Attached files
EXHIBIT 10.1
EXECUTION COPY
SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
SOUTH BEACH SPIRITS, INC.,
ST. MARTIN POWERBOATS, LLC,
AND
PAUL SPIVAK, THE SOLE MEMBER OF ST. MARTIN POWERBOATS, LLC
DATED AS OF: JUNE 8, 2016
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT (the "AGREEMENT"), dated as of June 8,
2016, is made by and among SOUTH BEACH SPIRITS, INC., a Nevada corporation
("SBES"), ST. MARTIN POWERBOATS, LLC, an Ohio limited liability company ("SMP")
and PAUL SPIVAK, the sole member of SMP (the "MEMBER"). Each of SBES, SMP and
the Member are referred to herein individually, as a "PARTY" and collectively,
as the "PARTIES."
RECITALS
WHEREAS, the Member owns one hundred percent (100%) of the issued and
outstanding limited liability company membership interests in SMP (the "SMP
INTERESTS"); and
WHEREAS, the Member has agreed to sell, transfer, assign, convey and
deliver the SMP Interests to SBES, and SBES has agreed to acquire the SMP
Interests from the Member in SMP in exchange for the issuance to the Member of
such number of "restricted" shares of common stock of SBES (the "SBES SHARES"),
which gives the Member fifty-one percent (51%) of the issued and outstanding
common stock of SBES after consummation of the transactions contemplated hereby,
all on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and the
covenants, representations and warranties set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and accepted, the Parties, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of and under this Agreement, the following terms shall have the
following respective meanings:
"ACCREDITED INVESTOR" has the meaning set forth in Rule 501(a) under the
Securities Act.
"ACTION" means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened before or by any court, arbitrator, governmental or administrative
agency, regulatory authority (federal, state, county, local or foreign), stock
market, stock exchange or trading facility.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"AGREEMENT" has the meaning set forth in the preamble.
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"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in Miami, Florida are generally closed for business.
"CLOSING" has the meaning set forth in SECTION 2.2.
"CLOSING DATE" has the meaning set forth in SECTION 2.2. "CODE" means the
Internal Revenue Code of 1986, as amended.
"CONTRACT" means any written or oral contract, lease, license, indenture,
note, bond, agreement, arrangement, understanding, permit, concession, franchise
or other instrument.
"DAMAGES" has the meaning set forth in SECTION 11.2.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 4.18.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same will then be in effect
"GAAP" means, with respect to any Person, generally accepted accounting
principles in the U.S. applied on a consistent basis with such Person's past
practices.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign, federal or
national, state or provincial, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission,
department, board, bureau, agency or instrumentality, political subdivision,
commission, court, tribunal, official, arbitrator or arbitral body.
"HAZARDOUS MATERIALS" has the meaning set forth in SECTION 4.18.
"INDEBTEDNESS" means without duplication, (a) all indebtedness or other
obligation of the Person for borrowed money, whether current, short-term, or
long-term, secured or unsecured; (b) all indebtedness of the Person for the
deferred purchase price for purchases of property outside the Ordinary Course of
Business; (c) all lease obligations of the Person under leases which are capital
leases in accordance with GAAP; (d) any off-balance sheet financing of the
Person including synthetic leases and project financing; (e) any payment
obligations of the Person in respect of banker's acceptances or letters of
credit (other than stand-by letters of credit in support of ordinary course
trade payables); (f) any liability of the Person with respect to interest rate
swaps, collars, caps and similar hedging obligations; (g) any liability of the
Person under deferred compensation plans, phantom stock plans, severance or
bonus plans, or similar arrangements made payable as a result of the
transactions contemplated herein; (h) any indebtedness referred to in clauses
(a) through (g) above of any other Person which is either guaranteed by, or
secured by a security interest upon any property owned by, the Person; and (i)
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accrued and unpaid interest of, and prepayment premiums, penalties or similar
contractual charges arising as result of the discharge at Closing of, any such
foregoing obligation.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 11.3.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 11.3.
"INTELLECTUAL PROPERTY" means all industrial and intellectual property,
including, without limitation, all U.S. and non-U.S. patents, patent
applications, patent rights, trademarks, trademark applications, common law
trademarks, Internet domain names, trade names, service marks, service mark
applications, common law service marks, and the goodwill associated therewith,
copyrights, in both published and unpublished works, whether registered or
unregistered, copyright applications, franchises, licenses, know-how, trade
secrets, technical data, designs, customer lists, confidential and proprietary
information, processes and formulae, all computer software programs or
applications, layouts, inventions, development tools and all documentation and
media constituting, describing or relating to the above, including manuals,
memoranda, and records, whether such intellectual property has been created,
applied for or obtained anywhere throughout the world.
"KNOWLEDGE" shall mean, except as otherwise explicitly provided herein,
actual knowledge after reasonable investigation. SBES and SMP shall be deemed to
have "Knowledge" of a matter if any of its officers, directors, managers,
members or employees has Knowledge of such matter.
"LAWS" means, with respect to any Person, any U.S. or non-U.S., federal,
national, state, provincial, local, municipal, international, multinational or
other Law (including common law), constitution, statute, code, ordinance, rule,
regulation or treaty applicable to such Person.
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"LICENSE" means any security clearance, permit, license, variance,
franchise, Order, approval, consent, certificate, registration or other
authorization of any Governmental Authority or regulatory body, and other
similar rights.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction and including any lien or charge arising by Law.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a material
adverse effect on the business, financial condition, operations, results of
operations, assets, customer, supplier or employee relations or future prospects
of such Person.
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"MEMBER" has the meaning set forth in the preamble.
"ORDER" means any order, judgment, ruling, injunction, assessment, award,
decree or writ of any Governmental Authority or regulatory body.
"OPERATING AGREEMENT" has the meaning set forth in SECTION 4.6.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" and "PARTIES" have the respective meanings set forth in the
preamble.
"PERSON" means all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures and other entities, governments, agencies and political subdivisions.
"PRINCIPAL MARKET" means the OTCPink Market.
"SBES" has the meaning set forth in the preamble.
"SBES INDEMNIFIED PARTIES" means SBES and its respective Affiliates and the
officers, directors, employees, attorneys and agents of such Persons.
"SBES MOST RECENT FISCAL YEAR END" means February 28, 2016.
"SBES ORGANIZATIONAL DOCUMENTS" has the meaning set forth in SECTION 5.6.
"SBES SHARES" has the meaning set forth in the recitals.
"SEC" means the U.S. Securities and Exchange Commission, or any successor
agency thereto.
"SEC REPORTS" has the meaning set forth in SECTION 5.18.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same will be in effect at the time.
"SMP" has the meaning set forth in the preamble.
"SMP DISCLOSURE SCHEDULE" has the meaning set forth in ARTICLE IV.
"SMP INDEMNIFIED PARTIES" means SMP and the Members and their respective
Affiliates and the officers, managers, employees, attorneys and agents of such
Persons.
"SMP INTERESTS" has the meaning set forth in the Recitals.
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"SMP MOST RECENT FISCAL YEAR END" means December 31, 2015.
"SMP ORGANIZATIONAL DOCUMENTS" has the meaning set forth in SECTION 4.6.
"TAX RETURN" means all returns, declarations, reports, estimates,
statements, forms and other documents filed with or supplied to or required to
be provided to a Governmental Authority with respect to Taxes, including any
schedule or attachment thereto and any amendment thereof.
"TAX" or "TAXES" means all taxes, assessments, duties, levies or other
charge imposed by any Governmental Authority of any kind whatsoever together
with any interest, penalties, fines or additions thereto and any liability for
payment of taxes whether as a result of (i) being a member of an affiliated,
consolidated, combined, unitary or similar group for any period, (ii) any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any Person, (iii) being liable for another
Person's taxes as a transferee or successor otherwise for any period, or (iv)
operation of Law.
"THIRD PARTY" has the meaning set forth in SECTION 11.4(A).
"TRANSACTION DOCUMENTS" means, collectively, this Agreement and all
agreements, certificates, instruments and other documents to be executed and
delivered in connection with the transactions contemplated by this Agreement.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"U.S." means the United States of America.
ARTICLE II
SECURITIES EXCHANGE; CLOSING
SECTION 2.1 SECURITIES EXCHANGE. At Closing, the Member shall sell,
transfer, convey, assign and deliver the SMP Interests, representing one hundred
percent (100%) all of the issued and outstanding limited liability company
membership interests in SMP, to SBES, and in consideration therefor, subject to
SECTION 2.2, SBES shall issue the SBES Shares, representing fifty-one percent
(51%) of the issued and outstanding shares of SBES common stock after giving
effect to consummation of the transactions contemplated hereby, to the Member.
SECTION 2.2 CLOSING. Upon the terms and subject to the conditions of this
Agreement, the transactions contemplated by this Agreement shall take place at a
closing (the "CLOSING") to be held by electronic or overnight courier exchange
of documents on a date agreed to by the Parties, which shall be within (5)
Business Days after satisfaction of all of the conditions to closing set forth
herein. The date the Closing occurs is referred to herein as the "CLOSING DATE."
