1
ASSET PURCHASE AGREEMENT
DATED AS OF
MAY 31, 1996
among
GLOBE BUSINESS RESOURCES, INC.,
INTERIM QUARTERS, INC.,
KENNETH L. HIXON
and
RAMONA A. HIXON
2
TABLE OF CONTENTS
Page
R E C I T A L S:..................................................................................................1
1. DEFINITIONS..............................................................................................1
2. SALE OF ASSETS; CLOSING..................................................................................1
2.1 ASSETS TO BE ACQUIRED...........................................................................1
2.2 EXCLUDED ASSETS ...............................................................................3
2.3 ASSUMPTION OF LIABILITIES.......................................................................4
2.4 PURCHASE PRICE..................................................................................6
2.5 CLOSING.........................................................................................6
2.6 CLOSING OBLIGATIONS.............................................................................6
2.7 ADJUSTMENT AMOUNT...............................................................................7
2.8 ADJUSTMENT PROCEDURE............................................................................9
2.9 1996 INCOME-RELATED ADJUSTMENT..................................................................9
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS................................................9
3.1 ORGANIZATION AND GOOD STANDING..................................................................9
3.2 AUTHORITY; NO CONFLICT.........................................................................10
3.3 CAPITALIZATION.................................................................................11
3.4 FINANCIAL STATEMENTS...........................................................................11
3.5 BOOKS AND RECORDS..............................................................................12
3.6 TITLE TO PROPERTIES; ENCUMBRANCES..............................................................12
3.7 CONDITION AND SUFFICIENCY OF ASSETS............................................................13
3.8 ACCOUNTS RECEIVABLE............................................................................13
3.9 INVENTORY......................................................................................13
3.10 NO UNDISCLOSED LIABILITIES.....................................................................14
3.11 TAXES..........................................................................................14
3.12 NO MATERIAL ADVERSE CHANGE.....................................................................14
3.13 EMPLOYEE BENEFITS..............................................................................14
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.................................................................................15
3.15 LEGAL PROCEEDINGS; ORDERS......................................................................16
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS..........................................................17
3.17 CONTRACTS; NO DEFAULTS.........................................................................18
3.18 INSURANCE......................................................................................19
3.19 ENVIRONMENTAL MATTERS..........................................................................19
3.20 EMPLOYEES......................................................................................20
3.21 LABOR RELATIONS; COMPLIANCE....................................................................21
3.22 INTELLECTUAL PROPERTY..........................................................................21
3.23 DISCLOSURE.....................................................................................22
3.24 BROKERS OR FINDERS.............................................................................23
4. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................23
4.1 ORGANIZATION AND GOOD STANDING.................................................................23
4.2 AUTHORITY; NO CONFLICT.........................................................................23
4.3 CAPITALIZATION; BUYER SHARES...................................................................24
4.4 SEC REPORTS....................................................................................24
3
4.5 CERTAIN PROCEEDINGS............................................................................25
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.....................................................25
5.1 ACCURACY OF REPRESENTATIONS....................................................................25
5.2 SELLER'S PERFORMANCE...........................................................................25
5.3 CONSENTS.......................................................................................25
5.4 ADDITIONAL DOCUMENTS...........................................................................25
5.5 NO PROCEEDINGS.................................................................................26
5.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS............................................26
5.7 NO PROHIBITION.................................................................................26
6. CONDITIONS PRECEDENT TO SELLER'S AND THE STOCKHOLDERS' OBLIGATION
TO CLOSE................................................................................................26
6.1 ACCURACY OF REPRESENTATIONS....................................................................27
6.2 BUYER'S PERFORMANCE............................................................................27
6.3 CONSENTS.......................................................................................27
6.4 ADDITIONAL DOCUMENTS...........................................................................27
6.5 NO INJUNCTION..................................................................................28
7. TERMINATION.............................................................................................28
7.1 TERMINATION EVENTS.............................................................................28
7.2 EFFECT OF TERMINATION..........................................................................28
8. INDEMNIFICATION; REMEDIES...............................................................................29
8.1 SURVIVAL.......................................................................................29
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
AND THE STOCKHOLDERS...........................................................................29
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER................................................30
8.4 TIME LIMITATIONS...............................................................................30
8.5 LIMITATIONS ON AMOUNT -- SELLER AND THE STOCKHOLDERS...........................................30
8.6 LIMITATIONS ON AMOUNT--BUYER...................................................................31
8.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS..............................................31
8.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS....................................................32
8.9 EXCLUSIVE REMEDIES.............................................................................33
9. GENERAL PROVISIONS......................................................................................33
9.1 EXPENSES.......................................................................................33
9.2 PUBLIC ANNOUNCEMENTS...........................................................................33
9.3 NOTICES........................................................................................33
9.4 FURTHER ASSURANCES; RECORDS RETENTION..........................................................34
9.5 WAIVER.........................................................................................35
9.6 ENTIRE AGREEMENT AND MODIFICATION..............................................................35
9.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.............................................35
9.8 SEVERABILITY...................................................................................35
9.9 SECTION HEADINGS, CONSTRUCTION.................................................................36
9.10 TIME OF ESSENCE................................................................................36
9.11 GOVERNING LAW..................................................................................36
9.12 COUNTERPARTS...................................................................................36
4
EXHIBITS
Exhibit 2.3(a)(i) -- Permitted Encumbrances
Exhibit 2.3(a)(ii) -- Assumed Liabilities
Exhibit 2.6(a)(ii) -- Employment Agreements
Exhibit 2.6(a)(iii) -- Consulting Agreements
Exhibit 2.6(a)(iv) -- Covenant Not to Compete
Exhibit 3.2(c) -- Registration Rights Agreement
Exhibit 5.4(a) -- Legal Opinion of Counsel to Seller and the Stockholders
Exhibit 6.4(a) -- Legal Opinion of Counsel to Buyer
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of May 31, 1996,
among GLOBE BUSINESS RESOURCES, INC., an Ohio corporation ("Buyer"), INTERIM
QUARTERS, INC., a Texas corporation ("Seller"), KENNETH L. HIXON ("KLH") and
RAMONA A. HIXON ("RAH") (KLH and RAH collectively, the "Stockholders").
R E C I T A L S:
---------------
A. Seller desires to sell to Buyer, and Buyer desires to acquire from
Seller, substantially all the assets, real, personal or mixed, tangible or
intangible, used or useable in the conduct of Seller's corporate/interim housing
business ("Seller's Business").
B. Seller desires that Buyer assume, and Buyer is willing to assume,
certain specified liabilities of Seller incurred in the conduct of Seller's
Business.
C. The transactions contemplated by this Agreement constitute the sale
of all or substantially all of Seller's assets. Accordingly, Buyer desires that
the Stockholders also be liable to Buyer for any breach by Seller of its
warranties, representations, agreements, covenants and indemnities hereunder,
and the Stockholders are willing, on the terms and conditions set forth herein,
to assume such liability.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and undertakings hereinafter set forth, the parties hereto do hereby
agree as follows:
1. DEFINITIONS
-----------
Certain capitalized terms used in this Agreement have the
meanings specified in the Glossary attached hereto. Other capitalized terms are
defined in the body of this Agreement.
2. SALE OF ASSETS; CLOSING
-----------------------
2.1 ASSETS TO BE ACQUIRED
---------------------
Subject to the satisfaction or waiver in writing of the
conditions set forth
herein and to the other terms, conditions and provisions hereof, at the Closing,
Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire, accept and pay for, all of Seller's right, title and
interest in and to all of the properties, assets and other rights (excluding the
Excluded Assets (as defined hereinafter)) , real, personal or mixed, tangible or
intangible, owned or leased by or licensed to Seller on the Closing Date and
used or useable in the conduct of the Seller's Business (collectively, the
"Assets"). Certain Assets have been obtained for the benefit of Seller but are
held in the name of KLH or RAH.
