 5
2.2 Adjustment Procedures 6
3.0 Escrow Accounts 7
4.0 Closing 9
4.1 Documents to be Delivered by Seller 10
4.2 Documents to be Delivered By Buyer to Seller 10
4.3 Documents to be Delivered by Seller, Buyer and Escrow Agent to Each Other 10
4.4 Form and Substance of Documents 10
5.0 Representations and Warranties by Seller 10
5.1 Corporate Organization 11
5.2 Capitalization; Stock Ownership 11
5.3 Subsidiaries and Other Equity Investments 11
5.4 Authorization of Agreement; No Violation 11
5.5 Financial Statements 12
5.6 No Undisclosed Liabilities, Etc. 12
5.7 Absence of Certain Changes 13
5.8 Title to and Consolidation of Properties and Assets 15
5.9 Certain Properties 15
5.10 Tax Matters 16
5.11 Contracts 18
5.12 Litigation 19
5.13 Patents and Trademarks 19
5.14 Compliance with Laws 19
5.15 Environmental Matters 20
5.16 Governmental Authorizations and Regulations 21
5.17 SEC and Antitrust Filings 22
5.18 Employee Benefit Plans and Arrangements 22
5.19 Certain Transactions 26
5.20 Foreign Corrupt Practices Act 26
5.21 Accounting Practices 26
5.22 Minute Books 26
5.23 Insurance 26
5.24 Bank Accounts; Powers of Attorney 27
5.25 Product Warranties 27
5.26 Certain Disclosures 27
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5.27 Brokers 27
5.28 No Untrue Statements 27
6.0 Representations and Warranties to Buyer 28
6.1 Corporate Organization 28
6.2 Authorization of Agreement 28
6.3 Litigation 28
6.4 Brokers 28
6.5 Investment Representation 28
6.6 Financing 29
6.7 No Untrue Statements 29
7.0 Covenants of Seller 29
7.1 Access, Information and Documents 29
7.2 Conduct of Business Pending Closing 29
7.3 Financial Statements and Certificate 31
7.4 Cooperation with Respect to Financing 32
7.5 Consents and Approvals 32
7.6 Resignation of Directors 32
7.7 Use of Name 32
7.8 Exclusive Dealing 32
7.9 Non-Competition Agreements 32
8.0 Covenants of Buyer 33
8.1 Confidential Information 33
8.2 No Disclosure of Consideration 33
8.3 Consents and Approvals 33
8.4 No Unreasonable Interference 33
8.5 Burbank Business 33
9.0 Conditions Precedent to Seller's Obligation to Sell the Stock 34
9.1 Buyer's Performance 34
9.2 Opinion of Counsel 34
9.3 Consents and Approvals 35
9.4 10A Conditions 35
10.0 Conditions Precedent to Buyer's Obligations to Purchase the Stock 35
10.1 Seller's Performance 35
10.2 Limited Procedures Report 36
10.3 Due Diligence Investigation and Acquisition Audit 36
10.4 Opinion of Counsel 36
10.5 Consents and Approvals 37
10.6 Properties and Leases 37
10.7 Retention of Key Employees 37
10.8 Resignation of Directors 37
10.9 10A Conditions 37
11.0 Termination 38
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11.1 Termination by Buyer 38
11.2 Termination by Seller 39
11.3 Effect of Termination 38
12.0 Intentionally Omitted 39
13.0 Survival of Representations and Warranties; Indemnification 39
13.1 Seller's Indemnification Obligations 39
13.2 Limitation on Seller's Indemnification Obligations 40
13.3 Buyer's Indemnification Obligations 40
13.4 Limitation on Buyer's Indemnification Obligations 40
13.5 Guaranty of Parent 40
13.6 Procedure of Indemnification Claims 40
13.7 Insurance Tax Effects 42
13.8 Sole and Exclusive Remedy 42
14.0 Miscellaneous 43
14.1 Assurance of Further Action 43
14.2 Expenses 43
14.3 Public Disclosure 43
14.4 Waiver 43
14.5 Notices 43
14.6 Entire Agreement 44
14.7 Rights Under this Agreement; Nonassignability 44
14.8 Governing Law 44
14.9 Headings, References to Sections; Exhibits and Schedules 44
14.10 Counterparts 44
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STOCK PURCHASE AGREEMENT
AGREEMENT dated as of this 19th day of May, 2006 among Dover Saddlery,
Inc., a corporation organized under the laws of the State of Delaware
("Parent"), Dover Saddlery Retail, Inc., a corporation organized under the laws
of the Commonwealth of Massachusetts ("Buyer"), Old Dominion Enterprises, Inc.
dba "Dominion Saddlery," a Virginia corporation (the "Company"), and Reynolds
Young ("Seller").
WHEREAS Seller owns all of the outstanding shares of capital stock of
Company, and is only interested in selling such capital stock in a transaction
taxable as a long-term capital gain under Internal Revenue Code Section 1222(3);
and
WHEREAS Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of the outstanding capital stock of the Company not otherwise
redeemed, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
DEFINITIONS:
Whenever they are used in, or in implementation of, this Agreement
with initial capital letters, the following terms have the definitions
hereinafter indicated:
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section
2.1(A) hereof.
"AGGRIEVED PARTY" shall have the meaning set forth in Section 13.4
hereof.
"ASSUMED LIABILITIES" shall have the meaning set forth in Schedule
1.1.
"BUYER" means Dover Saddlery Retail, Inc.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9604, et seq.), as amended,
and rules, regulations, standards, guidelines and publications issued
thereunder.
"CHARGES" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes, levies, assessments and charges,
liens, claims or encumbrances upon or relating to (i) the Company's employees,
payroll, income or gross receipts; (ii) the Company's ownership or use of any of
its assets; or (iii) any other aspect of the Company's business, in each case
including any and all interest and penalties.
"CLOSING" shall have the meaning set forth in Section 4.0 hereof.
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"CLOSING DATE" shall have the meaning set forth in Section 4.0
hereof.
"CLOSING DATE INVENTORY VALUE" shall have the meaning set forth in
Section 1.1 hereof.
"CLOSING DATE TARGET ASSET AMOUNT" shall mean the amount equal to
(A) the sum of (i) the Closing Date Inventory Value, plus (ii) all cash,
accounts receivable, and deposits (up to $20,400) of the Company set forth on
the Closing Date Balance Sheet, minus (B) the sum of (i) up to $200,000 accounts
payable of the Company set forth on the Closing Date Balance Sheet, plus (ii) up
to $20,000 in store credits and gift certificates, in each case determined in
accordance with generally accepted accounting principles applied on a basis
consistent with Seller's past practices and policies in the preparation of the
Company's financial statements (except as otherwise noted therein).
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 2.2 hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Old Dominion Enterprises, Inc. dba "Dominion
Saddlery."
"CONDITION" means any condition, which results in or otherwise
relates to any Environmental Liability.
"ENVIRONMENTAL LIABILITIES" means any obligations or liabilities
(including any notices, claims, complaints, suits or other assertions of
obligations or liabilities) that are:
(a) related to environmental, health or safety issues (including
on-site or off-site contamination by Pollutants of surface or
subsurface soil or water, and occupational safety and health);
and
(b) based upon or related to (i) any provision of past, present or
future United States or foreign Environmental Law (including
CERCLA and RCRA) or common law, or (ii) any judgment, order,
writ, decree, permit or injunction imposed by any court,
administrative agency, tribunal or otherwise.
The term "Environmental Liabilities" includes: (A) fines, penalties,
judgments, awards, settlements, losses, damages, costs, fees (including
attorneys' and consultants' fees), expenses and disbursements; (B) defense and
other responses to any administrative or judicial action (including notices,
claims, complaints, suits and other assertions of liability); and (C) financial
responsibility for (1) cleanup costs and injunctive relief, including any
Removal, Remedial or other Response actions, and natural resource damages, and
(2) any other compliance or remedial measures.
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"ENVIRONMENTAL LAWS" means all United States and foreign federal,
state and local laws, statutes, rules, regulations, ordinances, codes, orders,
requirements, standards, guidelines, and the like, which address, are related
to, or are otherwise concerned with environmental, health or safety issues
(including occupational safety and health).
"ESCROW AGENT" means Preti Flaherty, PLLP.
"ESCROW AGREEMENT" means the Escrow Agreement dated the date hereof
by and among Buyer, Seller and the Escrow Agent, in the form attached hereto as
EXHIBIT A.
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
13.4 hereof.
"KNOWLEDGE" of Seller shall include (i) the actual knowledge of the
Seller and Virginia Davis Young Newton and (ii) those matters which the Seller
or Virginia Davis Young Newton could reasonably be expected to become aware of
in the course of conducting a reasonably comprehensive investigation of the
representations and warranties contained in this Agreement.
"MANAGE" AND "MANAGEMENT" mean generation, production, handling,
distribution, processing, use, storage, treatment, operation, transportation,
recycling, reuse and/or disposal, as those terms are defined in CERCLA, RCRA and
other Environmental Laws (including as those terms are further defined,
construed, or otherwise used in rules, regulations, standards, guidelines and
publications issued pursuant to, or otherwise in implementation of, such
Environmental Laws).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, liabilities, properties, assets or financial condition of
the Company; provided that none of the following shall be deemed to constitute,
and none of the following shall be taken into account in determining whether
there has been, or would reasonably be expected to be, a Material Adverse
Effect: any adverse change, event, development, or effect (a) arising from or
relating to general business or economic conditions, including any change event,
development or effect relating to any war, acts of terrorism or similar events,
unless such change, event, development or effect disproportionately affects the
Company, or (b) primarily and proximately resulting from the announcement of the
transactions contemplated by this Agreement.
"PARENT" means Dover Saddlery, Inc.
"POLLUTANT" includes any "hazardous substance" and any "pollutant or
contaminant" as those terms are defined in CERCLA; any "hazardous waste" as that
term is defined in RCRA; and any "hazardous material" as that term is defined in
the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), as
amended (including as those terms are further defined, construed, or otherwise
used in rules, regulations, standards, guidelines and publications issued
pursuant to, or otherwise in implementation of, said Environmental Laws); and
including without
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limitation any petroleum product or byproduct, solvent, flammable or explosive
material, radioactive material, asbestos, polychlorinated biphenyls (PCBs),
dioxins, dibenzofurans, heavy metals, and radon gas; and including any other
substance or material that is reasonably determined to present a threat, hazard
or risk to human health or the environment.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.0
hereof.
"QUALIFIED PLAN" shall have the meaning set forth in Section 5.18(C)
hereof.
"RCRA" means the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), as amended, and all rules, regulations, standards,
guidelines and publications issued thereunder.
"REAL PROPERTIES" shall have the meaning set forth in Section 5.9
hereof.
"RECEIVABLES" shall have the meaning set forth in Section 12.0(A)
hereof.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, placing,
discarding, abandonment, or disposing into the environment (including the
placing, discarding or abandonment of any barrel, container or other receptacle
containing any Pollutant or other material).
"REMOVAL," "REMEDIAL" AND "RESPONSE" actions include the types of
activities covered by CERCLA, RCRA, and other comparable Environmental Laws, and
whether the activities are those which might be taken by a government entity or
those which a government entity or any other person might seek to require of
waste generators, handlers, distributors, processors, users, storers, treaters,
owners, operators, transporters, recyclers, reusers, disposers, or other persons
under "removal," "remedial," or other "response" actions.
"SELLER" means Reynolds Young.
"UST" means an underground storage tank, including as that term is
defined, construed and otherwise used in RCRA and in rules, regulations,
standards, guidelines and publications issued pursuant to RCRA and comparable
state and local laws.
1.0 Purchase and Sale of Stock: Upon the terms and provisions of
this Agreement, Buyer agrees to purchase and accept delivery from Seller of, and
Seller agrees to sell, assign transfer and deliver to Buyer, at the Closing, the
number of capital stock of the Company set
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forth below opposite such Seller's name, free and clear of all liens, claims,
charges, restrictions or encumbrances of any kind:
Seller: Number of Shares:
------- -----------------
Reynolds Young 50,000 common shares (100% equity interest)
The shares of Common Stock of the Company set forth above to be sold by
Seller to Buyer, constituting all of the outstanding shares of capital stock of
the Company, are hereinafter collectively called the "Stock."
