EXHIBIT 10.10
STOCK PURCHASE AGREEMENT BY AND BETWEEN
THE KEIM GROUP, LTD. AND HOMELIFE, INC.
DATED JULY 23, 1996
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT "), dated the 23rd day of
July, 1996, among the undersigned shareholders (collectively, the "Keim
SHAREHOLDERS", and, individually, a "Keim SHAREHOLDER") of The Keim Group, Ltd.
("KEIM"), a Michigan corporation having its principal office at
29201 Telegraph Rd., Suite 410, Southfield, Michigan 48034, the undersigned
shareholders (collectively, the "GUARDIAN SHAREHOLDERS", and, individually, a
"Guardian SHAREHOLDER") of Guardian Home Warranty Corp. ("GUARDIAN"), a
Michigan corporation having its principal office at 29201 Telegraph Road,
Suite 410, Southfield, Michigan 48034, and HomeLife, Inc. ("HOMELIFE"), a
Nevada corporation having its principal office at 4100 Newport Place, Suite 730,
Newport Beach, California 92660.
The Keim Shareholders own the issued and outstanding shares of the
common stock of Keim set forth next to their respective names on EXHIBIT A-1
(the "KEIM ,SHARES"). The Guardian Shareholders own the issued and
outstanding shares of the common stock of Guardian set forth next to their
respective names on EXHIBIT A-2 (the "GUARDIAN Shares"). The Keim Shares and
the Guardian Shares are collectively referred to as the "Shares". The Keim
Shareholders and the Guardian Shareholders are collectively referred to as
the "SHAREHOLDERS" and, individually, as a "SHAREHOLDER".
HomeLife desires to purchase from the Keim Shareholders, and the Keim
Shareholders desire to sell to HomeLife, all of the Keim Shares for the
purchase price set forth in Article I and upon the terms set forth below.
HomeLife further desires to purchase certain additional shares of the common
stock of Guardian, and the Guardian Shareholders desire to undertake to
perform such actions as are necessary to issue such shares. The Keim
Shareholders further desire to terminate the Shareholders' Stock Purchase
Agreement (as amended from time to time, the "KEIM SHAREHOLDERS AGREEMENT")
dated March 11, 1993, among Keim and the Keim Shareholders a party thereto.
The Guardian Shareholders further desire to terminate the Shareholders' Stock
Purchase Agreement (as amended from time to time, the "GUARDIAN SHAREHOLDERS
AGREEMENT ") dated September 8, 1993, among Guardian and the Guardian
Shareholders a party thereto.
In consideration of the mutual covenants, agreements, representations
and warranties herein contained, and intending, to be legally bound, HomeLife
and the Shareholders agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 COMMITMENT TO SELL. In reliance upon HomeLife's representations and
warranties contained herein, and upon the terms set forth in this Agreement,
on the Closing Date (as defined below), the Shareholders shall sell, assign
and deliver to HomeLife the Shares.
1.2 COMMITMENT TO PURCHASE.
(a) In reliance upon the Shareholders' representations and
warranties contained herein, and upon the terms set forth in this Agreement,
on the Closing Date, HomeLife shall purchase the Shares from the Shareholders
and, in full consideration therefor, shall pay to the Shareholders the
Purchase Price (AS defined below).
(b) The Purchase Price for 100% of the outstanding common stock of
Keim shall consist of the sum of $500,000 (as adjusted as set forth below,
the "CASH PORTION ") and 60,000 shares of HomeLife's common stock (the
"Initial Shares" and, collectively with the Cash Portion and as adjusted, the
"PURCHASE PRICE"), with an intended aggregate value of $800,000. The Cash
Portion shall be increased by $11,290.32 for every Keim franchise office over
65 existing in Michigan on the Closing Date; the Cash Portion shall be
decreased by $11,290.32 for every Keim. franchise office in Michigan less
than 65 on the Closing Date.
(c) The Purchase Price was established based on 8 1, 000 shares of
Keim. common stock being sold to HomeLife hereunder, constituting 100% of the
issued and outstanding shares of Keim, and shall be appropriately adjusted to
the extent that the Keim Shares comprise less than 100% of the issued and
outstanding shares of Keim. Thus, the Purchase Price allocated to each share
of Keim. common stock shall consist of Six and 17/100 Dollars ($6.17) plus
seventy-four one-hundredths (.74) of one share of the Initial Shares, all
subject to adjustment as described in Sections 1.2(b) and 1.3.
1.3 ADJUSTMENT TO PURCHASE PRICE. (a) If the average closing price of
HomeLife's common stock for the ninety (90) trading days following such stock
being approved for trading on a national securities trading service, with an
average daily trading volume of five hundred (500) shares (the "CLOSING
PRICE"), is not at least $5.00 per share, HomeLife shall promptly issue to
each Keim Shareholder, at such Shareholder's option, either (i) additional
shares of HomeLife's common stock sufficient to provide each Keim.
Shareholder with shares of HomeLife's common stock (including the Initial
Shares), valued at the Closing Price, worth an amount equal to the product of
their portion of the Initial Shares multiplied by $5.00 per share (the
"Initial Share Value"), or (ii) cash (the "CASH PAYMENT") which, together
with the Initial Shares held by such Shareholder, valued at the Closing,
Price, will have an aggregate value equal to the Initial Share Value, and the
Purchase Price shall be so adjusted. If the Closing Price cannot be
calculated due to the stock failing to trade at the required volume, HomeLife
and the Keim Shareholders shall establish a mutually acceptable method of
valuing the HomeLife common stock and, promptly thereafter, make the
adjustment, if necessary, set forth in the prior sentence.
(b) Andrew Cimerman guarantees the prompt payment by HomeLife of the
Cash Payment, if any, required to be made under Section 1.3(a).