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The Assets include, but shall not be limited to, the
following:
(i) all leases, contracts or other arrangements that
are outstanding and effective on the Closing Date under which Seller
has leased, as lessee, apartments, suites or other facilities to be
utilized in Seller's Business from the respective owners or landlords
of such apartments, suites or other facilities (collectively, the
"Apartment Leases");
(ii) all leases, contracts or other arrangements that are
outstanding and effective on the Closing Date under which Seller has,
in the conduct of Seller's Business, leased, as lessor, or otherwise
made available to the respective lessees or occupants thereof
apartments, suites or other facilities that are furnished with
furniture and related accessories, electronic and other appliances,
linens, kitchen utensils and other personal property owned by Seller
(such owned personal property utilized to furnish apartments, suites
or other facilities collectively, the "Property") (collectively, the
"Corporate/Interim Housing Contracts");
(iii) all leaseholds (other than those created pursuant to
the Apartment Leases) and other interests of every kind and
description in real property, buildings and improvements thereon
owned, leased or used by Seller in the Seller's Business on the date
of this Agreement together with those interests acquired by Seller
between the date of this Agreement and the Closing Date, including all
leases under which Seller leases, as lessee, office, warehouse or
storage space for use in the conduct of Seller's Business (the
"Office/Warehouse Leases");
(iv) all contracts, commitments or other arrangements to
which Seller is a party and related to the Seller's Business other
than the Apartment Leases, the Corpo rate/Interim Housing Contracts
and the Office/Warehouse Leases (collectively, the "Other Contracts");
(v) all items of Property located in apartments, suites or
other facilities that, as of the Closing Date, are leased or otherwise
made available to third parties pursuant to Corporate/Interim Housing
Contracts (collectively, the "In-Use Property");
(vi) all items of Property that, as of the Closing Date, are
available for use in the Seller's Business but that are not In-Use
Property (collectively, the "Inventory Property");
(vii) (excluding the Excluded Assets) all office, warehouse
and other equipment, machinery, vehicles, fixtures, office materials
and supplies, spare parts and other tangible personal property of
every kind and description owned as of the date of this Agreement by
Seller and used or useable in connection with Seller's Business, and
any additions, improvements, replacements and alterations thereto
between the date of this Agreement and the Closing Date;
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(viii) all cash and cash equivalents of Seller;
(ix) all accounts receivable, loan or notes receivable
(other than the loan or notes receivable from Cable Lite Corporation
and from International Quarters, which shall be Excluded Assets) and
other receivables arising out of the conduct of Seller's Business in
existence as of the Closing Date;
(x) all of Seller's right, title and interest in and to all
trademarks, service marks, patents, trade names, jingles, slogans,
logotypes or other similar intangible assets (or rights therein),
together with the goodwill respectively related thereto, owned or used
by Seller as of the Closing Date and used or useable in Seller's
Business;
(xi) excepting Seller's corporate minute books and
other corporate records pertaining to Seller (which shall be Excluded
Assets), the originals or accurate photocopies or other copies of all
files, books and other records of Seller relating to the operation of
the Seller's Business, including, without limitation, all written
technical information, employment records, data, specifications,
research and development information, engineering drawings, manuals,
computer programs, tapes and software relating to the Seller' s
Business;
(xii) all of Seller's goodwill in and going concern value of
the Seller's Business; and,
(xiii) to the extent transferable under applicable law, all
franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and other Governmental Authorizations.
2.2 EXCLUDED ASSETS
---------------
Notwithstanding any other provision of this
Agreement to the contrary, all of Seller's right, title and interest in all of
the following properties, assets and other rights (collectively, the "Excluded
Assets") shall be excluded from the Assets and retained by Seller:
(i) one (1) 1989 Cadillac Allante model motor vehicle, one
(1) 1984 Cadillac Seville model motor vehicle, one (1) laptop
computer, one (1) cellular phone and certain other non-material
personal items utilized by the Stockholders that Buyer has agreed
constitute Excluded Assets;
(ii) the loan or notes receivable from Cable Lite
Corporation and International Quarters;
(iii) any rights of Seller which are contingent on the
satisfaction of liabilities that are Non-Assumed Liabilities (as
defined hereinafter), except to the extent that any such rights relate
to any of the Assets;
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(iv) all rights, demands, claims, actions and causes of
action (whether for personal injuries or property, consequential or
other damages of any kind) (collectively, "Claims") which Seller may
have against any person with respect to, or which are related to, any
Non-Assumed Liabilities or Excluded Assets; and,
(v) the Purchase Price (as defined hereinafter).
2.3 ASSUMPTION OF LIABILITIES
--------------------------
(a) The Assets shall be sold and conveyed to Buyer free and
clear of all Encumbrances excepting only those Encumbrances set forth
on Exhibit 2.3(a)(i) hereto (collectively, "Permitted Encumbrances").
On and after the Closing Date, Buyer will assume and discharge only
those liabilities of Seller relating to the Assets or the Seller's
Business specified on Exhibit 2.3(a)(ii) hereto including all
liabilities and obligations arising on or after the Closing Date under
the Apartment Leases, the Corporate/Interim Housing Contracts, the
Office/Warehouse Leases and the Other Contracts (collectively, the
"Assumed Liabilities"). Certain of the Assumed Liabilities were
incurred on behalf of Seller but were incurred in the name of KLH or
RAH. EXCEPT AS SET FORTH IN THIS SECTION 2.3, BUYER HEREBY ASSUMES NO
OTHER LIABILITIES OF SELLER (INCLUDING, WITHOUT LIMITATION, NO
LIABILITIES, CLAIMS OR ACTIONS ALLEGING OR RELATING TO ANY TORT,
PRODUCT LIABILITY, ENVIRONMENTAL LIABILITY, TAXES, OR BREACH OF
CONTRACT OR OTHERWISE SEEKING DAMAGES AND RELATING TO THE OPERATION OF
THE SELLER'S BUSINESS PRIOR TO THE CLOSING DATE, AND NO LIABILITIES
RELATING TO THE EXCLUDED ASSETS (THE LIABILITIES OF SELLER WHICH ARE
NOT ASSUMED BY BUYER PURSUANT TO THIS AGREEMENT ARE HEREINAFTER
COLLECTIVELY REFERRED TO AS THE "NON-ASSUMED LIABILITIES")).
Notwithstanding any provision herein to the contrary, Buyer
shall be solely liable for the prompt and full discharge of the
Assumed Liabilities and also for any liability arising from, or in
connection with, the conduct of the Seller's Business or the ownership
of the Seller's Business or the Assets acquired by Buyer after the
consummation of the transactions contemplated hereby, including,
without limitation, any such liabilities arising by reason of any
violation or claimed violation by Buyer, by acts or events or
omissions arising or occurring after the Closing, of any federal,
state or local law, rule, regulation, ordinance or any requirement of
any government authority (collectively, the "Buyer's Post-Closing
Liabilities").