Notwithstanding the sale of the Stock, the Seller agrees to assume certain
liabilities of the Company set forth in SCHEDULE 1.1 (the "Assumed Liabilities")
and to indemnify the Buyer and the Company with respect thereto.
1.1 Inventory: Immediately prior to Closing, RGIS Inventory Specialists or
another inventory specialist mutually agreeable to Buyer and Seller shall
perform a complete physical inventory of the Company's assets to determine (i)
the value of the Company's saleable inventory, (the "Closing Date Inventory
Value") (ii) the value of those items within the Company's inventory as of the
Closing Date that are presently sold by the Buyer through its mail order
catalog, and (iii) the value of those items within the Company's inventory as of
the Closing Date that are NOT presently sold by the Buyer through its mail order
catalog (the "non-Dover Inventory"). The Closing Date Inventory Value shall be
based on the Company's acquisition cost, meaning the invoice price for each item
without regard to any rebates, advertising allowances or similar credits or
amounts payable by the applicable vendor. Each of Buyer and Seller shall have
the right to have a representative present at such inventory and shall jointly
supervise such inventory. Buyer and Seller shall each be responsible for payment
of fifty percent (50%) of the fees and expenses of RGIS Inventory Specialists.
2.0 Consideration: Buyer, at the Closing, will pay $1,625,000 in cash (the
"Purchase Price") to Seller. The Purchase Price is subject to adjustment as set
forth in Section 2.1 below. The Purchase Price shall be paid to Seller with a
portion placed in escrow as set forth in Section 3.0 below.
2.1 Adjustment of Purchase Price: The Purchase Price set forth in Section
2.0 above shall be adjusted in the following manner:
(A) Based in part on the inventory calculations determined under
Section 1.1, the Purchase Price set forth above will be
adjusted to account for any variation in the Closing Date
Target Asset Amount from $1,000,400. If the Company's Closing
Date Target Asset Amount is less than $1,000,400, then the
Purchase Price will be reduced by the amount of the
difference. If the Company's Closing Date Target Asset Amount
is
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greater than $1,000,400, then the Purchase Price will be
increased by the difference. The adjustment pursuant to this
Section 2.1(A) (the "Adjustment Amount") shall be made on a
dollar for dollar basis.
2.2 Adjustment Procedures:
(A) Buyer will cause certified public accountants selected by it
to prepare a balance sheet of the Company as of the Closing
Date (the "Closing Date Balance Sheet"), which, together with
the inventory calculation determined under Section 1.1 above,
shall be used for the computation of the Closing Date Target
Asset Amount (the "Target Assets Computation"). Buyer will
deliver the Closing Date Balance Sheet and the Target Assets
Computation (together with all work papers, schedules,
memorandums, and other documents used to prepare the same, in
each case, in whatever form they exist) to Seller within sixty
days after the Closing Date. The parties agree and acknowledge
that for purposes of preparing the Closing Date Balance Sheet,
the institutional debt and shareholder debt referenced in
clauses (ii) and (iii) of Schedule 1.1 shall not be included
as liabilities of the Company; provided, that such
institutional debt and shareholder debt is paid in full and/or
forgiven on the Closing Date. If within thirty days following
delivery of the Closing Date Balance Sheet and Target Assets
Computation Seller has not given Buyer notice of its objection
to the Target Assets Computation (such notice must contain a
statement of the basis of Buyer's objection), then the Closing
Date Target Asset Amount reflected in the Target Assets
Computation will be used in computing the Adjustment Amount.
If Seller gives such notice of objection, then Seller and
Buyer will use reasonable efforts to resolve any disagreements
as to the computation of the Closing Date Target Asset Amount,
but if they do not obtain a final resolution within thirty
(30) days after Seller delivers a notice of objection Notice,
Seller and Buyer will jointly retain an independent accounting
firm of recognized national or regional standing (the
"Accounting Firm") to resolve the issues in dispute. If Seller
and Buyer are unable to agree on the choice of the Accounting
Firm, the Accounting Firm will be an independent accounting
firm of recognized national or regional standing selected by
the firms designated by each of Seller and Buyer. If the
issues in dispute are submitted to the Accounting Firm for
resolution (i) each party will furnish to the Accounting Firm
selected work papers and other documents and information
relating to the disputed issues as the Accounting Firm may
request and are available to that party, and will be afforded
the opportunity to present to the Accounting Firm any material
relating to the determination and to discuss the determination
with the Accounting Firm; (ii) the determination by the
Accounting Firm, as set forth in a notice
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delivered to both parties by the Accounting Firm, will be
binding and conclusive on the parties; and (iii) Buyer and
Seller will each bear 50% of the fees of the Accounting Firm
for such determination.
(B) No later than the thirtieth day following the final
determination of the Adjustment Amount, (i) if the Purchase
Price increases, Buyer will pay the difference to Seller, (ii)
if the Purchase Price decreases, Seller will pay the
difference to Buyer. Payments must be made in immediately
available funds.
3.0 Escrow Accounts:
(A) Indemnity Escrow. From the Purchase Price, $162,500.00 shall
be placed in an interest earning escrow account (the
"Indemnity Escrow"), accruing for the benefit of Seller, for a
period of twenty-four (24) months beginning from the Closing
Date as defined below. Said amount plus accrued interest
thereon shall secure Seller's indemnification obligations
under the Agreement. Any amount due to Buyer for
indemnification obligations in excess of the Indemnity Escrow
shall be promptly paid at the end of the twenty-four (24)
month period. The Indemnity Escrow shall be held and disbursed
by the Escrow Agent in accordance with the terms of Section 13
hereof and the Escrow Agreement, which shall provide that
fifty percent (50%) of the balance remaining in the Indemnity
Escrow will be disbursed to Seller eighteen (18) months after
Closing, with the remaining balance in the Indemnity Escrow
disbursed to Seller at the end of the twenty-four (24) month
period.
(B) Inventory Escrow. From the Purchase Price, $135,000 shall be
placed in a separate interest earning escrow (the "Inventory
Escrow") account, accruing for the benefit of Seller for a
period of twenty-four (24) months beginning from the Closing
Date as defined below. Said amount plus accrued interest
thereon shall secure Seller's representation that the
non-Dover Inventory is saleable within such 24-month period.
The Inventory Escrow shall be held and disbursed by the Escrow
Agent in accordance with the terms of Section 3 hereof and the
Escrow Agreement.
(C) Disbursements from the Inventory Escrow. On each of the dates
that are six (6) months, twelve (12) months, and eighteen (18)
months, respectively, following the Closing Date, Buyer shall
calculate the value at cost of the remaining non-Dover
Inventory as of such dates and shall deliver written notice of
such calculations to Seller and the Escrow Agent not later
than ten (10) days after each such date. Buyer shall also
provide
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Seller with other periodic inventory reports including any
physical inventory reports regarding the non-Dover Inventory
as and when created. If any such calculation determines that
the value for the remaining non-Dover Inventory exceeds
$270,000, then no disbursements from the Inventory Escrow
shall be made at such time to either party. If, however, any
such calculation determines that the value of the remaining
non-Dover Inventory is less than $270,000, then the Escrow
Agent shall distribute forthwith to Seller from the Inventory
Escrow on a dollar-for dollar basis the amount equal to (i)
the product of (1) the amount by which the non-Dover Inventory
is less than $270,000, multiplied by (2) 0.5, minus (ii) any
amounts previously disbursed to Seller from the Inventory
Escrow.
On the second anniversary of the Closing Date, Buyer
shall again calculate the value at cost of the remaining
non-Dover Inventory for the purpose of making the final
distributions from the Inventory Escrow and shall deliver
written notice of such calculation to Seller and the Escrow
Agent not later than ten (10) days after such date. Seller
shall have the right to conduct its own physical inventory of
the non-Dover Inventory at his sole expense at the end of the
twenty-four (24) month period, if Seller believes that there
are problems with the Buyer's analysis or reports. If such
calculation determines that the value of the remaining
non-Dover Inventory exceeds $270,000, then the balance of
principal and interest in Inventory Escrow shall be paid to
Buyer. If, however, such calculation determines that the value
of the remaining non-Dover Inventory is less than $270,000,
then the Escrow Agent shall distribute forthwith to Seller
from the Inventory Escrow on a dollar-for dollar basis the
amount equal to (i) the product of (1) the amount by which the
non-Dover Inventory is less than $270,000, multiplied by (2)
0.5, minus (ii) any amounts previously disbursed to Seller
from the Inventory Escrow, plus (iii) an allocable share of
the accrued interest earned on the Inventory Escrow, with the
remaining balance of principal and interest in the Inventory
Escrow to be paid to Buyer. Seller shall retain no ownership
rights in or other rights to reclaim the unsold non-Dover
Inventory; provided, however, that immediately following the
second anniversary of the Closing Date, if Seller has received
less than $135,000 from the Inventory Escrow, Buyer shall
retain a third party liquidator to place a
close-out/liquidation value on all of the remaining non-Dover
Inventory and shall pay to Buyer the lesser of (i) fifty
percent (50%) of such close-out/liquidation value; or (ii) the
unpaid amount from the Inventory Escrow.
(D) Agreements with Respect to the Inventory Escrow. Buyer
covenants and agrees that it will use commercially reasonable
efforts to sell the non-Dover Inventory. Buyer further
covenants and agrees that it will sell the
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non-Dover Inventory at no more than the retail prices in
effect as of the Closing Date for the nine (9) month period
after the Closing Date and thereafter will sell the non-Dover
Inventory at cost or less. Buyer covenants and agrees that it
will use commercially reasonable efforts to sell the non-Dover
Inventory. Buyer further covenants and agrees that it will
sell the non-Dover Inventory at no more than the retail prices
in effect as of the Closing Date for the nine (9) month period
after the Closing Date and thereafter will sell the non-Dover
Inventory at cost or less. Further, if at any time after
Closing, Buyer (or Parent) decides to carry one or more of the
non-Dover Inventory units in its catalogs (the "Adopted
Inventory"), then for purposes of calculating the remaining
non-Dover Inventory pursuant to Section 3.0(C), the non-Dover
Inventory shall be reduced by the Adopted Inventory, entitling
Seller to payment for the Adopted Inventory. Additionally, in
the event that Buyer (or Parent) without including a unit of
non-Dover Inventory in its catalogs decides to purchase
additional units of non-Dover Inventory (such additional
units, "Post-Closing non-Dover Inventory"), then sales of such
units shall be tracked by Buyer (or Parent) on an individual
SKU basis and sales of such units shall be deemed to be first
from the non-Dover Inventory until there are no such units of
non-Dover Inventory remaining. As an illustration of the
foregoing, if pursuant to the inventory count to be conducted
pursuant to Section 1.1, there are 100 units of a particular
non-Dover Inventory and after Closing, Buyer (or Parent)
decides without including a unit of non-Dover Inventory in its
catalogs to purchase in its inventory an additional 50 of such
units, then sales of such units would be applied first to
reduce the non-Dover Inventory until there are no such units
of non-Dover Inventory remaining (i.e., the next 50 sales of
such units would be applied to the non-Dover Inventory).
4.0 Closing: The Closing of the purchase and sale of the Stock (the "Closing")
shall take place at the offices of Venable, LLP, 8010 Towers Crescent Drive,
Suite 300, Vienna, Virginia at 12 noon, local time, on June 15 2006 (the
"Closing Date"). The Closing Date may be postponed to June 19, 2006. If the
Closing is postponed, all references to the Closing Date in this Agreement shall
refer to the postponed date. Under no circumstances, however, will the Closing
Date be postponed beyond June 19, 2006, without the consent of Seller.
4.1 Documents to be Delivered by Seller: At the Closing, Seller will
deliver to Buyer:
(A) stock certificates for the Stock, free and clear of all liens,
claims, charges, restrictions, equities or encumbrances of any
kind, which certificates shall be duly endorsed respectively
to Buyer consistent with Section 1.0 or accompanied by duly
executed stock powers in form satisfactory to Buyer;
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(B) a certificate of Seller certifying the accuracy of Seller's
representations and warranties before and as of the Closing
and that Seller has performed and complied with all of the
terms, provisions and conditions to be performed and complied
with by Seller at or before the Closing;
(C) Non-Competition Agreement in form satisfactory to Buyer fully
executed by Seller; and
(D) certificates of corporate and tax good standing (to the extent
tax good standing certificates are available in the applicable
jurisdiction) for the Company, certified copies of the
corporate charter and such other certificates and documents as
Buyer or its counsel may reasonably request.