1.4 PAYMENT OF PURCHASE PRICE. The Cash Portion of the Purchase Price
be paid as follows:
(a) At the Closing, HomeLife shall contribute to Keim. an amount
equal to $120,000 in addition to the deposit paid by HomeLife to Keim in May,
1996 in the amount of $120,000 (the "DEPOSIT "), for a total of $240,000 (the
principal amount of all shareholder loans then owed by Keim to the Keim
Shareholders (the "KEIM SHAREHOLDER LOANS")), in return for Keim issuing
19,000 shares of its common stock to HomeLife. The Keim Shareholders shall
cause Keim to declare the Keim. Shareholder Loans to be due and payable, and
shall repay all outstanding principal and accrued interest on the Keim.
Shareholder Loans by certified or cashier's check or by such other method as
the Keim Shareholders and HomeLife may agree. No further interest shall
accrue on the Keim Shareholder Loans from and after the Closing Date.
(b) At the Closing, HomeLife shall contribute to Guardian an amount
equal to $47,017.26 (the principal amount of all shareholder loans then owed
by Guardian to the Guardian Shareholders (the "GUARDIAN SHAREHOLDER LOANS"),
in return for Guardian issuing 34,000 shares of its common stock to HomeLife.
The Guardian Shareholders shall cause Guardian to declare the Guardian
Shareholder Loans to be due and payable, and shall repay all outstanding
principal and accrued interest on the Guardian Shareholder Loans by certified
or cashier's check or by such other method as the Guardian Shareholders and
HomeLife may agree. No further interest shall accrue on the Guardian
Shareholder Loans from and after the Closing Date.
(c) Each Keim Shareholder who also owns Guardian Shares shall
receive $11,965.32 for all Keim Shares held by such Keim Shareholder. Each
Keim Shareholder who does not own Guardian Shares shall receive $9,572.26 for
all Keim Shares held by such Keim. Shareholder. Such amounts shall be paid to
the Keim. Shareholders by Noon, Detroit, Michigan, time on the Closing Date
by certified or cashier's check or by such other method as the Keim
Shareholders and HomeLife may agree.
(d) The Initial Shares shall be delivered to the Keim Shareholders
at the Closing, registered in the names set forth on EXHIBIT A-1. with each
Keim Shareholder receiving the number of shares of HomeLife's common stock
determined in accordance with Section 1.2(c).
1.5 THE CLOSING. The closing (the "CLOSING") will take place at
10:00 a.m., Detroit, Michigan, time on August 19, 1996, or at such other time
as the parties may agree, but in no event later than the Termination Date (as
defined in Section 8. 1). The Closing shall occur at the office of Dickinson,
Wright, Moon, Van Dusen & Freeman, 500 Woodward Avenue, 40th Floor, Detroit,
Michigan 48226, upon fulfillment of all the conditions set forth in Article VI
which have not been waived by HomeLife, and all the conditions set forth in
Article VII which have not been waived by the Shareholders. The date on which
the Closing is held is referred to as the "CLOSING DATE".
1.6 EXECUTING AGREEMENT BY SHAREHOLDERS. As set forth in Section 9.8,
this Agreement may be executed in counterparts. Upon executing this
Agreement, each Shareholder shall deliver into escrow all certificates
representing Keim Shares and Guardian Shares (if any) being sold hereunder,
duly endorsed in blank for transfer or accompanied by duly executed
assignments separate from certificate, to Dickinson, Wright, Moon, Van Dusen &
Freeman (the "Firm"). The Firm shall hold such certificates in escrow pending
the Closing, at which time such certificates and associated assignments shall
be delivered to HomeLife in accordance with this Agreement. If the Closing
does not occur and this Agreement is terminated, the Firm shall return such
certificates and associated assignments to the respective Shareholders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
The Shareholders, jointly and severally (except for Section 2.4, as to
which each Shareholder severally represents and warrants), represent and
warrant to HomeLife that:
2.1 ORGANIZATION AND GOOD STANDING. Each of Keim and Guardian is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Michigan, and has full power and authority to own its
properties and to carry on its business as now conducted.
2.2 CHARTER AND BYLAWS. (a) EXHIBIT B-1. contains true, correct and
complete copies of the Articles of Incorporation, certified as of a recent
date by the Michigan Secretary of State, and of the Bylaws of Keim, as
amended through and including the date of this Agreement, certified as of the
date hereof by the Secretary of Keim.
(b) EXHIBIT B-2 contains true, correct and complete copies of the
Articles of Incorporation, certified as of a recent date by the Michigan
Secretary of State, and of the Bylaws of Guardian, as amended through and
including the date of this Agreement, certified as of the date hereof by the
Secretary of Guardian.
2.3 CAPITALIZATION. (a) The authorized capital stock of Keim consists
of 100,000 shares of common stock, $1.00 par value, of which 90,000 shares
are validly issued and outstanding, and of which 81,000 shares shall be
validly issued and outstanding at Closing. All of the Keim Shares are
validly issued, fully paid and nonassessable. There are no dividends owing or
dividends which have been declared but not paid with respect to the Keim
Shares. Keim does not have any subsidiaries and does not own any interest in
any other person.
(b) The authorized capital stock of Guardian consists of 60,000
shares of common stock, $1.00 par value, of which 9,500 shares are validly
issued and outstanding, and of which 8,500 shares shall be validly issued and
outstanding at Closing. All of the Guardian Shares are validly issued, fully
paid and nonassessable. There are no dividends owing or dividends which have
been declared but not paid with respect to the Guardian Shares. Guardian does
not have any subsidiaries and does not own any interest in any other person.
