Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment No. 1 to Form S-1 96 477K
2: EX-10.1 Stock Purchase Agreement 46 179K
3: EX-10.2 Supplement to Stock Purchase Agreement 3 14K
5: EX-10.21 Lease Agreement, Dated as of January 31, 1995 43 164K
6: EX-10.22 Amendment No. 1 to Lease 4 17K
7: EX-10.23 Amendment No. 2 to Lease 6 21K
8: EX-10.24 Amendment No. 3 to Lease 7 22K
9: EX-10.25 Amendment No. 4 to Lease 13 41K
10: EX-10.26 Lease, Dated as of June 3, 1998 70 264K
11: EX-10.27 Amendment No. 1 to Lease 5 20K
12: EX-10.28 Amendment No. 2 to Lease 2 12K
4: EX-10.3 Amendment No. 1 to Stock Purchase Agreement 6 21K
13: EX-21.1 Subsidiaries of Tanning 1 5K
14: EX-23.1 Consent of Ernst & Young LLP 1 7K
EXHIBIT 10.1
EXECUTION COPY
__________________________________________________
STOCK PURCHASE AGREEMENT
among
TANNING TECHNOLOGY GROUP, L.L.C.,
COURTNEY ROSE CORPORATION,
WINSOFT CORPORATION,
HIPPELI ENTERPRISES, INC.,
STEPHEN BROBST,
LARRY TANNING,
BIPIN AGARWAL,
TONI HIPPELI
and
AEA TANNING INVESTORS INC.
Dated as of December 24, 1996
_________________________________________________
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TABLE OF CONTENTS
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Page
ARTICLE I ISSUANCE AND SALE OF SHARES....................................................2
Section 1.1 Issuance of Shares..........................................................2
Section 1.2 Consideration...............................................................2
ARTICLE II CLOSING; ISSUANCE OF SHARES; PAYMENT OF PURCHASE PRICE.........................2
Section 2.1 Closing.....................................................................2
Section 2.2 Issuance of the AEA Shares and Cash Payment.................................2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE TANNING PARTIES..........................2
Section 3.1 Organization................................................................3
Section 3.2 Authority...................................................................3
Section 3.3 Ownership of the Company....................................................4
Section 3.4 Subsidiaries and Equity Interests...........................................4
Section 3.5 Capitalization of New Tanning...............................................5
Section 3.6 The AEA Shares..............................................................5
Section 3.7 No Conflicts; Consents......................................................5
Section 3.8 Financial Statements; No Undisclosed Liabilities............................6
Section 3.9 Absence of Changes..........................................................7
Section 3.10 Title to Assets.............................................................7
Section 3.11 Compliance with Laws........................................................7
Section 3.12 Permits.....................................................................8
Section 3.13 Taxes.......................................................................8
Section 3.14 Litigation..................................................................10
Section 3.15 Contracts...................................................................10
Section 3.16 Broker's and Finder's Fee...................................................11
Section 3.17 Employee Benefit Plans......................................................11
Section 3.18 Patents, Trademarks, Trade Names, Etc.......................................13
Section 3.19 Insurance...................................................................13
Section 3.20 New Tanning.................................................................14
Section 3.21 Affiliate Matters...........................................................14
Section 3.22 Information.................................................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AEA..........................................14
Section 4.1 Organization................................................................14
Section 4.2 Authority...................................................................15
Section 4.3 No Conflicts; Consents......................................................15
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Section 4.4 Broker's and Finder's Fee...................................................15
ARTICLE V COVENANTS......................................................................15
Section 5.1 Cooperation by the Company..................................................15
Section 5.2 Conduct of Business.........................................................16
Section 5.3 Access......................................................................17
Section 5.4 No Solicitation.............................................................17
Section 5.5 Required Notices............................................................17
Section 5.6 New Tanning.................................................................18
Section 5.7 Merger......................................................................18
Section 5.8 Audited Financial Statements................................................18
Section 5.9 Related Agreements..........................................................18
ARTICLE VI CONDITIONS TO AEA'S OBLIGATIONS................................................19
Section 6.1 Representations, Warranties and Covenants of the Tanning Parties............19
Section 6.2 No Prohibition..............................................................19
Section 6.3 Consents....................................................................19
Section 6.4 Merger......................................................................19
Section 6.5 Certificates and Resolutions................................................20
Section 6.6 Board Approval..............................................................20
Section 6.7 Shareholders Agreement......................................................20
Section 6.8 Asset Purchase Agreement....................................................20
Section 6.9 Employment Agreements.......................................................20
Section 6.10 Audited Financial Statements................................................20
Section 6.11 Legal Opinion...............................................................20
Section 6.12 Pyramid.....................................................................20
Section 6.13 New Tanning.................................................................20
Section 6.14 Counterpart.................................................................20
Section 6.15 Confidentiality and Assignment Agreements...................................20
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE TANNING PARTIES...........................21
Section 7.1 Representations, Warranties and Covenants of AEA............................21
Section 7.2 No Prohibition..............................................................21
Section 7.3 Consents....................................................................21
Section 7.4 Employment Agreements.......................................................21
Section 7.5 Shareholders Agreement......................................................21
Section 7.6 Related Transaction.........................................................21
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ARTICLE VIII TERMINATION....................................................................22
Section 8.1 Termination.................................................................22
Section 8.2 Effect on Obligations.......................................................22
ARTICLE IX INDEMNIFICATION................................................................22
Section 9.1 Losses......................................................................22
Section 9.2 Indemnification by the Original Members and Principals......................22
Section 9.3 Indemnification by AEA......................................................23
Section 9.4 Claims......................................................................24
Section 9.5 Limitations on Indemnification..............................................25
Section 9.6 Exclusive Remedy............................................................25
ARTICLE X MISCELLANEOUS..................................................................25
Section 10.1 Survival....................................................................25
Section 10.2 Expenses....................................................................26
Section 10.3 Exclusive Agreement; No Third-Party Beneficiaries...........................26
Section 10.4 Governing Law, Etc..........................................................26
Section 10.5 Successors and Assigns......................................................27
Section 10.6 Publicity...................................................................27
Section 10.7 Severability................................................................27
Section 10.8 Notices.....................................................................27
Section 10.9 Counterparts; Facsimile Signatures..........................................28
Section 10.10 Interpretation..............................................................28
Section 10.11 Amendment...................................................................29
Section 10.12 Extension; Waiver...........................................................29
Section 10.13 Other Transaction Structures................................................29
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DEFINED TERMS
Term Section
---- -------
AEA................................................................ Preamble
AEA Shares ........................................................ Recitals
Affiliate ......................................................... 3.15
Agreement.......................................................... Preamble
Asset Purchase Agreement........................................ 5.9
Audited Financial Statements ...................................... 5.8
Balance Sheet...................................................... 3.8(a)
Brobst ............................................................ Preamble
Cash Payment ................................................... 9.2(d)
Closing............................................................ 2.1
Closing Date ...................................................... 2.1
Code............................................................ 3.13
Company ........................................................... Preamble
Company Benefit Plans.............................................. 3.17(a)
Confidentiality Agreement.......................................... 5.3
Courtney .......................................................... Preamble
Debt............................................................... 3.15(i)
Environmental Law ................................................. 3.11
Employment Agreements .......................................... 5.9
Environmental Matter ............................................. 3.11
ERISA Affiliate .................................................. 3.17(b)
Fair Value......................................................... 9.2(e)
Fees and Expenses ................................................. 10.2
Financial Statements .............................................. 3.8(a)
GAAP .............................................................. 3.8(a)
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Governmental Entity ............................................... 3.7
Hippeli ........................................................... Preamble
Income Tax ........................................................ 3.13
Indemnified Party ................................................. 9.4(a)
Indemnifying Party................................................. 9.4(a)
Intellectual Property Rights ...................................... 3.18
Laws .............................................................. 3.11
Lien .............................................................. 3.10
Litigation ........................................................ 3.14
Loss .............................................................. 9.1
Losses ............................................................ 9.1
Material Adverse Effect ........................................... 3.1
Material Contracts ................................................ 3.15
Merger ............................................................ Recitals
Merger Agreement .................................................. 5.9
New Tanning ....................................................... Recitals
Original Members .................................................. Preamble
Patents and Copyrights and Trademarks ............................. 3.18
Permits ........................................................... 3.12
Person ............................................................ 3.1
Principals ........................................................ Preamble
Proposals ......................................................... 5.4
Purchase Price .................................................... 1.2
Related Agreements................................................. 5.9
Return............................................................. 3.13
Shareholders Agreement ............................................ 5.9
Stock Payment ..................................................... 9.2(e)
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Subsidiary ........................................................ 3.1
Tanning Entities................................................... 3.13
Tanning Parties.................................................... Preamble
Tax................................................................ 3.13
Third Party Claims ................................................ 9.4(a)
Units ............................................................. 3.3
WinSoft............................................................ Preamble
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Schedules
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3.3(a) Ownership of Company
3.3(b) Ownership of Courtney, Hippeli and WinSoft
3.4 Subsidiaries
3.5 Capitalization
3.7 Conflicts
3.8 Financial Statements
3.9 Absence of Changes
3.10 Title to Assets
3.11 Compliance with Laws
3.12 Permits
3.13 Taxes
3.14 Litigation
3.15 Contracts
3.17 Employee Benefit Plans
3.18 Patents
3.19 Insurance
4.3 No Conflicts
5.2 Conduct of Business
7.3 Consents
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Exhibits
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1 Capitalization
2 Shareholders Agreement
3 Employment Agreements
4 Transaction Modifications
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of December 24,
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1996, among Tanning Technology Group, L.L.C., a Colorado limited liability
company (the "Company"), Courtney Rose Corporation, a Colorado corporation
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("Courtney"), WinSoft Corporation, a Colorado corporation ("WinSoft"), Hippeli
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Enterprises, Inc., a Colorado corporation ("Hippeli"), Stephen Brobst ("Brobst")
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(Courtney, WinSoft, Hippeli and Brobst are collectively referred to herein as
the "Original Members"), Larry Tanning, Bipin Agarwal, Toni Hippeli (Larry
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Tanning, Bipin Agarwal, Toni Hippeli and Stephen Brobst are collectively
referred to herein as the "Principals" and the Company, Larry Tanning, Bipin
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Agarwal, Stephen Brobst, Toni Hippeli and the Original Members, are collectively
referred to herein as the "Tanning Parties") and AEA Tanning Investors Inc., a
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Delaware corporation ("AEA").