4.2 Documents to be Delivered by Buyer to Seller: At the Closing, Seller
shall receive:
(A) wire transfers payable to the order of the Seller in the
following amount:
$1,327,500
(B) $297,500 to the Escrow Accounts described in Section 3.0
above;
(C) a certificate of Buyer certifying the accuracy of Buyer's
representations and warranties before and as of the Closing
and that Buyer has performed and complied with all of the
terms, provisions and conditions to be performed and complied
with by Buyer at or before the Closing;
(D) a certificate of Buyer certifying that the 10A Conditions have
been satisfied to Buyer's satisfaction;
(E) such other certificates and documents as Seller or his counsel
may reasonably request.
4.3 Documents to be Delivered by Seller, Buyer and Escrow Agent to Each
Other: At the Closing, Seller, Buyer and Escrow Agent will deliver to each other
the Escrow Agreement.
4.4 Form and Substance of Documents: The documents and instruments
referred to in Sections 4.1, 4.2 and 4.3 and shall be in form and substance
satisfactory to counsel for the party to whom they are delivered.
5.0 Representations and Warranties by Seller: Seller represents and
warrants to Buyer as follows:
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5.1 Corporate Organization: The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia and has the corporate power and authority to enter into and perform
this Agreement, to carry on its business as now being conducted and as proposed
to be conducted and to own and operate the properties and assets now owned and
being operated by it. Seller has delivered to Buyer complete and correct copies
of the Company's Articles of Incorporation and Bylaws as in effect on the date
hereof. The Company is not required to be qualified or licensed to do business
as a foreign corporation in any other jurisdiction except such jurisdictions, if
any, in which the failure to be so qualified or licensed will not have a
Material Adverse Effect on the Company. SCHEDULE 5.1 sets forth a true and
complete list of the names, addresses and titles of the directors and officers
of the Company.
5.2 Capitalization; Stock Ownership: The authorized capital stock of the
Company consists of 100,000 shares of Common Stock of the par value of $0.01 per
share of which 50,000 shares are issued. All of such issued shares have been
duly authorized and validly issued and are fully paid and non-assessable and
none of them was issued in violation of any preemptive or other right. Except as
set forth in SCHEDULE 5.2, the Company is not a party to or bound by any
contract, agreement or arrangement to issue, sell or otherwise dispose of or
redeem, purchase or otherwise acquire any capital stock or any other security of
the Company or any other security exercisable or exchangeable for or convertible
into any capital stock or any other security of the Company, and, except for
this Agreement, there is no outstanding option, warrant or other right to
subscribe for or purchase, or contract, agreement or arrangement with respect
to, any capital stock or any other security of the Company or any other security
exercisable or convertible into any capital stock or any other security of the
Company.
Seller owns all of the outstanding shares of Stock free and clear of all
liens, claims, charges, restrictions, equities and encumbrances of any kind and
has full power and legal right to sell, assign, transfer and deliver the same.
5.3 Subsidiaries and Other Equity Investments: The Company does not own,
directly or indirectly, any shares of capital stock of any corporation or any
equity investment in any partnership, association or other business
organization.
5.4 Authorization of Agreement; No Violation:
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
Seller has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and to perform his obligations hereunder.
(b) Neither the execution, delivery or performance of this Agreement
nor the consummation of any of the transactions contemplated hereby (i) will
violate or conflict with the Articles of Incorporation or Bylaws of the Company;
(ii) will conflict with or result in any
11
breach of or default under any provision of any contract or agreement of any
kind to which Seller or the Company is a party or by which Seller or the Company
is bound or to which any property or asset of any of them is subject; (iii) is
prohibited by or requires Seller or the Company to obtain or make any consent,
authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person; (iv) except as disclosed on SCHEDULE 5.4, will cause any
acceleration of the maturity of any note, instrument or other obligation to
which the Company is a party or by which the Company is bound or with respect to
which the Company is an obligor or guarantor; or (v) will result in the creation
or imposition of any lien, claim, charge, restriction, equity or encumbrance of
any kind whatsoever upon or give to any other person any interest or right
(including any right of termination or cancellation) in or with respect to any
of the properties, assets, business, agreements or contracts of the Company.
5.5 Financial Statements: Seller has delivered to Buyer copies of the
unaudited balance sheets of the Company as of December 31, 2005 and related
statements of income, for the year that ended on that date, together with
supporting schedules, certified by the Seller. Except as set forth in the notes
thereto, all of such financial statements are complete and correct and present
fairly and accurately the financial position of the Company as at the respective
dates of said balance sheets and the results of the operations and changes in
financial position of the Company for the respective periods then ended applied
on a basis consistent with that of the preceding period. No uncollectible
accounts receivable are reflected on said balance sheets without provision for
an adequate reserve for uncollectible amounts; inventories reflected on said
balance sheets represent only good and serviceable items priced at the lower of
cost or market value with adequate provision for obsolescence, shrinkage, excess
quantities, defective materials and deterioration; all inventories will be
valued based on the Company's acquisition cost, meaning the invoice price for
each item without regard to any rebates, advertising allowances or similar
credits or amounts payable by the applicable vendor; and as at December 31,
2005, there was no liability of any nature or in any amount that should properly
be reflected or reserved against in a balance sheet prepared in conformity with
generally accepted accounting principles applied on a basis consistent with that
of the preceding periods which is not fully reflected or reserved against in the
balance sheet of the Company as at December 31, 2005.
5.6 No Undisclosed Liabilities, Etc.: Since December 31, 2005:
(A) The Company has not incurred any material liability or
obligation of any nature, other than liabilities and
obligations incurred in the ordinary course of business, that
would properly be reflected or reserved against in a balance
sheet prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that
used in the preparation of the balance sheet of the Company as
at December 31, 2005 referred to in Section 5.5;
12
(B) All inventories acquired or produced by the Company have been
acquired or produced in the ordinary course of its business in
quantities that are not materially greater or less than those
required for the current operation of its business and, except
for a reasonable allowance for defective materials and
deterioration, consist of good and serviceable items; and
(C) The Company has not acquired any material amount of accounts
receivable that are or are believed to be uncollectible, and
the frequency and amounts of payments received by the Company
with respect to the accounts receivable reflected on the
balance sheet of the Company as at December 31, 2005 referred
to in Section 5.5 do not, in retrospect, render inadequate the
reserve for uncollectible accounts set forth on such balance
sheet.
5.7 Absence of Certain Changes: Since December 31, 2005 (except (i) for
the execution and delivery of this Agreement and (ii) as set forth in SCHEDULE
5.7), the Company has not:
(i) had any change in its condition, financial or otherwise,
operations, business, properties, assets, or liabilities,
other than changes in the ordinary course of business, none of
which will have a Material Adverse Effect on the Company;
(ii) suffered any damage, destruction or loss of physical property
which has had or could be reasonably expected to have a
Material Adverse Effect on the Company;
(iii) issued, sold or otherwise disposed of, or agreed to issue,
sell or otherwise dispose of, any capital stock or any other
security of the Company and has not granted or agreed to grant
any option, warrant or other right to subscribe for or to
purchase any capital stock or any other security of the
Company;
(iv) incurred or agreed to incur any indebtedness for borrowed
money;
(v) paid or obligated itself to pay in excess of $5,000.00 in the
aggregate for any fixed assets;
(vi) suffered any substantial loss or waived any substantial right;
(vii) sold, transferred or otherwise disposed of, or agreed to sell,
transfer or otherwise dispose of, any assets having a fair
market value at the time of sale, transfer or disposition of
$5,000.00 or more in the aggregate, or
13
canceled, or agreed to cancel, any debts or claims, other
than in the ordinary course of business;
(viii) mortgaged, pledged or subjected to any charge, lien, claim
or encumbrance, or agreed to mortgage, pledge or subject to
any charge, lien, claim or encumbrance, any of its
properties or assets;
(ix) declared, set aside or paid any dividend or made any
distribution whether in cash, property or stock, with
respect to any of its capital stock or redeemed, purchased
or otherwise acquired, or agreed to redeem, purchase or
otherwise acquire, any of its capital stock;
(x) increased, or agreed to increase, the compensation or
bonuses or special compensation of any kind of any of its
officers, employees or agents over the rate being paid to
them on December 31, 2005, other than normal merit and/or
cost-of-living increases pursuant to customary arrangements
consistently followed, or adopted or increased any benefit
under any insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any such
officer, employee or agent;
(xi) lost any major customer or had any material order canceled
or knows of any threatened cancellation of any material
order;
(xii) made or permitted any material amendment or termination of
any material contract, agreement or license to which it is a
party other than in the ordinary course of business;
(xiii) had any resignation or termination of employment of any of
its key officers or employees or knows of any impending or
threatened resignation or resignations or termination or
terminations of employment that would reasonably be expected
to have a Material Adverse Effect on the Company;
(xiv) had any labor trouble with its employees or knows of any
impending or threatened labor trouble with its employees;
(xv) experienced any shortage or difficulty in obtaining any
products;
(xvi) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties,
assets or liabilities;
(xvii) made any charitable or political contribution or pledge in
excess of $1,000.00 in the aggregate; or
14
(xviii) entered into any transaction not in the ordinary course of
its business.
5.8 Title to and Condition of Properties and Assets: The Company has good
and marketable title to all of its properties and assets, including, without
limitation, (i) all those used in its business; and (ii) those reflected in the
balance sheet of the Company as at December 31, 2005 referred to in Section 5.5
(except as thereafter sold or otherwise disposed of in the ordinary course of
business) subject to no mortgage, pledge, conditional sales contract, lien,
security interest, right of possession in favor of any third party, claim or
other encumbrance, except (i) the lien of current taxes not yet due and payable
and (ii) as set forth in SCHEDULE 5.8. Subsequent to December 31, 2005, the
Company has not sold or disposed of any of its properties or assets or obligated
itself to do so except in the ordinary course of business. The facilities,
machinery, furniture, office and other equipment of the Company that is used in
its business are in good operating condition and repair, subject only to the
ordinary wear and tear, and neither the Company nor any property or asset owned
or leased by it is in material violation of any applicable ordinance, regulation
or building, zoning, environmental or other law in respect thereof of which
Seller has Knowledge or, whether or not Seller has Knowledge thereof, the
violation of which will not have a Material Adverse Effect on the Company.
5.9 Certain Properties: SCHEDULE 5.9 sets forth all real estate leased to
the Company (collectively the "Real Properties") and all personal property
leased to the Company and specifies, in the case of real estate, the location of
each property, the use of the facility thereon, the name of the owner or the
names of the lessor and the lessee, the square footage of improvements and the
acreage of land. Seller has delivered to Buyer (i) a copy of the lease by which
the Company acquired its interest in the real estate described in SCHEDULE 5.9;
(ii) a copy of all title abstracts and title insurance policies the Company has
for the real estate described in SCHEDULE 5.9; (iii) a copy of the most recent
survey or surveys the Company has for the real estate described in SCHEDULE 5.9;
(iv) a copy of all certificates of occupancy for the improvements on the real
estate described in SCHEDULE 5.9 and a copy of any variance granted with respect
to any of such real estate described in SCHEDULE 5.9 pursuant to applicable
zoning laws or ordinances; and (v) a copy of each lease by which the Company
acquired its interest in the personal property described in SCHEDULE 5.9, all of
which documents are true and complete copies thereof as in effect on the date
hereof. The Company has not received any written notice from any governmental
agency, board, bureau, body, department or authority of any United States or
foreign jurisdiction, with respect to the ownership or use of any of the real
estate described in SCHEDULE 5.9. Except as set forth in SCHEDULE 5.9, there is
no easement, right-of-way agreement, license, sublease, occupancy agreement or
like instrument with respect to any of the real estate described in SCHEDULE
5.9. Each lease pursuant to which the Company leases any real or personal
property is in full force and effect and is valid and enforceable in accordance
with its terms. There is not under any such lease any default by the Company, or
any event that with notice or lapse of time or both would constitute such a
default by the Company and with respect to which the Company has not taken
adequate steps to prevent such default from occurring, all of such events, it
any, and the aforesaid steps taken by the Company are set forth in
15
SCHEDULE 5.9 and to the best of Seller's knowledge, there is not under any such
lease any default or any event that with notice or lapse of time or both would
constitute such a default thereunder, by any other party. Each property used in
the business of the Company is reflected in the balance sheet of the Company as
at December 31, 2005 referred to in Section 5.5 in the manner and to the extent
required by generally accepted accounting principles. The building, plants,
structures, and equipment of the Company are sufficient for the continued
conduct of the Company's business after the Closing in substantially the same
manner as conducted prior to the Closing.