2.4 TITLE AND AUTHORITY, INVESTMENT REPRESENTATION.
(a) Each Keim Shareholder is the absolute owner of the Keim Shares,
in the respective amounts set forth opposite each such Keim Shareholder's
name under "Number of Shares Owned" on EXHIBIT A-1 of this Agreement, free,
clear and discharged of and from any and all liens or other encumbrances, and
each Keim Shareholder has full right, power and authority to execute and
deliver this Agreement and to perform his, her or its respective obligations
under this Agreement. Upon delivery of all of the Keim Shares owned by the
Keim Shareholders at the Closing, duly endorsed for transfer, HomeLife will
be the absolute owner of all the Keim Shares so delivered, free and clear of
and from any and all liens and encumbrances. This Agreement is the legal,
valid and binding obligation of each Keim Shareholder and is enforceable in
accordance with its terms, except as the enforcement of this Agreement may be
limited by laws of general application relating to bankruptcy, insolvency and
the relief of debtors.
(b) Each Guardian Shareholder is the absolute owner of the Guardian
Shares, in the respective amounts set forth opposite each such Guardian
Shareholder's name under "Number of Shares Owned" on EXHIBIT A-2 of this
Agreement, free, clear and discharged of and from any and all liens or other
encumbrances, and each Guardian
Shareholder has full right, power and authority to execute and deliver this
Agreement and to perform his, her or its respective obligations under this
Agreement. Upon delivery of all of the Guardian Shares owned and transferred
hereunder by the Guardian Shareholder at the Closing, duly endorsed for
transfer, HomeLife will be the absolute owner of all the Guardian Shares so
delivered, free and clear of and from any and all liens and encumbrances.
This Agreement is the legal, valid and binding obligation of each Guardian
Shareholder and is enforceable in accordance with its terms, except as the
enforcement of this Agreement may be limited by laws of general application
relating to bankruptcy, insolvency and the relief of debtors.
(c) Each Shareholder is acquiring the common stock of HomeLife
included within its portion of the Purchase Price for investment and not with
a view to, or for resale in connection with, any distribution of such shares.
Each Shareholder's residence address7 is-as set forth next to its name on
EXHIBIT A-1 AND Exhibit A-2.
2.5 NO COMMITMENT TO ISSUE CAPITAL STOCK OR RIGHTS TO ACQUIRE CAPITAL
STOCK. Except as set forth in Section 1.4, and except as described in
Schedule 2.5, none of the Shareholders nor either of Keim or Guardian has
entered into any contract or agreement or made any commitment to purchase,
redeem, sell or otherwise transfer or issue any shares of either Keim's or
Guardian's capital stock, nor are there any outstanding options,
subscriptions, warrants, conversion rights or similar rights of any kind
convertible into any shares of Keim's or Guardian's capital stock.
2.6 ABILITY TO CARRY OUT AGREEMENT. Except for the Keim Shareholders
Agreement and the Guardian Shareholders Agreement (which are addressed under
Section 4.4 and 4.5, respectively), the execution and delivery of this
Agreement and the performance by the Shareholders of their respective
obligations hereunder will not conflict with, violate or result in any breach
of or constitute a default under any provisions of the Articles of
Incorporation or Bylaws of either of Keim or Guardian, or of any mortgage,
lease, contract, franchise agreement, license, permit, instrument, order,
judgment, law, regulation or any other restriction to which either Keim. or
Guardian is a party or by which either Keim or Guardian is bound. No consent
of any governmental authority or other third party is required to be obtained
by either Keim. or Guardian in connection with the Shareholders' execution,
delivery or performance of this Agreement.
2.7 FINANCIAL STATEMENTS.
(a) Keim's balance sheet as of the end of, and related statements of
income, retained earnings and cash flow for, the fiscal year ended December 31,
1995 (the "FINANCIAL STATEMENT Date"), compiled by Post, Smythe, Lutz and
Ziel (the "ACCOUNTANTS"), are referred to herein as the "Keim FINANCIAL
STATEMENTS". The Keim Financial Statements (i) present fairly, in all
material respects, the financial position of Keim at the Financial Statement
Date, and (ii) were prepared in conformity with generally accepted accounting
principles in a manner consistent with Keim's historic accounting practice
applied on a consistent basis, except as otherwise indicated.
(b) Keim's balance sheet as of May 31, 1996, and related statements
of income, retained earnings and cash flow for the five months ended May 31,
1996, are attached as Exhibit C-1 and are referred to herein as the "KEIM
INTERIM FINANCIAL STATEMENTS". The Keim. Interim Financial Statements
(i) present fairly, in all material respects, the financial position of Keim
at May 31, 1996, and (ii) were prepared in conformity with generally accepted
accounting principles in a manner consistent with Keim's historic accounting
practice applied on a consistent basis, subject to year-end closing
adjustments.
(c) Guardian's balance sheet as of the end of, and related
statements of income, retained earnings and cash flow for, the fiscal year
ended the Financial Statement Date, compiled by the Accountants, are referred
to herein as the "Guardian FINANCIAL STATEMENTS", and collectively with the
Keim Financial Statements, as the "FINANCIAL STATEMENTS". The Guardian
Financial Statements (i) present fairly, in all material respects, the
financial position of Guardian at the Financial Statement Date, and (ii) were
prepared in conformity with generally accepted accounting principles in a
manner consistent with Guardian's historic accounting practice applied on a
consistent basis, except as otherwise indicated.
(d) Guardian's balance sheet as of May 31, 1996, and related
statements of income, retained earnings and cash flow for the five months
ended May 31, 1996, are attached as Exhibit C-2 and are referred to herein as
the "GUARDIAN INTERIM FINANCIAL STATEMENTS". The Guardian Interim Financial
Statements (i) present fairly, in all material
respects, the financial position of Guardian at May 31, 1996, and (ii) were
prepared in conformity with generally accepted accounting principles in a
manner consistent with Guardian's historic accounting practice applied on a
consistent basis, subject to year-end closing adjustments.