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WHEREAS, immediately prior to the Closing (as defined below), the
Company will merge (the "Merger") with and into Tanning Technology Corporation,
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a Delaware corporation to be newly formed in connection with the transactions
contemplated hereby ("New Tanning"), with New Tanning being the surviving
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entity, and New Tanning shall, by virtue of the Merger, own and be the successor
to all of the assets, properties, rights and liabilities of any kind of the
Company (except as otherwise expressly provided for herein) (following the
Merger, the term the "Company" as used herein, shall include New Tanning);
WHEREAS, immediately following the Merger, the Original Members of the
Company will own, in the aggregate, all of the issued and outstanding shares of
capital stock of New Tanning; and
WHEREAS, immediately following the Merger, AEA desires to purchase
from New Tanning and the Original Members desire to cause New Tanning to issue
and sell to AEA, that number of shares of common stock of New Tanning (bearing
the liquidation preference described in Exhibit 1) which will, upon their
issuance, constitute 32% of the issued and outstanding common stock of New
Tanning (the "AEA Shares") on the terms and conditions set forth in this
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Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
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ARTICLE I
ISSUANCE AND SALE OF SHARES
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Section 1.1 Issuance of Shares. On the terms and subject to the
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conditions of this Agreement, at the Closing, the Original Members shall cause
New Tanning to issue, transfer, deliver and sell to AEA and AEA shall purchase
and accept from New Tanning, the AEA Shares for the consideration specified
below in Section 1.2.
Section 1.2 Consideration. On the terms and subject to the conditions of
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this Agreement, in consideration for the sale of the AEA Shares, at the Closing,
AEA will pay or cause to be paid to New Tanning the amount of $13,000,000 (the
"Purchase Price"), as adjusted pursuant to Section 10.2.
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ARTICLE II
CLOSING; ISSUANCE OF SHARES; PAYMENT OF PURCHASE PRICE
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Section 2.1 Closing. Subject to the terms and conditions of this
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Agreement, the consummation of the purchase and sale of the AEA Shares (the
"Closing") shall take place at the offices of Ireland, Stapleton, Pryor &
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Pascoe, P.C., 1675 Broadway, Suite 2600, Denver, Colorado 80202, at 10:00 a.m.,
local time, on January 24, 1997, or at such other time, date or place as is
agreed to in writing by the parties hereto. The date on which the Closing shall
occur is hereafter referred to as the "Closing Date."
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Section 2.2 Issuance of the AEA Shares and Cash Payment. At the Closing,
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(i) the Original Members shall cause New Tanning to deliver to AEA certificates
representing the AEA Shares, duly authorized and issued in blank, free and clear
of all Liens (as defined in Section 3.10) and restrictions of any kind (except
for those imposed by the Shareholders Agreement (as defined below) and
applicable securities laws) and (ii) AEA shall deliver, or cause to be
delivered, to New Tanning, the Purchase Price by wire transfer of immediately
available funds, to an account or accounts designated at least two days prior to
the Closing Date by New Tanning in a written notice to AEA.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TANNING PARTIES
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The Tanning Parties hereby represent and warrant to AEA as follows:
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Section 3.1 Organization. Each of Courtney, WinSoft, Hippeli, and each
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Subsidiary is a corporation duly organized and validly existing under the laws
of its respective jurisdiction of incorporation and has all requisite power and
authority to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as it is now being conducted. The Company is a
limited liability company duly organized and validly existing under the laws of
the State of Colorado and has all requisite power and authority to enable it to
own, lease or otherwise hold its properties and assets and to carry on its
business as it is now being conducted. Upon its incorporation, New Tanning will
be a corporation duly organized and validly existing under the laws of the State
of Delaware and will have all requisite corporate power and authority to enable
it to own, lease or otherwise hold its properties and assets and the properties
and assets of the Company after the Merger and to carry on its business as it
will be conducted after its incorporation and after the Merger. WinSoft,
Hippeli, Courtney, and each Subsidiary are duly qualified to do business and are
in good standing as foreign corporations in all jurisdictions where the nature
of the property owned or leased by them, or the nature of the business conducted
by them, makes such qualification necessary, except where such lack of
qualification would not have a material adverse effect on the business, assets,
condition (financial or otherwise), results of operations or prospects of the
Company and the Subsidiaries taken as a whole or on the ability of any of the
Tanning Parties to consummate the transactions contemplated hereby and by the
Related Agreements (a "Material Adverse Effect"). The Company is duly qualified
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to do business and is in good standing as a foreign limited liability company in
all jurisdictions where the nature of the property owned or leased by it, or the
nature of the business conducted by it, makes such qualification necessary,
except where such lack of qualification would not have a Material Adverse
Effect. New Tanning will be on the Closing Date duly qualified to do business
and in good standing as a foreign corporation in all jurisdictions where the
nature of the property owned or leased by it and by the Company, or the nature
of the business conducted by it or by the Company make such qualification
necessary, except where such lack of qualification would not have a Material
Adverse Effect. True and complete copies of the governing documents of the
Company, each of the Subsidiaries, Courtney, WinSoft and Hippeli have previously
been made available to AEA. As used in this Agreement, the term "Subsidiary"
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shall mean any Person, with respect to which the Company owns 50% or more of the
capital stock or other equity interests of such Person, the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such Person, directly or through one or more Subsidiaries. As
used in this Agreement, "Person" shall mean any individual, firm, corporation,
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partnership, limited liability company, trust, joint venture, Governmental
Entity (as defined in Section 3.7) or other entity.
Section 3.2 Authority. Each of the Tanning Parties has full power and
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authority to execute and deliver this Agreement and, to the extent it is a party
thereto, the Related
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Agreements, to perform all its respective obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and, to the extent it is a party
thereto, the Related Agreements, by each of the Tanning Parties and the
consummation by each of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary action (corporate or otherwise) of each.
This Agreement has been duly and validly executed and delivered by each of the
Tanning Parties and constitutes, and, as of the Closing, each of the Related
Agreements will have been duly and validly executed and delivered by each of the
Tanning Parties, to the extent a party thereto and will constitute, the valid
and binding obligation of each, enforceable against each in accordance with its
terms, except to the extent such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws relating to creditors' rights generally and to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law). As used in this Agreement, "Related Agreements" shall have the meaning
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set forth in Section 5.9.
Section 3.3 Ownership of the Company. (a) The outstanding equity
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interests of the Company consist of 10,000 units of limited liability company
interests (the "Units"). The Original Members are the record and beneficial
-----
owners of all of the Units (as set forth on Schedule 3.3(a)) free and clear of
any Liens, except as set forth on Schedule 3.3(a). Except for such Units, there
are no outstanding units, securities or interests or securities convertible
into, exchangeable for, or carrying the right to acquire, or any voting
agreements with respect to, any voting units, securities or interests of the
Company, or subscriptions, warrants, options, rights or other arrangements or
commitments obligating the Company or any Original Member to issue or acquire
any of its voting units, securities or interests or any ownership interest
therein.
(b) Except as set forth on Schedule 3.3(b), Larry Tanning, Toni
Hippeli and Bipin Agarwal, respectively, each own all of the capital stock of
Courtney, Hippeli and WinSoft, free and clear of any Liens. All of the issued
and outstanding shares of capital stock of each of Courtney, Hippeli and WinSoft
are validly issued, fully paid and nonassessable.
Section 3.4 Subsidiaries and Equity Interests. Schedule 3.4 sets forth a
---------------------------------
list of all direct or indirect Subsidiaries of the Company. The Company owns,
either directly or indirectly through one or more Subsidiaries, all of the
capital stock of the Subsidiaries free and clear of any Liens. All of the issued
and outstanding shares of capital stock of each Subsidiary is validly issued,
fully paid and nonassessable. There are outstanding no securities convertible
into, exchangeable for, or carrying the right to acquire, or any voting
agreements with respect to, any equity securities of any of the Subsidiaries, or
subscriptions, warrants, options, rights or other arrangements or commitments
obligating any Subsidiary to issue or acquire any of its equity securities or
any ownership interest
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therein. Except as set forth in Schedule 3.4, the Company does not own, directly
or indirectly any capital stock of, or other equity interests in, any Person,
and is not a member of, or participant in, any partnership, joint venture or
similar Person or entity.
Section 3.5 Capitalization of New Tanning. Immediately following the
-----------------------------
Merger, (i) the Original Members will own all of the issued and outstanding
capital stock of New Tanning, free and clear of any Liens, (ii) all of the
issued and outstanding shares of capital stock of New Tanning will be validly
issued, fully paid and nonassessable and (iii) the authorized capital stock of
New Tanning shall be divided into classes and have the rights and privileges
(including with respect to liquidation preferences) as set forth on Exhibit 1
(except for modifications which do not affect the economic, voting or other
substantial rights of such capital stock). Except as set forth on Schedule 3.5,
on the Closing Date, there will be outstanding no securities convertible into,
exchangeable for, or carrying the right to acquire, or any voting agreements
with respect to, any equity securities of New Tanning, or subscriptions,
warrants, options, rights or other arrangements or commitments obligating New
Tanning or any Original Member to issue or acquire any of its equity securities
or any ownership interest therein.
