STOCK PURCHASE AGREEMENT

 

and other documents evidencing or supporting any of the indebtedness incurred pursuant to the agreements set forth in clauses (i) though (v) above.

 

“ Buyer Parties ” means Buyer, Trade Secret Beauty Stores Inc., Trade Secret Exclusive Stores Inc., Trade Secret Luxury Stores Inc. (and, after the Closing, the Company and its Subsidiaries, but excluding Seller and its Affiliates) and their respective stockholders, officers, directors, employees, agents, partners, members, representatives, successors and assigns.

 

“ Capital Stock ” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation and any and all ownership interests in a Person (other than a corporation), including membership interests, partnership interests, joint venture interests and beneficial interests, and any and all warrants, options or rights to purchase any of the foregoing.

 

“ Cash Addback ” means, for the Company and its Subsidiaries, the sum of: (i) cash held by the Company and its Subsidiaries as of Closing, plus (ii) rent paid prior to Closing with respect to the Company and its Subsidiaries for any period (or portion thereof) after Closing (which shall not be deemed to include security deposits); plus (iii) amounts collected by Buyer after Closing in respect of Pre-Closing Receivables.

 

“ Closing CAL ” has the meaning set forth in Section 2.3(b) .

 

“ Closing Indebtedness ” has the meaning set forth in Section 2.3(b) .

 

“ Code ” means the Internal Revenue Code of 1986, as amended, and any reference to any particular Code section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified.

 

“ Company ” means Trade Secret, Inc., a wholly owned subsidiary of Seller.

 

“ Company Subsidiaries ” means BeautyFirst, Inc. and PureBeauty, Inc.

 

“ Confidential Information ” means all information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the business, products, services or research or development of the Company or its Subsidiaries or their respective suppliers, distributors, customers, independent contractors or other business relations.  Confidential Information includes the following:  (i) internal business information (including historical and projected financial information and budgets and information relating to strategic and staffing plans and practices, business, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures); (ii) identities of, individual requirements of, specific contractual arrangements with, and other confidential or proprietary information about, the Company’s or any of its Subsidiaries’ suppliers, distributors, customers, independent contractors or other business relations and their confidential or proprietary information; (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, research, records, reports, manuals, documentation, models, data and data bases relating thereto; and (iv) inventions, innovations, improvements, developments,

 

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designs, analyses, software architectures, drawings, reports and all similar or related information (whether or not patentable and whether or not reduced to practice).

 

“ Covered Accrued Liabilities ” means all vacation pay, payroll, payroll taxes, utilities, janitorial costs, insurance premiums, commissions payable and other liabilities of the Company and its Subsidiaries, but in each case only those that both (i) relate to the period prior to Closing, and (ii) are costs or liabilities of which the Company has Knowledge as of the Closing Date.

 

“ Covered Headquarter Liabilities ” means the actual severance amounts paid to any employees set forth on the attached Head Office Employee Schedule that are terminated within ninety (90) days after Closing (as long as (i) Seller is given at least twenty (20) days advance written notice of such terminations and given an opportunity to offer employment to such individuals as Seller may determine in its sole discretion, if any, and (ii) such severance amounts are not greater than they would have been if the individuals were terminated on the date of Closing (other than due to their increased service time)).

 

“ Covered Liabilities ” means Covered Accrued Liabilities, Covered Headquarter Liabilities and Covered Special Liabilities.

 

“ Covered Special Liabilities ” means (i) any Losses imposed against any Buyer Party by a court, governmental body or arbitrator or any settlement amount consented to by Seller relating to or arising from any Existing Litigation, (ii) any amounts actually paid to the landlord by Buyer or its Affiliates to terminate the lease for the BeautyFirst headquarter offices in Wichita, Kansas, and (iii) any amounts actually paid by Buyer or its Affiliates under the existing BeautyFirst-related equipment lease with Farnam Street.

 

“ Dollar ” or “$” means a United Stated dollar.

 

“ Encumbrance ” means any lien, charge, security interest, community property interest, claim, pledge, Tax, option, warrant, right, contract, call, commitment, equity, demand, proxy, voting agreement, restriction on transfer (other than restrictions on transfer under the Securities Act and applicable state securities laws) or other encumbrance or restriction of any kind.

 

“ Existing Litigation ” means lawsuit, action, order, or proceeding against the Company or its Subsidiaries or their directors, officers or employees (in their role as such), pending before any court, governmental body, arbitrator or mediator on the Closing Date.