(b) Without limiting the generality of Section 2.3(a) and
notwithstanding any other provision hereof, each of the following is a
Non-Assumed Liability of Seller which Buyer does not assume:
(i) any of Seller's obligations hereunder;
(ii) any liabilities that are materially inconsistent with
Seller's represen tations and warranties in this Agreement or in any
Schedule or certificate delivered hereunder;
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(iii) other than Seller's indebtedness to Southwest Bank,
the principal amount of which shall not exceed the principal amount
outstanding on April 26, 1996 plus any further amounts borrowed by
Seller between April 26, 1996 and the Closing Date to operate Seller's
Business in the Ordinary Course of Business or to make the payment
contemplated in Section 2.9 hereof, and the purchase money
indebtedness for certain motor vehicles and appliances listed on
Exhibit 2.3(a)(ii) (which shall be Assumed Liabilities), any liability
of Seller arising from indebtedness for borrowed money or long-term
debt of Seller;
(iv) any liability of Seller arising from, or in connection
with, the conduct of the Seller's Business or the ownership of the
Seller's Business or the Assets by Seller prior to the consummation of
the transactions contemplated hereby at the Closing, including,
without limitation, any such liabilities arising by reason of any
violation or claimed violation by Seller, by acts or events or
omissions arising or occurring prior to the Closing, of any federal,
state or local law, rule, regulation, ordinance or any requirement of
any government authority, other than any such liability which Buyer
has expressly assumed as an Assumed Liability;
(v) any liability of Seller for taxes owed to any taxing
authority other than the accruals or charges specifically set forth on
Exhibit 2.3(a)(ii);
(vi) any liability of Seller arising out of or related to
past, present or future litigation involving Seller or Seller as the
owner and operator of or the Seller's Business, whether the relevant
cause of action accrues before or after the Closing;
(vii) any liability in respect of any contract to which
Seller is a party or beneficiary which is not an Assumed Contract (as
defined in Section 3.17 of this Agreement);
(viii) any liability arising out of the employment or
termination of employment, in either case prior to the Closing, of any
person employed in the Seller's Business;
(ix) any liability that represents any amounts past due or
contractually due
on or prior to the Closing Date under any Assumed Contract;
(x) any liability of Seller or any present or former
director or officer of Seller arising from any claim, action or
proceeding, including, without limitation, any derivative action,
brought by or on behalf of any present or former holder of any debt or
equity security of Seller or by any lender to Seller, including,
without limitation, any liability arising from any indemnification,
reimbursement or advance in connection therewith; and,
(xi) any liability of Seller which is not an Assumed
Liability under Section 2.3(a).
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2.4 PURCHASE PRICE
--------------
The purchase price (the "Purchase Price") for the
Assets, plus or minus the Adjustment Amount, will be Five Million Seven Hundred
Thousand Dollars ($5,700,000), Eighty Six Thousand Seven Hundred (86,700) shares
of Buyer common stock, no par value (the "Buyer Shares"), and Buyer's assumption
of the Assumed Liabilities. At the Closing, Buyer will assume the Assumed
Liabilities, pay Five Million Seven Hundred Thousand Dollars ($5,700,000) of the
Purchase Price in cash (the "Cash Portion"); and deliver to Seller Thirty Six
Thousand Seven Hundred (36,700) of the Buyer Shares (the "Closing Buyer
Shares"). The other Fifty Thousand (50,000) Buyer Shares (the "Post-Closing
Buyer Shares") shall constitute the remainder of the Purchase Price and shall be
delivered to Seller, plus or minus the Adjustment Amount after conclusion of the
Audit, as set forth in Section 2.8 hereof.
2.5 CLOSING
-------
The purchase and sale (the "Closing") provided for
in this Agreement will take place at Seller's principal offices at 15510 Wright
Brothers Drive, Dallas, Texas 75244 at 10:00 a.m. (local time) on June 14, 1996,
or at such other time and place as the parties may agree. Subject to the
provisions of Sections 2.9 and 7, failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section 2.5 will not result in the termination of this
Agreement and will not relieve any party of any obligation under this Agreement.
2.6 CLOSING OBLIGATIONS
-------------------
At the Closing:
(a) Seller and the Stockholders shall deliver to
Buyer:
(i) bills of sale, assignment and assumption
agreements with respect to the Apartment Leases, the Corporate/Interim
Housing Contracts, the Office/Warehouse Leases and the Other
Contracts, assignments of trademarks, service marks and other
intellectual property (to the extent Buyer and Seller have agreed that
such estoppel certificates are reasonably obtainable) estoppel
certificates and other instruments of transfer and conveyance deemed
necessary or appropriate by Buyer to convey the Assets to Buyer at the
Closing, all in form and substance satisfactory to Buyer and executed
by Seller (the "Transfer Documentation");
(ii) employment agreements for KLH and RAH in the
form of Exhibit 2.6(a)(ii), executed by the Stockholders (the
"Employment Agreements");
(iii) consulting agreements for KLH and RAH in the
form of Exhibit 2.6(a)(iii), executed by the Stockholders (the
"Consulting Agreements");
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(iv) noncompetition agreements in the form of Exhibit
2.6(a)(iv), executed by Seller and the Stockholders (collectively,
the "Noncompetition Agreements");
and,
(v) a certificate executed by Seller representing and
warranting to Buyer that each of Seller's representations and
warranties in this Agreement was (after giving effect to the
statements set forth in the Disclosure Letter) accurate in all
respects as of the date of this Agreement and is (after giving effect
to the statements set forth in that Disclosure Letter) accurate in all
respects as of the Closing Date as if made on the Closing Date (giving
full effect to any supplements to the Disclosure Letter that were
delivered by Seller to Buyer prior to the Closing Date); and
(b) Buyer will deliver to Seller:
(i) the Cash Portion by wire transfer of immediately
available funds;
(ii) duly executed certificates evidencing the Closing Buyer
Shares;
(iii) the Employment Agreements, executed by Buyer;
(iv) the Consulting Agreements, executed by Buyer;
(v) the Noncompetition Agreements, executed by Buyer;
(vi) the Registration Rights Agreement (defined in Section
3.2(c) hereof), executed by Buyer; and
(vii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date.
In addition to the foregoing, Seller and Buyer shall execute
and deliver prior to or simultaneously with the delivery of the Audit such
federal and state tax forms and schedules as may be necessary or appropriate to
reflect the parties' agreed upon allocation of the Purchase Price among the
Assets. No less than Two Million Five Hundred Thousand Dollars ($2,500,000)
shall be allocated to goodwill.
2.7 ADJUSTMENT AMOUNT
-----------------
The Adjustment Amount (which may be a positive or negative
number) shall be equal to the following:
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(i) if the audit of Seller's financial statements to be
conducted by Price Waterhouse LLP ("Audit") reveals that the Seller's
1995 Operating Income (as defined hereinafter) is less than One
Million One Hundred Thousand Dollars ($1,100,000) (the "Minimum
Operating Income Level"), the Purchase Price shall be adjusted
downward by Five Dollars ($5.00) for each One Dollar ($1.00) that
Seller's 1995 Operating Income is less than the Minimum Operating
Income Level. The amount by which the Purchase Price is adjusted
downward would be the Adjustment Amount; and,
(ii) if the Audit reveals that Seller's 1995 Operating
Income is greater than One Million Five Hundred Thousand Dollars
($1,500,000), (the "Maximum Operating Income Level"), the Purchase
Price shall be adjusted upwards by Five Dollars ($5.00) for each One
Dollar ($1.00) that Seller's 1995 Operating Income is greater than the
Maximum Operating Income Level. The amount by which the Purchase Price
is adjusted upwards would be the Adjustment Amount.