Section 3.6 The AEA Shares. Upon delivery to AEA at the Closing of
--------------
certificates representing the AEA Shares, and upon receipt by New Tanning of the
Purchase Price, good and valid title to the AEA Shares will pass to AEA, free
and clear of all Liens and restrictions of any kind (except for those imposed by
the Shareholders Agreement and applicable securities laws). Upon the issuance of
the AEA Shares at the Closing, the AEA Shares will, upon their issuance,
constitute 32% of the issued and outstanding common stock of New Tanning, will
have the rights and privileges (including with respect to liquidation
preferences) as set forth in Exhibit 1 (except for modifications which do not
affect the economic, voting or other substantial rights of such capital stock)
and will be validly issued, fully paid and nonassessable. Other than as provided
for in this Agreement or any other agreement entered into by AEA, the AEA Shares
are not, and upon their issuance will not be, subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or other disposition of the AEA Shares other than the Shareholders Agreement.
Section 3.7 No Conflicts; Consents. Except as set forth in Schedule 3.7,
----------------------
the execution and delivery by each of the Tanning Parties of this Agreement,
and, to the extent they are a party thereto, the Related Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (i)
violate, conflict with, result in a breach of, or default under, or permit the
termination of, or require consent under any agreement, obligation or commitment
to which any of the Tanning Parties is bound, or to which any of its properties
or assets is subject (including, without limitation, the Material
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Contracts (as defined in Section 3.15)), (ii) violate any provision of any
applicable law, rule or regulation to which any of the Tanning Parties is
subject, (iii) violate any order, judgment or decree applicable to any of the
Tanning Parties, or (iv) conflict with, or result in a breach of or default
under, any term or condition of the governing documents of the Company,
Courtney, WinSoft or Hippeli. No consent, license, approval, waiver, expiration
of waiting period or authorization of, or registration or declaration with, any
federal, state, local or foreign government or any court of competent
jurisdiction, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity") is
-------------------
required to be obtained or made by any of the Tanning Parties in connection with
the execution, delivery and performance of the transactions contemplated by this
Agreement or the Related Agreements. To the knowledge of the Company, except as
set forth in Section 3.7, no creditor, employee, client, customer or other
Person having a business relationship with the Company or any Subsidiary intends
to change (in a manner adverse to the Company) such relationship because of the
issuance and sale of the AEA Shares or the transactions contemplated hereby or
by the Related Agreements.
Section 3.8 Financial Statements; No Undisclosed Liabilities. (a) The
-------------------------------------------------
Company has delivered to AEA balance sheets of the Company dated as of December
31, 1995 and September 30, 1996 and statements of income and cash flow of the
Company for the year ending December 31, 1995 and for the nine months ending
September 30, 1996 (such financial statements are herein referred to as the
"Financial Statements"). Except as set forth on Schedule 3.8, the Financial
--------------------
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") and present fairly, in all material respects, the financial
----
position of the Company as of their respective dates, and the results of its
operations and its cash flows for each of the periods indicated therein. All
customer accounts receivable of the Company and the Subsidiaries, whether
reflected on the most recent balance sheet contained in the Financial Statements
(the "Balance Sheet") or subsequently created, have arisen from bona fide
-------------
transactions in the ordinary course of business. To the knowledge of the
Company, all such customer accounts receivable are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserves for doubtful
accounts reflected on the Balance Sheet.
(b) The Company and the Subsidiaries have no liabilities or
obligations of any kind (whether absolute, accrued, contingent, determined,
determinable or otherwise), except to the extent such liabilities or obligations
(i) are fully reflected as liabilities or reserved for on the Balance Sheet,
(ii) are expressly disclosed in any Schedule hereto, (iii) are liabilities or
obligations incurred since the date of the Balance Sheet in the ordinary course
of business consistent with past practice and not in violation of any of the
terms of this Agreement or (iv) do not exceed, individually or in the aggregate,
$200,000.
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Section 3.9 Absence of Changes. Except as set forth on Schedule 3.9,
------------------
since September 30, 1996 the business of the Company and the Subsidiaries has
been conducted in the ordinary course of business consistent with past practice
in all material respects, and (i) there have been no changes in the business,
assets or liabilities or prospects of the Company or the Subsidiaries which
individually or in the aggregate have had, or could reasonably be expected to
have, a Material Adverse Effect, and (ii) there has not been any transaction or
event of the type restricted or prohibited by Section 5.2 which, if such
transaction or event occurred after the date hereof, would constitute a
violation of Section 5.2 of this Agreement.
Section 3.10 Title to Assets. The Company and the Subsidiaries have good
---------------
title to all of the assets and properties which they purport to own (except for
assets and properties sold, consumed or otherwise disposed of in the ordinary
course of business since September 30, 1996) free and clear of all Liens, except
(a) as set forth in Schedule 3.10, (b) Liens for taxes not yet due, and (c)
Liens which do not interfere with the use or value of the asset affected
thereby. The Company and the Subsidiaries do not own any real property. As used
in this Agreement, "Lien" shall mean all liens, claims, charges, security
----
interests, pledges, mortgages, rent charges, covenants, easements, restrictions,
provisions, consents, licenses or other encumbrances, obligations or
restrictions or rights or claims of others (including without limitation, any
options or similar rights) of any character whatsoever which impair the relevant
Person's right, title or interest in, or the value, use or enjoyment of, the
asset subject thereto except, with respect to securities, Liens imposed by
applicable securities laws.
Section 3.11 Compliance with Laws. (a) Except as set forth in the
--------------------
Schedule 3.11, the Company and the Subsidiaries have been and are in compliance
in all material respects with all applicable federal, state, local and foreign
laws (including statutes and judicial and administrative decisions, orders and
decrees), rules and regulations ("Laws"), including, without limitation, those
----
relating to Environmental Matters (as defined below), occupational health and
safety and employment practices and matters. The Company has not received notice
of any noncompliance by the Company or any Subsidiary with any Laws. Except as
set forth on Schedule 3.11, there are no conditions, events, circumstances,
facts, activities, practices, incidents, actions or omissions, that (i) may
interfere with or prevent continued compliance by the Company with Environmental
Laws (as defined below), or (ii) may give rise to any liability or other
obligation of or form the basis for a claim under any Environmental Law against
the Company. As used herein, the term "Environmental Matter" means any matter
--------------------
arising out of or relating to the environment, safety or health or the
production, storage, handling, use, emission, release, discharge or disposal of
any substance, product or waste which may cause damage or require remediation or
other costs to be incurred. As used herein, the term "Environmental Law" means
-----------------
any Law relating to Environmental Matters.
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(b) Each Original Member and Principal represents that it has not
received written notice of noncompliance by the Company or any Subsidiary with
any Laws.
Section 3.12 Permits. Schedule 3.12 sets forth a true and complete list
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of all material licenses, permits and authorizations ("Permits") which are
-------
necessary for the conduct of the business of the Company and the Subsidiaries.
Except as set forth in Schedule 3.12, all such Permits are validly held by the
Company or a Subsidiary, the Company and the Subsidiaries have complied in all
material respects with all terms and conditions relating to such Permits and the
same will not be subject to suspension, modification, revocation or nonrenewal
as a result of the execution and delivery of this Agreement or the Related
Agreements or the consummation of the transactions contemplated hereby and
thereby. The Company has not received notice nor otherwise has any knowledge
that any Governmental Entity intends to cancel or terminate any such Permits and
no consent or approval of any Governmental Entity is required under any such
Permit in connection with the transactions contemplated by this Agreement or the
Related Agreements. All such Permits which are held in the name of an employee,
officer, member, or agent or otherwise on behalf of the Company or any
Subsidiary shall be deemed included under this Section 3.12.
Section 3.13 Taxes. (a) For the purposes of this Agreement, the following
-----
terms shall have the following meanings:
(i) "Code" means the Internal Revenue Code of 1986, as amended.
----
(ii) "Income Tax" or "Income Taxes" means any federal, state, local
---------- ------------
or foreign income, franchise or similar Tax and, in each instance, any interest,
penalties or additions to tax attributable to such Tax and any damages, costs,
expenses, fees or other liability arising from such Tax;
(iii) "Return" means any report, return, statement, estimate,
------
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
(iv) "Tax" or "Taxes" means taxes of any kind, levies or other like
--- -----
assessments, customs, duties, imposts, charges or fees, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes or
other governmental taxes imposed or payable to the
-8-
United States, or any state, county, local or foreign government or subdivision
or agency thereof, and, in each instance, such term shall include any interest,
penalties or additions to tax attributable to any such Tax and any damages,
costs, expenses, fees or other liability arising from such Tax.
(b) Except as set forth on Schedule 3.13, the Company and its
Subsidiaries and any predecessors thereof (the "Tanning Entities") have (i)
----------------
timely filed in accordance with all applicable laws all material Returns
required to be filed, (ii) paid all Taxes shown to have become due pursuant to
such Returns and (iii) paid all Taxes for which a notice of, or assessment or
demand for, payment has been received or which are otherwise due and payable.
All Returns filed by the Tanning Entities with respect to Taxes were true and
correct in all material respects as of the date on which they were filed or as
subsequently amended to the date hereof, and all Taxes for which the Tanning
Entities have been or may be liable have been paid. Except as set forth on
Schedule 3.13, complete copies of all material Returns of the Tanning Entities
that have been filed since the inception of the Tanning Entities have been made
available to AEA prior to the date hereof. Prior to the date hereof, the
Tanning Entities have provided to AEA copies of all revenue agent's reports and
other written assertions of deficiencies or other liabilities for Taxes of the
Tanning Entities with respect to past periods for which the limitations period
has not run. Except as set forth on Schedule 3.13, (A) all amounts required to
be collected or withheld by the Tanning Entities with respect to Taxes have been
duly collected or withheld and any such amounts that are required to be remitted
to any taxing authority have been duly remitted, (B) the Company has, at all
times since its inception, qualified as a partnership for federal, state, and
local Income Tax purposes (rather than an association taxable as a corporation)
and has filed all Returns consistent with this characterization, (C) there is no
action, suit, proceeding, investigation, audit, claim or assessment pending or
proposed with respect to any liability for Tax or with respect to any Return for
which the Tanning Entities could be liable, (D) there are no waivers or
extensions of any applicable statute of limitations for the assessment or
collection of Taxes for which the Tanning Entities could be liable which remain
in effect, (E) no taxing authority in a jurisdiction where a Tanning Entity does
not file Returns has made a claim, assertion or threat that such Tanning Entity
is or may be subject to taxation by such jurisdiction, (F) Schedule 3.13
contains a list of states, territories and jurisdictions (whether foreign or
domestic) in which the Tanning Entities have filed income, franchise, or sales
and use Returns for all taxable periods ending after December 31, 1991, and (G)
the Tanning Entities have not agreed to, and are not required to include in
income, any adjustment pursuant to section 481(a) of the Code (or similar
provisions of other law or regulations) by reason of a change in accounting
method or otherwise, nor do the Tanning Entities have any knowledge that the
Internal Revenue Service (or other taxing authority) has proposed, or is
considering, any such change in accounting method.