2.8 UNREPORTED AND CONTINGENT LIABILITIES. Except (a) as set forth in
the Financial Statements, (b) for liabilities of a type reflected on the
Financial Statements or that have arisen in the ordinary course of business
following the Financial Statement Date, (c) for customary obligations and
liabilities arising under contracts, leases and purchase orders made by
either Keim or Guardian in the ordinary course of its business, and (d) the
liabilities set forth on Schedule 2.8, neither Keim. nor Guardian has any
material liabilities or obligations, whether accrued, absolute, fixed, known
or unknown, contingent or otherwise, existing, arising out of or relating to
any transaction entered into, or state of facts existing, on or prior to the
date of this Agreement.
2.9 LICENSES AND PERMITS. Each of Keim. and Guardian possesses all
material licenses or permits necessary to conduct its respective business as
now operated. Such licenses and permits are valid and in full force and
effect. No action or claim is pending, or, to the knowledge of any
Shareholder, threatened, to revoke or terminate any such licenses or permits
or declare any of them invalid in any respect.
2.10 LITIGATION. Except as set forth on Schedule 2.10, there is not
pending against either of Keim or Guardian, or, to the knowledge of any
Shareholder, threatened against either of Keim or Guardian, any claim,
action, suit, arbitration proceeding, governmental proceeding or
investigation or other proceeding of any character, including without
limitation any proceeding by any franchisee of Keim.
2.11 COMPLIANCE WITH LAWS GENERALLY. Each of Keim. and Guardian has
substantially complied with all laws, rules, regulations and ordinances
materially affecting its respective business. Except for laws, rules,
regulations or ordinances that are or are to be of general applicability,
there are no existing or, to the knowledge of the Shareholders, proposed
laws, rules, regulations or ordinances of such a nature as could be
reasonably expected to materially adversely affect the continued conduct of
either of Keim's or Guardian's businesses in the manner presently conducted.
2.12 TRADEMARKS, ETC. (a) Attached hereto as Exhibit D-1 is a list of
all copyrights, trade names and material trademarks and trade secrets as to
which Keim claims an ownership interest or as to which Keim is a licensee or
licensor (the "KEIM INTELLECTUAL PROPERTY"). Keim has good and marketable
title to or possesses adequate licenses or other valid rights to use the Keim
Intellectual Property, free and clear of all liens, charges, claims and other
encumbrances, subject only to such encumbrances of record and such other
imperfections of title, encumbrances and encroachments which in the aggregate
do not materially impair the value of such Keim Intellectual Property or
materially impair Keim's operations, PROVIDED, HOWEVER, that Keim's right to
use the "Red Carpet" trademark and related trademarks, trade names, service
marks, logos, advertising and commercial symbols (collectively, the "Red
Carpet Marks") is governed by an Agreement dated May 7, 1996 (the "S&S
Agreement"), among S&S Acquisition Corporation (" S&S "), National Real
Estate Services (a division of S&S), and Keim, under which Keim's right to
use the Red Carpet Marks expires on June 30, 2012, and is further subject to
the right of the person or persons identified in Section 5.7 of the S&S
Agreement to use the Red Carpet Marks in St. Joseph, Michigan. To the
knowledge of the Keim Shareholders, the use of the Keim Intellectual Property
does not misappropriate, infringe upon or conflict with any patent,
copyright, trade name, trade secret or trademark of any third party. No party
has filed a claim (or, to the knowledge of any Keim Shareholder, threatened
to file a claim) against Keim alleging that it has violated, infringed on or
otherwise improperly used the intellectual property rights of such party and
Keim has not violated or infringed any trademark, trade name, service mark,
service name, copyright or trade secret held by others.
(b) Attached hereto as Exhibit D-2 is a list of all copyrights,
trade names and material trademarks and trade secrets as to which Guardian
claims an ownership interest or as to which Guardian is a licensee or
licensor (the "GUARDIAN INTELLECTUAL PROPERTY "). Guardian has good and
marketable title to or possesses adequate licenses or other valid rights to
use the Guardian Intellectual Property, free and clear of all liens, charges,
claims and other encumbrances, subject only to such encumbrances of record
and such other imperfections of title, encumbrances and encroachments which
in the aggregate do not materially impair the value of such Guardian
Intellectual Property or materially impair Guardian's operations. Except as
set forth in Schedule 2.12(b), to the knowledge of the Guardian Shareholders,
the use of the Guardian Intellectual Property does not misappropriate,
infringe upon or conflict with any patent, copyright, trade
name, trade secret or trademark of any third party, and no party has filed a
claim (or, to the knowledge of any Guardian Shareholder, threatened to file a
claim) against Guardian alleging that it has violated, infringed on or
otherwise improperly used the intellectual property rights of such party and
Guardian has not violated or infringed any trademark, trade name, service
mark, service name, copyright or trade secret held by others.
(c) HomeLife acknowledges that Guardian's use of the term "Guardian"
as part of its corporate name and trade name is being challenged, as
described on Schedule 2.12(b). HomeLife nevertheless desires to complete this
transaction, and accepts that Guardian may not be permitted to use such term
in its corporate name and trade name and that Guardian's corporate name and
trade name may have to be changed at some time.
2.13 REPRESENTATIONS AND WARRANTIES AS OF THE CLOSING DATE. Each of the
representations and warranties made by the Shareholders hereunder shall be
deemed to have been made again on and as of the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOMELIFE
HomeLife represents and warrants to the Shareholders that:
3.1 CORPORATE ORGANIZATION. HomeLife is a corporation validly existing
and in good standing under the laws of Nevada.