The Adjustment Amount will be zero (0) if the Audit reveals that Seller's 1995
Operating Income is greater than or equal to the Minimum Operating Income Level
but less than or equal to the Maximum Operating Income Level. The amount of the
Adjustment Amount shall not in any event exceed Five Hundred Thousand Dollars
($500,000). As used in this Section 2.7, Seller's "1995 Operating Income" means
Seller's pre-tax income for the twelve (12) month period ended December 31, 1995
after taking into account accounting-basis depreciation, amortization and items
and after adding back officers' compensation in excess of One Hundred
Twenty-Five Thousand Dollars ($125,000), all as finally determined pursuant to
the Audit. Price Waterhouse LLP shall complete the Audit no later than sixty
(60) days after the Closing and shall present copies of the completed Audit
simultaneously to Seller and Buyer for review. Buyer shall bear the cost of
having Price Waterhouse LLP conduct the Audit.
If neither Seller nor Buyer has indicated in writing that it has a
material objection to the Audit as completed by Price Waterhouse LLP within ten
(10) days after its receipt of the Audit, the Audit shall be deemed accepted by
all parties to the Agreement and shall be conclusive on all such parties. If
either Seller or Buyer has a material objection to the Audit as completed by
Price Waterhouse LLP, it shall so indicate in a writing addressed to the other
parties hereto within ten (10) days after its receipt of the Audit, which
writing shall set forth in reasonable detail the basis of the objectant's
objections. If the parties hereto, after good faith consultation among each
other and with Price Waterhouse LLP, are not, within five (5) days, able to
address the objectant's objections satisfactorily, the objectant shall refer its
objections to the Audit to a neutral and independent third party accounting firm
reasonably acceptable to the other parties hereto (the "Arbitrator"). The
Arbitrator shall, without conducting another audit, review the Audit and the
objectant's objections thereto, determine whether any adjustments are
appropriately made in view of the objectant's objections and make such
appropriate adjustments. The Audit, as so adjusted by the Arbitrator shall, in
the absence of manifest error, be conclusive on all parties hereto. The Seller
and the Buyer shall share equally in the fees and other charges of the
Arbitrator.
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Seller acknowledges the importance to Buyer, as a publicly traded
company, of the Audit and therefore agrees to cooperate fully in the conduct and
preparation of the Audit, making available (or causing its accountants to make
available) to Price Waterhouse LLP work papers and all other materials required
by Price Waterhouse LLP to complete the Audit.
2.8 ADJUSTMENT PROCEDURE
--------------------
Any downward adjustment to the Purchase Price required to be
made as a result of the Audit shall be made by a reduction in the number of
Post-Closing Buyer Shares delivered to Seller (valued solely for these purposes
at Ten Dollars ($10.00) per Buyer Share). Any upward adjustment to the Purchase
Price required to be made as a result of the Audit shall be made by an increase
in the number of Post-Closing Buyer Shares disbursed to Seller (valued solely
for these purposes at Ten Dollars ($10.00) per Buyer Share). Payments of the
Adjustment Amount shall be made within ten (10) days after completion and
delivery to Buyer and Seller of the Audit, as adjusted by the Arbitrator, if so
required.
2.9 1996 INCOME-RELATED ADJUSTMENT
------------------------------
It is the intention of the parties that Seller shall retain
the net income generated in the conduct of the Seller's Business from January 1,
1996 through May 31,1996. In furtherance of this intention, Seller shall pay RAH
a bonus of Five Hundred Sixty-Two Thousand Five Hundred Dollars ($562,500), as
adjusted, prior to the Closing Date. This bonus amount shall be adjusted
downwards by the amount of any increase in the loans or notes receivable from
Cable Lite Corporation or International Quarters from December 31, 1995 through
the Closing Date. This bonus amount shall be increased by One Hundred Twelve
Thousand Five Hundred Dollars ($112,500) if the Closing shall not have occurred
by June 15, 1996 through no fault or delay of Seller or the Stockholders. If the
Closing shall not have occurred by June 15, 1996 through the fault and/or delay
of each of Buyer (on the one hand) and Seller and the Stockholders (on the
other), the bonus amount shall be increased by Fifty-Six Thousand Two Hundred
Fifty Dollars ($56,250).
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS
---------------------------------------------------------
Seller and each of the Stockholders, jointly and severally,
represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
------------------------------
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Texas, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use. Seller is not qualified to do business as a foreign corporation under the
laws of any other state or other jurisdiction because it does not do business in
such states in a manner that requires qualification.
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(b) Seller has delivered to Buyer copies of its
Organizational Documents, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
----------------------
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller and the Stockholders, enforceable against each of Seller
and the Stockholders in accordance with its terms. Seller and the Stockholders
have the absolute and unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the other documents contemplated to be
executed and delivered at the Closing by Seller or the Stockholders and to
perform their respective obligations under this Agreement and such other
documents.
(b) Except as set forth in Part 3.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated hereby will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of
(A) any provision of the Organizational Documents of Seller, or (B)
any resolution adopted by the board of directors or the stockholders
of Seller;
(ii) to Seller's Knowledge, contravene, conflict with, or
result in a violation of, or give any Governmental Body or other
Person the right to challenge any of the transactions contemplated
hereby or to exercise any remedy or obtain any relief under,
(iii) to Seller's Knowledge, contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any material Governmental Authorization that is
held by Seller or that otherwise relates to the Seller's Business, or
any of the Assets;
(iv) cause Buyer to become subject to, or to become liable
for the payment of, any state or local Tax (except as relates to
Buyer's ownership of the Assets or conduct of the business after the
Closing);
(v) to Seller's Knowledge, cause any of the Assets to be
reassessed or revalued by any taxing authority or other Governmental
Body (except as relates to Buyer's ownership of the Assets or conduct
of the business after the Closing);
(vi) to Seller's Knowledge, contravene, conflict with, or
result in a violation or breach of any provision of, or give any
Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel,
15
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terminate, or modify, any material Apartment Lease, Corporate/
Interim Housing Contract, Office/Warehouse Lease or Other
Contract; or
(vii) result in the imposition or creation of any material
Encumbrance upon or with respect to any of the Assets.
Except as set forth in Part 3.2 of the Disclosure Letter, Seller is not
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated
hereby.
(c) Seller is acquiring the Buyer Shares for its own account
and not with a view to their distribution within the meaning of Section 2(11) of
the Securities Act. Seller is aware of the restrictions on transfer applicable
to the Buyer Shares under federal and state securities laws and that the Buyer
Shares have not been registered under the Securities Act or under any state
securities laws and therefore, must be held indefinitely unless so registered or
unless an exemption from registration, such as under SEC Rule 144, is available.
Except as provided in the Registration Rights Agreement (as defined
hereinafter), Buyer is under no obligation to register the Buyer Shares. Seller
is an "accredited investor" as such term is defined in Rule 501(a) under the
Securities Act. Buyer and Seller shall, at Closing, enter into the Registration
Rights Agreement in the form of Exhibit 3.2(c) (the "Registration Rights
Agreement") pursuant to which Seller shall have "piggyback" registration rights
with respect to the Buyer Shares.
3.3 CAPITALIZATION
--------------
The authorized equity securities of Seller consist of Ten
Thousand (10,000) shares of common stock, par value $.01 per share, of which
Eight Thousand Five Hundred (8,500) shares are issued and outstanding. The
Stockholders are and will be on the Closing Date the record and beneficial
owners and holders of all such shares. Seller owns no shares of capital stock in
any other corporation, firm or other entity and has no Subsidiaries.