-9-
Section 3.14 Litigation. Except as set forth in Schedule 3.14, there is
----------
no suit, legal or administrative action or arbitration pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
("Litigation"), nor are there any judgments, decrees or orders of any
----------
Governmental Entity binding on the Company or any Subsidiary. There are no
pending or, to the knowledge of the Company, threatened governmental
investigations or inquiries or proceedings concerning the Company or the
business or operations of the Company.
Section 3.15 Contracts. Except as set forth in Schedule 3.15 and except
---------
for the Related Agreements, neither, the Company, nor any Subsidiary is party to
or is bound by, and none of the properties, assets or operations of each is
subject to, any agreement, contract, lease, license, commitment or instrument
each that is of a type described below:
(a) any lease agreement (whether as lessor or lessee) relating to real
property or personal property, other than those lease agreements which do
not in any case provide for a rental of more than $10,000 per year;
(b) any license agreement, assignment or contract (whether as licensor
or licensee, assignor or assignee and whether written or oral) relating to
any Intellectual Property Rights (as defined in Section 3.18);
(c) any agreement with any of its employees or consultants;
(d) any agreement, contract, lease, commitment or instrument with any
party, including any customer or supplier, (i) providing for any payment in
excess of $20,000 by any party thereto or (ii) which does not contemplate
performance within 12 months;
(e) any collective bargaining or other agreement with any labor union;
(f) any agreement relating to the acquisition or disposition of any
business, corporation or other legal entity or a material amount of assets
(by way of merger, consolidation, purchase, sale or otherwise);
(g) any agreement granting any Person a Lien on any of its assets or
properties, including, without limitation, any factoring agreement or
agreement for the assignment of accounts receivable or inventory;
(h) any agreement that creates a joint venture or partnership with any
other Person;
-10-
(i) any indenture, mortgage, note, bond or other evidence of
indebtedness, any credit or similar agreement under which it has borrowed
any money, and any guarantee of or agreement to acquire any such
obligation, of any other Person ("Debt");
----
(j) any agreement which restricts it from entering into any new or
existing line of business or any agreement which contains geographic
restrictions on its ability to conduct business activities (including a
covenant not to compete);
(k) any agreement, contract or other arrangement with any Principal,
any Original Member or any Affiliate of an Original Member;
(l) any guarantee of third party obligations; or
(m) any other agreement which is material to the business or financial
condition of the Company and the Subsidiaries.
Except as set forth in Schedule 3.15, all agreements, contracts, leases,
licenses, commitments or instruments of the Company or any Subsidiary listed or
required to be listed in Schedule 3.15 (collectively, the "Material Contracts")
------------------
are valid, binding and in full force and effect and are enforceable by the
Company or a Subsidiary in accordance with its terms. Except as set forth in
Schedule 3.15, (a) the Company and the Subsidiaries have performed all material
obligations required to be performed by them to date under the Material
Contracts, and are not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder, and
(b) to the knowledge of the Company, no other party to any of the Material
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder. Correct and
complete copies of all written Material Contracts (and true and complete
summaries of all oral Material Contracts) have been made available to AEA prior
to the date hereof. As used in this Agreement, "Affiliate" means, (i) with
---------
respect to a Person, any other Person directly or indirectly controlling,
controlled by, or under common control with such other Person or (ii) with
respect to any individual, any individual in such other individual's immediate
family.
Section 3.16 Broker's and Finder's Fee. The Company has not employed any
-------------------------
broker, finder, or financial intermediary in connection with the transactions
contemplated by this Agreement or the Related Agreements that would be entitled
to a broker's, finder's or similar fee or commission in connection therewith.
Section 3.17 Employee Benefit Plans. (a) Schedule 3.17 contains a true
----------------------
and complete list of each plan, policy, practice, agreement or other
arrangement, or commitment therefor, providing for compensation, termination
pay, performance awards,
-11-
equity-related awards, fringe benefits or other employee benefits of any kind
pursuant to which the Company, any of the Subsidiaries or any ERISA Affiliate
has or may have any liability, contingent or otherwise (each, a "Company Benefit
---------------
Plan").
----
(b) Neither the Company nor any of the Subsidiaries has or has ever
had any ERISA Affiliates (other than the Company or a Subsidiary). "ERISA
-----
Affiliate" shall mean any Person which is (or at any relevant time was) a member
---------
of a "controlled group of corporations" with, under "common control" with, or a
member of any "affiliated service group" with or otherwise required to be
aggregated with, the Company or any of the Subsidiaries as set forth in Section
414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of Employee
Retirement Income Security Act of 1974, as amended.
(c) The Company and each of the Subsidiaries has performed all
obligations required to be performed by it under each Company Benefit Plan and
each Company Benefit Plan has been established and maintained in accordance with
its terms and in compliance with all applicable laws, statutes, orders, rules
and regulations. There are no actions, proceedings, arbitrations, suits or
claims (other than routine claims for benefits) pending, or to the knowledge of
the Company, threatened or anticipated, with respect to any Company Benefit
Plan. No Company Benefit Plan is under audit or investigation by the Internal
Revenue Service, the Department of Labor or the Pension Benefit Guaranty
Corporation, and to the knowledge of the Company, no such audit or investigation
is pending or threatened.
(d) Each Company Benefit Plan intended to qualify under Section 401 of
the Code is, and since its inception has been, so qualified. No circumstances
exist which would adversely affect this qualification. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406 of
ERISA, has occurred with respect to any Company Benefit Plan.
(e) The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (i) constitute an event under any Company
Benefit Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits, or (ii)
result in the triggering or imposition of any restrictions or limitations on the
right of the Company or any of the Subsidiaries to amend or terminate any
Company Benefit Plan.
(f) With respect to each Company Benefit Plan which is a "welfare
plan" (within the meaning of Section 3(1) of ERISA), all claims incurred
(including claims incurred but not reported) thereunder are (i) insured pursuant
to a contract of insurance whereby the insurance company bears any risk of loss
with respect to such
-12-
claims; or (ii) covered under a contract with a health maintenance organization
(an "HMO") pursuant to which the HMO bears the liability for such claims.
---
Section 3.18 Patents, Trademarks, Trade Names, Etc. Schedule 3.18 sets
-------------------------------------
forth, as of the date hereof, all registered United States and foreign patents,
trademarks, trade names, copyrights and applications therefor which are held or
used by the Company and the Subsidiaries (the "Patents, Copyrights and
-----------------------
Trademarks"). Except as set forth in Schedule 3.18, (i) the Company is the sole
----------
owner of the Patents, Copyrights, Trademarks shop rights, inventions,
discoveries, improvements, drawings, designs, patterns, processes, formulae,
trade secrets, proprietary rights and data, ideas and know-how, whether or not
patentable or registrable, owned, used, or held for use by the Tanning Parties
in connection with the Company's business ("Intellectual Property Rights"); (ii)
----------------------------
to the knowledge of the Company, none of the Intellectual Property Rights is
being infringed upon or appropriated by others; (iii) all Patents, Copyrights
and Trademarks have been duly registered or filed in the United States Patent
and Trademark Office or in the appropriate office in other jurisdictions, and
such registrations have been properly maintained and renewed in accordance with
all applicable laws, rules, and regulations and all fees associated therewith
have been paid; (iv) the Company has not received notice of any claim or demand
of any Person pertaining to any prosecution, suit, action or proceeding pending
or threatened, that challenges the exclusive right of the Company to use any of
the Intellectual Property Rights; (v) no aspect of the Intellectual Property
Rights is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency; (vi) the
Company is not engaged in any Litigation, and, to the knowledge of the Company,
no Litigation is threatened, with respect to the use of any of the Intellectual
Property Rights; and (vii) to the knowledge of the Company, the conduct of the
Company and the Subsidiaries as now being conducted does not, and as currently
proposed to be conducted, will not, infringe or otherwise conflict with, any
patents, trademarks, service marks, trade names, copyrights or other
intellectual property or proprietary rights of others.
Section 3.19 Insurance. Schedule 3.19 sets forth, as of the date hereof,
---------
a correct and complete list of all of the material policies of insurance and
fidelity or surety bonds with respect to the Company. All such policies are in
full force and effect, all premiums due and payable thereon have been paid
(other than retroactive or retrospective premium adjustments that are not yet,
but may be, required to be paid with respect to any period ending prior to the
Closing Date), and no notice of cancellation or termination has been received
with respect to any such policy which has not been replaced on substantially
similar terms prior to the date of such cancellation. There are no claims by the
Company or any Subsidiary as to which any insurance company is denying liability
or defending under a reservation of rights or similar causes. The activities and
operations of the Company and the Subsidiaries have been conducted in a manner
so as to conform in all material respects to all applicable provisions of such
insurance policies and, except as set
-13-
forth in Schedule 3.19, proper notice of all known claims that the Company
reasonably believes it has under such insurance policies, has been given to the
providers of such insurance policies.