3.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. HomeLife has all requisite
corporate power and authority to enter into this Agreement, and to perform
the obligations required to be performed by it thereunder. All corporate
proceedings required by HomeLife's charter documents or otherwise required by
law for the execution and delivery of this Agreement and for the consummation
of the transactions provided for therein have been duly taken. This Agreement
has been duly and validly executed and delivered by HomeLife and is
enforceable against HomeLife in accordance with its terms, except as the
enforceability may be limited by laws of general application relating to
bankruptcy, insolvency and debtors' relief, and by the general principles of
equity.
3.3 ABILI1Y TO CARRY OUT AGREEMENT. The execution and delivery of this
Agreement by HomeLife and the performance by HomeLife of its obligations
thereunder will not conflict with, violate or result in any breach of or
constitute a default under any provisions of HomeLife's Articles of
Incorporation or Bylaws, or of any of the provisions of any material
mortgage, lease, contract, franchise agreement, license, permit, instrument,
order, judgment, law, regulation or any other restriction of any kind or
character to which HomeLife is a party or by which it is bound. No consent of
any governmental authority or other third party is required to be obtained on
the part of HomeLife in connection with HomeLife's execution, delivery or
performance of this Agreement.
3.4 INVESTMENT REPRESENTATION. HomeLife is acquiring the Shares for
investment and not with a view to, or for resale in connection with, any
distribution of the Shares.
3.5 REPRESENTATIONS AND WARRANTIES AS OF CLOSING DATE. Each of the
representations and warranties made by HomeLife hereunder shall be deemed to
have been made again on and as of the Closing Date.
ARTICLE IV
COVENANTS
4.1 AFFIRMATIVE COVENANTS OF HOMELIFE. HomeLife covenants and agrees
that, following the Closing:
(a) It shall permit each Keim. franchisee to determine for itself,
subject to its existing contractual obligations, whether to remain a Red
Carpet Keim agency or to become a HomeLife agency, subject to the Keim
franchisees satisfying and continuing to satisfy the respective franchisor's
eligibility standards. Those Keim franchisees which elect to remain a Red
Carpet Keim. agency may do so during the remaining term of their respective
existing written contracts with Keim, including any options which they may
exercise, and thereafter with the express written consent of HomeLife, which
consent shall not be unreasonably withheld. The intended operating format of
HomeLife
shall be in accordance with Schedule 4.1(a). Subject to satisfying HomeLife's
eligibility standards, any Keim franchisee which elects to remain a Red
Carpet Keim agency may convert to a HomeLife agency upon completing all
appropriate documentation as reasonably required by HomeLife and paying a
transfer fee of Two Dollars ($2.00).
(b) In order to provide stability in the operations of Keim and
Guardian and to assist in complying with state and Federal Securities laws,
the HomeLife shares being issued as part of the Purchase Price will be
restricted securities and the certificates representing such shares will
contain an appropriate legend. If, at any time after one year from the
Closing Date, any Shareholder desires to sell or otherwise transfer its
HomeLife shares received hereunder within the United States, HomeLife will,
at its expense and as expeditiously as reasonably possible, use its best
efforts to cause such shares to be duly registered or exempted from
registration under any appropriate state or Federal securities law.
(c) HomeLife shall vote its Guardian common stock in favor of a
nominee or nominees to the Guardian Board of Directors submitted by the
Guardian Shareholders to hold not more than twenty percent (20 %), but not
fewer than one (1), of the seats on the Guardian Board of Directors for so
long as Guardian Shareholders retain their common stock of Guardian following
the Closing. The Guardian nominees shall be submitted to HomeLife in a
certificate signed by Guardian Shareholders holding at least 75 % of the
Guardian common stock then held by the Guardian Shareholders, and shall meet
all reasonable qualification requirements for Board membership established
under Guardian's bylaws and applicable law.
4.2 AFFIRMATIVE COVENANTS OF SHAREHOLDERS.
(a) Each of the Shareholders covenants and agrees that from the date
of this Agreement to the Closing Date, it shall use its best efforts in its
capacity as a shareholder to cause each of Keim and Guardian to, and shall
not individually take any action which would not permit each of Keim and
Guardian to:
(i) carry on its business in a manner consistent with prior practice
and only in the usual and ordinary course, and use its best efforts to
preserve its business organization intact and conserve the good will and
relationships of its franchisees, customers, suppliers and others having
business relations with it;
(ii) duly and timely file or cause to be filed all reports and
returns required to be filed with any governmental body, agency or authority
and promptly pay or cause to be paid when due all taxes, assessments and
governmental charges, including interest and penalties levied or assessed,
unless diligently contested in good faith by appropriate proceedings; and
(iii) maintain in full force and effect all existing policies of
insurance except for replacements or renewals in the ordinary course of
business.
4.3 NEGATIVE COVENANTS OF THE SHAREHOLDERS.
(a) Each of the Shareholders covenants and agrees that from the date
of this Agreement to the Closing Date, it shall not permit either of Keim. or
Guardian to:
(i) amend its charter documents;
(ii) authorize for issuance, issue or deliver any additional shares
of its capital stock or securities convertible into or exchangeable for
shares of its capital stock, or issue or grant any right, option or other
commitment for the issuance of shares of its capital stock or of such
securities, or split, combine or reclassify any shares of its capital stock,
except for the shares of Keim. and Guardian to be issued to HomeLife on the
Closing Date in accordance with Section 1.4, and except for those shares
described on Schedule 2.5;
(iii) declare or pay any dividends or other distributions of any
kind to any Shareholder or directly or indirectly purchase, retire or redeem
or otherwise acquire from any Shareholder any shares of its capital stock or
make any payment of principal on any of the Shareholder Loans, except for
those shares described on Schedule 2.5;
(iv) incur any liability, commitment or obligation, except
unsecured current and trade liabilities and other unsecured liabilities
incurred in the ordinary course of business, and except as permitted under
Section 9.1;
(v) borrow, or agree to borrow, any funds;
(vi) sell, transfer or otherwise dispose of assets, except for the
sale or disposition of obsolete or damaged tangible personal property and
except for the sale of inventory and other assets in the ordinary course of
business; or
(vii) mortgage, pledge or encumber any of its assets or guaranty the
obligations of any party.