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SECTION 2.3 CLOSING DELIVERIES BY SBES. At Closing, SBES shall deliver, or
cause to be delivered to the Member, as applicable, (a) certificates evidencing
the SBES Shares registered in the name of the Member; (b) the resignations of
Martin Ustin and Vincent Prince as directors and executive officers of SBES; (c)
the appointment of the Member as the sole director of SBES; (d) a letter from
each of Martin Ustin and Vincent Prince terminating the employment and
consulting agreements between SBES and them and/or their Affiliates and waiving
the right to receive any and all accrued but unpaid compensation thereunder; and
(e) such other customary closing documents and certificates as SMP and the
Member or their counsel may reasonably request
SECTION 2.4 CLOSING DELIVERIES BY SMP AND MEMBERS. At Closing, SMP and the
Member, as applicable, shall deliver, or cause to be delivered to SBES, (a) an
executed transfer power in form and substance satisfactory to SBES and its
counsel, selling, transferring, assigning, conveying and delivering title
thereto to SBES; and (b) such other customary closing documents and certificates
as SBES or its counsel may reasonably request.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MEMBER
The Member hereby represents and warrants to SBES that the statements made
in this ARTICLE III are correct and complete as of the date of this Agreement
and as of the Closing Date (except where another date or period of time is
specifically stated herein for a representation or warranty).
SECTION 3.1 AUTHORITY. The Member has all requisite authority and power to
enter into and deliver this Agreement and any of the other Transaction Documents
to which the Member is a party, and any other certificate, agreement, document
or instrument to be executed and delivered by the Member in connection with the
transactions contemplated hereby and thereby and to perform his, hers or its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. This Agreement has been, and each of the
Transaction Documents to which such Member is a party will be, duly and validly
authorized and approved, executed and delivered by the Member.
SECTION 3.2 BINDING OBLIGATIONS. Assuming this Agreement and the
Transaction Documents have been duly and validly authorized, executed and
delivered by the parties hereto and thereto other than the Member, this
Agreement and each of the Transaction Documents to which the Member is a party
are duly authorized, executed and delivered by the Member, and constitutes the
legal, valid and binding obligations of the Member, enforceable against the
Member in accordance with their respective terms, except as such enforcement is
limited by general equitable principles, or by bankruptcy, insolvency and other
similar Laws affecting the enforcement of creditors rights generally.
SECTION 3.3 NO CONFLICTS. Neither the execution or delivery by the Member
of this Agreement or any Transaction Document to which the Member is a party,
nor the consummation or performance by the Member of the transactions
contemplated hereby or thereby will, directly or indirectly, (a) contravene,
conflict with, constitute a default (or an event or condition which, with notice
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or lapse of time or both, would constitute a default) under, or result in the
termination or acceleration of, any agreement or instrument to which the Member
is a party or by which the properties or assets of the Member are bound; or (b)
contravene, conflict with, result in any breach of, or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, impair the rights of the Member under, or alter the obligations of any
Person under, or create in any Person the right to terminate, amend, accelerate
or cancel, or require any notice, report or other filing (whether with a
Governmental Authority or any other Person) pursuant to, or result in the
creation of a Lien on any of the assets or properties of SMP under, any note,
bond, mortgage, indenture, Contract, License, permit, franchise or other
instrument or obligation to which the Member is a party or any of the Member's
assets and properties are bound or affected, except for any such contraventions,
conflicts, violations, or other occurrences as could not reasonably be expected
to have a Material Adverse Effect on the Member.
SECTION 3.4 OWNERSHIP OF SMP INTERESTS. The Member owns, of record and
beneficially, and has good, valid and indefeasible title to and the right to
transfer to SBES pursuant to this Agreement, the SMP Interests, free and clear
of any and all Liens. There are no options, rights, voting trusts, shareholder
agreements or any other Contracts or understandings to which the Member is a
party or by which the Member or the SMP Interests are bound with respect to the
issuance, sale, transfer, voting or registration of the SMP Interests. At the
Closing Date, SBES will acquire good, valid and marketable title to the SMP
Interests free and clear of any and all Liens.
SECTION 3.5 CERTAIN PROCEEDINGS. There is no Action pending against, or to
the Knowledge of the Member, threatened against or affecting, the Member by any
Governmental Authority or other Person with respect to the Member that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the transactions contemplated by this
Agreement.
SECTION 3.6 NO BROKERS OR FINDERS. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against the
Member for any SEC, fee or other compensation as a finder or broker, or in any
similar capacity, based upon arrangements made by or on behalf of the Member and
the Member will indemnify and hold SBES harmless against any liability or
expense arising out of, or in connection with, any such claim.
SECTION 3.7 INVESTMENT REPRESENTATIONS.
(A) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Member is acquiring the SBES
Shares proposed to be acquired hereunder for investment for the Member's own
account and not with a view to the resale or distribution of any part thereof,
and the Member has no present intention of selling or otherwise distributing
such SBES Shares, except in compliance with applicable securities Laws.
(B) RESTRICTED SECURITIES. The Member understands that the SBES Shares are
characterized as "RESTRICTED SECURITIES" under the Securities Act inasmuch as
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this Agreement contemplates that, if acquired by the Member pursuant hereto, the
SBES Shares would be acquired in a transaction not involving a public offering.
The issuance of the SBES Shares hereunder is being effected in reliance upon an
exemption from registration afforded under Section 4(a)(2) of the Securities
Act. The Member further acknowledges that if the SBES Shares are issued to the
Member in accordance with the provisions of this Agreement, the SBES Shares may
not be resold without registration under the Securities Act or the existence of
an exemption therefrom. The Member represents that he is familiar with Rule 144
promulgated under the Securities Act, as presently in effect, and understands
the resale limitations imposed thereby, and specifically those in subparagraph
(i) thereof, and by the Securities Act.
(C) ACKNOWLEDGMENT OF NON-REGISTRATION.The Member understands and agrees
that the SBES Shares to be issued pursuant to this Agreement have not been
registered under the Securities Act or the securities Laws of any state of the
U.S.
(D) STATUS. By executing of this Agreement, the Member represents and
warrants to SBES that the Member is an Accredited Investor. The Member
understands that the SBES Shares are being offered and sold to the Member in
reliance upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Members set forth in this
Agreement, in order that SBES may determine the applicability and availability
of the exemptions from registration of the SBES Shares on which SBES is relying.
(E) ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. The Member (i)
consents to the placement of a legend on any certificate or other document
evidencing the SBES Shares substantially in the form set forth in SECTION
3.8(A); (ii) has sufficient knowledge and experience in finance, securities,
investments and other business matters to be able to protect his interests in
connection with the transactions contemplated by this Agreement; (iii) has
consulted, to the extent that he has deemed necessary, with his tax, legal,
accounting and financial advisors concerning its acquisition of the SBES Shares
and can afford to bear such risks for an indefinite period of time, including,
without limitation, the risk of losing its entire investment in the SBES Shares;
(iv) has had access to the SEC Reports; (vi) has been furnished during the
course of the transactions contemplated by this Agreement with all other public
information regarding SBES that such the Member has requested and all such
public information is sufficient for the Member to evaluate the risks of
acquiring the SBES Shares; (vii) has been afforded the opportunity to ask
questions of and receive answers concerning SBES and the terms and conditions of
the issuance of the SBES Shares; (viii) is not relying on any representations
and warranties concerning SBES made by SBES or any officer, employee or agent of
SBES, other than those contained in this Agreement or the SEC Reports; (ix) will
not sell or otherwise transfer the SBES Shares, unless either (A) the transfer
of the SBES Shares is registered under the Securities Act; or (B) an exemption
from registration of the SBES Shares is available; (x) understands and
acknowledges that SBES is under no obligation to register the SBES Shares for
sale under the Securities Act; (xi) represents and warrants that the address
furnished to SBES is the principal residence of the Member; (xii) understands
and acknowledges that the SBES Shares have not been recommended by any federal
or state securities commission or regulatory authority, that the foregoing
authorities have not confirmed the accuracy or determined the adequacy of any
information concerning SBES that has been supplied to the Member and that any
representation to the contrary is a criminal offense; and (xiii) acknowledges
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that the representations, warranties and agreements made by the Member herein
shall survive the execution and delivery of this Agreement and the acquisition
of the SBES Shares.
(F) CONSENT. The Member understands and acknowledges that SBES may refuse
to transfer the SBES Shares, unless the Member complies with SECTION 3.7 and any
other restrictions on transferability set forth herein. The Member consents to
SBES making a notation on its records or giving instructions to any transfer
agent of SBES Shares in order to implement the restrictions on transfer of the
SBES Shares.
SECTION 3.8 STOCK LEGENDS. The Member hereby agrees with SBES as follows:
(a) The certificates evidencing the SBES Shares and each certificate issued
in transfer thereof, will bear the following or similar legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
(b) The certificates representing the SBES Shares, and each certificate
issued in transfer thereof, will also bear any other legend required under any
applicable Law, including, without limitation, any state corporate and state
securities Law, or Contract.
SECTION 3.9 DISCLOSURE. No representation or warranty of the Member
contained in this Agreement or any other Transaction Document and no statement
or disclosure made by or on behalf of the Member to SBES pursuant to this
Agreement or any other agreement contemplated herein contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SMP
SMP hereby represents and warrants to SBES, subject to the exceptions and
qualifications specifically set forth or disclosed in writing in the disclosure
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schedule delivered by SMP and the Member to SBES simultaneously herewith (the
"SMP DISCLOSURE SCHEDULE") that the statements contained in this ARTICLE IV are
correct and complete as of the date of this Agreement and as of the Closing Date
(except where another date or period of time is specifically stated herein for a
representation or warranty).
SECTION 4.1 ORGANIZATION AND QUALIFICATION. SMP is a limited liability
company duly organized, validly existing and in good standing under the Laws of
the jurisdiction of its incorporation or organization, has all requisite
corporate authority and power, Licenses, authorizations, consents and approvals
to carry on its business as presently conducted and to own, hold and operate its
properties and assets as now owned, held and operated by it, and is duly
qualified to do business and in good standing in each jurisdiction in which the
failure to be so qualified would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect on SMP.