Section 3.20 New Tanning. New Tanning (i) will be a newly formed
-----------
corporation and will not have (other than the assets and liabilities of the
Company following the Merger and nominal amounts contributed as its initial
capitalization) any assets or liabilities of any kind and (ii) will not have
conducted any business or operations, except in each case as contemplated by
this Agreement.
Section 3.21 Affiliate Matters. No Original Member or other Affiliate of
-----------------
the Company or any Principal has any interest in any property (real or personal,
tangible or intangible) or contract used in or pertaining to the business of the
Company and no Original Member or other Affiliate of the Company or any
Principal has any direct or indirect ownership interest or economic interest in
any Person with which the Company or any Subsidiary competes (except that
Stephen Brobst d/b/a Strategic Technologies & Systems may have competed in the
past with the Company) or with which it has a business relationship. After
giving effect to the Merger, the assets of New Tanning will include all of the
assets necessary to the conduct of the Company's business as presently
conducted.
Section 3.22 Information. To the knowledge of the Company, none of (a)
-----------
this Agreement (including the Schedules and Exhibits hereto), (b) the agreements
(including, without limitation, the Related Agreements), certificates and other
instruments executed and delivered by or on behalf of any of the Tanning Parties
in connection with the execution of this Agreement or the Closing or (c) the
Financial Statements and, when delivered, the Audited Financial Statements
contain (or in the case of the Audited Financial Statements, will contain) any
material misstatement of fact or omit any material fact necessary to be stated
in order to make the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AEA
-------------------------------------
AEA hereby represents and warrants to each of the Tanning Parties as
follows:
Section 4.1 Organization. AEA is a corporation duly organized and validly
------------
existing under the laws of Delaware and has all requisite corporate power and
authority to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as it is now being conducted. AEA is duly qualified
to do business and is in good standing as a foreign corporation in all
jurisdictions where the nature of the property
-14-
owned or leased by it, or the nature of the business conducted by it, makes such
qualification necessary and the absence of such qualification would materially
hinder or impair the consummation of the transactions contemplated hereby.
Section 4.2 Authority. AEA has full power and authority to execute and
---------
deliver this Agreement, to perform all its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by AEA, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary action of AEA. This Agreement
has been duly and validly executed and delivered by AEA and constitutes the
valid and binding obligation of AEA, enforceable against AEA in accordance with
its terms, except to the extent such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws relating to creditors' rights generally and to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
Section 4.3 No Conflicts; Consents. Except as set forth in Schedule 4.3,
----------------------
the execution and delivery by AEA of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate any provision of any
applicable law, rule or regulation to which AEA is subject, (ii) violate any
order, judgment or decree applicable to AEA, or (iii) conflict with, or result
in a breach of or default under, any term or condition of the charters or by-
laws of AEA, except, in each case, as would not hinder or impair the
consummation of the transactions contemplated hereby. No consent, license,
approval, waiver, expiration of waiting period or authorization of, or
registration or declaration with, any Governmental Entity is required to be
obtained or made by AEA in connection with the execution, delivery and
performance by AEA of the transactions contemplated by this Agreement.
Section 4.4 Broker's and Finder's Fee. AEA has not employed any broker,
-------------------------
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement or the Related Agreements that would be entitled
to a broker's, finder's or similar fee or commission in connection therewith.
ARTICLE V
COVENANTS
---------
Each of the Tanning Parties hereby covenants and agrees with AEA as
follows:
Section 5.1 Cooperation by the Company. (a) From the date hereof and
prior to the Closing, the Tanning Parties shall use all reasonable efforts, and
will cooperate with
-15-
AEA, to secure all necessary consents, approvals, authorizations, exemptions and
waivers from third parties as shall be required in order to enable the Tanning
Parties to effect the transactions contemplated hereby (including taking such
actions as may be required to cause the representations and warranties contained
herein to be true and complete), and shall otherwise use all reasonable efforts
to cause the consummation of such transactions in accordance with the terms and
conditions hereof.
(b) Further Assurances. At any time or from time to time after the
------------------
Closing, the Tanning Parties shall execute and deliver any further instruments
or documents and take all such commercially reasonable further action as AEA may
reasonably request in order to consummate the transactions contemplated hereby.
Section 5.2 Conduct of Business. (a) Except as set forth in Schedule 5.2
-------------------
or otherwise expressly permitted by the terms of this Agreement or the Related
Agreements, or except as AEA may otherwise consent to in writing, from the date
hereof to the Closing, the Company and each Subsidiary will, and the Tanning
Parties will cause the Company and each of the Subsidiaries to, (i) in all
material respects, conduct its business only in the ordinary course in
substantially the same manner as presently conducted; (ii) preserve intact its
business organization; (iii) maintain its properties, machinery and equipment in
sufficient operating condition and repair to enable it to conduct its business
in all material respects in the manner in which its business is currently
conducted; (iv) continue all existing insurance policies (or comparable
insurance) in full force and effect; and (v) preserve its relationships with its
suppliers, customers, licensors and licensees and others having business
dealings with the Company and the Subsidiaries.
(b) Except as set forth in Schedule 5.2, or otherwise expressly
permitted by the terms of this Agreement or the Related Agreements, or except as
AEA may otherwise consent to in writing, from the date hereof to the Closing,
the Company and each Subsidiary will not, and the Tanning Parties will cause the
Company and each of the Subsidiaries not to (i) increase the rate or terms of
compensation payable or to become payable by the Company or any of its
Subsidiaries to any of their respective directors, officers, members, managers,
or key employees, or increase the rate or terms of any bonus, pension or other
employee benefit plan covering any of their respective directors, officers,
members, managers, or key employees, except, in each case, increases occurring
in the ordinary course of business in accordance with their respective customary
practices (including normal periodic performance reviews and related
compensation and benefit increases) or as required by any pre-existing Material
Contract; (ii) except as set forth on Schedule 5.2 (which shall describe the
parties' understanding with respect to the distribution of certain accounts
receivable and certain of the Company's accrued profits), declare or pay any
dividend or make any other distribution to its members or stockholders whether
or not in respect of any equity interests; (iii) amend its Operating Agreements,
Articles of Organization, Certificate of Incorporation or by-laws, as
applicable; (iv)
-16-
redeem or otherwise acquire any of its equity interests or issue any equity
interests or any option, warrant or right relating thereto or any securities
convertible into or exchangeable for any equity interests; (v) adopt or amend in
any material respect, any Company Benefit Plan, except as required by law; (vi)
incur or assume any Debt; (vii) permit, allow, or suffer any of its assets to
become subjected to any Lien or other material restriction of any nature; (viii)
settle, compromise or waive any claims or rights of substantial value
(including, without limitation, effecting any settlement or resolution of
matters relating to NexTek); (ix) pay, loan or advance any amount to, or sell,
transfer or lease any assets to, or enter into any agreement or arrangement with
any Original Member, any Affiliate of an Original Member or any Principal; or
(x) agree, whether in writing or otherwise, to do any of the foregoing.
Section 5.3 Access. From the date hereof and prior to the Closing, the
------
Tanning Parties shall provide AEA with such information as AEA may from time to
time reasonably request with respect to the Company and the Subsidiaries and the
transactions contemplated by this Agreement and the Related Agreements and
provide AEA and its representatives reasonable access during regular business
hours and upon reasonable notice to the properties, books and records of the
Company and the Subsidiaries as AEA may from time to time reasonably request.
All such information and access shall be subject to the terms and conditions of
the letter agreement dated October 17, 1996 between AEA and the Company (the
"Confidentiality Agreement").
--------------------------
Section 5.4 No Solicitation. From and after the date hereof, each of the
---------------
Tanning Parties shall not, and shall cause its respective officers, directors,
equity holders, employees and representatives not to, solicit offers, inquiries
or proposals (collectively, "Proposals") from, or disclose information to, or
negotiate or participate in discussions with, others in connection with the
possible sale, transfer or other disposition of all or any part of the Company
or any interest in the Company. The Tanning Parties agree to promptly inform AEA
of the identity of any party making a Proposal or any inquiry relating to a
potential Proposal, and the nature and terms of such Proposal or inquiry, and to
keep AEA informed as to the status thereof.
Section 5.5 Required Notices. At all times prior to the Closing, each of
----------------
the Tanning Parties shall promptly, upon obtaining knowledge thereof, give
written notice to AEA of (i) any facts or circumstances or the occurrence of any
event or the failure of any event to occur, which will, or could reasonably be
expected to, result in a Material Adverse Effect, (ii) any failure by any of the
Tanning Parties to comply in all material respects with any covenant, condition
or agreement contained in this Agreement, (iii) any complaints, investigations,
proceedings or hearings of any Governmental Entity with respect to the Company
or this Agreement, (iv) any institution or threat of institution of any
litigation or similar action or (v) the occurrence of any event which will or
could reasonably be expected to result in the failure by the Tanning Parties to
satisfy any
-17-
condition set forth in Articles VI and VII. During the period from the date of
this Agreement to the Closing Date, the Company and the Original Members will
cause one or more of each of their representatives to be reasonably available to
confer on a regular basis with representatives of AEA to report on the general
status of the ongoing operations of the Company and the Subsidiaries.
Section 5.6 New Tanning. (a) Prior to the Closing Date, the parties agree
-----------
that they will cause New Tanning to be incorporated in the State of Delaware by
causing a certificate of incorporation which reflects the capital structure
described in Exhibit 1 and which is otherwise reasonably acceptable to the
parties to be filed with the Secretary of State of the State of Delaware and by
adopting by-laws reasonably acceptable to the parties.
(b) From the date of its incorporation until the Closing, the Tanning
Parties will cause New Tanning not to take any action whatsoever without the
prior written consent of AEA.
Section 5.7 Merger. The Tanning Parties will take all actions necessary
------
to effect the Merger on or prior to the Closing Date and cause New Tanning to
execute a counterpart signature page to this Agreement.