 

“ GAAP ” means United States generally accepted accounting principles, as in effect from time to time.

 

“ Guaranty ” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon the debt, obligation or other liability of any other Person (other than by endorsements of instruments in the ordinary course of collection), or guaranties of the payment of dividends or other distributions upon the shares of any other Person.

 

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“ Indebtedness ” means, with respect to any Person at any date, without duplication, all obligations of such Person for borrowed money or in respect of loans or advances, including all obligations of such Person evidenced by bonds, debentures, letters of credit, notes or other similar debt securities (and all accrued interest, prepayment premiums or penalties related to any of the foregoing).

 

“ knowledge of the Seller ,” “ knowledge of the Company ,” “ Company’s knowledge ” or “ Seller’s knowledge ” or similar phrase means the actual knowledge of Eric Bakken, Mark Fosland and Randy Pearce, after making reasonable inquiry with respect to the particular matter in question.

 

“ Lien ” means any mortgage, pledge, lien, security interest, security agreement or other encumbrance of any kind or nature whatsoever.

 

“ Losses ” means any loss, liability, cause of action, cost, damage, penalty, Tax, fine or expense, whether or not arising out of third-party claims (including interest, penalties, reasonable attorneys’ fees and expenses and all reasonable amounts paid in defense or settlement, of any of the foregoing).

 

“ Material Adverse Effect ” means a material and adverse effect or development upon the business, operations, assets, liabilities, financial condition, operating results, cash flow or employee, customer or supplier relations of the Company and its Subsidiaries taken as a whole.

 

“ Options ” shall mean all options, warrants, plans, purchase rights, subscription rights, conversion rights, exchange rights or other contracts or commitments to issue, sell or otherwise cause to become outstanding any Capital Stock, whether or not vested or exercisable in accordance with their terms and conditions.

 

“ Permitted Liens ” means (i) Liens that are set forth on the Permitted Liens Schedule attached hereto, (ii) Liens for Taxes not delinquent or the validity of which are being contested in good faith by appropriate proceedings, (iii) statutory landlord’s, mechanic’s, carrier’s, workmen’s, repairmen’s or other similar Liens arising or incurred in the ordinary course of business for amounts which are not due and payable, (iv) Liens arising from zoning ordinances which are not material to the Company’s or its Subsidiaries’ business as currently conducted thereon, or (v) Liens in favour of Buyer or its Affiliates.

 

“ Person ” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, corporation, limited liability company, entity or governmental entity (whether foreign, federal, state, county, city or otherwise and including any instrumentality, division, agency or department thereof).

 

“ Pre-Closing Receivables ” means any accounts receivable of the Company or any of its Subsidiaries that exist as of Closing (or that arise after closing for sales or transactions occurring prior to Closing).

 

“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal law then in force.

 

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“ Security Agreement ” means the security agreement delivered by Buyer at Closing, in the form attached as Exhibit A to the Services Agreement.

 

“ Seller Parties ” means (i) during the period prior to Closing, each of Seller, the Company, the Company’s Subsidiaries and their respective Affiliates, and (ii) from and after Closing, the Seller and its Affiliates.

 

“ Services Agreement ” means the Transition Services Agreement between Buyer and Seller in substantially the form attached hereto as Exhibit A .

 

“ Split-Cost Losses ” means any amounts paid or owed by Seller or its Affiliates to counterparty under a store lease for the salons listed on the Split-Cost Losses Schedule , whether under any guaranty thereof or otherwise, in each case that is for rent, liquidated damages (if specified in the lease) or other payments due because the lease is terminated in connection with Buyer closing the applicable store during such lease’s currently existing primary term.  For the avoidance of doubt, the parties agree that Split-Cost Losses do not include any amounts paid or owed with respect to (i) any period prior to the effective date of the termination, (ii) any extension, renewal, replacement lease, optional term or other period beyond the currently effective primary term of the current lease, or (iii) any breach of a lease.

 

“ Statement Cash Addback ” has the meaning set forth in Section 3.2(b) .

 

“ Statement CSL ” has the meaning set forth in Section 3.2(b) .

 

“ Statement Payment Amount ” means the amount (either positive or negative) determined by subtracting (i) the amount of Statement Cash Addback, from (ii) the sum of Closing Indebtedness plus the Closing CAL plus the Statement CSL.

 

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which (i) if a corporation, at least 50% of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association, joint venture or other business entity, at least 50% of the partnership, joint venture or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof.

 

“ Tax ” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

 

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“ Tax Returns ” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any laws, regulations or administrative requirements relating to any Taxes.