SECTION 4.2 AUTHORITY. SMP has have all requisite authority and power (as a
limited liability company and otherwise), Licenses, authorizations, consents and
approvals to enter into and deliver this Agreement and any of the other
Transaction Documents to which SMP is a party and any other certificate,
agreement, document or instrument to be executed and delivered by SMP in
connection with the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents by SMP and the performance by SMP of its
obligations hereunder and thereunder and the consummation by SMP of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of SMP. SMP does not need to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
Person or Governmental Authority in order for the Parties to execute, deliver or
perform this Agreement or the transactions contemplated hereby. This Agreement
has been, and each of the Transaction Documents to which SMP is a party will be,
duly and validly authorized and approved, executed and delivered by SMP.
SECTION 4.3 BINDING OBLIGATIONS. Assuming this Agreement and the
Transaction Documents have been duly and validly authorized, executed and
delivered by the parties hereto and thereto other than SMP, this Agreement and
each of the Transaction Documents to which SMP is a party are duly authorized,
executed and delivered by SMP and constitutes the legal, valid and binding
obligations of SMP enforceable against SMP in accordance with their respective
terms, except as such enforcement is limited by general equitable principles, or
by bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
SECTION 4.4 NO CONFLICTS. Neither the execution nor the delivery by SMP of
this Agreement or any Transaction Document to which SMP is a party, nor the
consummation or performance by SMP of the transactions contemplated hereby or
thereby will, directly or indirectly, (a) contravene, conflict with, or result
in a violation of any provision of the SMP Organizational Documents; (b)
contravene, conflict with or result in a violation of any Law, Order, charge or
other restriction or decree applicable to SMP, or by which SMP or any of its
respective assets and properties are bound or affected, including without
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limitation, applicable rules and regulations of the TTB relating to reporting
requirements, product and label registrations and other distillery operations;
(c) contravene, conflict with, result in any breach of, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, impair the rights of SMP under, or alter the obligations of any Person
under, or create in any Person the right to terminate, amend, accelerate or
cancel, or require any notice, report or other filing (whether with a
Governmental Authority or any other Person) pursuant to, or result in the
creation of a Lien on any of the assets or properties of SMP under, any note,
bond, mortgage, indenture, Contract, License, permit, franchise or other
instrument or obligation to which SMP is a party or by which SMP or any of its
respective assets and properties are bound or affected; or (d) contravene,
conflict with, or result in a violation of, the terms or requirements of, or
give any Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any licenses, permits, authorizations, approvals,
franchises or other rights held by SMP or that otherwise relate to the business
of, or any of the properties or assets owned or used by, SMP, except, in the
case of clauses (b), (c) or (d), for any such contraventions, conflicts,
violations, or other occurrences as would not have a Material Adverse Effect on
SMP.
SECTION 4.5 SUBSIDIARIES. SMP does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise. There are no Contracts or other
obligations (contingent or otherwise) of SMP to retire, repurchase, redeem or
otherwise acquire any outstanding shares of capital stock of, or other ownership
interests in, any other Person or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any other Person.
SECTION 4.6 ORGANIZATIONAL DOCUMENTS. SMP has delivered or made available
to SBES true and correct copies of the Articles of Organization and limited
liability company operating agreement of SMP (the "OPERATING AGREEMENT") and any
other organizational documents of SMP, each as amended, and each such instrument
is in full force and effect (the "SMP ORGANIZATIONAL DOCUMENTS"). SMP is not in
violation of any of the provisions of the SMP Organizational Documents.
SECTION 4.7 CAPITALIZATION. Except for the SMP Interests, no limited
liability company membership interests or other securities of SMP were issued,
reserved for issuance or outstanding. Except as set forth in the Operating
Agreement or as contemplated by this Agreement, there are no options, warrants,
rights, convertible or exchangeable securities, commitments, Contracts,
arrangements or undertakings of any kind to which SMP or any of its members is a
party or by which it or they are bound (a) obligating SMP to issue, deliver or
sell, or cause to be issued, delivered or sold, equity or profit interests in,
or any security convertible or exercisable for or exchangeable into an equity or
profit interest in, SMP; (b) obligating SMP to issue, grant, extend or enter
into any such option, warrant, call, right, security, commitment, Contract,
arrangement or undertaking; or (c) that give any Person the right to receive any
economic benefit or right similar to or derived from the economic benefits and
rights occurring to holders of the capital stock of SMP. There are no (x)
outstanding purchase options, call options, rights of first refusal, preemptive
rights, subscription right or any similar rights relating to securities of SMP;
or (y) Contracts or other obligations of SMP to repurchase, redeem or otherwise
acquire any securities of SMP.
12
SECTION 4.8 NO BROKERS OR FINDERS. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against SMP
for any commission, fee or other compensation as a finder or broker, or in any
similar capacity, based upon arrangements made by or on behalf of SMP, and SMP
will indemnify and hold SBES harmless against any liability or expense arising
out of, or in connection with, any such claim.
SECTION 4.9 COMPLIANCE WITH LAWS. The business and operations of SMP have
been and are being conducted in accordance with all applicable Laws and Orders.
SMP is not conflict with, or in default or violation of and, to the Knowledge of
SMP, is not under investigation with respect to and has not been threatened to
be charged with or given notice of any violation of or default under, any (a)
Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage,
indenture, Contract, License, permit, franchise or other instrument or
obligation to which SMP is a party or by which SMP or any of its assets and
properties are bound or affected. There is no agreement, judgment or Order
binding upon SMP which has, or could reasonably be expected to have, the effect
of prohibiting or materially impairing any business practice of SMP or the
conduct of business by SMP as currently conducted. SMP has filed all forms,
reports and documents required to be filed with any Governmental Authority and
SMP has made available such forms, reports and documents to SBES. As of their
respective dates, such forms, reports and documents complied in all material
respects with the applicable requirements pertaining thereto and none of such
forms, reports and documents contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
SECTION 4.10 CERTAIN PROCEEDINGS. There is no Action pending against, or to
the Knowledge of SMP, threatened against or affecting, SMP by any Governmental
Authority or other Person with respect to SMP or its business or that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the transactions contemplated by this
Agreement. SMP, or to the Knowledge of SMP, has not been a party to any material
litigation or, within the past two (2) years, the subject of any threat of
material litigation (litigation shall be deemed "MATERIAL" if the amount at
issue exceeds the lesser of $10,000 per matter or $25,000 in the aggregate). SMP
is not in violation of and, to the Knowledge of SMP and the Members, is not
under investigation with respect to and has not been threatened to be charged
with or given notice of any violation of, any applicable Law, rule, regulation,
judgment or Order. Neither SMP nor any past or present manager or officer (in
his or her capacity as such) or Affiliate, is or has been the subject of any
civil, criminal, or administrative Action involving a claim or violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. Neither SMP nor any past or present manager or officer (in his
or her capacity as such) or Affiliate, have any reason to believe that they will
be the subject of any civil, criminal, or administrative Action involving a
claim or violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. Neither SMP nor any past or present manager
or officer (in his or her capacity as such) or affiliate, have any reason to
believe that they will be the subject of any civil, criminal, or administrative
Action brought by any federal or state agency.
13
SECTION 4.11 CONTRACTS. Except as set forth in SECTION 4.11 of the SMP
Disclosure Schedule, there are no Contracts that are material to the business,
properties, assets, condition (financial or otherwise), results of operations or
prospects of SMP. SMP is not in violation of or in default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause such a violation of or default under) any Contract to which it is a party
or to which it or any of its properties or assets is subject, except for
violations or defaults that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect of SMP.
SECTION 4.12 FINANCIAL STATEMENTS AND TAX MATTERS.
(A) FINANCIAL STATEMENTS; BOOKS AND RECORDS; ACCOUNTS RECEIVABLE.
(i) SMP has delivered to SBES the financial statements attached as SECTION
4.12 of the SMP Disclosure Schedule s SECTION 4.12 of the SMP Disclosure
Schedule (the "SMP FINANCIAL STATEMENTS"). The SMP Financial Statements have
been prepared on an accrual basis and fairly present in all material respects
the financial position of SMP as of and for the dates thereof and the results of
operations for the periods then ended. Within seventy (70) days of the Closing
Date, the Member shall cause to be delivered to SBES, for filing as part of an
amendment to SBES's Current Report on Form 8-K with respect to the transactions
contemplated by this Agreement, audited annual and unaudited interim financial
statements of SMP, for the periods and meeting the applicable accounting
requirements of the SEC, as provided in the instructions to Current Report on
Form 8-K.
(ii) The books and records of SMP are complete and correct in all material
respects and have been maintained in accordance with sound business practices
consistent with industry standards.
(iii) The accounts receivable of SMP are reflected on the books and records
of SMP and represent valid obligations arising from the sale of products or
performance of services in the Ordinary Course of Business. To the Knowledge of
SMP, the accounts receivable are current and collectible net of the respective
reserves established on SMP's books and records in accordance with past
practices consistently applied. To the Knowledge of SMP, there is no contest,
claim or right of set-off under any Contract relating to accounts receivable
with respect to the amount or validity of such accounts receivable.
(B) ABSENCE OF CERTAIN CHANGES. Since the date of the latest balance sheet
included in the SMP Financial Statements, SMP has been operated, in the ordinary
course and consistent with past practice and, in any event, there has not been:
(i) any material adverse change in the business, condition (financial or
otherwise), operations, results of operations or prospects of SMP; (ii) any loss
or, to the Knowledge of SMP, threatened or contemplated loss, of business of any
customers or suppliers of SMP which, individually or in the aggregate, could
14
reasonably be expected to have a Material Adverse Effect on SMP; (iii) any loss,
damage, condemnation or destruction to any of the properties of SMP (whether or
not covered by insurance); (iv) any borrowings by SMP other than trade payables
arising in the ordinary course of the business and consistent with past
practice; or (v) any sale, transfer or other disposition of any of the assets
other than in the ordinary course of the business and consistent with past
practice.