3.4 FINANCIAL STATEMENTS
--------------------
Seller has delivered to Buyer (or will deliver to Buyer in
accordance with this Agreement): (a) unaudited balance sheets of Seller as at
December 31, in each of the years 1992 through 1994, and the related unaudited
statements of income for each of the fiscal years then ended, and (b) an
unaudited balance sheet of Seller as at March 31, 1996 (the "Interim Balance
Sheet") and the related unaudited statement of income for the three-month period
then ended. Such unaudited financial statements have been prepared in accordance
with a modified cash basis/tax basis method of accounting, have been compiled by
Seller's accountant based upon information supplied by Seller, and do not
contain any accompanying notes. Further, the unaudited financial statements have
not been reviewed or audited by Seller's accountant, and Seller's accountant has
not issued any opinion with respect to them. Subject to the foregoing and to
those matters which have been disclosed orally
16
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in due diligence sessions with David D. Hoguet or Victoria L. Chester or in
writing by Seller to Buyer with respect to such unaudited financial statements,
such unaudited financial statements delivered by Seller to Buyer fairly present
in all material respects the financial condition and the results of operations
of Seller as at the respective dates of and for the periods referred to in such
unaudited financial statements in accordance with the method of accounting
pursuant to which they were prepared. Any interim financial statements are
further subject to normal recurring year-end adjustments.
Buyer is also obtaining an audited balance sheet of Seller
as at December 31, 1995 (the "Balance Sheet"), and the related statements of
income, changes in stockholders' equity, and cash flow for the fiscal year then
ended, which have been audited by Price Waterhouse LLP. Subject to Seller's
acceptance of the Audit (as defined in Section 2.7), such audited financial
statements fairly present in all material respects the financial condition and
the results of operations of Seller as at the date of and for the period
referred to in such audited financial statements.
3.5 BOOKS AND RECORDS
-----------------
The books of account, minute books, stock record books, and
other records of Seller, copies or the originals of all of which have been made
available to Buyer, are complete and correct in all material respects relevant
to the transactions contemplated hereby and have been maintained in accordance
with sound business practices (except for the minute books and stock minute
books, which have been maintained in accordance with Seller's business
practices), including the maintenance of an adequate system of internal
controls.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
---------------------------------
Except as otherwise indicated in Parts 3.6 or 3.22 of the
Disclosure Letter, Seller owns all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that it purports to own,
including all of the properties and assets reflected in the Balance Sheet and
the Interim Balance Sheet (except for personal property sold since the date of
the Balance Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by Seller since the date of the Balance Sheet (except for
personal property acquired and sold since the date of the Balance Sheet in the
Ordinary Course of Business and consistent with past practice). All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances other than the Permitted
Encumbrances. To Seller's Knowledge, all buildings, plants, and structures
leased or used by Seller lie wholly within the boundaries of the real property
leased or used by Seller and do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person.
17
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3.7 CONDITION AND SUFFICIENCY OF ASSETS
-----------------------------------
To Seller's Knowledge, the equipment, vehicles, In-Use
Property and Contract Property of Seller and included in the Assets are
structurally sound, are in good operating condition and repair, ordinary wear
and tear excepted, and are adequate for the uses to which they are being put,
and none of such equipment, vehicles, In-Use Property and Contract Property is
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The equipment, vehicles,
In-Use Property and Contract Property of Seller and included in the Assets are
sufficient for the continued conduct of the Seller's Business after the Closing
in substantially the same manner as conducted prior to the Closing. To Seller's
Knowledge, the apartments, suites or other facilities leased by Seller pursuant
to the Apartment Leases are habitable and tenantable, taken as a whole.
3.8 ACCOUNTS RECEIVABLE
-------------------
All accounts receivable of Seller that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of
Seller as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of a reserve (hereby made) of One
Hundred Thousand Dollars ($100,000) ("Section 3.8 Reserve"). Subject to this
Section 3.8 Reserve, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, by February 28, 1997. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Corporate/Interim Housing Contract or other contract or
arrangement with any obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable. Part 3.8 of the Disclosure Letter, to be
delivered by June 30, 1996, will contain a complete and accurate list of all
Accounts Receivable as of May 31, 1996, which list shall set forth the aging of
such Accounts Receivable. In the event that Seller is required to indemnify
Buyer, in accordance with Section 8 of this Agreement, with respect to any
Accounts Receivable that are not collected on or before February 28, 1997,
subject to the Section 3.8 Reserve, then Buyer shall assign such uncollected
receivables to Seller, without recourse, totaling a face amount equal to the
amount of the indemnification paid by Seller. Seller and Buyer shall in good
faith determine the particular receivables to be assigned to Seller.
3.9 INVENTORY
---------
All inventory of Seller included in the Assets, including
the Inventory Property, whether or not reflected in the Balance Sheet or the
Interim Balance Sheet, consists of tangible property that is, in all material
respects, of a quality and quantity usable and salable in the Ordinary Course of
Business, except for obsolete items and items of below-standard quality, which
do not constitute a material amount of such inventories.
18
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3.10 NO UNDISCLOSED LIABILITIES
--------------------------
Except as set forth in Part 3.10 of the Disclosure Letter,
to Seller's Knowledge, Seller has no liabilities or obligations of any nature
(whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the respective dates thereof.
3.11 TAXES
-----
(a) Seller has filed or caused to be filed (on a timely
basis, giving effect to allowable extensions, since January 1, 1993) all Tax
Returns that are or were required to be filed by or with respect to Seller or
Seller's Business, pursuant to applicable Legal Requirements. Seller has
delivered to Buyer copies of all such Tax Returns relating to income or
franchise taxes filed since January 1, 1993. All Tax Returns filed by Seller are
true, correct and complete in all material respects as such and to the extent
that such Tax Returns may affect the transactions contemplated by this
Agreement. Seller has paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Seller, except such Taxes, if any, as are
listed in Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves have been provided in the Balance Sheet
and the Interim Balance Sheet.
(b) To Seller's Knowledge, the charges, accruals and
reserves, if any, with respect to Taxes on the books of Seller are adequate and
are at least equal to Seller's liability for Taxes. Seller has received no
proposed tax assessment against Seller except as disclosed in the Balance Sheet
or in Part 3.11 of the Disclosure Letter. To Seller's Knowledge, no consent to
the application of Section 341(f)(2) of the IRC has been filed with respect to
any property or assets held, acquired, or to be acquired by Seller. To Seller's
Knowledge, all Taxes that Seller is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
3.12 NO MATERIAL ADVERSE CHANGE
--------------------------
To Seller's Knowledge, except as otherwise expressly
permitted under this Agreement, since the date of the Balance Sheet, there has
not been any material adverse change in the business, operations, properties,
prospects, assets, or condition of the Seller's Business or the Assets, and no
event has occurred or circumstance exists that may result in such a material
adverse change.
3.13 EMPLOYEE BENEFITS
-----------------
(a) Seller sponsors or maintains in effect for its employees
a health insurance plan, a sick pay plan or policy, a vacation pay plan or
policy and a holiday pay plan or
19
-15-
policy (the "Four Plans"). Other than the Four Plans, there are no Company
Plans, Company Other Benefit Obligations or Company VEBAs.