 

“ Unpaid Receivables ” means any Pre-Closing Receivables that remain unpaid after the Closing Statement Date (or that for some other reason are not included in the Statement Cash Addback)

 

ARTICLE II
PURCHASE AND SALE OF THE SHARES

 

2.1                                  Basic Transaction .  On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall purchase from Seller, and Seller shall sell, convey, assign, transfer and deliver to Buyer, the Shares, free and clear of all Encumbrances.  The parties agree to discuss with each other in good faith whether an alternative structure they have been considering (whereby the Seller would sell the Company Shares to Buyer, and the applicable owners of the Subsidiary Shares would sell the Subsidiary Shares to Buyer) is acceptable to each party in its sole discretion.  For the avoidance of doubt, the parties acknowledge and agree that (a) no such alternative structure shall be used or applicable unless agreed in writing by all of the parties in an amendment to this Agreement, and (b) no party is under any obligation to agree to any such alternative structure.

 

2.2                                  Closing Transactions .

 

(a)                                   Closing .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Seller or at such other place as is mutually agreeable to Buyer and the Seller, at 10:00 a.m. local time on February 15, 2009 (or such other date agreed by the Seller and the Buyer), or, if any of the conditions to Closing set forth in Article III have not been satisfied or waived by the party entitled to the benefit thereof on or prior to such date, on the second business day following satisfaction or waiver of such conditions (the “ Closing Date ”).

 

(b)                                  Closing Deliveries .  At the Closing: (i) Buyer shall pay to Seller three dollars ($3.00) in cash by means of a check, (ii) Buyer and Seller shall execute and deliver the Security Agreement and the Services Agreement; and (iii) Seller shall deliver to Buyer the certificate(s) representing the Shares, duly endorsed in blank or accompanied by duly executed stock power(s), with appropriate transfer stamps (if any) affixed thereto.

 

2.3                                  Purchase Price .

 

(a)                                   General .  The aggregate purchase price (the “ Purchase Price ”) for the Shares sold pursuant to this Agreement shall be three dollars ($3.00).  Following Closing, the Seller and the Buyer may be required to make other cash payments to each other in accordance with the other provisions of this Section 2.3 .  Any such payments shall be deemed adjustments to the Purchase Price.

 

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(b)                                  Closing Statement Process .  Within ninety (90) days following the Closing Date, Seller shall deliver (the date of such delivery, the “ Closing Statement Date ”) to Buyer a statement (in its final and binding form as determined below, the “ Closing Statement ”) setting forth (i) the amount of Indebtedness of the Company and its Subsidiaries as of Closing, if any (the “ Closing Indebtedness ”), (ii) the amount of Covered Accrued Liabilities as of Closing (the “ Closing CAL ”), (iii) the amount of Cash Addback as of the Closing Statement Date (the “ Statement Cash Addback ”), (iv) the amount of any Covered Special Liabilities that have been finally determined as of the Closing Statement Date (the “ Statement CSL ”), and (v) the Statement Payment Amount.  The Closing Statement shall include any adjustments required by Section 2.3(h) , if any.  The Buyer shall cooperate as reasonably requested in connection with the preparation of the Closing Statement.  During the 30-day period immediately following Buyer’s receipt of the Closing Statement, Buyer shall be permitted to review Seller’s books and working papers related to the preparation of the Closing Statement and determination of the amounts therein.  The Closing Statement shall become final and binding upon the parties sixty (60) days following Buyer’s receipt thereof, unless Buyer shall give written notice of its disagreement (a “ Notice of Disagreement ”) to Seller prior to such date.  Any Notice of Disagreement shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted.  If a timely Notice of Disagreement is received by Seller, then the Closing Statement (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the parties on the earliest of (x) the date the parties resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (y) the date all matters in dispute are finally resolved in writing pursuant to Section 9.11 .  During the twenty (20) days following delivery of a Notice of Disagreement, Buyer and Seller shall seek in good faith to resolve in writing any differences which they may have with respect to the matters specified in the Notice of Disagreement.  Following delivery of a Notice of Disagreement, Seller and its agents and representatives shall be permitted to review Buyer’s and its representatives’ working papers relating to the Notice of Disagreement.  If, at the end of the 20-day period referred to above, the matters in dispute have not been fully resolved, then the parties shall submit the matter for arbitration under Section 9.11 (with only such matters that remain in dispute being subject to the arbitration).  In resolving any matters in dispute, the arbitrator may not assign a value to any item in dispute greater than the greatest value for such item assigned by Buyer, on the one hand, or Seller, on the other hand, or less than the smallest value for such item assigned by Buyer, on the one hand, or Seller, on the other hand.  The arbitrator’s determination will be based solely on presentations by Buyer and Seller which are in accordance with the guidelines and procedures set forth in this Agreement (i.e., not on the basis of an independent review).