(C) TAX RETURNS. SMP has filed all Tax Returns required to be filed (if
any) by or on behalf of SMP and has paid all Taxes of SMP required to have been
paid (whether or not reflected on any Tax Return). No Governmental Authority in
any jurisdiction has made a claim, assertion or threat to SMP that SMP is or may
be subject to taxation by such jurisdiction; there are no Liens with respect to
Taxes on SMP's property or assets; and there are no Tax rulings, requests for
rulings, or closing agreements relating to SMP for any period (or portion of a
period) that would affect any period after the date hereof. (D) NO ADJUSTMENTS,
CHANGES. Neither SMP nor any other Person on behalf of SMP (a) has executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; or (b) has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law.
(E) NO DISPUTES. There is no pending audit, examination, investigation,
dispute, proceeding or claim with respect to any Taxes of SMP, nor is any such
claim or dispute pending or contemplated. SMP has delivered to SBES true,
correct and complete copies of all Tax Returns and examination reports and
statements of deficiencies assessed or asserted against or agreed to by SMP, if
any, since its inception and any and all correspondence with respect to the
foregoing.
SECTION 4.13 INTERNAL ACCOUNTING CONTROLS. SMP maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (c) access to assets is
permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. SMP has established disclosure controls and
procedures for SMP and designed such disclosure controls and procedures to
ensure that material information relating to SMP is made known to the officers
by others within SMP. SMP's officers have evaluated the effectiveness of the
SMP's controls and procedures. Since SMP's Most Recent Fiscal Year End, there
have been no significant changes in SMP's internal controls or, to the Knowledge
of SMP, in other factors that could significantly affect SMP's internal
controls.
15
SECTION 4.14 LABOR MATTERS.
(a) There are no collective bargaining or other labor union agreements to
which SMP is a party or by which it is bound. No material labor dispute exists
or, to the Knowledge of SMP and the Members, is imminent with respect to any of
the employees of SMP.
(b) SMP is in full compliance with all Laws regarding employment, wages,
hours, benefits, equal opportunity, collective bargaining, the payment of Social
Security and other taxes, and occupational safety and health. SMP is not liable
for the payment of any compensation, damages, taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
Laws.
(c) No manager, officer or employee of SMP is a party to, or is otherwise
bound by, any Contract (including any confidentiality, non-competition or
proprietary rights agreement) with any other Person that in any way adversely
affects or will materially affect (i) the performance of his or her duties as a
manager, officer or employee of SMP; or (ii) the ability of SMP to conduct its
business. Each employee of SMP is employed on an at-will basis and the SMP does
not have any Contract with any of its employees which would interfere with its
ability to discharge its employees.
SECTION 4.15 EMPLOYEE BENEFITS.
(a) SMP does not, and since its inception never has, maintained or
contributed to any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former employee,
officer or director of SMP. There are not any employment, consulting,
indemnification, severance or termination agreements or arrangements between SMP
and any current or former employee, officer or director of SMP, nor does SMP
have any general severance plan or policy.
(b) SMP does not, and since its inception never has, maintained or
contributed to any "EMPLOYEE PENSION BENEFIT PLANS" (as defined in Section 3(2)
of ERISA), "EMPLOYEE WELFARE BENEFIT PLANS" (as defined in Section 3(1) of
ERISA) or any other benefit plan for the benefit of any current or former
employees, consultants, officers or directors of SMP.
(c) Neither the consummation of the transactions contemplated hereby alone,
nor in combination with another event, with respect to each manager, officer,
employee and consultant of SMP, will result in (i) any payment (including,
without limitation, severance, unemployment compensation or bonus payments)
becoming due from SMP; (ii) any increase in the amount of compensation or
benefits payable to any such individual; or (iii) any acceleration of the
vesting or timing of payment of compensation payable to any such individual. No
arrangement or other Contract of SMP provides benefits or payments contingent
upon, triggered by, or increased as a result of a change in the ownership or
effective control of SMP.
16
SECTION 4.16 TITLE TO ASSETS. SMP has sufficient title to, or valid
leasehold interests in, all of its properties and assets used in the conduct of
its businesses. All such assets and properties, other than assets and properties
in which SMP has leasehold interests, are free and clear of all Liens, except
for Liens that, in the aggregate, do not and will not materially interfere with
the ability of SMP to conduct business as currently conducted.
SECTION 4.17 INTELLECTUAL PROPERTY. SECTION 4.17 of the SMP Disclosure
Schedule sets forth a true and correct list of Intellectual Property used by SMP
n its business as presently conducted, which constitutes all of the Intellectual
Property needed by SMP to operate its business as presently conducted. SMP is
the sole and exclusive owner of or has a license or other right to sue the
Intellectual Property, free and clear of any Liens and, to the Knowledge of SMP,
any infringing or diluting uses thereof by third parties. SMP has neither
abandoned nor granted any license, permit or other consent or authorization to
any third party to use any of the Intellectual Property None of the Intellectual
Property is subject to any outstanding order, decree, judgment, stipulation,
injunction or restriction or agreement restricting the scope or use thereof. To
the Knowledge of SMP, none of the Intellectual Property infringes on any
trademarks, Internet domain names, copyrights or any other intellectual property
rights of any kind of any third party.
SECTION 4.18 ENVIRONMENTAL LAWS. SMP (a) is in compliance with all
Environmental Laws; (b) has received all Licenses or other approvals required of
it under applicable Environmental Laws to conduct its business; and (c) is in
compliance with all terms and conditions of any such License or approval where,
in each of the foregoing clauses (a), (b) and (c), the failure to so comply
could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on SMP. The term "ENVIRONMENTAL LAWS" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, Licenses, notices or notice letters, Orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
SECTION 4.19 TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SMP Financial Statements or SECTION 4.19 of the SMP Disclosure
Schedule, no member, manager, officer or employee of SMP or any Affiliate of any
such Person, has or has had, either directly or indirectly, an interest in any
transaction with SMP (other than for services as managers, directors, officers
and employees), including any Contract or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such Person
or, to the Knowledge of SMP and the Members, any entity in which any such Person
has an interest or is a director, manager, officer, trustee or partner.
SECTION 4.20 LIABILITIES. SMP has no Liability (and there is no Action
pending, or to the Knowledge of SMP and the members, threatened against SMP that
17
would reasonably be expected to give rise to any Liability). SMP is not a
guarantor nor is it otherwise liable for any Liability or obligation (including
Indebtedness) of any other Person.
SECTION 4.21 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the SMP Most
Recent Fiscal Year End (a) SMP has conducted its business only in Ordinary
Course of Business; and (b) there has not been any change in the assets,
Liabilities, financial condition or operating results of SMP since, except
changes in the Ordinary Course of Business that have not caused, in the
aggregate, a Material Adverse Effect on SMP. SMP has not taken any steps to seek
protection pursuant to any Law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does SMP have any
Knowledge or reason to believe that any of SMP's creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so.
SECTION 4.22 DISCLOSURE. No representation or warranty of SMP contained in
this Agreement and no statement or disclosure made by or on behalf of SMP to
SBES pursuant to this Agreement or any other agreement contemplated herein
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SBES
SBES hereby represents and warrant to SMP and the Member, subject to the
exceptions and qualifications specifically set forth or disclosed in writing in
the SEC Reports, that the statements contained in this ARTICLE V are correct and
complete as of the Closing Date.
SECTION 5.1 ORGANIZATION AND QUALIFICATION. SBES is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation, has all requisite corporate authority and
power, Licenses, authorizations, consents and approvals to carry on its business
as presently conducted and to own, hold and operate its properties and assets as
now owned, held and operated by it, and is duly qualified to do business and in
good standing in each jurisdiction in which the failure to be so qualified would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on SBES. The SBES Shares are presently quoted on the OTCPink
Market maintained by OTC Markets, Inc. and SBES is not subject to any notice
that it no longer qualified for such quotation or that it has received any
notice from the SEC that it has or will commence, institute or bring a
proceeding pursuant to Section 12(j) of the Exchange Act.
SECTION 5.2 AUTHORITY. SBES has all requisite authority and power,
Licenses, authorizations, consents and approvals to enter into and deliver this
Agreement and any of the other Transaction Documents to which SBES is a party
and any other certificate, agreement, document or instrument to be executed and
delivered by SBES in connection with the transactions contemplated hereby and
thereby and to perform their respective obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other Transaction Documents by SBES and
the performance by SBES of its respective obligations hereunder and thereunder
18
and the consummation by SBES of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of SBES. SBES is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Person or Governmental Authority in
order for the Parties to execute, deliver or perform this Agreement or the
transactions contemplated hereby. This Agreement has been, and each of the
Transaction Documents to which SBES is a party will be, duly and validly
authorized and approved, executed and delivered by SBES.