5.10 Tax Matters:
(A) All federal, state, local and foreign tax returns, reports and
statements required to be filed by the Company have been filed
with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements
are required to be filed, and all Charges (as hereinafter
defined) and other impositions shown thereon to be due and
payable have been paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto
for the nonpayment thereof, unless any such amounts are being
contested in good faith by appropriate proceedings and an
adequate reserve has been established therefor on the balance
sheet of the Company as at December 31, 2005 referred to in
Section 5.5, or any such fine, penalty, interest, late charge
or loss has been paid.
(B) The Company has paid when due and payable all Charges required
to be paid by it, except those contested in good faith, by
appropriate proceedings, if adequate reserves therefor have
been established on the balance sheet of the Company as at
December 31, 2005 referred to in Section 5.5 in accordance
with generally accepted accounting principles and where such
nonpayment would not have a Material Adverse Effect on the
Company. The provisions for taxes due by the Company in the
balance sheet of the Company as at December 31, 2005 referred
to in Section 5.5 are sufficient for all unpaid Charges,
whether or not disputed.
(C) SCHEDULE 5.10 sets forth, for the Company, those taxable years
for which its tax returns are currently being audited by the
Internal Revenue Service ("IRS"), any State taxing authority
or any other government authority. No issue has been raised or
settled in any such examination that, by application of
similar principles, reasonably may be expected to result in an
assertion of a material deficiency for any other taxable year
not so examined that has not been accrued on the balance sheet
of the Company as at December 31, 2005 referred to in Section
5.5, in accordance with generally accepted accounting
principles. The Company has not settled, issued, or entered
into a closing agreement with respect to any tax year for
which an audit or examination has been concluded that, by
application of
16
similar principles, reasonably may be expected to result in a
material deficiency for any other taxable year not so examined
(or currently under examination) that has not been accrued on
the balance sheet of the Company as at December 31, 2005
referred to in Section 5.5 in accordance with generally
accepted accounting principles. There is no issue known to the
Company or Seller relating to any Charge (federal or
otherwise) that, if determined adversely to the Company, would
result in the assertion of any material deficiency for any
taxable year that has not been accrued on the balance sheet of
the Company as at December 31, 2005 referred to Section 5.5.
(D) Except as set forth in SCHEDULE 5.10, the Company has not
executed or filed with the IRS, any State taxing authority or
any other governmental authority any agreement or other
document extending, or having the effect of extending, the
period for assessment or collection of any Charge.
(E) Except as set forth in SCHEDULE 5.10, the Company has not
filed a consent pursuant to Section 341(f) of the Code, or
agreed to have Section 341(f)(2) of the Code apply to any
disposition of subsection (f) assets as such term is defined
in Section 341(f) (4) of the Code. The Company has not made
any payment, is not obligated to make any payment, and is not
a party to any agreement that could under certain
circumstances obligate it to make any payment, that will not
be deductible under Section 280C of the Code. The Company has
not disclosed on its federal income tax returns any positions
taken thereon that could give rise to a substantial
understatement of federal income tax within the meaning of
Section 6661 of the Code.
(F) Except as set forth in SCHEDULE 5.10, none of the property
owned by the Company is property which the Company is required
to treat as being owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(G) Except as set forth in SCHEDULE 5.10, the Company has not
agreed nor has been requested to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting
method initiated by the Company and the Company has no
knowledge that the IRS has proposed any such adjustment or
change in accounting methods.
(H) Except as set forth in SCHEDULE 5.10, the Company has no
obligation under any written tax sharing agreement.
17
5.11 Contracts: Except as set forth in SCHEDULE 5.11, the Company is not a
party to any written or oral:
(i) contract with any labor union;
(ii) employment or consulting contract or other contract for
services involving a payment of more than $2,000.00 annually;
(iii) lease, whether as lessee or lessor, with respect to any
property, real or personal, involving a payment of more than
$2,000.00 annually;
(iv) loan agreement or instrument relating to any indebtedness;
(v) contract of purchase or sale involving more than $5,000.00;
(vi) contract with any agent, dealer or distributor;
(vii) stand-by letter of credit, guarantee or performance bond;
(viii) contract or agreement restricting the ability of any person
from freely engaging in any business or competing anywhere in
the world;
(ix) contract not made in the ordinary course of business; or
(xi) other contract, except insubstantial contracts for supplies or
services not involving more than $2,000.00 and which can be
terminated within one year without cost.
Except as set forth in SCHEDULE 5.11, the Company is not a party to any material
contract with any governmental authority. The Company is not a party to any
contract that has a Material Adverse Effect on the Company. Each contract or
other agreement listed in SCHEDULE 5.11 is in full force and effect and is valid
and enforceable by the Company in accordance with its terms. Neither the Company
nor, to the Knowledge of the Seller, any other party is in default in the
observance or the performance of any term or obligation to be performed by it
under any contract listed in SCHEDULE 5.11. To the Seller's Knowledge, no other
person is in default in the observance or the performance of any term or
obligation to be performed by it under any material contract with the Company.
Seller knows of no bid or contract proposal made by the Company that, if
accepted or entered into, might reasonably be expected to result in a loss to
the Company. Seller has delivered to Buyer true and complete copies of all
contracts listed in SCHEDULE 5.11 as in effect on the date hereof.
18
5.12 Litigation: Except as set forth in SCHEDULE 5.12, there are no
actions, suits, proceedings or investigations, either at law or in equity, or
before any commission or other administrative authority in any United States or
foreign jurisdiction, of any kind now pending and, to the best of the Seller's
Knowledge, there are no circumstances which should or could reasonably form the
basis of any such action, suit, proceeding or investigation, involving Seller,
the Company or any of the properties or assets of the Company that (i) if
asserted and decided adversely to Seller or the Company, could have a Material
Adverse Effect on the Company; or (ii) questions the validity of this Agreement;
or (iii) seeks to delay, prohibit or restrict in any manner any action taken or
to be taken by the Seller under this Agreement. Except as set forth in SCHEDULE
5.12, there is no arbitration proceeding pending or, to the best of Seller's
Knowledge, threatened or proposed in any manner under any collective bargaining
agreement or other agreement or otherwise. Neither the Company nor any of its
properties or assets is subject to any judicial or administrative judgment,
order, decree or restraint.
5.13 Patents and Trademarks: Except as set forth in SCHEDULE 5.13, the
Company owns no patent relating to any product which it sells or any process
used in the manufacture of any such product, nor has any license under any
patent been issued to it relating to any such product or any such process, and
there is no patent which would cover any such product or any such process; and
the Company owns no copyright, registered trademark or trade name, nor has any
license to use any copyright, trademark or trade name been issued to it, nor
does the Company use any copyright, registered trademark or trade name in its
operations or business.
Each of the patents, registered trademarks and trade names listed in
SCHEDULE 5.13 has been validly issued and is owned by the Company, and the
Company has the exclusive rights to use all such patents, copyrights, registered
trademarks and trade names in its business and operations. Except as set forth
in SCHEDULE 5.13, the Company owns all patents, copyrights, trademarks, trade
names, know-how, trade secrets and other proprietary rights necessary to
manufacture and sell its products and to conduct its operations and business,
and Seller does not know of any claim, or any basis of any claim, that the
Company has infringed any patent, copyright, trademark, trade name, know-how,
trade secret or other proprietary right of any other person. The Seller knows of
no potential claim of infringement of any patent, copyright, trademark, trade
name, know-how, trade secret or other proprietary right of any other person that
has not been asserted but that, if asserted and determined adversely to the
Company, would have a Material Adverse Effect on the Company.
5.14 Compliance with Laws: The Company has complied with and is in
compliance in all material respects with all federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits, judgments, orders and
decrees applicable to it or any of its properties, assets, operations and
business, and there does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, judgment, order
or decree except such defaults or violations or such bases for any claims of
such defaults or violations, if any, that in the aggregate do not and will not
have a Material Adverse Effect on the Company. The Company has not received any
opinion or memorandum or legal advice from any legal
19
counsel to the effect that it is exposed to any liability or disadvantage that
is or may be material to the Company. The Company is in compliance in all
material respects with all applicable requirements of all United States and
foreign governmental authorities with respect to environmental protection,
including, without limitation, (i) regulations establishing quality criteria and
standards for air, water, land and hazardous materials; (ii) all applicable
requirements of the Occupational Safety and Health Act of 1970 within the United
States and comparable workplace-safety laws of all other jurisdictions and all
rules, regulations and orders thereunder; and (iii) all applicable laws and
related rules and regulations of all United States and foreign jurisdictions
affecting labor union activities, civil rights or employment, including without
limitation, in the United States, the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Equal Employment Opportunity Act
of 1972, the Employee Retirement Income Security Act of 1974, the Equal Pay Act
and the National Labor Relations Act.
5.15 Environmental Matters:
(A) Except as disclosed in SCHEDULE 5.9 and SCHEDULE 5.15, the
Company does not currently own, lease, manage, use, hold,
control, or operate any real properties.
(B) Except as disclosed in SCHEDULE 5.15, there are no real
properties which the Company formerly owned, leased, managed,
controlled or operated and which the Company has ceased to
own, lease, manage, control or operate since January 1, 2000.
(C) With respect to the Real Properties, and except as disclosed
in SCHEDULE 5.15, neither the Company, nor to the knowledge of
the Seller, any prior owner or operator, has incurred in the
past, or is now subject to, any Environmental Liabilities.
(D) With respect to the Real Properties, and except as disclosed
in SCHEDULE 5.15, the Company has obtained, possesses, and is
in compliance in all material respects with all permits,
licenses, reviews, certifications, approvals, registrations,
consents, and any other authorizations required under any
Environmental Laws.
(E) Except as disclosed in SCHEDULE 5.15, all of the Real
Properties are in compliance in all material respects with all
Environmental Laws.
20
(F) Except as disclosed in SCHEDULE 5.15, there are no liens,
encumbrances, defaults, equitable interests, covenants, deed
restrictions, notice or registration requirements, or other
limitations applicable to the Real Properties, based upon any
Environmental Laws or other legal obligations.
(G) There are no USTs located in, at, on, or under the Real
Properties other than those identified in SCHEDULE 5.15 as
USTs; and each of those USTs is in compliance in all material
respects with all Environmental Laws and other legal
obligations.
(H) There are no locations at which Pollutants have been released,
or otherwise come to be, in, at, on, under, a part of, or
otherwise related to the Real Properties, other than those
locations identified in SCHEDULE 5.15; and each such location
is in compliance in all material respects with all
Environmental Laws and other legal obligations.
(I) Except as disclosed in SCHEDULE 5.15, there are no Conditions
in, at, on, under, a part of, or otherwise related to the Real
Properties involving the presence of any Pollutant.
(J) Except as disclosed in SCHEDULE 5.15, there are no PCBs, lead
paint, asbestos (of any type or form), or materials, articles
or products containing PCBs, lead paint or asbestos, located
in, at, on, under, a part of, or otherwise related to the Real
Properties (including, without limitation, any building,
structure, or other improvement that is a part of the Real
Properties); and all of the PCBs, lead paint, asbestos, and
materials, articles and products containing PCBs, lead paint
or asbestos identified in SCHEDULE 5.15 are in compliance in
all material respects with all Environmental Laws and other
legal obligations.