 

(c)                                   Statement Payment . If the Statement Payment Amount determined pursuant to Section 2.3(c)  is positive (meaning that the sum of Closing Indebtedness plus the Closing CAL plus the Statement CSL is greater than the amount of Statement Cash Addback), then within ten (10) days after the Closing Statement is finalized Seller shall pay to Buyer an amount in cash equal to the Statement Payment Amount.  If the Statement Payment Amount determined pursuant to Section 2.3(c)  is negative (meaning that the sum of Closing Indebtedness plus the Closing CAL plus the Statement CSL is less than the amount of Statement Cash Addback), then within ten (10) days after the Closing Statement is finalized Buyer shall pay to Seller an amount in cash equal to the absolute value of the Statement Payment Amount.

 

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(d)                                  Pre-Closing Receivables .  Any amounts received by Buyer or its Affiliates with respect to the Unpaid Receivables shall be promptly paid over to Seller by Buyer in cash (without any reduction or offset).  Buyer hereby agrees to use (and to cause its Affiliates to use) reasonable commercial efforts to collect all Pre-Closing Receivables and will, in any event, use at least as great of efforts to collect them as Buyer uses to collect its own receivables.  Buyer shall not be required to commence legal proceedings in order to collect Pre-Closing Receivables. Buyer hereby agrees not to settle or compromise any Pre-Closing Receivable, or permit it to be settled, for less than its full amount (including by way of any credit, rebate, setoff or otherwise) without the prior written consent of Seller.  If requested by Seller at any time, Buyer shall allow Seller to seek collection of the Pre-Closing Receivables on behalf of the Company and its Subsidiaries in such manner as Seller shall reasonably determine and Buyer shall provide Seller access to, and copies of (at Seller’s expense) relevant invoices and documentation in such efforts if and to the extent requested by Seller.  Seller shall reimburse Buyer for any reasonable out-of-pocket costs actually incurred by Buyer in collecting Pre-Closing Receivables; provided, that Buyer shall not incur any such costs without getting the prior written approval of Seller to do so (and, if the Seller wishes, shall allow Seller to collect them instead) .

 

(e)                                   Covered Headquarter Liabilities .  Within one hundred twenty (120) days following the Closing Date, Buyer shall deliver to Seller a statement (in its final and binding form as determined below, the “ Headquarter Statement ”) setting forth the amount of the Covered Headquarter Liabilities, if any. The Headquarter Statement shall include any adjustments required by Section 2.3(h) , if any. During the 30-day period immediately following Seller’s receipt of the Headquarter Statement, Seller shall be permitted to review Buyer’s books and working papers related to the preparation of the Headquarter Statement and determination of the amounts therein.  The Headquarter Statement shall become final and binding upon the parties thirty (30) days following Seller’s receipt thereof, unless Seller shall give a Notice of Disagreement to Buyer prior to such date.  Any Notice of Disagreement shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted.  If a timely Notice of Disagreement is received by Buyer, then the Headquarter Statement (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the parties on the earliest of (x) the date the parties resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (y) the date all matters in dispute are finally resolved in writing pursuant to Section 9.11 .  During the twenty (20) days following delivery of a Notice of Disagreement, Buyer and Seller shall seek in good faith to resolve in writing any differences which they may have with respect to the matters specified in the Notice of Disagreement.  Following delivery of a Notice of Disagreement, Buyer and its agents and representatives shall be permitted to review Seller’s and its representatives’ working papers relating to the Notice of Disagreement.  If, at the end of the 20-day period referred to above, the matters in dispute have not been fully resolved, then the parties shall submit the matter for arbitration under Section 9.11 (with only such matters that remain in dispute being subject to the arbitration). In resolving any matters in dispute, the arbitrator may not assign a value to any item in dispute greater than the greatest value for such item assigned by Buyer, on the one hand, or Seller, on the other hand, or less than the smallest value for such item assigned by Buyer, on the one hand, or Seller, on the other hand.  The arbitrator’s determination will be based solely on presentations by Buyer and Seller which are in accordance with the guidelines and procedures set forth in this Agreement (i.e., not on the basis of an independent review).  Within ten (10) days

 

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after the Headquarter Statement is finalized pursuant to this Section, Seller shall pay to Buyer an amount in cash equal to the Covered Headquarter Liability.