(b) Each of the Keim Shareholders covenants for itself only that,
from the date hereof until the Closing Date, it shall not enter into
discussions with any third party with regard to the possible sale of Keim,
nor disclose any information regarding this Agreement or the transactions
contemplated hereby without HomeLife's prior approval. Each of the Guardian
Shareholders covenants for itself only that, from the date hereof until the
Closing Date, it shall not enter into discussions with any third party with
regard to the possible sale of Guardian, nor disclose any information
regarding this Agreement or the transactions contemplated hereby without
HomeLife's prior approval.
4.4 TERMINATION OF KEIM SHAREHOLDERS AGREEMENT. The Keim Shareholders,
representing two-thirds (2/3) or more of the shares of Keim set forth in
Schedule "A" to the Keim. Shareholders Agreement, and acting in accordance
with Section 12.A of the Keim Shareholders -Agreement, hereby terminate the
Keim. Shareholders Agreement, PROVIDED, HOWEVER, that this termination is
contingent upon the Closing occurring and shall only be effective if and at
the time that the Closing occurs.
4.5 TERMINATION OF GUARDIAN SHAREHOLDERS AGREEMENT. The Guardian
Shareholders, representing two-thirds (2/3) or more of the shares of Guardian
set forth in Schedule "A" to the Guardian Shareholders Agreement, and acting
in accordance with Section 12.A of the Guardian Shareholders Agreement,
hereby terminate the Guardian Shareholders Agreement, PROVIDED, HOWEVER, that
this termination is contingent upon the Closing, occurring, and shall only be
effective if and at the time that the Closing occurs.
4.6 GRANT OF IRREVOCABLE PROXY. From and after the Closing, each Keim.
Shareholder hereby grants to HomeLife an irrevocable proxy to act on its
behalf in connection with any matters which thereafter come before the
shareholders of Keim. The Keim Shareholders, representing two-thirds (2/3) or
more of the shares of Keim, hereby amend Article III, Section 3 of the Bylaws
of Keim to delete the word "notarized" from the first sentence thereof,
PROVIDED, however, that this amendment is contingent upon the Closing
occurring and shall only be effective if and at the time that the Closing
occurs.
ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY SHAREHOLDERS. From and after the Closing, the
Shareholders shall indemnify, defend and hold HomeLife and its permitted
successors and assigns (a "HOMELIFE INDEMNIFIED PARTY" or, collectively,
"HOMELIFE INDEMNIFIED PARTIES") harmless from and against all losses,
damages, liabilities or expenses (including., reasonable attorneys' fees and
expenses) ("LOSS" or "LOSSES") suffered by a HomeLife Indemnified Party that
result, directly or indirectly, from any breach of a representation and
warranty contained in Article II, but each Shareholder shall be liable
hereunder only to the extent of its pro rata share of any Loss.
5.2 INDEMNIFICATION BY HOMELIFE. From and after the Closing, HomeLife,
Keim and Guardian, jointly and severally, shall indemnify, defend and hold
the Shareholders and their respective permitted successors and assigns (a
"SHAREHOLDER INDEMNIFIED PARTIES" or, collectively, "SHAREHOLDER INDEMNIFIED
PARTIES") harmless from and against all Losses (as defined in Section 5. 1)
that result, directly or indirectly, from (i) any breach of a representation
and warranty contained in Article III.
5.3 NOTICE AND DEFENSE. If a HomeLife Indemnified Party or Shareholder
Indemnified Party seeking indemnification (the "INDEMNIFIED PARTY") desires
to make a claim against a party for indemnification (the "INDEMNIFYING
PARTY") under this Article V, the Indemnified Party will, within thirty (30)
days after the Indemnified Party becomes aware of a claim by notice or
knowledge, notify the Indemnifying Party in writing of any claim or demand as
to which the Indemnified Party is entitled to claim indemnification, the
section under this Agreement with respect to which such claim is being made
and, to the extent known, the amount and circumstances surrounding such
claim. In the event the claim is a third party claim against an Indemnified
Party or involves a claim by or liability involving a governmental authority,
the Indemnifying Party shall have the right to employ counsel of its choice
to defend any such claim or demand.
5.4 LIMITATION ON LOSSES. Notwithstanding anything herein to the
contrary, the terms "Loss" and "Losses" shall not include any indirect,
consequential or punitive damages or liabilities incurred by any Indemnified
Party, and shall be calculated after considering all tax effects, insurance
proceeds, and other benefits received or receivable by the Indemnified Party.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF HOMELIFE
6.1 CONDITIONS PRECEDENT. HomeLife's obligation to purchase the Keim
Shares under this Agreement is subject to the fulfillment on or before the
Closing Date of each of the following conditions:
(a) MINIMUM NUMBER OF SHARES. The Keim Shares to be sold by the Keim
Shareholders hereunder and deposited under Section 1.6 shall constitute 80%
of the issued and outstanding, common stock of Keim held by the Keim
Shareholders (exclusive of any shares issued to HomeLife under Section 1.4).