SECTION 5.3 BINDING OBLIGATIONS. Assuming this Agreement and the
Transaction Documents have been duly and validly authorized, executed and
delivered by the parties hereto and thereto other than SBES, this Agreement and
each of the Transaction Documents to which SBES is a party are duly authorized,
executed and delivered by SBES and constitutes the legal, valid and binding
obligations of SBES enforceable against SBES in accordance with their respective
terms, except as such enforcement is limited by general equitable principles, or
by bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
SECTION 5.4 NO CONFLICTS. Neither the execution nor the delivery by SBES of
this Agreement or any Transaction Document to which SBES is a party, nor the
consummation or performance by SBES of the transactions contemplated hereby or
thereby will, directly or indirectly, contravene, conflict with, or result in
(a) a violation of any provision of SBES Organizational Documents; (b) a
violation of any Law, Order, charge or other restriction or decree of any
Governmental Authority or any rule or regulation of the Principal Market
applicable to SBES, or by which SBES or any of its respective assets and
properties are bound or affected; (c) a violation of, any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, impair the rights of SBES under, or alter the
obligations of any Person under, or create in any Person the right to terminate,
amend, accelerate or cancel, or require any notice, report or other filing
(whether with a Governmental Authority or any other Person) pursuant to, or
result in the creation of a Lien on any of the assets or properties of SBES
under, any note, bond, mortgage, indenture, Contract, License, permit, franchise
or other instrument or obligation to which SBES is a party or by which SBES or
any of its respective assets and properties are bound or affected; or (d) a
violation of, the terms or requirements of, or give any Governmental Authority
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Licenses, permits, authorizations, approvals, franchises or other rights held by
SBES or that otherwise relate to the business of, or any of the properties or
assets owned or used by, SBES, except, in the case of clauses (b), (c) or (d),
for any such contraventions, conflicts, violations, or other occurrences as
could not reasonably be expected to have a Material Adverse Effect on SBES.
SECTION 5.5 SUBSIDIARIES. Except as set forth in the SEC Reports, SBES does
not own, directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise. There are
no Contracts or other obligations (contingent or otherwise) of SBES to retire,
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of, or other ownership interests in, any other Person or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any other Person.
19
SECTION 5.6 ORGANIZATIONAL DOCUMENTS. SBES has delivered or made available
to SMP a true and correct copy of its Articles of Incorporation, Bylaws and any
other organizational documents, each as amended, and each such instrument is in
full force and effect (the "SBES ORGANIZATIONAL DOCUMENTS"). SBES is not in
violation of any of the provisions of the SBES Organizational Documents. The
minute books (containing the records or meetings of the stockholders, the board
of directors and any committees of the board of directors), the stock
certificate books, and the stock record books of SBES, each as provided or made
available to the SMP, are correct and complete.
SECTION 5.7 CAPITALIZATION.
(a) The authorized and outstanding capitalization of SBES is as set forth
in the SEC Reports. Except as set forth in the SEC Reports, no shares of capital
stock or other voting securities of SBES were issued, reserved for issuance or
outstanding. All outstanding shares of the capital stock of SBES are, and all
such shares that may be issued prior to the Closing Date will be when issued,
duly authorized, validly issued, fully paid and nonassessable, have been issued
in accordance with all applicable Laws, including, but not limited to, the
Securities Act, and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the Laws of the jurisdiction
of SBES's organization, the SBES Organizational Documents or any Contract to
which SBES is a party or otherwise bound. Except as set forth in the SBES
Reports, there are no any bonds, debentures, notes or other Indebtedness of SBES
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of shares of common
stock of may vote. Except as set forth in the SEC Reports, there are no options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which SBES is a party or
by which it is bound (i) obligating SBES to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, SBES; (ii) obligating
SBES to issue, grant, extend or enter into any such option, warrant, call,
right, security, commitment, Contract, arrangement or undertaking; or (iii) that
give any Person the right to receive any economic benefit or right similar to or
derived from the economic benefits and rights occurring to holders of the
capital stock of SBES. Except as set forth in the SEC Reports, there are no
outstanding Contracts or obligations of SBES to repurchase, redeem or otherwise
acquire any shares of capital stock of SBES. Except as set forth in the SEC
Reports, there are no registration rights, proxies, voting trust agreements or
other agreements or understandings with respect to any class or series of any
capital stock or other security of SBES. The shareholder list provided to the
SMP and the Members is a current shareholder list generated by its stock
transfer agent, and such list accurately reflects all of the issued and
outstanding shares of the SBES Shares.
(b) The issuance of the SBES Shares to the Member has been duly authorized
and, upon issuance to the Member of certificates therefor in accordance with the
terms of this Agreement, the SBES Shares will have been duly and validly issued,
fully paid and nonassessable, have the rights, preferences and privileges
20
specified, will be free of preemptive rights and will be free and clear of all
Liens and restrictions, other than Liens created by the Members and restrictions
on transfer imposed by this Agreement and the Securities Act.
SECTION 5.8 COMPLIANCE WITH LAWS. The business and operations of SBES have
been and are being conducted in accordance with all applicable Laws and Orders.
SBES is not conflict with, or in default or violation of and, to the Knowledge
of SBES, is not under investigation with respect to and has not been threatened
to be charged with or given notice of any violation of or default under, any (a)
Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage,
indenture, Contract, License, permit, franchise or other instrument or
obligation to which SBES is a party or by which SBES or any of its respective
assets and properties are bound or affected. There is no agreement, judgment or
Order binding upon SBES which has, or could reasonably be expected to have, the
effect of prohibiting or materially impairing any business practice of SBES or
the conduct of business by SBES as currently conducted. SBES has filed all
forms, reports and documents required to be filed with any Governmental
Authority and SBES has made available such forms, reports and documents to SMP
and the Members As of their respective dates, such forms, reports and documents
complied in all material respects with the applicable requirements pertaining
thereto and none of such forms, reports and documents contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5.9 CERTAIN PROCEEDINGS. Except as set forth in the SEC Reports,
there is no Action pending against, or to the Knowledge of SBES, threatened
against or affecting, SBES by any Governmental Authority or other Person with
respect to SBES or its business or that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. SBES, or to the Knowledge of SBES,
has not been a party to any material litigation or, within the past two (2)
years, the subject of any threat of material litigation (litigation shall be
deemed "material" if the amount at issue exceeds the lesser of $10,000 per
matter or $25,000 in the aggregate). SBES is not in violation of and, to the
Knowledge of SBES, is not under investigation with respect to and has not been
threatened to be charged with or given notice of any violation of, any
applicable Law, rule, regulation, judgment or Order. Neither SBES nor any past
or present director or officer (in his or her capacity as such) or affiliate, is
or has been the subject of any civil, criminal, or administrative Action
involving a claim or violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. Neither SBES nor any past or
present director or officer (in his or her capacity as such) or affiliate, have
any reason to believe that they will be the subject of any civil, criminal, or
administrative Action involving a claim or violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. Neither
SBES nor any past or present director or officer (in his or her capacity as
such) or affiliate, have any reason to believe that they will be the subject of
any civil, criminal, or administrative Action brought by any federal or state
agency.
SECTION 5.10 NO BROKERS OR FINDERS. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against
SBES for any commission, fee or other compensation as a finder or broker, or in
any similar capacity, based upon arrangements made by or on behalf of SBES, and
21
SBES will indemnify and hold SMP and the Member harmless against any liability
or expense arising out of, or in connection with, any such claim.
SECTION 5.11 CONTRACTS. Except as disclosed in the SEC Reports, there are
no Contracts that are material to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of SBES. SBES is
not in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any Contract to which it is a party or to which
it or any of its properties or assets is subject, except for violations or
defaults that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect of SBES.
SECTION 5.12 TAX MATTERS.
(A) TAX RETURNS. SBES has filed all Tax Returns required to be filed (if
any) by or on behalf of SBES and has paid all Taxes of SBES required to have
been paid (whether or not reflected on any Tax Return). No Governmental
Authority in any jurisdiction has made a claim, assertion or threat to SBES that
SBES is or may be subject to taxation by such jurisdiction; there are no Liens
with respect to Taxes on SBES's property or assets; and there are no Tax
rulings, requests for rulings, or closing agreements relating to SBES for any
period (or portion of a period) that would affect any period after the date
hereof.
(B) NO ADJUSTMENTS, CHANGES. Neither SBES nor any other Person on behalf of
SBES (i) has executed or entered into a closing agreement pursuant to Section
7121 of the Code or any predecessor provision thereof or any similar provision
of state, local or foreign law; or (ii) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision of
state, local or foreign law.
(C) NO DISPUTES. There is no pending audit, examination, investigation,
dispute, proceeding or claim with respect to any Taxes of SBES, nor is any such
claim or dispute pending or contemplated. SBES has delivered to the SMP true,
correct and complete copies of all Tax Returns and examination reports and
statements of deficiencies assessed or asserted against or agreed to by SBES, if
any, since its inception and any and all correspondence with respect to the
foregoing.
(D) NO OTHER ARRANGEMENTS. SBES is not a party to any Contract or
arrangement for services that would result, individually or in the aggregate, in
the payment of any amount that would not be deductible by reason of Section
162(m), 280G or 404 of the Code. SBES is not a "consenting corporation" within
the meaning of Section 341(f) of the Code. SBES does not have any "tax-exempt
bond financed property" or "tax-exempt use property" within the meaning of
Section 168(g) or (h), respectively of the Code. SBES does not have any
outstanding closing agreement, ruling request, request for consent to change a
method of accounting, subpoena or request for information to or from a
Governmental Authority in connection with any Tax matter. During the last two
years, SBES has not engaged in any exchange with a related party (within the
meaning of Section 1031(f) of the Code) under which gain realized was not
22
recognized by reason of Section 1031 of the Code. SMP is not a party to any
reportable transaction within the meaning of Treasury Regulation Section
1.6011-4.
SECTION 5.13 TITLE TO ASSETS. SBES has sufficient title to, or valid
leasehold interests in, all of its properties and assets used in the conduct of
its businesses. All such assets and properties, other than assets and properties
in which SBES has leasehold interests, are free and clear of all Liens, except
for Liens that, in the aggregate, do not and will not materially interfere with
the ability of SBES to conduct business as currently conducted.
SECTION 5.14 SEC REPORTS.
(a) SBES has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the Exchange Act
(the "SEC REPORTS").