 

(f)                                     Pre-Closing Receivables .  If after the Closing Statement Date any amount of Cash Addback arises under clause (iii) of the definition thereof, then Buyer shall within ten (10) days after receipt thereof pay such amount in cash over to Seller (without any reduction or offset).

 

(g)                                  Other Covered Special Liabilities .  If any Covered Special Liabilities arise after the Closing Statement Date, such amounts shall be addressed solely by indemnification as provided in Section 8.2(a)(ii) .

 

(h)                                  Adjustment to Amounts Payable .  With respect to any amount payable after Closing pursuant to this Section 2.3 , the parties shall make appropriate adjustments for tax benefits actually realized (such as deductions available to Buyer or its Affiliates due to the severance included in the Covered Headquarter Liability), and insurance coverage actually received.  In the event that any such tax benefit or insurance proceeds are realized subsequent to the payment hereunder in respect of such matter, appropriate refunds shall be made promptly regarding the amount of such payment.

 

ARTICLE III
CONDITIONS TO CLOSING

 

3.1                                  Conditions to Buyer’s Obligations .  The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions on or prior to the Closing Date:

 

(a)                                   (i)                                      Subject to clause (ii), below, the representations and warranties in Article V hereof that are subject to materiality qualifications shall be true and correct in all respects at and as of the Closing and the representations and warranties contained in Article V hereof that are not subject to materiality qualifications shall be, solely for purposes of this condition, true and correct in all material respects at and as of the Closing, in each case as though then made and as though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties, and the Seller Parties shall have performed in all material respects all of the covenants and agreements required to be performed by them hereunder prior to the Closing;

 

(ii)                                   If a representation and warranty in Section 5.3(b)  is not true or correct in all respects, it shall nevertheless, solely for the purposes of this condition, be deemed to be true and correct unless the inaccuracy in such representation and warranty could reasonably be expected to have a Material Adverse Effect;

 

(iii)                                Nothing in clauses (i) or (ii) above is intended to modify any representation or warranties in Article V for purposes of determining whether a breach thereof has occurred under Section 8.2(a) .

 

(b)                                  No suit, action or other proceeding shall be pending or threatened before any court or governmental or regulatory official, body or authority or any arbitrator wherein an

 

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unfavorable injunction, judgment, order, decree, ruling or charge could reasonably be expected to (i) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby, or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation;

 

(c)                                   The parties shall have received or obtained all federal, state, local and foreign governmental and regulatory consents, approvals, licenses and authorizations that are necessary for the consummation of the transactions contemplated hereby (collectively, the “ Governmental Approvals ”) and all material third party approvals or consents (except consents from landlords) that are necessary to actually sell the Shares as contemplated hereby; and

 

(d)                                  Seller shall have executed and delivered the Services Agreement and the Security Agreement.

 

All proceedings to be taken by the Seller Parties in connection with the consummation of the transactions contemplated hereby and all certificates, instruments and other documents required to be delivered by them to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Buyer.  Any condition specified in this Section 3.1 may be waived by Buyer if such waiver is set forth in a writing duly executed by Buyer.

 

3.2                                  Conditions to the Seller’s Obligations .  The obligation of the Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction of the following conditions at or prior to the Closing:

 

(a)                                   The representations and warranties made in Article VI hereof shall be true and correct in all material respects at and as of the Closing Date as though then made and as though the Closing Date was substituted for the date of this Agreement throughout such representations and warranties, and Buyer shall have performed in all material respects all the covenants and agreements required to be performed by it hereunder prior to the Closing;

 

(b)                                  No suit, action or other proceeding shall be pending or threatened before any court or governmental or regulatory official, body or authority or any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge could reasonably be expected to (i) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such injunction, judgment, order, decree or ruling shall be in effect;

 

(c)                                   The Seller Parties shall have received or obtained all third-party consents (except consents from landlords) and approvals that it deems necessary for the consummation of the transactions contemplated hereby, in each case on terms and conditions satisfactory to Seller, including any such consents required under the Bank Agreements, if any (which shall be deemed not to include consents under any leases or contracts (other than a contractual obligation that Seller determines would actually block the sale of the Shares, as opposed to merely giving rise to other remedies));

 

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(d)                                  The parties shall have received or obtained the Governmental Approvals; and

 

(e)                                   Buyer shall have executed and delivered the Services Agreement and the Security Agreement.