(K) Except as disclosed in SCHEDULE 5.15, no on-site sources of
water for human consumption or other human contact in or at
the Real Properties, and no subsurface waters under the Real
Properties, contain a Pollutant at a level exceeding a level
which is established or recommended in Environmental Laws.
5.16 Governmental Authorizations and Regulations: SCHEDULE 5.16 lists all
licenses, franchises, permits and other governmental authorizations held by the
Company material to the conduct of its business. Such licenses, franchises,
permits and other governmental authorizations are valid, and the Company has not
received any notice that any governmental authority intends to cancel, terminate
or not renew any such license, franchise, permit or other governmental
21
authorization. The Company holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect on the Company. Except as set forth in SCHEDULE 5.16, the
business of the Company is not being conducted, and no properties or assets of
the Company relating thereto are owned or are being used by the Company, in
material violation of any statute, law, ordinance, regulation, rule or permit of
any governmental entity or any judgment, order or decree. All products
manufactured or sold by the Company comply in all material respects with all
statutes, laws, ordinances, regulations and rules and criteria governing the
design, manufacture and intended use thereof.
5.17 SEC and Antitrust Filings: The Company has never issued any security
covered by a registration statement filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, or the Investment
Company Act of 1940, as amended, and no security issued by the Company has ever
been registered pursuant to the Securities Exchange Act of 1934, as amended.
Seller is not required to file a Schedule 13E-3 Transaction Statement or a
report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any
other antitrust law in respect to any action pursuant to or contemplated by this
Agreement.
5.18 Employee Benefit Plans and Arrangements.
(A) Pension Benefit Plans Generally: The Company does not sponsor,
maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee pension benefit
plan," nor has the Company any obligation to contribute to or
accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or
employees. For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as
is given that term in section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee
pension benefit plan other than the Profit-Sharing Plan, nor
is the Company required to contribute to any retirement plan
(other than the Profit-Sharing Plan) pursuant to the
provisions of any collective bargaining agreement establishing
the terms and conditions or employment of any of the Company's
employees. Seller has delivered to Buyer true and complete
copies of the Profit-Sharing Plan.
(B) ERISA Title IV Considerations: The Company is not now, nor can
become, liable to the Pension Benefit Guaranty Corporation or
to any multi-employer employee pension benefit plan under the
provisions of Title IV of ERISA.
22
(C) Common-Control Enterprises: The Company has not at any time
subsequent to September 1, 1974, formed, with any other entity
(other than the Company), a controlled group of corporations
within the meaning of Section 414(b) of the Code or a group of
trades or businesses under common control within the meaning
of Section 414(c) of the Code.
(D) Prohibited Transactions: The Company has not engaged in any
transaction with respect to the assets of any employee benefit
plan by reason of which the Company is or could be subject to
(i) the excise taxes imposed by Sections 4971 through 4980B of
the Code; or (ii) civil liability under Section 502(i) of
ERISA.
(E) Employee Benefit Plan Claims Liability: Seller has no
Knowledge of any action, claim or demand of any kind brought
or threatened by any potential claimant or representative of
such claimant under any employee benefit plan where the
Company may be (i) liable directly on such action, claim or
demand; (ii) liable to another party in connection with such
action, claim or demand; or (iii) obligated to indemnify any
person, group of persons or entity with respect to such
action, claim or demand. The Seller has no Knowledge of any
investigation or proceeding by any governmental agency or
quasi-governmental agency with respect to any employee benefit
plan sponsored or maintained by the Company.
(F) Reporting and Disclosure: The Company has filed or caused to
be filed on a timely basis every return, report, statement,
notice, declaration and other document required by any
government agency, federal, state and local (including,
without limitation, the Internal Revenue Service, the
Department of Labor, the Pension Benefit Guaranty Corporation
and the Securities and Exchange Commission) with respect to
each employee benefit plan sponsored or maintained by the
Company. The Company is in substantial compliance with all
disclosures to employees and beneficiaries required under
ERISA, including, without limitation, timely distribution of
summary plan descriptions and summary annual reports.
(G) Stock Option Arrangements: The Company does not sponsor and
has not granted any option under any stock option arrangement
for the benefit of any employee or former employee.
(H) Other Employee Benefit Plans and Arrangements: Except as set
forth in SCHEDULE 5.18, the Company does not sponsor,
maintain, or support, is not otherwise a party to, and does
not have any liability or contingent liability under any plan,
program, fund, arrangement or contractual undertaking, whether
for the benefit of a single individual or for more than one
23
individual, and whether or not funded, which is in the nature
of (i) an employee pension benefit plan; (ii) an employee
welfare benefit plan as defined in Section 3(1) of ERISA; or
(iii) any incentive or other benefit arrangement for
employees, their dependents and/or their beneficiaries; or
(iv) any of the types of plans identified in the following
list, or plans similar in nature or intent thereto:
(1) cash bonus or incentive pay arrangements (current or
deferred, earned or contingent);
(2) debt forgiveness or low-interest (or interest free)
loans;
(3) stock bonus plan arrangements (including, but not
limited to, arrangements known as ESOPs and/or TRASOPs);
(4) employee stock purchase plans;
(5) employee stock put options;
(6) shadow or phantom stock arrangements;
(7) stock appreciation rights, whether separate from or
associated with stock options;
(8) performance share plans;
(9) individual life insurance policies (including but not
limited to, "key man" and "split dollar" arrangements);
(10) group life insurance programs;
(11) retired life reserve programs;
(12) surviving spouse's or survivor's benefits;
(13) wage or salary continuation programs;
(14) severance benefit plans;
(15) short or long-term disability income programs;
(16) travel insurance coverage;
24
(17) accidental death and/or dismemberment benefits;
(18) medical expense reimbursement plans (insured or
self-insured);
(19) medical/surgical insurance;
(20) major medical expense programs;
(21) health maintenance organization benefits;
(22) capital accumulation arrangements;
(23) optical and/or dental care benefits;
(24) prepaid legal services;
(25) Section 501(c)(9) "voluntary employee beneficial
associations";
(26) day care centers;
(27) apprenticeship training centers;
(28) educational expense benefit plans subsidies;
(29) layoff and/or vacation pay plans, or time banks;
(30) furnishing goods or services on a discount or subsidized
basis;
(31) non-cash incentive programs (such as trading stamps,
travel or merchandise award programs);
(32) uniform or clothing allowances, eyeglass allowances,
safety equipment allowances, tool allowances, etc.;
(33) "cafeteria plans";
(34) recreation programs at total or partial employer
expense;
(35) contributions to simplified employee pensions,
individual retirement accounts or individual retirement
annuities;
(36) early retirement incentive or Social Security supplement
payments;
25
(37) retiree payments and bonuses (gratuitous, traditional or
contractual);
(38) other benefits or policies in the nature of compensation
or otherwise of economic value to employees, their
dependents or their survivors; or
(39) "golden parachute" arrangements.
5.19 Certain Transactions: Except as set forth in SCHEDULE 5.19, there is
no transaction, and no transaction now proposed, to which the Company was or is
to be a party and in which any director or officer of the Company or any
associate of any such person had or has a direct or indirect material interest.
5.20 Foreign Corrupt Practices Act: Neither the Company nor any director,
officer, agent, employee or other person associated with or acting on behalf of
the Company has used any corporate funds for any unlawful contribution, gift,
entertainment or other expense relating to political activity or made any direct
or indirect unlawful payment to any United States or foreign government official
or employee from corporate funds or violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977 or paid or made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment.
5.21 Accounting Practices: The Company makes and keeps accurate books and
records reflecting its assets and maintains internal accounting controls that
provide reasonable assurance that (i) transactions are executed with
management's authorization; (ii) transactions are recorded as necessary to
permit preparation of the Company's financial statements and to maintain
accountability for the assets of the Company; (iii) access to the assets of the
Company is permitted only in accordance with management's authorization; and
(iv) the reported accountability of the assets of the Company is compared with
existing assets at reasonable intervals.
5.22 Minute Books: The Company's minute books contain complete and
accurate records of all meetings and other corporate actions of its stockholders
and Board of Directors and committees thereof.
5.23 Insurance: All properties and operations of the Company are insured
in amounts deemed adequate by the Company's Board of Directors or management,
against all risks usually insured against by persons operating similar
properties or conducting similar operations in the localities where such
properties are located or such operations are conducted under valid and
enforceable policies issued by insurers of recognized responsibility. SCHEDULE
5.23 lists all such policies. Seller made available to Buyer true and complete
copies of all such policies as in effect on the date hereof.
26
5.24 Bank Accounts; Powers of Attorney: SCHEDULE 5.24 sets forth (i) the
name of each bank in which the Company has an account or safe deposit box and
the names of all persons authorized to draw thereon or to have access thereto;
and (ii) the names of all persons, if any, holding powers of attorney from the
Company and a summary statement of the terms thereof.
5.25 Product Warranties: Except as set forth in SCHEDULE 5.25, (i) the
Company has no unexpired, expressed, product warranty with respect to any
product that it manufactures or sells or that it has heretofore manufactured or
sold; (ii) the Company has not received any notice of any claim based on any
product warranty; and (iii) the Seller knows of no or has no reasonable grounds
to know of any claim actual or threatened based on any product warranty of which
the Company has not received notice. The Company does not make any other
warranties expressed or implied, with respect to any of the products that it
manufactures or sells.
5.26 Certain Disclosures: SCHEDULE 5.26 contains:
(i) a list of all officers and other employees, agents and
consultants of the Company and their respective annual
compensation including any outstanding loans owing to the
Company;
(ii) a list of those suppliers that were the twenty largest
suppliers of the Company in terms of dollar amount of
purchases during the Company's fiscal year that ended December
31, 2005, and during the period from December 31, 2005 through
the date hereof, together with a statement for each such
supplier for each such period of the dollar amount of such
purchases;
(iii) a list of all of the outstanding purchase orders and/or
blanket commitments of the Company involving more than $500 on
the date hereof;
(iv) a list of all of the outstanding sales orders of the Company
involving more than $5,000 on the date hereof; and
(v) a list of all machinery and equipment owned and leased by the
Company on the date hereof.
5.27 Brokers: All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company and Seller
directly with Buyer and without the intervention of any other person other than
Potomac Capital Group, LLP and in such manner as not to give rise to any valid
claim against any of the parties for any finder's fee, brokerage commission or
like payment to any party other than Potomac Capital Group, LLP.
5.28 No Untrue Statements: No statement by Seller contained in this
Agreement and no written statement contained in any certificate or other
document required to be furnished by
27
Seller or any officer, employee, counsel or other agent of Seller to Buyer
pursuant to or in connection with this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit a material fact
necessary in order to make the statements therein contained not misleading.
6.0 Representations and Warranties by Buyer: Buyer represents and warrants
to the Seller as follows:
6.1 Corporate Organization: Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the corporate power and authority to carry on its business
as now being conducted by it and to acquire and own the Stock.
6.2 Authorization of Agreement:
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement and to perform its obligations hereunder.
(b) Neither the execution, delivery or performance of this Agreement
nor the consummation of any of the transactions contemplated hereby (i) will
violate or conflict with the Articles of Incorporation or Bylaws of Buyer; or
(ii) is prohibited by or requires Buyer to obtain or make any consent,
authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, other than the consents of Parent's senior lenders listed on
Schedule 6.2 hereto.
6.3 Litigation: There are no actions, suits, proceedings or
investigations, either at law or in equity, or before any commission or other
administrative authority in any United States or foreign jurisdiction, of any
kind now pending or threatened or proposed in any manner, or any circumstances
which should or could reasonably form the basis of any such action, suit,
proceeding or investigation involving Buyer or any of its properties or assets
that (i) questions the validity of this Agreement; or (ii) seeks to delay,
prohibit or restrict in any manner any action taken or to be taken by Buyer
under this Agreement.
6.4 Brokers: Except as set forth in SCHEDULE 6.4, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried on by Buyer directly with Seller and the Company and without the
intervention of any other person other than Potomac Capital Group, LLP and in
such manner as not to give rise to any valid claim for a finder's fee, brokerage
commission or like payment to any party other than Potomac Capital Group, LLP.
6.5 Investment Representation: Buyer is acquiring the Stock for investment
and not
28
with a view to the distribution thereof or dividing all or any part of its
interest therein with any other person.