(b) Seller will deliver to Buyer within ten days of the date
of this Agreement:
(i) all documents that set forth the terms of each of the
Four Plans, including (A) all plan descriptions and summary plan
descriptions of the Four Plans for which Seller is required to prepare,
file, and distribute plan descriptions and summary plan descriptions,
and (B) all summaries and descriptions furnished to participants and
beneficiaries regarding those of the Four Plans for which a plan
description or summary plan description is not required;
(ii) all personnel, payroll, and employment manuals and
policies;
(iii) all insurance policies purchased by or to provide
benefits under any of the Four Plans;
(iv) all notifications to employees of their rights under
ERISA Sec. 601 et seq. and IRC Sec. 4980B; and,
(v) the Form 5500, if any, filed in each of the most recent
three plan years with respect to each of the Four Plans, including all
schedules thereto and the opinions of independent accountants.
(c) Except as set forth in Part 3.13(vi) of the Disclosure
Letter:
(i) Seller, with respect to the Four Plans is, and each of
the Four Plans is, in compliance in all material respects with ERISA,
the IRC, and other applicable Laws including the provisions of such
Laws expressly mentioned in this Section 3.13, and with any applicable
collective bargaining agreement.
(ii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving, any of the Four Plans is pending or, to Sellers' or the
Stockholders' Knowledge, is Threatened.
(iii) The consummation of the transactions contemplated
hereby will not result in the payment, vesting, or acceleration of any
benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
------------------------------------------------
(a) Except as set forth in Part 3.14 of the Disclosure
Letter:
20
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(i) Seller is in compliance in all material respects with
each Legal Requirement that is or was applicable to it or to the
conduct or operation of Seller's Business or the ownership or use of
any of its assets;
(ii) to Seller's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A)
may constitute or result in a violation by Seller of, or a failure on
the part of Seller to comply with, any Legal Requirement, or (B) may
give rise to any obligation on the part of Seller to undertake, or to
bear all or any portion of the cost of, any remedial action of any
nature; and
(iii) Seller has not received, at any time since January 1,
1993, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible, or potential material violation of, or material
failure to comply with, any Legal Requirement, or (B) any actual,
alleged, possible, or potential obligation on the part of Seller to
undertake, or to bear all or any portion of the cost of, any material
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete
and accurate list of each material Governmental Authorization that is held by
Seller or that otherwise relates to the Seller's Business or the Assets. Each
material Governmental Authorization listed or required to be listed in Part 3.14
of the Disclosure Letter is valid and in full force and effect.
3.15 LEGAL PROCEEDINGS; ORDERS
-------------------------
(a) except as set forth in part 3.15 of the Disclosure
Letter, there is no pending Proceeding:
(i) that has been commenced by or against Seller or that
otherwise materially relates to or may materially affect Seller's
Business or the Assets; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the transactions contemplated hereby.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding
other than as set forth in Part 3.15 of the Disclosure Letter. Seller
has delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the
Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of Seller's
Business or the Assets.
21
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(b) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) Seller is not subject to any Order that relates in any
material respect to the Seller's Business, or any of the Assets;
(ii) to the Knowledge of Seller and the Stockholders, no
officer, director, agent, or employee of Seller is subject to any
Order that prohibits such officer, director, agent, or employee from
engaging in or continuing any conduct, activity, or practice relating
to the Seller's Business.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
-------------------------------------
Except as set forth in Part 3.16 of the Disclosure Letter or
as otherwise expressly permitted in this Agreement, since the date of
the Balance Sheet, Seller has conducted the Seller's Business only in
the Ordinary Course of Business and there has not been any:
(a) change in Seller's authorized or issued capital stock;
grant of any stockoption or right to purchase shares of capital stock
of Seller; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by Seller of any shares of any such
capital stock; or declaration or payment of any
(b) amendment to the Organizational Documents of Seller;
(c) except in the Ordinary Course of Business, payment or
increase by Seller of any bonuses, salaries, or other compensation to
any stockholder, director, officer, or employee or entry into any
employment, severance, or similar contract with any director, officer,
or employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or
with any employees of Seller;
(e) damage to or destruction or loss of any asset or
property of Seller, whether or not covered by insurance, materially
and adversely affecting the properties, assets, business, financial
condition, or prospects of Seller;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, exclusive contract or arrangement,
joint venture, credit, or similar agreement, or (ii) any contract or
transaction involving a total remaining commitment by or to Seller
(determined on an individual basis) of at least $25,000;
22
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(g) other than in the Ordinary Course of Business, sale,
lease, or other disposition of any asset or property of Seller or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of Seller, including the sale, lease, or other disposition of any of
the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value (determined individually) to Seller in excess of $25,000;
(i) material change in the accounting methods used by
Seller; or
(j) agreement, whether oral or written, by Seller to do any
of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
----------------------
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and Seller has delivered or made available to Buyer
true and complete copies, of each of the Apartment Leases, the Corporate/Interim
Housing Contracts, the Office/Warehouse Leases and the Other Contracts
(collectively, the "Assumed Contracts").
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter, Seller has no rights under, and has no or may not become subject to any
obligation or liability under, any other contract that relates in any material
respect to Seller's Business or the Assets.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Assumed Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) Seller is in compliance in all material respects with
all applicable terms and requirements of each of the Assumed
Contracts;
(ii) to Seller's Knowledge, each other Person that has or
had any obligation or liability under any of the Assumed Contracts is
in compliance in all material respects with all applicable terms and
requirements of such Assumed Contract;
(iii) to Seller's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or breach of, or
give Seller or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Assumed Contract; and
23
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(iv) Seller has not given to or received
from any other Person, at any time since January 1, 1995, any notice
or other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default
under, any Assumed Contract.
(e) Other than in the Ordinary Course of
Business, there are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
Seller under current or completed contracts with any Person included in the
Assumed Contracts and no such Person has made written demand for such
renegotiation.
3.18 INSURANCE
---------
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all
policies of insurance to which Seller is a party or under which Seller
is or has been covered at any time within the three (3) years
preceding the date of this Agreement; and
(ii) true and complete copies of all
pending applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter
describes:
(i) any self-insurance arrangement by
or affecting Seller or the Assets, including any reserves established
thereunder;
(ii) any contract or arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by
Seller; and
(iii) all obligations of Seller to third
parties with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under which
such coverage is provided.
3.19 ENVIRONMENTAL MATTERS
---------------------
Except as set forth in part 3.19 of the Disclosure
Letter:
(a) To Seller's Knowledge, Seller is, and at
all times has been, in compliance in all material respects with all
Environmental Laws. Seller has not received any actual or Threatened order,
notice, or other communication from (i) any Governmental Body or private
citizen acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and
24
-20-
Safety Liabilities with respect to any of the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Seller has had
an interest, or with respect to any property or Facility at or to which
Hazardous Materials were refined, transferred, imported, or processed by Seller
or any other Person for whose conduct it is or may be held responsible.
(b) There are no pending or, to the Knowledge
of Seller, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets (whether
real, personal, or mixed) in which Seller has or had an interest.
(c) To Seller's Knowledge, neither Seller nor
any other Person for whose conduct it is or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities
or, to the Knowledge of Seller with respect to any other properties and assets
(whether real, personal, or mixed) in which Seller (or any predecessor), has or
had an interest.
(d) To the Knowledge of Seller, there has been
no Release or Threat of Release, of any Hazardous Materials that would
constitute a material violation of any Environmental Laws at or from the
Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which Seller has or had an
interest.
3.20 EMPLOYEES
---------
(a) Part 3.20 of the Disclosure Letter contains
a complete and accurate list of the following information for each employee of
Seller, including each employee on leave of absence or layoff status: employee
name; job title; current compensation paid or payable and any change in
compensation since January 1, 1995; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under Seller's fringe
benefit plans.