(b) As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material Contracts to which SBES is a party or to which the
property or assets of SBES are subject have been filed as exhibits to or
incorporated by reference in the SEC Reports and to the extent required under
the Exchange Act, as applicable. The financial statements of SBES included in
the SEC Reports comply in all respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto, or, in the case of unaudited statements as permitted by Form
10-Q), and fairly present in all material respects (subject in the case of
unaudited statements, to normal, recurring audit adjustments) the financial
position of SBES as at the dates thereof and the results of its operations and
cash flows for the periods then ended. The disclosure set forth in the SEC
Reports regarding SBES's business is current and complete and accurately
reflects operations of SBES as it exists as of the date hereof.
SECTION 5.14 LISTING AND MAINTENANCE REQUIREMENTS. SBES is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued listing
or quotation of the SBES Shares on the Principal Market. The issuance of the
SBES Shares under this Agreement does not contravene the rules and regulations
of the Principal Market and no approval by the shareholders of SBES is required
for SBES to issue and deliver the SBES Shares to the Member at Closing.
SECTION 5.15 UNDISCLOSED EVENTS. No event, Liability, development or
circumstance has occurred or exists, or is contemplated to occur with respect to
SBES, or its businesses, properties, prospects, operations or financial
condition, that would be required to be disclosed by SBES under the Securities
Act in a registration statement on Form S-1 filed with the SEC relating to an
issuance and sale by SBES of its common stock and which has not been publicly
announced.
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ARTICLE VI
CONDUCT PRIOR TO CLOSING
SECTION 6.1 CONDUCT OF BUSINESS. At all times during the period commencing
with the execution and delivery of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to the terms hereof or the
Closing, SBES and SMP shall (a) carry on their respective businesses diligently
and in the usual, regular and Ordinary Course of Business, in substantially the
same manner as heretofore conducted and in compliance with all applicable Laws;
(b) pay or perform its material obligations when due; (c) use its commercially
reasonable efforts, consistent with past practices and policies, to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
business dealings; and (d) keep their business and properties substantially
intact, including their present operations, physical facilities and working
conditions. In furtherance of the foregoing and subject to applicable Law, SBES
and SMP shall confer with the other Party, as promptly as practicable, prior to
taking any material actions or making any material management decisions with
respect to the conduct of the business of SBES or SMP.
SECTION 6.2 RESTRICTIONS ON CONDUCT OF BUSINESS. Without limiting the
generality of the terms of Section 6.1 hereof, except as required by the terms
hereof or to the extent that the other Party (either SBES or SMP, for purposes
of SECTION 6.2) shall otherwise consent in writing, at all times during the
period commencing with the execution and delivery of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
the terms hereof or the Closing, SBES and SMP shall not do any of the following,
where applicable:
(a) except as required by applicable Law, waive any stock repurchase
rights, accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant or
director stock plans or authorize cash payments in exchange for any options
granted under any of such plans;
(b) enter into any partnership arrangements, joint development agreements
or strategic alliances, other than in the Ordinary Course of Business;
(c) increase the compensation or fringe benefits of, or pay any bonuses or
special awards to, any present or former director, officer, stockholder or
employee of SBES or SMP (except for increases in salary or wages in the Ordinary
Course of Business) or increase any fees to any independent contractors; (ii)
grant any severance or termination pay to any present or former director,
officer or employee of SBES or SMP; (iii) enter into, amend or terminate any
employment Contract, independent contractor agreement or collective bargaining
agreement, written or oral; or (iv) establish, adopt, enter into, amend or
terminate any bonus, profit sharing, incentive, severance, or other plan,
agreement, program, policy, trust, fund or other arrangement that would be an
employee benefit plan if it were in existence as of the date of this Agreement,
except as required by applicable Law;
24
(d) except as contemplated by this Agreement, issue, deliver, sell,
authorize, pledge or otherwise encumber, or propose any of the foregoing with
respect to, any shares of capital stock or any securities convertible into, or
exercisable or exchangeable for, shares of capital stock of SBES or SMP, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into, or exercisable or exchangeable for,
shares of capital stock of SBES or SMP, or enter into other Contracts or
commitments of any character obligating it to issue any such shares of capital
stock of SBES or SMP or securities convertible into, or exercisable or
exchangeable for, shares of capital stock of SBES or SMP;
(e) cause, permit or propose any amendments to any SBES or SMP
Organizational Documents;
(f) acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, limited liability company, general or
limited partnership, joint venture, association, business trust or other
business enterprise or entity, or otherwise acquire or agree to acquire any
assets other than in the Ordinary Course of Business;
(g) adopt a plan of merger, complete or partial liquidation, dissolution,
consolidation, restructuring, recapitalization or other reorganization;
(h) except as required by applicable Law, adopt or amend any employee
benefit plan or employee stock purchase or employee stock option plan, or enter
into any employment Contract or collective bargaining agreement (other than
offer letters and letter agreements entered into in the Ordinary Course of
Business with employees who are terminable "at will"), pay any special bonus or
special remuneration to any director or employee other than in the Ordinary
Course of Business, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its officers;
(i) except in the Ordinary Course of Business, modify, amend or terminate
any Contract to which SBES or SMP is a party, or waive, delay the exercise of,
release or assign any rights or claims thereunder;
(j) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets, except in the
Ordinary Course of Business;
(k) (i) incur any Indebtedness or guarantee any such Indebtedness of
another Person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of SBES or SMP, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for endorsements and
guarantees for collection, short-term borrowings and lease obligations, in each
case incurred in the Ordinary Course of Business; or (ii) make any loans,
advances or capital contributions to, or investment in, any other Person, other
than to SBES or SMP;
25
(l) pay, discharge or satisfy any claims (including claims of
stockholders), Liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of liabilities or obligations in the Ordinary Course of Business or
in accordance with their terms as in effect on the date hereof, or waive,
release, grant, or transfer any rights of material value or modify or change in
any material respect any existing License, Contract or other document, other
than in the Ordinary Course of Business;
(m) change any financial reporting or accounting principle, methods or
practices used by it unless otherwise required by applicable Law or GAAP;
(n) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement);
(o) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock; (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of SBES or SMP or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(p) enter into any transaction with any of its directors, officers,
stockholders, or other Affiliates;
(q) make any capital expenditure in excess of $50,000;
(r) (i) grant any license or sublicense of any rights under or with respect
to any Intellectual Property; (ii) dispose of or let lapse and Intellectual
Property, or any application for the foregoing, or any license, permit or
authorization to use any Intellectual Property; or (iii) amend, terminate any
other Contract, license or permit to which SBES or SMP is a party;
(s) make, or permit to be made, without the prior written consent of the
other Party any material Tax election which would affect SBES or SMP; or
(t) commit to or otherwise to take any of the actions described in this
SECTION 6.2.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 ACCESS TO INFORMATION. Each of SBES and SMP shall afford the
other Party, its accountants, counsel and other representatives (including the
Principal Stockholder), reasonable access, during normal business hours, to the
properties, books, records and personnel of such Party at any time prior to the
Closing in order to enable each Party to obtain all information concerning the
business, assets and properties, results of operations and personnel of the
other Party as each Party may reasonably request. No information obtained in the
foregoing investigation by a Party pursuant to this Section 7.1 shall affect or
26
be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby.
SECTION 7.2 LEGAL REQUIREMENTS. The Parties shall take all reasonable
actions necessary or desirable to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement (including, without limitation,
furnishing all information required in connection with approvals of or filings
with any Governmental Authority, and prompt resolution of any litigation
prompted hereby), and shall promptly cooperate with, and furnish information to,
the other Parties to the extent necessary in connection with any such
requirements imposed upon any of them in connection with the consummation of the
transactions contemplated by this Agreement.
SECTION 7.3 NOTIFICATION OF CERTAIN MATTERS. SMP shall give prompt notice
to SBES, and SBES shall give prompt notice to the SMP, of the occurrence, or
failure to occur, of any event, which occurrence or failure to occur would be
reasonably likely to cause (a) any representation or warranty contained in this
Agreement to be untrue or inaccurate at the Closing, such that the conditions
set forth in ARTICLE X hereof, as the case may be, would not be satisfied or
fulfilled as a result thereof; or (b) any material failure of any SMP, the
Stockholder or SBES, as the case may be, or of any officer, director, employee
or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement. Notwithstanding the
foregoing, the delivery of any notice pursuant to this SECTION 7.3 shall not
limit or otherwise affect the rights and remedies available hereunder to the
Party receiving such notice.
SECTION 7.4 CAPITAL STRUCTURE MATTERS.
(a) Following execution of this Agreement, SBES shall use commercially
reasonable efforts to necessary to authorize or otherwise have available the
necessary number of SBES Shares or preferred shares having equivalent rights to
the SBES Shares to be issued to the Member hereunder. Having a sufficient number
of authorized SBES Shares or equivalent preferred shares for issuance to the
Member shall be a condition to Closing this Agreement.
(b) Following execution of this Agreement, the Member shall be authorized
as the sole and exclusive representative of SBES to negotiate with holders of
SBES' outstanding Indebtedness, with respect to the modification of the terms or
satisfaction of such Indebtedness.
ARTICLE VIII
POST CLOSING COVENANTS
SECTION 8.1 GENERAL. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request.