6.6 Financing. Buyer has all funds necessary to consummate the
transactions contemplated by this Agreement, including payment of the Purchase
Price.
6.7 No Untrue Statements: No statement by Buyer contained in this
Agreement and no written statement contained in any certificate or other
document required to be furnished by any officer, employee, counsel or other
agent of Buyer to Seller pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit a material fact
necessary in order to make the statements therein contained not misleading.
7.0 Covenants of Seller: Seller covenants and agrees with Buyer as
follows:
7.1 Access, Information and Documents: Pending the Closing, Seller will
cause the Company to give to Buyer and to its agents and representatives
including, but not limited to, accountants, lawyers, appraisers and employees,
full and complete access during normal working hours to any and all of the
properties, assets, books, records and other documents of the Company to enable
Buyer to make such examination of the business, properties, assets, books,
records, and other documents of the Company as Buyer may determine. Seller will
furnish, and will cause the Company to furnish to Buyer such information and
copies of such documents and records as Buyer shall reasonably request. As part
of such examination Buyer may make such inquiries of such persons having
business relationships with the Company including, but not limited to,
suppliers, licensees, distributors and customers as Buyer shall determine and
Seller shall cooperate fully, and shall cause the Company to cooperate fully,
with Buyer in connection therewith.
7.2 Conduct of Business Pending Closing: From the date hereof until the
Closing, except as consented to by Buyer in writing:
(A) Seller will cause the Company to maintain itself at all times
as a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction under which it is
incorporated;
(B) Seller will cause the Company to carry on its business and
operations in a good and diligent manner on an arm's-length
basis and substantially in the manner carried on as of the
date hereof and will not permit the Company to engage in any
activity or transaction or make any commitment to purchase or
spend other than in the ordinary course of its business as
heretofore conducted: provided, however, without the written
consent of Buyer, Seller will not permit the Company to make
any commitment to purchase or spend involving $2,000.00 or
more;
29
(C) Except as contemplated as part of this Agreement, Seller will
not permit the Company to declare, authorize or pay any
distribution or dividend to its stockholders and will not
permit the Company to redeem, purchase or otherwise acquire,
or agree to redeem purchase or otherwise acquire, any shares
of its stock;
(D) Seller will not permit the Company to pay or obligate itself
to pay any compensation, commission or bonus to any director,
officer, employee or independent contractor as such, except
for the regular compensation and commissions payable to such
director, officer, employee or independent contractor at the
rate in effect on the date of this Agreement;
(E) Seller will cause the Company to continue to carry insurance
insuring its properties and operations in amounts deemed
adequate by its Board of Directors or management, against all
risks usually insured against by persons operating similar
properties or conducting similar operations in the localities
where such properties are located or such operations are
conducted under valid and enforceable policies issued by
insurers of recognized responsibility;
(F) Seller will cause the Company to use all commercially
reasonable efforts to preserve its business organization
intact, to keep available to Buyer the services of its
employees and independent contractors and to preserve for
Buyer its relationships with suppliers, licensees,
distributors and customers and others having business
relationships with it;
(G) Seller will not permit the Company to, or to obligate itself
to, sell or otherwise dispose of or pledge or otherwise
encumber, any of its properties or assets except in the
ordinary course of business and Seller will cause the Company
to maintain its facilities, machinery and equipment in good
operating condition and repair, subject only to ordinary wear
and tear;
(H) Seller will not permit the Company to amend its Articles of
Incorporation or Bylaws;
(I) Seller will not permit the Company to engage in any activity
or transaction other than in the ordinary course of its
business as heretofore conducted;
(J) Seller shall as soon as possible (i) cause all of its
inventory to be reloaded onto Seller's computer by SKU and
(ii) shall cause all of its inventory to be retagged with the
appropriate SKU information; and
30
(K) Without limiting the foregoing, Seller will not fail to
consult with Buyer regarding all significant developments,
transactions and proposals relating to the business or
operations or any of the assets or liabilities of the Company.
7.3 Financial Statements and Certificate: As soon as possible, Seller
shall prepare and deliver to and to be received by Buyer the balance sheet of
the Company as at April 30, 2006, all of which shall be in form and substance
satisfactory to Buyer. Seller will deliver at Closing a certificate executed by
Seller in which Seller shall represent and warrant to Buyer that:
(A) such balance sheet is complete and correct and presents fairly
and accurately the financial position of the Company as at
April 30, 2006;
(B) no uncollectible accounts receivable are reflected on said
balance sheet without provision for an adequate reserve for
uncollectible amounts;
(C) inventories reflected on said balance sheet represent only
good and serviceable items priced at the lower of cost or
market values with adequate provision for obsolescence,
shrinkage, excess quantities, defective materials and
deterioration;
(D) as at April 30, 2006, there was no material liability that
should properly be reflected or reserved against in a balance
sheet which is not fully reflected or reserved against in said
balance sheet ;
(E) there are no matters of material importance relating to the
condition, financial or otherwise, operations, business,
property, assets or liabilities of the Company which have not
been appropriately reflected or reserved against in said
balance sheet;
(F) the Company has good and marketable title to all of its
properties and assets, including those reflected in said
balance sheet except as sold or otherwise disposed of in the
ordinary course of business since the date of said balance
sheet, subject to no mortgage, pledge, conditional sales
contract, lien or other encumbrance, except the lien of
current taxes not yet due and payable and the security
interest of Cardinal Bank disclosed in Schedule 5.11;
(G) the provisions for taxes due by the Company in said balance
sheet are sufficient for all unpaid federal, state and local
taxes, whether or not disputed, in respect of their businesses
and operations for all periods that ended prior to or on April
30, 2006; and
31
(H) Seller knows of no question relating to any of the tax or
information returns of the Company which if determined
adversely to the Company would result in the assertion of any
tax deficiency.
7.4 Cooperation With Respect to Financing: Seller agrees to cooperate in
any reasonable manner with Buyer in connection with the obtaining of any
financing related to this transaction and, in connection therewith, at the
request of Buyer, will cause the Company to execute and deliver loan and/or
security agreements which at the Closing will obligate the full credit of the
Company and which will be secured by all of the assets of the Company, provided
that Seller is reasonably assured that such agreements will be fully discharged
in the event the Closing is not consummated.
7.5 Consents and Approvals: Seller shall use his reasonable best efforts
to obtain prior to the Closing all consents, authorizations and approvals under
all statutes, laws, ordinances, regulations, rules, judgments, decrees and
orders of any court or governmental agency, board, bureau, body, department or
authority or of any other person required to be obtained by Seller in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
7.6 Resignation of Directors: Prior to or at the Closing, Seller will
cause each of the officers and directors of the Company to resign effective at
the Closing.
7.7 Use of Name: Seller will not use the name "Dominion Saddlery" or any
derivative thereof in any way whatsoever at any time after the Closing.
7.8 Exclusive Dealing: Seller will not offer the Stock for sale to any
person other than Buyer nor will Seller, or any of his representatives enter
into negotiation with any other party for the disposition of the Company or the
Stock during the pendency of this Agreement, between Buyer and Seller.
Further, Seller will not, directly or indirectly, through any officer,
director, agent or otherwise, (i) solicit or initiate, directly or indirectly,
or encourage submission of inquiries, proposals, or offers from any potential
buyer relating to the disposition of the Company or the Stock, or any part
thereof, other than sales of inventory and the replacement of furniture,
fixtures and equipment, in the ordinary course of business; or (ii) actively
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, the disposition of the Company or the
Stock or any part thereof.
7.9 Non-Competition Agreements: Seller and Virginia Davis Young Newton
will execute at Closing in favor of the Company and Buyer non-competition
agreements, which shall provide that for periods of five (5) years and three (3)
years respectively commencing on the Closing Date:
32
(A) Seller and Virginia Davis Young Newton will agree to not,
directly or indirectly, be involved in the manufacture,
assembly, sale or distribution, within or without the United
States, of any product manufactured, furnished, assembled,
sold or distributed by the Company at any time during the
five-year period ending on the Closing Date or otherwise
attempt to compete with Buyer with respect to the business of
the Company.
(B) Seller and Virginia Davis Young Newton shall not enter into
the employ of, render services or advice to, or engage in or
become a proprietor, partner or stockholder of any business
that competes with or contemplates competing with the business
of the Company.
8.0 Covenants of Buyer.
8.1 Confidential Information: Buyer shall preserve and maintain all
proprietary information and trade secrets of the Company received or confirmed
in documentary form by Buyer from Seller and the Company and shall not disclose
to any third person or use any such proprietary information or trade secret for
personal advantage, except that Buyer shall be free to use and disclose all or
any of such proprietary information and trade secrets which (i) were already in
Buyer's possession at the time of disclosure to Buyer; (ii) are a matter of
public knowledge; (iii) have been or are hereafter published other than through
Buyer; or (iv) are lawfully obtained by Buyer from a third person without
restrictions of confidentiality.
8.2 No Disclosure of Consideration: Unless otherwise required by any
statute, law, ordinance, regulation, rule, judgment, order or decree, Buyer will
not disclose to any third person the amount of the consideration for the Stock
referred to in Section 2.0.
8.3 Consents and Approvals: Buyer shall use its reasonable best efforts to
obtain prior to the Closing all consents, authorizations and approvals under all
statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of
any court or governmental agency, board, bureau, body, department or authority
or of any other person required to be obtained by Buyer in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
8.4 No Unreasonable Interference: Pending the Closing, Buyer will not take
any action, which could reasonably be expected to interfere unreasonably with
the business or operations of the Company.
8.5 Burbank Business: The Company is a party to that certain Licensing
Agreement dated September 20, 1993 with Kinnaman, Morse & Byassee (KMB)
(together with its successors and permitted assigns, the "Licensee"), pursuant
to which the Company has licensed to the Licensee the right to use certain
service marks of the Company and the tradename
33
"Dominion Saddlery" in connection with a business located at the Los Angeles
Equestrian Center, 480 Riverside Drive, Burbank, California 91506 (the "Burbank
Business") for a term ending on September 20, 2013 (the "Term"). Buyer covenants
and agrees that if prior to September 20, 2013 it or any of its affiliates
enters into any agreement, arrangement or understanding to purchase or acquire
all or substantially all of the Burbank Business pursuant to an asset sale,
stock purchase, consolidation or merger, lease, exclusive license, transfer or
conveyance, statutory exchange of securities, or other business combination,
then Buyer shall pay an additional amount of $100,000.00 to Seller in
immediately available funds.
9.0 Conditions Precedent to Seller's Obligation to Sell the Stock: The
obligation of Seller to sell the Stock is subject to the fulfillment prior to or
at the Closing of the following conditions:
9.1 Buyer's Performance: There shall not be any material error,
misstatement or omission in the representations and warranties made by Buyer in
this Agreement; all representations and warranties by Buyer contained in this
Agreement or in any written statement delivered by Buyer to Seller pursuant to
this Agreement shall be true in all material respects at and as of the Closing
as though such representations and warranties were made at and as of said time;
and Buyer shall have performed and complied in all material respects with all
the terms, provisions and conditions of this Agreement to be performed and
complied with by Buyer at or before the Closing.
9.2 Opinion of Counsel: Seller shall have received an opinion, dated the
Closing Date, of Preti Flaherty, PLLP, counsel for Buyer, in form and substance
satisfactory to counsel for Seller, to the effect that:
(A) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of
Massachusetts and has the corporate power to carry on its
business now conducted and to acquire and own the Stock;
(B) This Agreement has been duly authorized, executed and
delivered by Buyer and is a valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms,
except (a) as the same may be limited by bankruptcy,
insolvency, reorganization or other laws or equitable
principles relating to or affecting the enforcement of
creditors' rights; and (b) that the granting of specific
performance is subject to the discretion of a court of equity;
(C) All corporate proceedings required to be taken by Buyer at or
before the Closing in connection with this Agreement and the
transactions contemplated hereby have been duly taken;
34
(D) The execution and delivery of this Agreement by Buyer and the
consummation of the transactions provided for in this
Agreement will not violate or conflict with any provision of
the Articles of Incorporation or Bylaws of Buyer or, to the
best of the knowledge of such counsel, result in any breach of
any contract or agreement to which Buyer is a party or by
which Buyer is bound or to which the properties or assets of
Buyer are subject; and
(E) As to such other matters (including the form of all documents
and the validity of all proceedings) incident to the matters
herein contemplated as Seller and his counsel may reasonably
request.