 

All proceedings to be taken by Buyer in connection with the consummation of the transactions contemplated hereby and all documents required to be delivered by Buyer to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Seller.  Any condition specified in this Section 3.2 may be waived if such waiver is set forth in a writing duly executed by Seller.

 

ARTICLE IV

COVENANTS PRIOR TO CLOSING

 

Each of the parties agrees as follows with respect to the period between the date of this Agreement and the Closing:

 

4.1                                  General .  Subject to the terms of this Agreement, each party shall use reasonable commercial efforts to take all actions and do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the conditions set forth in Article III above).  Without limiting the foregoing, each of the parties shall execute and deliver all agreements and other documents required to be delivered by or on behalf of such party or any of its Subsidiaries under Article III above.

 

4.2                                  Third-Party Notices and Consents .  The Seller Parties shall use reasonable commercial efforts to (a) give all required notices to third parties and (b) obtain all third-party approvals in connection with the matters contemplated by this Agreement for any instrument, contract, lease, license or other agreement requiring any such notice or consent; provided, that Seller shall not be obligated to seek consents under any leases or contracts (other than a contractual obligation that would prohibit the sale of the Shares).  Buyer shall cooperate with the Seller Parties and Buyer shall use reasonable commercial efforts to assist Seller Parties in obtaining such third-party approvals, including the provision of reasonable information to contractual counterparties.

 

4.3                                  Governmental Notices and Consents .  Each of the parties shall give any notices to, make any filings with, and use reasonable best efforts to obtain, any material authorizations, consents and approvals of all federal, state, local and foreign governments and governmental agencies in connection with the matters contemplated by this Agreement.

 

4.4                                  Access .  The Seller Parties shall afford, and cause its officers to afford, to Buyer and its accounting and legal representatives, reasonable access upon request at reasonable times and during normal business hours, upon reasonable notice, to the Company’s and its Subsidiaries’ business, financial, legal, tax, compensation and other data and information concerning the Company’s and its Subsidiaries’ affairs and operations.  The Company shall use commercially reasonable efforts to provide information to Buyer, as and when reasonably requested, concerning the status of the operations, finances and affairs of the Company and its

 

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Subsidiaries.  Any requests by Buyer for such access shall be made solely to Randy Pearce or Eric Bakken unless otherwise consented to by either such individual in writing.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES CONCERNING

THE COMPANY, ITS SUBSIDIARIES AND THE SELLER

 

As an inducement to Buyer to enter into this Agreement and consummate the transactions contemplated hereby, the Seller hereby represents and warrants to Buyer that as of the Closing Date:

 

5.1                                  Corporate Organization .  The Company is a corporation duly organized, validly existing and in good standing under the laws of its State of incorporation and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.

 

5.2                                  Capital Stock and Related Matters; Title to Shares .  All shares of the Capital Stock of the Company are held beneficially and of record by the Seller, free and clear of all Encumbrances.  All shares of Capital Stock of the Company Subsidiaries are held beneficially and of record by the Company, directly or indirectly, free and clear of all Encumbrances.  Neither the Company, nor the Company Subsidiaries, have outstanding any stock or securities convertible or exchangeable for any shares of its Capital Stock or containing any profit participation features, nor any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its Capital Stock or any stock appreciation rights or phantom stock plan.

 

5.3                                  Authorization; Noncontravention .

 

(a)                                   The execution, delivery and performance of this Agreement and all of the other agreements and instruments contemplated hereby to which Seller or the Company is a party have been duly authorized by the Seller and the Company, and no other act (corporate or otherwise) or other proceeding on the part of Seller, its shareholders, or the Company is necessary to authorize the execution, delivery or performance of this Agreement or the other agreements contemplated hereby and the consummation of the transactions contemplated hereby or thereby.  This Agreement has been duly executed and delivered by Seller and the Company and constitutes a valid and binding obligation of Seller and the Company enforceable in accordance with its terms (except as enforceability may be limited by laws relating to bankruptcy, insolvency, winding-up or other similar laws affecting the enforcement of creditors’ rights and by general principles of equity), and each of the other agreements and instruments contemplated hereby to which Seller or the Company is a party, when executed and delivered by Seller or the Company in accordance with the terms hereof and thereof, shall each constitute a valid and binding obligation of Seller or the Company, as applicable, enforceable in accordance with its respective terms (except as enforceability may be limited by laws relating to bankruptcy, insolvency, winding-up or other similar laws affecting the enforcement of creditors’ rig