Section 5.8 Audited Financial Statements. At least three business days
----------------------------
prior to the Closing Date, the Company shall deliver to AEA (a) audited balance
sheets of the Company dated December 31, 1995 and September 30, 1996 and
statements of income and cash flow of the Company for the nine months ending
September 30, 1996, in each case audited by Ernst & Young LLP (the "Audited
-------
Financial Statements") and (b) statements of income and cash flow of the Company
--------------------
for the year ending December 31, 1995, which will be subject to a review report
of Ernst & Young LLP (the "Reviewed Financial Statements"). The Audited
-----------------------------
Financial Statements and the Reviewed Financial Statements will be prepared in
accordance with GAAP and present fairly, in all material respects, the
consolidated financial position of the Company and the Subsidiaries as of their
respective dates, and the results of their consolidated operations and cash
flows for each of the annual periods ended on such dates.
Section 5.9 Related Agreements. The parties shall use all reasonable
------------------
efforts and negotiate in good faith to enter into the following agreements as
promptly as practicable and in any event prior to the Closing Date
(collectively, the "Related Agreements"):
------------------
(a) An Agreement and Plan of Merger (the "Merger Agreement") between
----------------
the Company and New Tanning effecting the Merger in form and substance
reasonably satisfactory to the parties hereto.
-18-
(b) A Shareholders Agreement (the "Shareholders Agreement") among New
----------------------
Tanning, the Original Members and AEA which reflects the terms set forth in
Exhibit 2 and is otherwise reasonably satisfactory to the parties thereto.
(c) Employment Agreements between New Tanning and the employees of New
Tanning listed in Exhibit 3 which reflect the terms set forth in Exhibit 3 and
which are otherwise reasonably satisfactory to such employees, AEA and New
Tanning (the "Employment Agreements").
---------------------
(d) Asset Purchase Agreement (the "Asset Purchase Agreement") between
------------------------
New Tanning and Brobst pursuant to which New Tanning will acquire the assets of
Strategic Technologies & Systems which is reasonably satisfactory to New
Tanning, Brobst and AEA.
ARTICLE VI
CONDITIONS TO AEA'S OBLIGATIONS
-------------------------------
The obligation of AEA to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction (or waiver, where
permissible) at or prior to the Closing of all of the following conditions:
Section 6.1 Representations, Warranties and Covenants of the Tanning
--------------------------------------------------------
Parties. Each of the Tanning Parties shall have complied in all material
-------
respects with all of their agreements and covenants contained herein to be
performed on or prior to the Closing Date, and all the representations and
warranties of the Tanning Parties contained herein shall be true in all material
respects on and as of the Closing Date with the same effect as though made on
and as of the Closing Date. AEA shall have received a certificate executed by
the Tanning Parties, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 6.1.
Section 6.2 No Prohibition. No statute, rule or regulation or order of
--------------
any court or administrative agency shall be in effect which prohibits the
parties from consummating the transactions contemplated hereby.
Section 6.3 Consents. All consents, approvals, authorizations, exemptions
--------
and waivers from any Governmental Entity or any third party that shall be
required in connection with the transactions contemplated hereby, including
those set forth in Schedule 3.7 hereof, shall have been obtained.
Section 6.4 Merger. The Company and New Tanning shall have effected the
------
Merger in accordance with the Merger Agreement.
-19-
Section 6.5 Certificates and Resolutions. AEA shall have received copies,
----------------------------
in form and substance reasonably satisfactory to it, of such certificates of
good standing, board resolutions, officers and secretaries' certificates,
resignations of officers and directors, revocations of powers of attorney and
other documents (including waivers and releases from the Original Members and
the Principals) with respect to the Tanning Parties as AEA or its counsel shall
reasonably request.
Section 6.6 Board Approval. The Board of Directors of AEA Investors Inc.
--------------
shall have approved this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby.
Section 6.7 Shareholders Agreement. New Tanning and each Original Member
----------------------
shall have entered into the Shareholders Agreement.
Section 6.8 Asset Purchase Agreement. Brobst and New Tanning shall have
------------------------
entered into the Asset Purchase Agreement.
Section 6.9 Employment Agreements. The employees listed in Exhibit 3
---------------------
shall have entered into the Employment Agreements.
Section 6.10 Audited Financial Statements. The Audited Financial
----------------------------
Statements and the Reviewed Financial Statements shall have been delivered in
accordance with Section 5.8 and shall not differ materially from the Financial
Statements and shall not otherwise be inconsistent in any material respect with
the information regarding the Company provided by the Tanning Parties or their
representatives to AEA or its Affiliates or representatives.
Section 6.11 Legal Opinion. AEA shall have received an opinion from
-------------
Ireland, Stapleton, Pryor & Pascoe, P.C., addressed to AEA, in form and
substance reasonably satisfactory to AEA.
Section 6.12 Pyramid. Simultaneously with the Closing, AEA shall receive
-------
evidence satisfactory to it that all Liens held by Pyramid Technology
Corporation in Units of the Company shall have been released and discharged.
Section 6.13 New Tanning. New Tanning shall have been formed in
-----------
accordance with Section 5.6(a) pursuant to documentation satisfactory to AEA.
Section 6.14 Counterpart. New Tanning shall have executed the counterpart
-----------
to this Agreement referred to in Section 5.7.
Section 6.15 Confidentiality and Assignment Agreements. The Company shall
-----------------------------------------
have obtained work-made-for-hire and intellectual property assignment agreements
from
-20-
such consultants, and Confidentiality and Assignment Agreements (as defined
on Schedule 3.15(c)) from such employees as AEA and the Company agree are
necessary and appropriate.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE TANNING PARTIES
----------------------------------------------------
The obligation of the Tanning Parties to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver,
where permissible) at or prior to the Closing of all of the following
conditions:
Section 7.1 Representations, Warranties and Covenants of AEA. AEA shall
------------------------------------------------
have complied in all material respects with its agreements and covenants
contained herein to be performed on or prior to the Closing Date, and the
representations and warranties of AEA contained herein shall be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date. The Company shall have received a
certificate executed by or on behalf of AEA, dated as of the Closing Date,
certifying as to the fulfillment of the conditions set forth in this Section
7.1.
Section 7.2 No Prohibition. No statute, rule or regulation or order of
--------------
any court or administrative agency shall be in effect which prohibits the
parties from consummating the transactions contemplated hereby.
Section 7.3 Consents. All consents, approvals, authorizations, exemptions
--------
and waivers from governmental agencies set forth in Schedule 7.3 shall have been
obtained.
Section 7.4 Employment Agreements. New Tanning shall have entered into
---------------------
the Employment Agreements in accordance with Section 5.9(c).
Section 7.5 Shareholders Agreement. AEA shall have entered into the
----------------------
Shareholders Agreement in accordance with Section 5.9(b).
Section 7.6 Related Transaction. The parties shall have agreed on a term
-------------------
sheet for implementing the transaction described in the second numbered
paragraph of the Letter of Intent, dated October 22, 1996, executed in
connection with the transactions contemplated hereby.
-21-
ARTICLE VIII
TERMINATION
-----------
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing,
(a) by the mutual written consent of the parties hereto; or
(b) by either AEA, on the one hand, or the Tanning Parties, on
the other hand, if the Closing shall not have occurred on or before
February 28, 1997.
Section 8.2 Effect on Obligations. Termination of this Agreement pursuant
---------------------
to this Article VIII shall terminate all rights and obligations of the parties
hereunder and none of the parties shall have any liability to the other parties
hereunder, except that Sections 10.2, 10.4 and 10.6, the Confidentiality
Agreement, the last sentence of Section 5.3 and this Section 8.2 shall remain in
effect, and provided that nothing herein shall relieve any party from liability
for any breach of any covenant or agreement in this Agreement prior to such
termination.
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1 Losses. For purposes of this Agreement, the terms "Loss" or
------
"Losses" shall mean each and all of the following items to the extent actually
------
incurred: claims, losses, liabilities, damages, judgments, fines, penalties,
amounts paid in settlement and reasonable costs and expenses incurred in
connection therewith (including, without limitation, interest which is imposed
in connection therewith, costs and expenses of suits and proceedings, and
reasonable fees and disbursements of counsel).
Section 9.2 Indemnification by the Original Members and Principals. (a)
------------------------------------------------------
Subject to Section 9.5, the Original Members and the Principals shall indemnify
and hold harmless AEA, its shareholders and Affiliates, their respective
officers, directors, shareholders, successors and permitted transferees and
assigns from and against any and all Losses based upon, arising out of, or
resulting from, any of the following:
(i) any breach by any of the Tanning Parties of any of the
representations or warranties made by the Tanning Parties in this
Agreement; or
-22-
(ii) any failure by any of the Tanning Parties to perform any of
its covenants or agreements contained in this Agreement.
(b) AEA shall give any notice pursuant to this Article IX (and subject
to the terms of Section 9.4) to each Original Member and Principal. Each of the
Original Members and Principals hereby appoints Wes Light as their
representative for the purpose of administering all indemnity procedures and to
act on behalf of the Original Members and Principals for all purposes of this
Article IX and Section 10.6.
(c) Any obligation of the Original Members or Principals arising under
this Article IX may be satisfied, at the option of the Original Member or
Principal satisfying such obligation, with (x) a Cash Payment, (y) a Stock
Payment, or (z) any combination of a Cash Payment and a Stock Payment.
(d) For purposes of this Article IX, "Cash Payment" shall mean a
------------
payment in an amount equal to the amount of the obligation, or portion thereof,
to be satisfied by such Cash Payment.
(e) For purposes of this Article IX, "Stock Payment" shall mean a
-------------
payment of an amount of common stock of New Tanning the Fair Value of which is
equal to the amount of the obligation, or portion thereof, to be satisfied by
such Stock Payment. For purposes of this Article IX, "Fair Value" of a share of
----------
common stock of New Tanning shall be the per share price paid for the AEA
Shares, pursuant to this Agreement.