In rendering the opinion described above, Preti Flaherty, PLLP may rely on
an opinion or opinions, copies of which shall be furnished to Seller, of local
counsel satisfactory to Seller with respect to the laws of jurisdictions other
than the United States of America and the Common-wealth of Massachusetts. As
part of its opinion, Preti Flaherty, PLLP will advise Seller that, in their
opinion, Preti Flaherty, PLLP and Seller are justified in relying on the
opinions of such local counsel.
9.3 Consents and Approvals: Seller and Buyer shall have obtained all
consents, authorizations and approvals under all statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any other person
required to be obtained by Seller or Buyer, as the case may be, in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
9.4 10A Conditions: Buyer's written 10A Determination concludes that the
10A Conditions have been satisfied.
10.0 Conditions Precedent to Buyer's Obligation to Purchase the Stock: The
obligation of Buyer to purchase the Stock is subject to the fulfillment prior to
or at the Closing of the following conditions:
10.1 Seller's Performance: There shall not be any material error,
misstatement or omission in the representations and warranties made by Seller in
this Agreement; all representations and warranties by Seller and the Company
contained in this Agreement or in any written statement delivered by Seller to
Buyer pursuant to this Agreement shall be true in all material respects at and
as of the Closing as though such representations and warranties were made at and
as of said time; and Seller shall have performed and complied in all material
respects with all the terms, provisions and conditions of this Agreement to be
performed and complied with by Seller at or before the Closing.
35
10.2 Limited Procedures Report. (a) Buyer shall have received a written
report, dated no earlier than ten (10) days before Closing, either from the
Company's independent accountant or an independent accountant introduced by
Seller or his legal counsel (herein, the "Reporting Accountant"), summarizing
its findings based on its undertaking the Specified Limited Procedures, as
defined in subsection 10.2(b) below (such a report herein the "Accounting
Report"). Buyer agrees to pay for the Reporting Accountant's services to a
maximum of $5,000.
(b) As used herein, the term "Specified Limited Procedures" means the
activities in clauses (i-ii) undertaken by the Reporting Accountant for the
purpose of testing the accuracy of certain financial information shown in the
Company's income statement and balance sheet for the year ended December 31,
2005 and the Company's tax return for the 2005 tax year (collectively herein,
the "Company's Financial Statements"):
(i) Documenting the Company's procedures and methodology for
reporting and controlling its accounts payable; and
(ii) Documenting the Company's procedures and methodology for
assigning per item costs to individual inventory items by the Company.
10.2A Accounting Report. If the Accounting Report reveals information
indicating a probability of material adverse discrepancies or errors in the
Company's Financial Statements, then Buyer shall have the right to terminate
this Agreement.
10.3 Due Diligence Investigation and Acquisition Audit: Buyer's
investigation of Company's books, records, and documents regarding the financial
condition, assets, liabilities and potential liabilities of the Company shall
have been completed and produced results that are satisfactory to the Buyer.
10.4 Opinion of Counsel: Buyer shall have received an opinion, dated the
Closing Date, of Venable LLP counsel for Seller, in form and substance
satisfactory to Preti Flaherty, PLLP, counsel for Buyer, to the effect that:
(A) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Virginia; and has full corporate power to carry on its
business as now conducted;
(B) The Company's entire authorized capital stock consists of
100,000 shares of Common Stock of the par value of $0.01 per
share, of which 50,000 shares are issued; all of such 50,000
issued shares of common stock of the Company have been validly
issued and are fully paid and non-assessable;
(C) This Agreement has been duly executed and delivered by the
Seller and is a legal, valid and binding obligation of the
Seller enforceable against the
36
Seller in accordance with its terms, except as the same may be
limited by (i) bankruptcy, insolvency, reorganization or other
laws or equitable principles relating to or affecting the
enforcement of creditors' rights; and (ii) the exercise of
judicial discretion in accordance with general principles of
equity;
(D) The execution and delivery of this Agreement by the Seller and
the consummation of the transactions provided for in this
Agreement will not violate or conflict with any provision of
the Articles of Incorporation or Bylaws of the Company or, to
the best of the knowledge of such counsel, result in any
breach of any contract or agreement set forth on Schedule
5.11;
10.5 Consents and Approvals: Seller and Buyer shall have obtained all
consents, authorizations and approvals under all statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any other person
required to be obtained by Seller or Buyer, as the case may be, in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
10.6 Properties and Leases: There shall have occurred no material damage
to or destruction or loss of (whether or not covered by insurance) any of the
Company's facilities, machinery, equipment or other assets, and Buyer shall have
obtained written extensions to all of the Company's store leases on terms
satisfactory to Buyer.
10.7 Retention of Key Employees: Buyer's obligation to close shall be
conditioned on, among other things, the retention of certain employees of the
Company, specifically (i) Virginia Newton and (ii) David Revilla.
10.8 Resignations of Directors: The directors and officers of the Company
shall have executed and delivered to the Buyer their resignations as directors
and officers of the Company effective at the Closing.
10.9 10A Conditions: Buyer's written 10A Determination concludes that the
10A Conditions have been satisfied.
10A No Binding Obligation: Notwithstanding anything to the contrary in this
Agreement, Buyer shall not have a binding obligation, and Seller shall not have
the right to enforce Buyer's agreement to purchase the Company Stock pursuant to
Section 1.0 of this Agreement, unless and until Buyer decides, in the sole
discretion of Buyer and its advisors, on the basis of its review of the
Company's financial statements, tax returns and business records, that each and
all of the following conditions (jointly, the "10A Conditions") have been met:
(i) that the Company
37
neither is nor would be deemed to be a "significant subsidiary" of Buyer
pursuant to Rule 1-02(w) of Regulation S-X promulgated by the United States
Securities and Exchange Commission (SEC); and (ii) in connection with the
consummation of the transactions contemplated by this Agreement, both (A) that
Rule 3-05 of Regulation S-X does not requires the Company to file with the SEC
audited financial statements of the Buyer, and (B) that Article 11 of Regulation
S-X does not require the Company to file pro forma financial information of the
combined businesses of the Company and Buyer. Further, unless and until Buyer
decides that the 10A conditions have been satisfied, the Buyer shall not have
the right to enforce the Seller's agreement to sell the Company stock pursuant
to Section 1.0 of this Agreement. Buyer shall use its best efforts to make its
determination (herein, the "10A Determination") whether the 10A Conditions have
been satisfied, and Buyer shall no later than five (5) days prior to the Closing
Date (the "Determination Deadline") give written notice to Seller and the
Company of its 10A Determination, which notice shall include Buyer's statement
whether the 10A Conditions have been satisfied. If Buyer does not provide
written notice to Seller and the Company of its 10A Determination on or before
the Determination Deadline, then the Buyer's rights arising under this Section
shall be waived and this Agreement shall become binding on the Buyer.
11.0 Termination: This Agreement may be terminated as follows:
11.1 Termination by Buyer: Buyer may, without liability to Seller,
terminate this Agreement by notice to Seller (i) at any time prior to the
Closing if default shall be made by Seller in the observance or in the due and
timely performance of any of the terms hereof to be performed by Seller that
cannot be cured at or prior to the Closing; (ii) at the Closing if any of the
conditions precedent to the performance of Buyer's obligations at the Closing
shall not have been fulfilled, or on or prior to the Determination Date, if
Buyer concludes that the 10A Conditions have not been satisfied; (iii) at the
Closing if the Inventory described in Section 1.1 above reveals material
problems with respect to the value, condition or accounting for the Company's
saleable inventory or (iv) at any time prior to the Closing upon tender of the
break-up fee described in Section 14.2.
11.2 Termination by Seller: Seller may, without liability to Buyer,
terminate this Agreement by notice to Buyer (i) at any time prior to the Closing
if default shall be made by Buyer in the observance or in the due and timely
performance of any of the terms hereof to be performed by Buyer that cannot be
cured at or prior to the Closing; or (ii) at the Closing if any of the
conditions precedent to the performance of Seller's obligations at the Closing
shall not have been fulfilled.
11.3 Effect of Termination: If this Agreement is terminated, this
Agreement, except for Section 8.1, shall no longer be of any force or effect and
there shall be no liability on the part of any party or its respective
directors, officers or shareholders except, in the case of termination because
of a material default or material breach resulting from the willful fault of
another party, the aggrieved party or parties may recover from the defaulting
party the amount of expenses incurred by such aggrieved party or parties in
connection with this Agreement and the
38
transactions contemplated hereby which the aggrieved party or parties would
otherwise have to bear pursuant to Section 14.2 of this Agreement. If this
Agreement shall be terminated, each party will (i) redeliver all documents, work
papers and other materials of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same; and (ii) destroy all documents,
work papers and other materials developed by its accountants, agents and
employees in connection with the transactions contemplated hereby which embody
proprietary information or trade secrets furnished by any party hereto or
deliver such documents, work papers and other materials to the party furnishing
the same or excise such information or secrets therefrom and all information
received by any party hereto with respect to the business of any other party
(other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall not at any time be used for personal advantage or disclosed by such party
to any third person to the detriment of the party furnishing such information or
any of its subsidiaries.
12.0 Intentionally Omitted.
13.0 Survival of Representations and Warranties: All statements contained
in any certificate or other instrument delivered by or on behalf of Seller or
Buyer pursuant to this Agreement shall be deemed representations and warranties
hereunder by the party delivering such certificate or instrument. All
representations, warranties and agreements made by Seller or Buyer in this
Agreement or pursuant hereto shall survive the Closing for a period of three (3)
years, except for the representations, warranties and agreements contained in
Sections 5.2, 5.10, 5.15 or 5.18 survive for the longer of three (3) years or
the duration of the applicable statute of limitations.
13.1 Seller's Indemnification Obligations: Subject to the terms and
conditions of this Section 11, Seller shall indemnify and hold harmless Buyer
from and against any and all losses, costs, expenses (including, without
limitation, reasonable legal and other expenses), actions, suits, demands,
assessments, judgments or claims actually suffered or incurred by it, excluding
any special, consequential or punitive damages (hereinafter, "Loss(es)"), except
as expressly limited by the terms of Section 13.2, arising out of or resulting
from:
(a) any misrepresentation or breach of warranty of Seller
contained in this Agreement or in any Schedule of Seller or in
any certificate delivered by Seller at the Closing; provided
that any claim for indemnification by Buyer under this
paragraph (a) may be made no later than the date three (3)
years from and after the Closing Date, except for the
representations, warranties and agreements contained in
Sections 5.2, 5.10; 5.15 or 5.18, for which a claim may be
made during the longer of three (3) years from and after the
Closing Date or the duration of the applicable statute of
limitations;
39
(b) any breach of any covenant of Seller contained in this
Agreement; and
(c) the Assumed Liabilities.
13.2 Limitation on Seller's Indemnification Obligations: Seller shall have
no obligation to provide indemnification pursuant to Section 13.1 for amounts in
excess of the amount equal to fifty percent (50%) of the Purchase Price and only
to the extent that the aggregate amount of indemnification to which Buyer shall
have become entitled hereunder shall exceed $5,000.
13.3 Buyer's Indemnification Obligations: Subject to the terms and
conditions of this Section 13.3, Buyer agrees to indemnify and hold Seller
harmless against all Losses, except as expressly limited by the terms of Section
13.4, resulting from or relating to:
(a) any misrepresentation or breach of warranty of Buyer contained
in this Agreement or in any Schedule of Buyer or in any
certificate delivered by Buyer at the Closing; provided that
any claim for indemnification by Seller under this paragraph
(a) may be made no later than the date three (3) years from
and after the Closing Date; and
(b) any breach of any covenant of Buyer contained in this
Agreement.
13.4 Limitation on Buyer's Indemnification Obligations: Buyer has no
obligation to provide indemnification pursuant to Section 13.3 except to the
extent that the aggregate amount of indemnification to which Seller otherwise
shall have become entitled hereunder shall exceed $5,000.