Notwithstanding the foregoing, HomeLife reserves the right to proceed with
purchasing the Keim Shares under this Agreement if the Keim Shares to be sold
by the Keim. Shareholders constitute at least 67 % of the issued and
outstanding common stock of Keim (exclusive of any shares issued to HomeLife
under Section 1.4).
(b) REPRESENTATIONS, WARRANTIES, AND COVENANTS. The representations
and warranties of the Shareholders set forth herein shall be accurate in all
material respects on and as of the Closing Date to the same extent as if made
on and as of such date, and each Shareholder shall have complied in all
material respects with or performed in all material respects all agreements,
covenants and conditions on its part to be performed or complied with on or
prior to the Closing Date.
(c) LEGAL ACTIONS. No suit, action or other proceeding by any third
party shall be pending -before any court or governmental body, agency or
authority seeking to restrain or prohibit, or to obtain damages or other
relief in connection with, this Agreement or the consummation of the
transactions contemplated hereby or which is likely to materially adversely
affect the value of the assets or business of either of Keim or Guardian.
(d) CONSENTS. HomeLife shall have received duly executed copies of
any consents relating to the consummation of the transactions contemplated by
this Agreement that are required by any governmental body, agency or
authority.
(e) DELIVERIES. There shall have been delivered to HomeLife:
Notes (if any);
(i) Certificates representing the Keim. Shares, duly endorsed
for transfer to HomeLife or accompanied by a duly executed stock power;
(ii) Certificates representing the Guardian Shares, duly
endorsed for transfer to HomeLife or accompanied by a duly executed stock
power;
(iii) A certificate, signed by the Executive Vice President of
Keim, certifying as to the number of franchise offices operating under the
Keim name within Michigan as of the Closing Date;
(iv) The Keim Shareholder Notes and the Guardian
Shareholder
(v) A cross-receipt, signed by each of the Shareholders,
evidencing that such Shareholder has received all consideration to be
delivered to it hereunder at the time of the Closing; and
(vi) Such other items as HomeLife may reasonably request.
(f) NO ADVERSE MATERIAL CHANGE. There shall have occurred no
material adverse chance in the business or financial condition of Keim and
Guardian from that disclosed in the Keim Interim Financial Statements and the
Guardian Interim Financial Statements, respectively.
(g) STOCK REDEMPTIONS. The redemption of the Keim and
Guardian common stock held by Alger and Joanne Butts and James and Dyan
Boudreau shall have been completed under the terms disclosed to HomeLife.
ARTICLE V11
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS
7.1 CONDITIONS PRECEDENT. The duty of the Shareholders to sell their
respective Shares under this Agreement is subject to the fulfillment, on or
before the Closing Date, of each of the following conditions:
(a) REPRESENTATIONS, WARRANTIES, AND COVENANTS. The representations
and warranties made by HomeLife herein shall be accurate in all material
respects on and as of the Closing Date to the same extent as if made on and
as of such date and HomeLife shall have complied in all material respects
with or performed in all material respects all agreements, covenants and
conditions on its part to be performed or complied with on or prior to the
Closing Date.
(b) LEGAL ACTIONS. No suit, action or other proceeding by any third
party shall be pending before any court or governmental agency seeking to
restrain or prohibit, or to obtain damages or other relief in connection
with, this Agreement or the consummation of the transactions contemplated
hereby.
(c) DELIVERIES. HomeLife shall have delivered to the Shareholders
(or to Keim or Guardian, in accordance with Section 1.4):
(i) The Cash Portion and the Initial Shares;
(ii) A certificate by the Secretary of HomeLife as to the due
adoption by the Board of Directors of HomeLife of the required corporate
resolutions authorizing the execution, delivery and performance of this
Agreement by HomeLife and the consummation of the transactions contemplated
thereby; and (v) A cross-receipt, signed by HomeLife in favor of each
Shareholder, evidencing that HomeLife has received from such Shareholder all
consideration to be delivered to it hereunder at the time of the Closing.
(d) STOCK REDEMPTIONS. The redemption of the Keim. and Guardian
common stock held by Alger and Joanne Butts and James and Dyan Boudreau shall
have been completed under the terms disclosed to HomeLife.
ARTICLE VIII
TERMINATION
8.1 TERMINATION.
(a) This Agreement and the transactions contemplated herein may be
terminated and abandoned at any time prior to the Closing Date by the mutual
consent of HomeLife and the Shareholders or independently by
HomeLife or the Shareholders if the Closing has not occurred by September 30,
1996 (the "TERMINATION DATE"), and the party terminating this Agreement is
not in breach of the terms of this Agreement.
(b) This Agreement may be terminated by the Shareholders if, at any
time prior to the Closing, there shall occur a material breach of any of the
representations, warranties or covenants of HomeLife contained herein.
(c) This Agreement may be terminated by HomeLife if, at any time
prior to the Closing, there shall occur a material breach of any of the
representations, warranties or covenants of the Shareholders contained herein.
(d) In the case of termination of this Agreement under either
subsection (a) or subsection (c) above, Keim. shall immediately return to
HomeLife in full the Deposit in the amount of $120,000, without interest.
8.2 EFFECT OF TERMINATION. Upon the termination of this Agreement under
the provisions set forth above, no party hereto shall have any obligation to
any other party thereafter arising out of this Agreement; PROVIDED, HOWEVER,
that (a) if any Shareholder fails or refuses to tender full performance of
its obligations under this Agreement other than due to a failure of a
condition set forth in Article VII and as a result thereof HomeLife
terminates this Agreement, HomeLife shall be entitled to exercise and pursue
all legal or equitable rights or remedies which it may have against such
Shareholder by reason of any breach of this Agreement by the Shareholders;
and (b) if HomeLife fails or refuses to tender full performance of its
obligations under this Agreement other than a failure of a condition set
forth in Article VI and as a result thereof any Shareholder terminates this
Agreement, such Shareholder shall be entitled to exercise and pursue all
legal or equitable rights or remedies which it may have against HomeLife by
reason of any breach of this Agreement by HomeLife.