(f) For purposes of any indemnification made pursuant to Section
9.2(a)(i), any Loss arising out of a breach of a representation or warranty
contained in Sections 3.1, 3.2, 3.3(b), 3.7, or 3.11(b) to the extent such
representation or warranty relates solely to the status, actions or inaction of
any Principal or Original Member and is made by a Principal or Original Member,
acting on its own behalf and not on behalf of the Company, shall only be the
several (and not joint) obligation of such Original Member or Principal; it
being understood and agreed that indemnification for any other Loss shall be the
joint and several obligation of all of the Tanning Parties (other than the
Company).
Section 9.3 Indemnification by AEA. (a) Subject to Section 9.5, AEA shall
----------------------
indemnify and hold harmless each Original Member, each Principal, successors,
and permitted transferees and assigns from and against any and all Losses based
upon or resulting from any of the following:
(i) any breach by AEA of any of the representations or warranties
made by AEA in this Agreement; or
-23-
(ii) any failure by AEA to perform any of its covenants or
agreements contained in this Agreement.
(b) Any obligation of AEA arising under this Article IX may be
satisfied, at the option of AEA, with (x) a Cash Payment, (y) a Stock Payment or
(z) any combination of a Cash Payment and a Stock Payment.
Section 9.4 Claims. (a) When a party seeking indemnification under
Sections 9.2 or 9.3 (the "Indemnified Party") receives notice of any claims made
-----------------
by third parties ("Third Party Claims") or has any other claim for
-------------------
indemnification other than a Third Party Claim, which is to be the basis for a
claim for indemnification hereunder, the Indemnified Party shall give prompt
written notice thereof to the other party or parties (the "Indemnifying Party")
------------------
reasonably indicating (to the extent known) the nature of such claims and the
basis thereof; provided, however, that failure of the Indemnified Party to give
the Indemnifying Party prompt notice as provided herein shall not relieve the
Indemnifying Party of any of its obligations hereunder unless and only to the
extent that the Indemnifying Party shall have been prejudiced thereby. Upon
notice from the Indemnified Party, the Indemnifying Party may, but shall not be
required to, assume the defense of any such Third Party Claims, including its
compromise or settlement, and the Indemnifying Party shall pay all reasonable
costs and expenses thereof and shall be fully responsible for the outcome
thereof; provided, however, that in such case, the Indemnifying Party shall have
-------- -------
no obligation to pay any further costs or expenses of legal counsel of the
Indemnified Party thereafter incurred in connection with such defense. No
compromise or settlement in respect of any Third Party Claims may be effected by
the Indemnifying Party without the Indemnified Party's prior written consent
(which consent shall not be unreasonably withheld or delayed), unless the sole
relief is monetary damages that are paid in full by the Indemnifying Party (and
satisfactory releases are delivered to the Indemnified Party). The Indemnifying
Party shall give notice to the Indemnified Party as to its intention to assume
the defense of any such Third Party Claims within thirty (30) days after the
date of receipt of the Indemnified Party's notice in respect of such Third Party
Claims. If an Indemnifying Party does not, within thirty (30) days after the
Indemnified Party's notice is given, give notice to the Indemnified Party of its
assumption of the defense of the Third Party Claims, the Indemnifying Party
shall be deemed to have waived rights to control the defense thereof. If the
Indemnified Party assumes the defense of any Third Party Claims because of the
failure of the Indemnifying Party to do so in accordance with this Section 9.4,
it may do so in such reasonable manner as it may deem appropriate, and the
Indemnifying Party shall pay all reasonable costs and expenses of such defense.
The Indemnifying Party shall have no liability with respect to any compromise or
settlement thereof effected without its prior written consent (which consent
shall not be unreasonably withheld or delayed), unless the sole relief granted
was equitable relief for which the Company would have no liability or to which
the Company would not be subject.
-24-
(b) Notwithstanding the foregoing, with respect to any Third Party
Claim that the Indemnifying Party is defending, the Indemnified Party shall have
the right to retain separate counsel to represent it and the Indemnifying Party
shall pay the fees and expenses of such separate counsel if there are conflicts
that make it reasonably necessary for separate counsel to represent the
Indemnified Party and the Indemnifying Party.
Section 9.5 Limitations on Indemnification. (a) The provisions for
------------------------------
indemnity under Sections 9.2(a) and 9.3(a), as the case may be, shall be
effective only when the aggregate amount of all Losses for which indemnification
is sought from the Original Members and the Principals, on the one hand, or AEA,
on the other, under Sections 9.2(a) or 9.3(a), respectively, exceeds $200,000,
in which case the Indemnified Party shall be entitled to indemnification for all
of the Indemnified Party's Losses in excess thereof.
(b) In no event shall the Original Members and the Principals, on the
one hand, or AEA, on the other, be liable for an amount, in the aggregate,
greater than $6,500,000 for all claims made against it under Sections 9.2(a) or
9.3(a), as the case may be.
(c) Notwithstanding the foregoing, Losses arising out of a breach of
Sections 3.13 or 3.17(b) or any intentional failure to perform any covenant or
agreement contained in this Agreement shall be indemnified without regard to
this Section 9.5.
Section 9.6 Exclusive Remedy. Except as expressly provided otherwise in
----------------
this Agreement, following the Closing, the indemnification provisions set forth
in this Article IX shall be the sole and exclusive remedy of the parties hereto
for damages for breaches of representations and warranties and covenants and
other agreements.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1 Survival. All representations and warranties by the parties
--------
herein shall survive the Closing until (and no claim for indemnification in
respect of a breach thereof shall be made following) the earlier of (i) the
approval by the Audit Committee of the Board of Directors of New Tanning of the
audit of the financial statements of the Company and the Subsidiaries for the
fiscal year ended December 31, 1997 or (ii) an initial public offering by New
Tanning, except in all cases with respect to and to the extent of any claims of
which written notice specifying, in reasonable detail (to the extent known), the
nature and amount of the claims has been given by AEA to the Original Members
and the Principals, or by the Original Members and the Principals to AEA, as the
case may be, prior to such expiration, which claims shall survive without
limitation as to time, and except in all cases with respect to losses arising
out of Sections 3.13 and 3.17(b), which shall survive without limitation as
-25-
to time. Nothing in this Agreement is intended to impose any time limitations in
connection with covenants or agreements which are not to be performed at or
prior to the Closing.
Section 10.2 Expenses. Except as otherwise provided herein, each party
--------
hereto shall pay all fees and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby, including fees and expenses
of its accountants and counsel ("Fees and Expenses"); provided however, that the
Purchase Price shall be reduced by the amount of Fees and Expenses incurred by
AEA or on its behalf (such reduction not to exceed $275,000).
Section 10.3 Exclusive Agreement; No Third-Party Beneficiaries. This
-------------------------------------------------
Agreement, the Related Agreements (including the Schedules and all Exhibits
hereto and thereto), and the Confidentiality Agreement constitute the sole
understanding of the parties with respect to the subject matter hereof and any
verbal or written communication between the parties prior to the adoption of
this Agreement shall be deemed merged herein and of no further force and effect.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, express or implied, is intended to confer on any Person other
than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
Section 10.4 Governing Law, Etc. This Agreement shall be construed in
------------------
accordance with and governed by the laws of the State of Delaware applicable to
agreements made and to be performed wholly within such jurisdiction. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America in each case located in the County of New Castle for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in Section 10.8 shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of Delaware or the United States of America in each case
located in the County of New Castle and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
-26-
Section 10.5 Successors and Assigns. The terms and conditions of this
----------------------
Agreement and the Related Agreements shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto;
provided, however, that this Agreement may not be assigned (by operation of law
-------- -------
or otherwise) by any Tanning Party without the prior written consent of AEA, and
any such assignment shall be void and of no force or effect; and provided
further that AEA may, at its election, assign all or part of its rights under
this Agreement (including the right to acquire the AEA Shares) to any Affiliate
of AEA or any related entities formed for the purpose of the transactions
contemplated by this Agreement, but no such assignment of this Agreement or any
of the rights or obligations hereunder shall relieve AEA of any of its
obligations under this Agreement.
Section 10.6 Publicity. No public release or announcement concerning the
---------
transactions contemplated hereby or by the Related Agreements shall be issued by
any party without the prior consent of the other parties hereto (which consent
shall not be unreasonably withheld), except as such release or announcement may
be required by law or the rules or regulations of any United States or foreign
securities exchange, in which case the party required to make the release or
announcement shall give the other parties notice in advance of such issuance.
Section 10.7 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are fulfilled to the greatest extent possible.
Section 10.8 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by any party hereto to any other party shall be in writing
and shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid:
(a) If to any of the Tanning Parties, to:
Tanning Technology Corporation
4600 South Ulster Street, Suite 380
Denver, Colorado 80237
-27-
Attention: Toni Hippeli
Telecopy: 303 220-9958
with a copy to:
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway
Suite 2600
Denver, Colorado 80202
Attention: Susan L. Oakes, Esq.
Telecopy: 303 623-2062
(b) If to AEA, to:
AEA Tanning Investors Inc.
c/o AEA Investors Inc.
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: Christine J. Smith, Esq.
Telecopy: 212 702-0518
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Frederick H. Fogel, Esq.
Telecopy: 212 859-4000
or at such other address for a party as shall be specified by
like notice.
Section 10.9 Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute but one and the same
agreement. Delivery of a photocopy or transmission by telecopy of a signed
signature page of this Agreement shall constitute delivery of such signed
signature page; provided, however, that each party shall provide each other
party an originally executed copy of such signature page as promptly as
practicable.
Section 10.10 Interpretation. When a reference is made in this Agreement
--------------
to Articles, Sections, Schedule or Exhibits, such reference is to an Article or
a Section of, Schedule to, or an Exhibit to, this Agreement, unless otherwise
indicated. The table of
-28-
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be understood to be followed by the words "without
limitation." Whenever used in this Agreement, "to the Company's knowledge" shall
mean the knowledge of Larry Tanning, Stephen Brobst, Toni Hippeli, and Bipin
Agarwal. Whenever used in this Agreement "to the knowledge of an Original
Member" shall mean the knowledge of any shareholder or shareholders of such
Original Member.