SECTION 8.2 PUBLIC ANNOUNCEMENTS. Within five (5) calendar days of Closing,
SBES shall file with the SEC a Form 8-K, describing the material terms of the
27
transactions contemplated hereby as soon as practicable following the Closing
Date but in no event more than four (4) business days following the Closing
Date. Prior to the Closing Date, the Parties shall consult with each other in
issuing the Form 8-K and any press releases or otherwise making public
statements or filings and other communications with the SEC or any regulatory
agency or stock market or trading facility with respect to the transactions
contemplated hereby and no Party shall issue any such press release or otherwise
make any such public statement, filings or other communications without the
prior written consent of the other Parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by Law, in which case the disclosing Party shall
provide the other Parties with prior notice of no less than three (3) calendar
days, of such public statement, filing or other communication and shall
incorporate into such public statement, filing or other communication the reason
incorporate into such public statement, filing or other communication the
reasonable comments of the other Parties.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.1 CONDITIONS TO OBLIGATION OF THE PARTIES GENERALLY. The Parties
shall not be obligated to consummate the transactions to be performed by each of
them in connection with the Closing if, on the Closing Date, (i) any Action
shall be pending or threatened before any Governmental Authority wherein an
Order or charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation; (ii) any Law or Order
which would have any of the foregoing effects shall have been enacted or
promulgated by any Governmental Authority; or (iii) there is no consummation of
all required definitive instruments and agreements, including, but not limited
to, this Agreement and applicable SEC filings in forms acceptable to SBES and
SMP.
SECTION 9.2 CONDITIONS TO OBLIGATION OF SMP AND THE MEMBER. The obligations
of SMP and the Member to enter into and perform their respective obligations
under this Agreement are subject, at the option of SMP and the Member, to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived by the SMP and the Member in writing:
(a) The representations and warranties of SBES set forth in this Agreement
shall be true and correct in all material respects as of the Closing Date,
except to the extent such representations and warranties are specifically made
as of a particular date, in which case such representations and warranties shall
be true and correct as of such date and except to the extent that such
representations and warranties are qualified by terms such as "MATERIAL" and
"MATERIAL ADVERSE EFFECT," in which case such representations and warranties
shall be true and correct in all respects at the Closing Date;
(b) SBES shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
28
(c) No action, suit, or proceeding shall be pending or, to the Knowledge of
SBES, threatened before any Governmental Authority wherein an Order or charge
would (i) affect adversely the right of the Member to own the SBES Shares; or
(ii) affect adversely the right of SBES to own its assets or to operate its
business (and no such Order or charge shall be in effect), nor shall any Law or
Order which would have any of the foregoing effects have been enacted or
promulgated by any Governmental Authority;
(d) No event, change or development shall exist or shall have occurred
since SBES's Most Recent Fiscal Year End that has had or is reasonably likely to
have a Material Adverse Effect on SBES;
(e) All consents, waivers, approvals, authorizations or Orders required to
be obtained, and all filings required to be made, by SBES for the authorization,
execution and delivery of this Agreement and the consummation by it of the
transactions contemplated by this Agreement, shall have been obtained and made
by SBES and SBES shall have delivered proof of same to the SMP and the Member;
(f) SBES shall have filed all reports and other documents required to be
filed by it under the U.S. federal securities laws through the Closing Date;
(g) SBES shall have delivered to SMP and the Member a certificate, dated
the Closing Date, executed by an officer of SBES, certifying the satisfaction of
the conditions specified in SECTIONS 9.2(A) through 9.2(F), inclusive;
(g) SBES shall have delivered to SMP and the Member a certificate duly
executed by the Secretary of SBES and dated as of the Closing Date, as to the
resolutions as adopted by SBES's board of directors, in a form reasonably
acceptable to SMP, approving this Agreement and the Transaction Documents to
which it is a party and the transactions contemplated hereby and thereby; and
(h) All actions to be taken by SBES in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to SMP and the Member.
SECTION 9.3 CONDITIONS TO OBLIGATION OF SBES. The obligations of SBES to
enter into and perform their respective obligations under this Agreement are
subject, at the option of SBES, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by SBES
in writing:
(a) The representations and warranties of SMP and the Member set forth in
this Agreement shall be true and correct in all material respects as of the
Closing Date, except to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date and except to the
extent that such representations and warranties are qualified by terms such as
29
"MATERIAL" and "MATERIAL ADVERSE EFFECT," in which case such representations and
warranties shall be true and correct in all respects at the Closing Date;
(b) SMP and the Member shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing Date;
(c) No action, suit, or proceeding shall be pending or, to the Knowledge of
SMP, threatened before any Governmental Authority wherein an Order or charge
would (i) affect adversely the right of the SMP to own the SBES Shares; or (ii)
affect adversely the right of SMP to own its assets or to operate its business
(and no such Order or charge shall be in effect), nor shall any Law or Order
which would have any of the foregoing effects have been enacted or promulgated
by any Governmental Authority;
(d) No event, change or development shall exist or shall have occurred
since SMP's Most Recent Fiscal Year End that has had or is reasonably likely to
have a Material Adverse Effect on SMP;
(e) All consents, waivers, approvals, authorizations or Orders required to
be obtained, and all filings required to be made, by SMP for the authorization,
execution and delivery of this Agreement and the consummation by it of the
transactions contemplated by this Agreement, shall have been obtained and made
by SMP and SMP shall have delivered proof of same to the SBES;
(f) All consents, waivers, approvals, authorizations or Orders required to
be obtained, and all filings required to be made, by SMP for the authorization,
execution and delivery of this Agreement and the consummation by it of the
transactions contemplated by this Agreement, shall have been obtained and made
by SMP and SMP shall have delivered proof of same to SBES;
(g) SMP shall have delivered to SBES a certificate, dated the Closing Date,
executed by an officer of SMP, certifying the satisfaction of the conditions
specified in SECTIONS 9.3(A) through 9.3(F), inclusive, relating to SMP;
(h) The Member shall have delivered to SBES a certificate, dated the
Closing Date, executed by the Member, certifying the satisfaction of the
conditions specified in SECTIONS 9.3(A) and 9.3(B) relating to the Member; and
(i) All actions to be taken by SMP and the Member in connection with
consummation of the transactions contemplated hereby and all payments,
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to SBES.
30
ARTICLE X
TERMINATION
SECTION 10.1 GROUNDS FOR TERMINATION. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by the mutual written agreement of the Parties;
(b) by SMP and the Member (by written notice of termination from SMP and
the Member to SBES, in which reference is made to this subsection) if the
Closing has not occurred on or prior to the Termination Date, unless the failure
of the Closing to have occurred is attributable to a failure on the part of SMP
or the Member to perform any material obligation to be performed by SMP or the
Member pursuant to this Agreement at or prior to the Closing;
(c) by SBES (by written notice of termination from SBES to SMP and the
Member, in which reference is made to this subsection) if the Closing has not
occurred on or prior to the Termination Date, unless the failure of the Closing
to have occurred is attributable to a failure on the part of SBES to perform any
material obligation required to be performed by SBES pursuant to this Agreement
at or prior to the Closing;
(d) by SBES or SMP (by written notice of termination from such Party to the
other Parties) if a Governmental Authority of competent jurisdiction shall have
issued a final non-appealable Order, or shall have taken any other action having
the effect of, permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby; provided, however, that
the right to terminate this Agreement under this SECTION 10.1(D) shall not be
available to a Party if such Order was primarily due to the failure of such
Party to perform any of its obligations under this Agreement;
(e) by SBES, SMP or the Member (by written notice of termination from such
Party to the other Parties) if any event shall occur after the date hereof that
shall have made it impossible to satisfy a condition precedent to the
terminating Party's obligations to perform its obligations hereunder, unless the
occurrence of such event shall be due to the failure of the terminating Party to
perform or comply with any of the agreements, covenants or conditions hereof to
be performed or complied with by such Party at or prior to the Closing;
(f) by SMP or the Member (by written notice of termination from SMP to
SBES, in which reference is made to this subsection) if, since the date of this
Agreement, there shall have occurred any Material Adverse Effect on SBES, or
there shall have occurred any event or circumstance that, in combination with
any other events or circumstances, could reasonably be expected to have, a
Material Adverse Effect with respect to SBES;
(g) by SBES (by written notice of termination from SBES to SMP, in which
reference is made to this subsection) if, since the date of this Agreement,
there shall have occurred any Material Adverse Effect on SMP, or there shall
have occurred any event or circumstance that, in combination with any other
31
events or circumstances, could reasonably be expected to have, a Material
Adverse Effect with respect to SMP;
(h) by SMP (by written notice of termination from the SMP to SBES, in which
reference is made to the specific provision(s) of this subsection giving rise to
the right of termination) if (i) any of SBES's representations and warranties
shall have been inaccurate as of the date of this Agreement or as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in SECTION 9.1(a) would not be satisfied and
such inaccuracy has not been cured by SBES within five (5) Business Days after
its receipt of written notice thereof and remains uncured at the time notice of
termination is given, (ii) any of the SBES's covenants contained in this
Agreement shall have been breached, such that the condition set forth in SECTION
9.2(B) would not be satisfied; or
(i) by SBES (by written notice of termination from SBES to SMP and the
Member, in which reference is made to the specific provision(s) of this
subsection giving rise to the right of termination) if (i) any of SMP's or the
Member' representations and warranties shall have been inaccurate as of the date
of this Agreement or as of a date subsequent to the date of this Agreement (as
if made on such subsequent date), such that the condition set forth in SECTION
9.3(A) would not be satisfied and such inaccuracy has not been cured by SMP or
the Member within five (5) Business Days after its receipt of written notice
thereof and remains uncured at the time notice of termination is given; or (ii)
any of SMP's or the Member's covenants contained in this Agreement shall have
been breached, such that the condition set forth in SECTION 9.3(B) would not be
satisfied.