ARTICLE IX
MISCELLANEOUS
9.1 EXPENSES. The Shareholders, on the one hand, and HomeLife, on the
other hand, shall each pay their own expenses in connection with the
negotiations leading up to and the preparation of this Agreement and the
consummation of the transactions provided for herein, including without
limitation fees and expenses of their respective legal counsel, accountants
and other outside experts retained by it to conduct due diligence, PROVIDED,
HOWEVER, that the Shareholders may cause Keim. and Guardian to pay legal
fees, not exceeding $25,000 in the aggregate, incurred by Keim. or Guardian
in connection with this transaction.
9.2 SURVIVAL. The representations made by the Shareholders in Article II
shall survive for a period of two years after the Closing Date, and the
representations made by HomeLife in Article III shall survive for a period of
two years after the Closing Date, PROVIDED, HOWEVER, that any representation
made by HomeLife herein regarding the HomeLife common stock shall survive for
a period of three years after the Closing Date.
9.3 BENEFITS AND BURDENS; ASSIGNMENT. This Agreement shall inure to the
benefit of and shall be binding upon the Shareholders and HomeLife, and the
respective successors and permitted assigns of the Shareholders and HomeLife;
PROVIDED, HOWEVER, that this Agreement may only be assigned by HomeLife to an
affiliate entity, and in such event HomeLife shall not be released from its
obligations hereunder.
9.4 AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by the Shareholders and by HomeLife.
9.5 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
(including telecommunications) and shall be deemed to have been duly given
upon receipt if personally delivered or sent by (i) telecopy or other wire
transmission with request for assurance of receipt; or (ii) Federal Express
or other overnight air express and receipted for by the recipient or an agent
of the recipient; or (iii) by United States Postal Service, postage prepaid.
All notices delivered to a party to this Agreement shall be sent to the
addresses set forth in the first paragraph of this Agreement or on EXHIBIT
A-1 or EXHIBIT A-2, or to such other address or to such other person or
persons designated in writing by such party or counsel, as the case may be.
9.6 ENTIRE UNDERSTANDING. This Agreement and all Exhibits referred to
herein represent the entire understanding of the parties with respect to the
subject matter herein and supersedes all correspondence, memoranda,
conversations or other communications with respect thereto.
9.7 HEADINGS. The section headings in this Agreement are intended
solely for convenience and shall be given no effect in the construction and
interpretation hereof.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument, and, when signed by
all of the parties hereto, shall become legally binding on such parties
effective as of the date set forth at the beginning of this Agreement.
9.9 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the State of Michigan applicable to contracts made and to
be performed entirely within such State and without giving effect to the
choice of law principles of such State.
9.10 SEVERABI1ITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
9.11 TIME. Time is of the essence under this Agreement.
IN WITNESS WHEREOF, the parties have executed or causes to be executed
this Agreement effective as of the day and year first above written.
HOMELIFE, INC.
By: /s/ Andrew Cimerman
-------------------------------------
Andrew Cimerman
Its: Chairman
/s/ Alice J. Suit
-----------------------------------------
Alice J. Suit
/s/ William C. Suit /s/ Daniel L. Scrimger
- ------------------------------------ -----------------------------------------
William C. Suit Daniel L. Scrimger
/s/ Linda C. Rock /s/ Thomas E. Isbell
- ------------------------------------ -----------------------------------------
Linda C. Rock Thomas E. Isbell
/s/ James R. Goulding /s/ Dennis M. Nabor
- ------------------------------------ -----------------------------------------
James R. Goulding Dennis M. Nabor
/s/ Diane A. Nabor /s/ Edward Martin
- ------------------------------------ -----------------------------------------
Diane A. Nabor Edward Martin
/s/ Robert W. Garchow /s/ Lynn D. Keep
- ------------------------------------ -----------------------------------------
Robert W. Garchow Lynn D. Keep
/s/ Steven J. Gootlieb /s/ Catherine M. Reid
- ------------------------------------ -----------------------------------------
Steven J. Gootlieb Catherine M. Reid
/s/ Kenneth R. Duetsch /s/ Sharon A. Duetsch
- ------------------------------------ -----------------------------------------
Kenneth R. Duetsch Sharon A. Duetsch
/s/ Richard W. Andrew /s/ Sharon K. Andrews
- ------------------------------------ -----------------------------------------
Richard W. Andrew Sharon K. Andrew
/s/ D. Willard Tipton /s/ Virginia M. Tipton
- ------------------------------------ -----------------------------------------
D. Willard Tipton Virginia M. Tipton
/s/ Judith Walker /s/ William G. Knoop, Jr.
- ------------------------------------ -----------------------------------------
Judith Walker William G. Knoop, Jr.
/s/ Martin J. Leavitt /s/ Judith Brant
- ------------------------------------ -----------------------------------------
Martin J. Leavitt Judith Brant
/s/ Betty Walker /s/ Richard P. Richardson, Jr.
- ------------------------------------ -----------------------------------------
Betty Walker Richard P. Richardson, Jr.
/s/ Louise Herrgott /s/ Robert Herrgott
- ------------------------------------ -----------------------------------------
Louise Herrgott Robert Herrgott
/s/ Philip V. Lang /s/ Mary Ellen Lewis-Lang
- ------------------------------------ -----------------------------------------
Philip V. Lang, as Co-trustee Mary Ellen Lewis-Lang, as Co-trustee
For the purpose of assuming his guarantee obligation under Section 1.3(b)
/s/ Andrew Cimerman
- ------------------------------------
Andrew Cimerman