Section 10.11 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties.
Section 10.12 Extension; Waiver. At any time the parties may extend the
-----------------
time for the performance of any of the obligations or other acts of the other
parties, waive any inaccuracies in the representations and warranties contained
in this Agreement and waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument signed on
behalf of such party. The waiver by any party hereto of a breach of any
provision hereunder shall not operate to be construed as a waiver of any prior
or subsequent breach of the same or any other provision hereunder.
Section 10.13 Other Transaction Structures. The parties agree to
----------------------------
cooperate and to develop and implement alternative legal structures to those
described in this Agreement and the Related Agreements (including the Merger) if
necessary to address legal, accounting or other considerations, it being
understood that any alternative legal structure shall not alter the economic
rights and obligations of the parties hereto or the commercial substance of the
intended transactions. In particular, if the parties determine that in order to
achieve the result intended to be achieved by the Merger, it is necessary to
cause the Company to merge with and into a Delaware limited liability company
and then cause such Delaware limited liability company to merge with and into
New Tanning, the parties shall effect such transaction. The parties agree that
the terms of this Agreement shall be modified to implement the terms set forth
in Exhibit 4.
-29-
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each
of the parties hereto as of the date first above written.
TANNING TECHNOLOGY GROUP, L.L.C.
/s/ Toni Hippeli
-----------------------------
By: Toni Hippeli
Title: Managing Member
COURTNEY ROSE CORPORATION
/s/ Larry Tanning
-----------------------------
By: Larry Tanning
Title: President
WINSOFT CORPORATION
/s/ Bipin Agarwal
-----------------------------
By: Bipin Agarwal
Title: President
HIPPELI ENTERPRISES, INC.
/s/ Toni Hippeli
------------------------------
By: Toni Hippeli
Title: President
STEPHEN BROBST
/s/ Stephen Brobst *
------------------------------
* Subject to the Letter Agreement dated as of January 29, 1997, among Tanning
Technology Group, L.L.C., a Colorado limited liability, Courtney Rose
Corporation, a Colorado corporation, WinSoft Corporation, a Colorado
corporation, Hippeli Enterprises, Inc., a Colorado corporation, Larry Tanning,
Bipin Agarwal, Toni Hippeli and Stephen Brobst.
-30-
LARRY TANNING
/s/ Larry Tanning
-------------------------------
BIPIN AGARWAL
/s/ Bipin Agarwal
-------------------------------
TONI HIPPELI
/s/ Toni Hippeli
-------------------------------
AEA TANNING INVESTORS INC.
/s/ Henry F. Skelsey
-------------------------------
By: Henry F. Skelsey
Title:
-31-
COUNTERPART TO THE STOCK PURCHASE AGREEMENT
Tanning Technology Corporation, a Delaware corporation, hereby assumes,
as successor to Tanning Technology Group, L.L.C., a Colorado limited liability
company ("TTG"), all the rights and obligations of TTG with respect to the Stock
---
Purchase Agreement and the transactions contemplated thereby, dated December 24,
1996, by and among TTG, Courtney Rose Corporation, a Colorado Corporation
("Courtney"), WinSoft Corporation, a Colorado corporation ("WinSoft"), Hippeli
---------- -------
Enterprises, Inc., a Colorado corporation ("Hippeli"), Stephen Brobst, Larry
-------
Tanning, Bipin Agarwal, Toni Hippeli and AEA Tanning Investors Inc., a Delaware
corporation ("AEA"), as supplemented by the Letter Agreement, dated January 29,
---
1997, by and among TTG, Courtney, WinSoft, Hippeli, Stephen Brobst, Larry
Tanning, Bipin Agarwal, Toni Hippeli and AEA.
TANNING TECHNOLOGY CORPORATION
/s/ Larry G. Tanning
------------------------------------
By: Larry G. Tanning
Title: President
-32-
Exhibit 1
---------
Principal terms of Capitalization of New Tanning
------------------------------------------------
New Tanning will be structured with three classes of capital stock
(classes A, B, and C). The Original Members will hold the A Shares, which will
have (prior to the exercise of any options) 68% of the vote and profits; AEA
will hold the B Shares (the "AEA Shares," as defined in the Stock Purchase
Agreement) which will have (prior to the exercise of any options) 32% of the
vote and profits; and, upon the exercise of the options, the option holders will
receive the C Shares (which will not be voting shares). Upon liquidation,
dissolution, disposition of all or substantially all of the stock or assets of
New Tanning or similar transactions, the B Shares will receive the first $13
million, then the A Shares will receive the next $27,625,000, then, if any C
Shares are outstanding, they will receive the amount paid for such C Shares, and
next, all classes will share pro-rata.
-33-
Exhibit 2
---------
Principal Terms of the Shareholders Agreement
---------------------------------------------
1. Parties. New Tanning, the Original Members and AEA.
-------
2. Principal Terms.
---------------
2.1 Governance. Management decisions will be made by a majority of the
----------
Board of Directors. Board representation will be proportionate to
ownership interest (i.e. AEA will have the right to appoint 1/3 of the
----
board members). Notwithstanding the foregoing, the following actions
would require the approval of a majority of the Board, including at
least one AEA director:
. Acquisitions or dispositions of assets or operations outside the
ordinary course; dissolution, liquidation, mergers or other
extraordinary transactions.
. The issuance of private or public equity or public debt of New
Tanning.
. The incurrence by New Tanning of significant indebtedness ($5
million or more).
. Any related party transactions (including employment agreements
with any 5% equity holders or affiliates of 5% equity holders).
. Any material change in management (including appointment or removal
of senior management) or compensation arrangements.
. Amendments or modifications to New Tanning's governing documents or
terms of securities or other interests.
. Any declaration of dividends or other distributions (including
redemptions of stock).
. Other corporate actions of similar significance outside the
ordinary course.
2.2 Information.
-----------
-34-
. New Tanning will provide annual and monthly financial statements to
AEA in a form satisfactory to AEA, together with annual budgets and
operating plans (including balance sheets and statements of cash
flows).
. New Tanning will provide AEA access to New Tanning's books and
records.
2.3 Committees. AEA will have the right to designate one member on each
----------
committee of the Board.
2.4 Transfer. No equity holder will be permitted to transfer (directly or
--------
indirectly) its interest in New Tanning without the approval of the
holders of 80% of the voting shares (including the transferor) of the
equity interests in New Tanning. "Tag along" rights (which grant to
all shareholders the right to participate, pro rata, in any transfer)
and "drag along" rights (which provide that if shareholders holding
80% of the shares choose to sell at least substantially all of the
shares they own, they can require the other shareholders to sell the
same percentage of their shares) would apply to any such approved
sale.
2.5 Registration Rights.
-------------------
. AEA will have the right to one demand registration right in each 12
month period beginning on the 24 month anniversary of the Closing.
This right includes the right to require a primary IPO by New
Tanning, as well as the right to demand registration of shares held
by the AEA investor participants.
. AEA and the Original Members will have customary "piggy-back" and
S-3 registration rights.
. Piggy-back and S-3 registration rights will be subject to standard
marketability restrictions.
-35-
Exhibit 3
---------
Principal terms of Employment Agreements
----------------------------------------
1. Parties. New Tanning and the following employees of New Tanning:
-------
Larry Tanning
Bipin Agarwal
2. Principal Terms.
---------------
2.1 Term -- 3 years.
----
2.2 Compensation -- base salary plus bonus structure as well as bonuses at
------------
Closing as set forth on Schedule 1.
2.3 Benefits -- to be agreed.
--------
2.4 Exclusivity -- during the term, the employee shall devote his full
-----------
business efforts and time to New Tanning and shall not render services
to any other person or entity without the prior written consent of the
Board of Directors.
2.5 Non-Competition; Non-Solicitation -- will contain standard non-
---------------------------------
competition and non-solicitation provisions covering the term of the
Agreement.
2.6 Confidentiality; Trade Secrets -- Confidentiality/trade secret
------------------------------
provisions will conform to those contained in the the Company's form
"Employment, Confidentiality and Non-Competition" agreement.
2.7 Termination -- if terminated without cause, employee entitled to
-----------
receive base salary over remainder of the term.
-36-
Exhibit 4
---------
Transaction Modification Term Sheet
-----------------------------------
The parties agree that the terms of the Stock Purchase Agreement to
which this Exhibit is attached shall be modified to implement the terms set
forth below:
1. At the Closing, AEA will purchase 9/13 of the AEA Shares (the "Initial AEA
Shares") for $9,000,000 in cash.
2. AEA will purchase up to $4,000,000 of current accounts receivable of the
Company (valued at face) (the "Accounts Receivable") from the Original
Members.
3. The Company will act as the collection agent to collect the Accounts
Receivable on AEA's behalf.
4. AEA shall purchase the 4/13 of the AEA Shares which it did not purchase on
the Closing Date (the "Remaining AEA Shares") at a date no later than the
four month anniversary of the Closing Date (which, at AEA's option, may be
any earlier date after the Closing Date) for cash and Accounts Receivable
(valued at face) equal to $4,000,000. The Remaining AEA Shares shall be
purchased on the same terms and conditions as the Initial AEA Shares.
-37-
Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘S-1/A’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 6/25/99 | | | | | | | None on these Dates |
| | 12/31/97 | | 34 |
| | 2/28/97 | | 31 |
| | 1/29/97 | | 39 |
| | 1/24/97 | | 11 |
| | 12/24/96 | | 1 | | 41 |
| | 10/22/96 | | 30 |
| | 10/17/96 | | 26 |
| | 9/30/96 | | 15 | | 27 |
| | 12/31/95 | | 15 | | 27 |
| List all Filings |
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Filing Submission 0000950130-99-003819 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
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