13.5 Guaranty of Parent. Parent agrees to confirm in writing at Closing,
its guaranty of all of Buyer's obligations arising under the indemnifications
provisions provided in favor of Seller.
13.6 Procedure for Indemnification Claims: The respective indemnification
obligations of Seller and Buyer pursuant to this Section 13.0 shall be
conditioned upon compliance by Seller and Buyer with the following procedures
for indemnification claims based upon or arising out of any claim, action or
proceeding by any person not a party to this Agreement:
(a) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, against
a party hereto (the "Aggrieved Party") which could result in
liability of the other party (the "Indemnifying Party") under
its indemnification obligations hereunder, the Aggrieved Party
shall give to the Indemnifying Party prompt notice of such
claim, action or proceeding. Such notice shall state the basis
for the
40
claim, action or proceeding and the amount thereof (to the
extent such amount is determinable at the time when such
notice is given) and shall permit the Indemnifying Party to
assume the defense of any such claim, action or proceeding
(including any action or proceeding resulting from any such
claim). Failure by the Indemnifying Party to notify the
Aggrieved Party of its election to defend any such claim,
action or proceeding within a reasonable time, but in no event
more than fifteen days after notice thereof shall have been
given to the Indemnifying Party, shall be deemed a waiver by
the Indemnifying Party of its right to defend such claim,
action or proceeding; provided, however, that the Indemnifying
Party shall not be deemed to have waived its right to contest
and defend against any claim of the Aggrieved Party for
indemnification hereunder based upon or arising out of such
claim, action or proceeding.
(b) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the
Indemnifying Party as to such claim, action or proceeding
shall be limited to taking all steps necessary in the defense
or settlement thereof and, provided the Indemnifying Party is
held to be liable for indemnification hereunder, to holding
the Aggrieved Party harmless from and against any and all
Losses caused by or arising out of any settlement approved by
the Indemnifying Party or any judgment or award rendered in
connection with such claim, action or proceeding. The
Aggrieved Party may participate, at its expense, in the
defense of such claim, action or proceeding provided that the
Indemnifying Party shall direct and control the defense of
such claim, action or proceeding. The Aggrieved Party agrees
to cooperate and make available to the Indemnifying Party all
books and records and such officers, employees and agents as
are reasonably necessary and useful in connection with the
defense. The Indemnifying Party shall not, in the defense of
such claim, action or proceeding, consent to the entry of any
judgment or award, or enter into any settlement, except in
either event with the prior consent of the Aggrieved Party,
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Aggrieved Party
of a release from all liability in respect of such claim,
action or proceeding.
(c) If the Indemnifying Party does not assume the defense of any
such claim, action or proceeding, the Aggrieved Party may
defend against such claim, action or proceeding in such manner
as it may deem appropriate. The Indemnifying Party agrees to
cooperate and make available to the Aggrieved Party all books
and records and such officers, employees and agents as are
reasonably necessary and useful in connection with the
defense.
41
(d) In the event an Aggrieved Party or Indemnifying Party shall
cooperate in the defense or make available books, records,
officers, employees or agents, as required by the terns of
paragraphs (b) and (c), respectively, of this Section 13.6 the
party to which such cooperation is provided shall pay the
out-of-pocket costs and expenses (including legal fees and
disbursements) of the party providing such cooperation and of
its officers, employees and agents reasonably incurred in
connection with providing such cooperation, but shall not be
responsible to reimburse the party providing such cooperation
for such party's time or the salaries or costs of fringe
benefits or other similar expenses paid by the party providing
such cooperation to its officers and employees in connection
therewith.
13.7 Insurance and Tax Effects:
(a) If any Loss related to a claim by an Aggrieved Party is covered
by one or more third party insurance policies held by the Aggrieved Party and
the Aggrieved Party actually receives a full or partial recovery under such
insurance policies, the Aggrieved Party shall not be entitled to recover from
the Indemnifying Party (and shall refund amounts received from the Indemnifying
Party up to the amount of indemnification actually received from the
Indemnifying Party) with respect to such Loss to the extent Aggrieved Party
receives any insurance payment under such third party insurance with respect to
such Loss (net of (i) any costs of collecting such insurance payment, including
the amount of any co-payment or deductible, and (ii) that portion of any premium
increase in the next policy period of the applicable insurance policy or
replacement insurance policy that results directly from the assertion of such
claim, as determined by correspondence from the insurance carrier or insurance
broker to the Aggrieved Party, a copy which shall have been provided to the
Indemnifying Party).
(b) The amount of any indemnification payable under this Agreement
shall be (i) treated as an adjustment to the Purchase Price for tax purposes and
(ii) net of any tax benefit actually realized by the Aggrieved Party (including,
where Buyer is the Aggrieved Party, the Company) by reason of the facts and
circumstances giving rise to the indemnification and (iii) increased by the
amount of any tax actually required to be paid by the Aggrieved Party on the
accrual or receipt of the indemnification payment (including any amount payable
pursuant to this clause (iii)). For purposes of the preceding sentence, the
amount of any state income tax benefit or cost shall take into account the
federal income tax effect of such benefit or cost.
13.8 Sole and Exclusive Remedy: The indemnification obligations of Seller
and Buyer under this Section 13.0 shall constitute the sole and exclusive
remedies of Buyer and Seller, respectively, for the recovery of money damages
with respect to the matters described in Sections 13.1 and 13.3, respectively.
The terms of this Section 13.8 shall not be construed as limiting in any way
whatsoever any remedy other than for the recovery of money damages to which
Buyer or Seller may be entitled.
42
14.0 Miscellaneous:
14.1 Assurance of Further Action: From time to time after the Closing and
without further consideration from Buyer, but at Buyer's expense, Seller shall
execute and deliver, or cause to be executed and delivered, to Buyer such
further instruments of sale, assignment, transfer and delivery and take such
other action as Buyer may reasonably request in order to more effectively sell,
assign, transfer and deliver and reduce to the possession of Buyer any and all
of the Stock and consummate the transactions contemplated hereby.
14.2 Expenses: Whether or not the Closing is consummated, except as
otherwise provided in Section 11.3 and Section 10.2(a), each of the parties will
pay all of its own legal and accounting fees and other expenses incurred in the
preparation of this Agreement and the performance of the terms and provisions of
this Agreement. If Seller fails to perform any of his material obligations at
the Closing for any reason, absent a prior default by Buyer, Seller shall pay to
Buyer $50,000 to defray the costs incurred by Buyer in connection with the
transactions contemplated hereby. If Buyer fails to perform any of its material
obligations at the Closing for any reason, absent a prior default by Seller; or
Buyer opts to terminate this Agreement as provided in Section 11.1(iii), Buyer
shall pay to Seller $50,000 to defray the costs incurred by Seller in connection
with the transactions contemplated hereby.
14.3 Public Disclosure: Before the Closing, neither Buyer nor Seller shall
make any public release of information regarding the matter contemplated herein
except (i) that a joint press release of agreed form may be issued by Buyer and
Seller to announce execution of this Agreement; (ii) that Buyer and Seller may
each continue such communications with employees, customers, suppliers, lenders,
lessors, shareholders, and other particular groups as may be legally required or
necessary or appropriate and not inconsistent with the best interests of the
other party directly in connection with consummation of this Agreement and (iii)
as required by law.
14.4 Waiver: The parties hereto may by written agreement (i) extend the
time for or waive or modify the performance of any of the obligations or other
acts of the parties hereto; or (ii) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement.
14.5 Notices: All notices, requests or other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
sent by overnight delivery, facsimile followed by telephonic confirmation of
receipt and mailed first class certified mail postage prepaid addressed as
follows: if to Buyer, to Dover Saddlery, Inc., Attention: Stephen L. Day, 525
Great Road, Littleton, MA 01460 (with a copy to John M. Sullivan, Esq., Preti
Flaherty, PLLP, P.O. Box 1318, Concord, NH 03302-1318); if to Seller, to
Reynolds Young, 4520 32nd Road, Arlington, VA 22207-4459 (with a copy to Thomas
W. France, Esq., Venable LLP, 8010 Towers Crescent Drive, Suite 300, Vienna, VA
22182); or to such other address as may have been furnished in writing to the
party giving the notice by the party to whom notice is to be given.
43
14.6 Entire Agreement: This Agreement embodies the entire agreement among
the parties and there have been and are no agreements, representations or
warranties, oral or written among the parties other than those set forth or
provided for in this Agreement. This Agreement may not be modified or changed,
in whole or in part, except by a supplemental agreement signed by each of the
parties.
14.7 Rights Under this Agreement; Nonassignability: This Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns, but shall not be assignable by any party without the
prior written consent of the other parties. Nothing contained in this Agreement
is intended to confer upon any person, other than the parties to this Agreement
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
14.8 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia applicable to
agreements made and to be performed in the Commonwealth of Virginia and shall be
construed without regard to any presumption or other rule requiring the
construction of an agreement against the party causing it to be drafted.
14.9 Headings; References to Sections;. Exhibits and Schedules: The
headings of the Sections, paragraphs and subparagraphs of this Agreement are
solely for convenience and reference and shall not limit or otherwise affect the
meaning of any of the terms or provisions of this Agreement. The references
herein to Sections, Exhibits and Schedules, unless otherwise indicated, are
references to sections of and exhibits and schedules to this Agreement.
14.10 Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
44
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
Witnesses:
DOVER SADDLERY, INC.
______________________ By: ________________________________
Its President, duly authorized
DOVER SADDLERY RETAIL, INC.
______________________ By: ________________________________
Its President, duly authorized
OLD DOMINION ENTERPRISES, INC.
______________________ By: _________________________________
Its President, duly authorized
SELLER
______________________ _________________________________
Reynolds Young
45
SCHEDULE 1.1
ASSUMED LIABILITY
Following the Closing, Buyer shall assume liability for (i) no more than
$200,000 in accounts payable of the Company as of the Closing Date; (ii) no more
than $20,000 in gift certificates and store credit amounts due for customers as
of the Closing Date; and (iii) any and all liabilities incurred by the Company
on or after the Closing Date. Seller shall retain liability for and Buyer will
NOT assume (i) any payables of the Company incurred prior to the Closing Date in
excess of $200,000; (ii) all institutional debt of the Company as of the Closing
Date, including all debts owing to Cardinal Bank; (iii) all shareholder debt of
the Company as of the Closing Date, previously designated as "loans payable" on
the Company's Balance Sheet; (iv) any liability related to litigation or claims
arising out of pre-Closing events, including any Environmental Liabilities; (v)
any pre-closing product liability claims; (vi) any of Seller's obligations
arising under the Agreement; (vii) all motor vehicle lease arrangements prior to
the Closing Date, previously designated as "capital leases(s) payable" on the
Company's Balance Sheet; and (viii) any accrued liabilities of the Company as of
the Closing Date to employees for paid time off.
46
5.1
DIRECTORS AND OFFICERS OF THE COMPANY
47
SCHEDULE 5.2
CAPITALIZATION AND STOCK OWNERSHIP
48
SCHEDULE 5.4
AUTHORIZATION OF AGREEMENT; NO VIOLATION
49
SCHEDULE 5.7
ABSENCE OF CERTAIN CHANGES
50
SCHEDULE 5.8
TITLE TO AND CONSOLIDATION OF PROPERTIES AND ASSETS
51
SCHEDULE 5.9
REAL ESTATE AND PROPERTY OF THE COMPANY
52
SCHEDULE 5.10
TAX MATTERS
53
SCHEDULE 5.11
CONTRACTS
54
SCHEDULE 5.12
PENDING LITIGATION
55
SCHEDULE 5.13
PATENTS AND TRADEMARKS
56
SCHEDULE 5.15
ENVIRONMENTAL MATTERS
57
SCHEDULE 5.16
GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS
58
SCHEDULE 5.18
EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS
59
SCHEDULE 5.19
CERTAIN TRANSACTIONS
60
SCHEDULE 5.23
INSURANCE
61
SCHEDULE 5.24
BANK ACCOUNTS; POWERS OF ATTORNEY
62
SCHEDULE 5.25
PRODUCT WARRANTIES
63
SCHEDULE 5.26
CERTAIN DISCLOSURES
64
SCHEDULE 6.4
BROKERS
Potomac Capital Group, LLP
65