SECTION 10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement by SBES or SMP pursuant to Section 10.1 hereof,
written notice thereof shall forthwith be given to the other Party. If this
Agreement is terminated as provided herein (a) each Party will redeliver all
documents, work papers and other material of any other Party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the Party furnishing the same; provided, that each Party
may retain one copy of all such documents for archival purposes in the custody
of its outside counsel; and (b) all filings, applications and other submission
made by any Party to any Person, including any Governmental Authority, in
connection with the transactions contemplated hereby shall, to the extent
practicable, be withdrawn by such Party from such Person.
SECTION 10.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1 hereof, this Agreement shall become void and of no
further force and effect, except for the provisions of (a) ARTICLE XI; (b)
SECTIONS 3.6, 4.8 and 5.10 hereof relating to brokers' fees or commissions; and
(iv) SECTION 10.2 and this SECTION 10.3.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
SECTION 11.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement shall survive the Closing, and for a period of one
(1) year after which they shall be of no further force and effect, other than
those set forth in SECTIONS 3.1, 3.2, 3.3, 3.4, 4.1, 4,2, 4.3, 4.4, 5.1, 5.2,
32
5.3 and 5.4, which shall survive indefinitely, and those related to Tax Matters
set forth in SECTIONS 4.12 and 5.12, which shall survive until forty-five (45)
days after the expiration of applicable statutes of limitations. The right to
indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, payment of damages, or other remedy based
on such representations, warranties, covenants, and obligations.
SECTION 11.2 INDEMNIFICATION.
(a) From and after the execution of this Agreement, SBES shall indemnify
and hold harmless the SMP Indemnified Parties, from and against any all costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement (collectively, "DAMAGES") arising,
directly or indirectly, from or in connection with: (i) any breach (or alleged
breach) of any representation or warranty made by SBES in this Agreement or any
Transaction Document or in any certificate delivered by SBES pursuant to this
Agreement; or (ii) any breach (or alleged breach) by SBES of any covenant or
obligation of SBES in this Agreement or any Transaction Document required to be
performed by SBES on or prior to the Closing Date or by SBES after the Closing
Date.
(b) From and after the execution of this Agreement, SMP and the Member,
severally and not jointly, shall indemnify and hold harmless the SBES
Indemnified Parties, from and against any all Damages arising, directly or
indirectly, from or in connection with: (i) any breach (or alleged breach) of
any representation or warranty made by SMP or the Member in this Agreement or
any Transaction Document or in any certificate delivered by SMP or the Member
pursuant to this Agreement; or (ii) any breach (or alleged breach) by SMP or the
Member of any covenant or obligation of SMP or Members in this Agreement or any
Transaction Document required to be performed by SMP or the Member on or prior
to the Closing Date or by SMP or the Member after the Closing Date.
SECTION 11.3 MATTERS INVOLVING THIRD PARTIES. Promptly after the assertion
of any claim by a third party or occurrence of any event which may give rise to
a claim for indemnification from an indemnifying party ("INDEMNIFYING PARTY")
under this ARTICLE XI, an indemnified party ("INDEMNIFIED PARTY") shall notify
the Indemnitor in writing of such claim. The Indemnitor shall have the right to
assume the control and defense of any such action (including, but without
limitation, tax audits), provided that the Indemnitee may participate in the
defense of such action subject to the Indemnitor's reasonable direction and at
Indemnitee's sole cost and expense. The party contesting any such claim shall be
furnished all reasonable assistance in connection therewith by the other party
and be given full access to all information relevant thereto. In no event shall
any such claim be settled without the Indemnitor's consent.
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SECTION 11.4 EXCLUSIVE REMEDY.The Parties acknowledge and agree that the
indemnification provisions in this ARTICLE XI shall be the exclusive remedies of
the Parties with respect to the transactions contemplated by this Agreement,
other than for fraud and willful misconduct.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each Party will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
transactions contemplated by this Agreement, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each Party to pay its own expenses will be
subject to any rights of such Party arising from a breach of this Agreement by
another Party.
SECTION 12.2 CONFIDENTIALITY.
(a) The Parties will maintain in confidence, and will cause their
respective directors, officers, employees, agents, and advisors to maintain in
confidence, any written, oral, or other information obtained in confidence from
another Person in connection with this Agreement or the transactions
contemplated by this Agreement, unless (i) such information is already known to
such Party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such Party; (ii) the
use of such information is necessary or appropriate in making any required
filing with the SEC, or obtaining any consent or approval required for the
consummation of the transactions contemplated by this Agreement, or (iii) the
furnishing or use of such information is required by or necessary or appropriate
in connection with legal proceedings.
(b) In the event that any Party is required to disclose any information of
another Person pursuant to clause (II) or (III) of SECTION 12.2(A) above, the
Party requested or required to make the disclosure (the "DISCLOSING PARTY")
shall provide the Person that provided such information (the "PROVIDING PARTY")
with prompt notice of any such requirement so that the providing party may seek
a protective Order or other appropriate remedy and/or waive compliance with the
provisions of this SECTION 12.2. If, in the absence of a protective Order or
other remedy or the receipt of a waiver by the providing party, the disclosing
party is nonetheless, in the opinion of counsel, legally compelled to disclose
the information of the providing party, the disclosing party may, without
liability hereunder, disclose only that portion of the providing party's
information which such counsel advises is legally required to be disclosed,
provided that the disclosing party exercises its reasonable efforts to preserve
the confidentiality of the providing party's information, including, without
limitation, by cooperating with the providing party to obtain an appropriate
protective Order or other relief assurance that confidential treatment will be
accorded the providing party's information.
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(c) If the transactions contemplated by this Agreement are not consummated,
each Party will return or destroy all of such written information each party has
regarding the other Parties.
SECTION 12.3 NOTICES. All notices, demands, consents, requests,
instructions and other communications to be given or delivered or permitted
under or by reason of the provisions of this Agreement or in connection with the
transactions contemplated hereby shall be in writing and shall be deemed to be
delivered and received by the intended recipient as follows: (a) if personally
delivered, on the Business Day of such delivery (as evidenced by the receipt of
the personal delivery service); (b) if mailed by certified mail, return receipt
requested, two (2) Business Days after being mailed; or (c) if delivered by
overnight courier (with all charges having been prepaid), on the Business Day of
such delivery (as evidenced by the receipt of the overnight courier service of
recognized standing. If any notice, demand, consent, request, instruction or
other communication cannot be delivered because of a changed address of which no
notice was given (in accordance with this SECTION 12.3), or the refusal to
accept same, the notice, demand, consent, request, instruction or other
communication shall be deemed received on the second business day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices,
demands, consents, requests, instructions and other communications will be sent
to the following addresses or facsimile numbers as applicable:
If to SBES, to: 1411 Sawgrass Corporate Parkway, Suite B
Sunrise, FL 33323
Attention: Chief Executive Officer
If to SMP or the Member, to: 34099 Melinz Pkwy.
Unit E
Eastlake, OH, 44095
Attention: Paul Spivak
or such other address as shall be furnished in writing by any Party in the
manner for giving notices hereunder.
SECTION 12.4 FURTHER ASSURANCES. The Parties agree (a) to furnish upon
request to each other such further information; (b) to execute and deliver to
each other such other documents; and (c) to do such other acts and things, all
as the other Parties may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
SECTION 12.5 WAIVER. The rights and remedies of the Parties are cumulative
and not alternative. Neither the failure nor any delay by any Party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable Law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
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right unless in writing signed by the other Parties; (b) no waiver that may be
given by a Party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one Party will be deemed to be a
waiver of any obligation of such Party or of the right of the Party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
SECTION 12.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the Parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the Party against whom the enforcement of such
amendment is sought.
SECTION 12.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No Party
may assign any of its rights under this Agreement without the prior consent of
the other Parties. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of and be
enforceable by the respective successors and permitted assigns of the Parties.
SECTION 12.8 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
SECTION 12.9 SECTION HEADINGS.The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "ARTICLE" or "ARTICLES" or "SECTION" or
"SECTIONS" refer to the corresponding Article or Articles or Section or Sections
of this Agreement, unless the context indicates otherwise.
SECTION 12.10 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Unless otherwise expressly provided, the word "including" shall mean including
without limitation. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of such representation, warranty,
or covenant. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require.
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SECTION 12.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. In the event that any signature is delivered by
facsimile transmission, electronic delivery, or by e-mail delivery of a ".pdf"
format data file, such signature shall create a valid and binding obligation of
the Party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile, electronic copy, or ".pdf" signature
page were an original thereof.
SECTION 12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; ATTORNEYS' FEES.
This Agreement shall be governed by and construed in accordance with the Laws of
the State of Florida, without regard to conflicts of Laws principles. Each of
the Parties submits to the jurisdiction of any state or federal court sitting in
the State of Florida, Broward County, in any action or proceeding arising out of
or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other Party with respect thereto. Any Party may
make service on any other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner provided for the
giving of notices in SECTION 12.3 above. Nothing in this SECTION 12.12, however,
shall affect the right of any Party to serve legal process in any other manner
permitted by Law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by Law or at equity. In any
action brought to interpret to enforce this Agreement, the prevailing Party or
Parties shall be entitled to recover all cost related thereto from the
non-prevailing Party or Parties, including attorneys' fees and costs at both the
trial and appellate levels.
SECTION 12.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY IRREVOCABLY
WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as
of the date first above written.
SBES:
SOUTH BEACH SPIRITS, INC.
a Nevada corporation
By: /s/ Martin D. Ustin
------------------------------------------
Martin D. Ustin, Chief Executive Officer
SMP:
ST. MARTIN POWERBOATS, LLC
an Ohio limited liability company
By: /s/ Paul Spivak
------------------------------------------
Paul Spivak, President
THE MEMBER:
/s/ Paul Spivak
----------------------------------------------
Paul Spivak
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