(b) To Seller's Knowledge, except as set forth
in Part 3.20 of the Disclosure Letter, no Seller employee is a party to, or is
otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee in Seller's Business, or (ii) the ability of Seller to conduct
Seller's Business. To Seller's Knowledge, no officer or other key employee of
Seller intends to terminate his employment with Seller in connection with the
transactions contemplated hereby.
25
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3.21 LABOR RELATIONS; COMPLIANCE
---------------------------
Since January 1, 1995, Seller has not been or is not
a party to any collective bargaining or other labor Contract. Since January 1,
1995, there has not been, there is not presently pending or existing, and there
is not Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting the
Seller's Business relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organizational activity, or other labor or employment
dispute against or affecting Seller or its premises, or (c) any application for
certification of a collective bargaining agent. To Seller's Knowledge, no event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. There is no lockout of any employees by
Seller, and no such action is contemplated by Seller. To Seller's Knowledge,
Seller has complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. Seller 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 Legal Requirements.
3.22 INTELLECTUAL PROPERTY
---------------------
(a) INTELLECTUAL PROPERTY ASSETS--The term
"Intellectual Property Assets" includes:
(i) the names "Interim Quarters" and
"Corporate Quarters," all fictional business names, trading names,
registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications,
and inventions and discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published
works and unpublished works (collectively, "Copyrights"); and,
(iv) all know-how, trade secrets,
confidential information, customer lists, internally derived or custom
software, technical information, data, process technology, plans,
drawings, and blue prints (collectively, "Trade Secrets") owned, used,
or licensed by Seller as licensee or licensor.
(b) Agreements -- Part 3.22(b) of the
Disclosure Letter contains a complete and accurate list and summary
description, including any royalties paid or received by
26
- 22-
Seller, of all Contracts relating to the Intellectual Property Assets to which
Seller is a party or by which Seller is bound, except for any license implied
by the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $10,000 under which Seller is the
licensee. There are no outstanding and, to Seller's Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
(c) [INTENTIONALLY LEFT BLANK]
(d) Trademarks
(i) Part 3.22(d) of the Disclosure
Letter contains a complete and accurate list and summary description
of all Marks.
(ii) Except as set forth on Part 3.22(d)
of the Disclosure Letter, all Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance
with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject
to any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) Except as set forth on Part 3.22(d)
of the Disclosure Letter, no Mark has been or is now involved in any
opposition, invalidation, or cancellation and, to Seller's Knowledge,
no such action is Threatened with the respect to any of the Marks.
(iv) Except as set forth on Part 3.22(d)
of the Disclosure Letter, to Seller's Knowledge, there is no
potentially interfering trademark or trademark application of any
third party.
(e) Trade Secrets
(i) With respect to the Trade Secrets,
taken as a whole, the documentation relating to such Trade Secret is
current, accurate, and sufficient in detail and content to identify
and explain it and to allow its full and proper use without reliance
on the knowledge or memory of any individual.
(ii) Seller has taken all reasonable
precautions to protect the secrecy, confidentiality and value of its
Trade Secrets.
3.23 DISCLOSURE
----------
(a) No representation or warranty of Seller in
this Agreement and no statement in the Disclosure Letter omits to state a
material fact required to be made in such representation or warranty or in the
Disclosure Letter and necessary to make the statements herein
27
- 23 -
or therein, in light of the circumstances in which they were made, not
misleading.
(b) There is no fact known to Seller that has
specific application to the Seller's Business (other than general economic or
industry conditions) and that materially adversely affects the assets,
business, prospects, financial condition, or results of operations of the
Seller's Business that has not been set forth in this Agreement or the
Disclosure Letter.
(c) Disclosure by Seller and/or the
Stockholders of any matter with respect to any representation or warranty made
by Seller and/or the Stockholders in this Agreement shall constitute disclosure
of the same matter with respect to any other representation or warranty made by
Seller and/or the Stockholders in this Agreement.
3.24 BROKERS OR FINDERS
------------------
Seller and its agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to each of Seller and the
Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING
------------------------------
Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Ohio, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own
or use. Buyer is duly qualified to do business as foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification. Buyer
has delivered to Seller copies of its Organizational Documents, as currently in
effect.
4.2 AUTHORITY; NO CONFLICT
----------------------
(a) This Agreement constitutes the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the other documents
contemplated to be executed and delivered at the Closing by Buyer and to
perform its obligations under this Agreement and such other documents.
(b) Except as set forth in Schedule 4.2,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the transactions contemplated hereby will give any Person
the right to prevent, delay, or otherwise interfere with any of the
28
- 24 -
transactions contemplated hereby pursuant to:
(i) any provision of Buyer's
Organizational Documents;
(ii) any resolution adopted by the board
of directors or the stockholders of Buyer;
(iii) any Legal Requirement or Order to
which Buyer may be subject; or
(iv) any material contract to which
Buyer is a party or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated hereby.
4.3 CAPITALIZATION; BUYER SHARES
----------------------------
The authorized equity securities of Buyer consist of
10,000,000 shares of common stock, no par value per share, and 100,000 shares
of undesignated preferred stock, no par value per share. As of February 29,
1996, [3,941,869] shares of common stock were issued and outstanding and no
shares of undesignated preferred stock were issued and outstanding. The Buyer
Shares to be received by Seller in connection with the transactions
contemplated hereby will be duly authorized, validly issued, fully paid and
non-assessable shares of common stock free of any claim of preemptive rights
and free and clear of any and all Encumbrances other than restrictions on
transfer imposed by federal and state securities laws and regulations.
4.4 SEC REPORTS
-----------
Buyer has timely filed with the Securities and
Exchange Commission ("SEC") all materials and documents required to be filed by
it under the Securities Exchange Act of 1934 (the "Exchange Act"). All the
materials and documents filed with the SEC by Buyer since December 1, 1995,
including its initial Registration Statement on Form S-1, are hereinafter
referred to as the "Buyer SEC Reports." The Buyer SEC Reports, copies of which
have been delivered to the Seller, are true and correct in all material
respects, including the financial statements and other financial information
contained therein, and do not omit to state any material fact necessary to make
the statements in such Buyer SEC Reports, in light of the circumstances in
which they were made, not misleading. The financial statements included in the
Buyer SEC Reports fairly present in all material respects the financial
condition and the results of operations, changes in stockholders' equity and
cash flow of Buyer and its subsidiaries as at the respective dates of and for
the periods referred to in such financial statements, all in accordance with
GAAP.
29
- 25 -
4.5 CERTAIN PROCEEDINGS
-------------------
There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby. To Buyer's Knowledge, no such Proceeding has
been Threatened.
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
---------------------------------------------------
Buyer's obligation to purchase the Assets and assume the
Assumed Liabilities and to take the other actions required to be taken by Buyer
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Buyer, in whole
or in part):
5.1 ACCURACY OF REPRESENTATIONS
---------------------------
After giving effect to the matters set forth in the
Disclosure Letter, all of the representations and warranties of Seller and the
Stockholders in this Agreement (considered collec tively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects (other than representations and warranties
having materiality qualifiers, which shall be accurate in all respects) as of
the date of this Agreement, and must be accurate in all material respects
(other than representations and warranties having materiality qualifiers, which
shall be accurate in all respects) as of the Closing Date as if made on the
Closing Date, after effect to any supplement to the Disclosure Letter.
5.2 SELLER'S PERFORMANCE
--------------------
(a) All of the covenants and obligations that
Seller or the Stockholders are required to perform or to comply with pursuant
to this Agreement at or prior to the Closing (considered collectively), and
each of these covenants and obligations (considered individually), must have
been duly performed and complied with in all material respects.
(b) Each document required to be delivered
pursuant to Section 2.6 must have been delivered.
5.3 CONSENTS
--------
Each of the Consents identified in Part 3.2 of the
Disclosure Letter, and each Consent identified in Schedule 4.2, must have been
obtained and must be in full force and effect.
5.4 ADDITIONAL DOCUMENTS
--------------------
Each of the following documents must have been
delivered to Buyer:
30
- 26 -
(a) an opinion of Powell & Thomas, P.C., dated
the Closing Date, in the form of Exhibit 5.4(a); and,
(b) such other documents as Buyer may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 6.4(a), (ii) evidencing the accuracy of any of
Seller's representations and warranties, (iii) evidencing the performance by
Seller of, or the compliance by Seller with, any covenant or obligation
required to be performed or complied with by Seller, (iv) evidencing the
satisfaction of any condition referred to in this Section 5, or (v) otherwise
facilitating the consummation or performance of any of the transactions
contemplated hereby, including evidence of the change to Seller's corporate
name to KM Interests, Inc.
5.5 NO PROCEEDINGS
--------------
Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the transactions
contemplated hereby, or (b) that may reasonably have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions
contemplated hereby.
5.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
---------------------------------------------------
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, the
Assets or any stock of, or any other voting, equity, or ownership interest in
Seller, or (b) is entitled to all or any portion of the Purchase Price payable
for the Assets.
5.7 NO PROHIBITION
--------------
Neither the consummation nor the performance of any
of the transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
6. CONDITIONS PRECEDENT TO SELLER'S AND THE STOCKHOLDERS'
-----------------------------------------------------
OBLIGATION TO CLOSE
-------------------
Seller's obligation to sell the Assets and to take the other
actions required to be taken by Seller or the Stockholders at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Seller and/or the
Stockholders, in whole or in part):
31
- 27 -
6.1 ACCURACY OF REPRESENTATIONS
---------------------------
All of Buyer's representations and warranties in
this Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all material
respects (other than representations and warranties having materiality
qualifiers, which shall be accurate in all respects) as of the date of this
Agreement and must be accurate in all material respects (other than
representations and warranties having materiality qualifiers, which shall be
accurate in all respects) as of the Closing Date as if made on the Closing
Date.
6.2 BUYER'S PERFORMANCE
-------------------
(a) All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
(b) Buyer must have delivered each of the
documents required to be delivered by Buyer pursuant to Section 2.6 and must
have paid the Purchase Price.
6.3 CONSENTS
--------
Each of the Consents identified in Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
6.4 ADDITIONAL DOCUMENTS
--------------------
Buyer must have caused the following documents to be
delivered to Seller:
(a) an opinion of Keating, Muething & Klekamp,
dated the Closing Date, in the form of Exhibit 6.4(a); and
(b) such other documents as Seller may
reasonably request for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 5.4(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of any
condition referred to in this Section 6, or (v) otherwise facilitating the
consummation of any of the transactions contemplated hereby.
32
- 28 -
6.5 NO INJUNCTION
-------------
There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Assets by
Seller to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
7. TERMINATION
-----------
7.1 TERMINATION EVENTS
------------------
This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by either Buyer or Seller if a material
Breach of any provision of this Agreement has been committed by the other party
and such Breach has not been waived;
(b) (i) by Buyer if any of the conditions
in Section 5 has not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Seller, if any
of the conditions in Section 6 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Seller to comply with its obligations under this Agreement) and
Seller has not waived such condition on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing
has not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obliga tions under this
Agreement) on or before July 15, 1996 or such later date as the parties may
agree upon.
7.2 EFFECT OF TERMINATION
---------------------
Each party's right of termination under Section 7.1
is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 7.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Section 9.1 will survive and except that, if this
Agreement is terminated due to the material Breach hereof by Buyer or pursuant
to Section 7.1(d), Buyer shall reimburse Seller for the incremental interest
and other costs incurred by Seller relating to additional borrowings made by
Seller to fund Seller's Business after April 26, 1996 and prior to Closing;
provided, however, that if this Agreement is
33
- 29 -
terminated by a party because of the Breach of the Agreement by the other party
or because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
8. INDEMNIFICATION; REMEDIES
-------------------------
8.1 SURVIVAL
--------
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificate delivered pursuant to Section 2.6(a)(vi) and
Section 2.6(b)(vii), and any other certificate or document delivered pursuant
to this Agreement will survive the Closing. However, the knowing waiver of any
condition based on the accuracy of any representation or warranty in this
Agreement, or on the performance of or compliance with any covenant or
obligation in this Agreement, will eliminate the right to indemnification,
payment of Damages, or other remedy based on such representations, warranties,
covenants and obligations.
8.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND
THE STOCKHOLDERS
----------------------------------------------------
Seller and each of the Stockholders, jointly and
severally, will indemnify and hold harmless Buyer and its Representatives,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (including incidental and consequential
damages), expense (including costs of investigation and defense and reasonable
attorneys' fees) or diminution of value, whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or
warranty made by Seller or the Stockholders in this Agreement or any other
certificate or document delivered by Seller or the Stockholders pursuant to
this Agreement;
(b) any Breach of any representation or
warranty made by Seller or the Stockholders in this Agreement as if such
representation or warranty were made on and as of the Closing Date;
(c) any Breach by Seller or the Stockholders of
any covenant or obligation in this Agreement (but not covenants or obligations
set forth in the Consulting Agreements, the Non-Competition Agreements or the
Employment Agreements);
(d) any product shipped or manufactured by, or
any services provided by, Seller prior to the Closing Date; or
34
- 30 -
(e) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Seller (or any
Person acting on their behalf) in connection with any of the transactions
contemplated hereby.
8.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
-----------------------------------------------
Buyer will indemnify and hold harmless Seller and
the Stockholders, and will pay to Seller or the Stockholders the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any certificate delivered by Buyer pursuant to this Agreement, (b) any Breach
by Buyer of any covenant or obligation of Buyer in this Agreement, including
the obligation to discharge the Assumed Liabilities (but not covenants or
obligations set forth in the Consulting Agreement, the Registration Rights
Agreement or the Employment Agreements), or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the transactions
contemplated hereby.
8.4 TIME LIMITATIONS
----------------
If the Closing occurs, Seller will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, other than those in Sections 3.6 (title only), 3.11, 3.13,
3.15 and 3.19, unless on or before July 15, 1997, Buyer notifies Seller and the
Stockholders of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; a claim with respect to
Section 3.6 (title only), 3.11, 3.13, or 3.15, or a claim for indemnification
or reimbursement not based upon any representation or warranty or any covenant
or obligation to be performed and complied with prior to the Closing Date, may
be made at any time within the applicable statute of limitations; a claim with
respect to Section 3.19, which must be made by July 15, 1998. If the Closing
occurs, Buyer will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or before July
15, 1997, Seller notifies Buyer of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Seller except with
respect to Section 4.5 as to which claims may be made at any time within the
applicable statute of limitations.
8.5 LIMITATIONS ON AMOUNT -- SELLER AND THE STOCKHOLDERS
----------------------------------------------------
Seller and the Stockholders will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a), clause (b) or, to the extent relating to any failure to perform or
comply prior to the Closing Date, clause (c) of Section 8.2 until the total of
all Damages actually paid or incurred by Buyer with respect to such matters
exceeds Sixty-Seven Thousand Five Hundred Dollars ($67,500), and then only for
the amount by which such Damages
35
- 31 -
actually paid or incurred by Buyer exceed Sixty-Seven Thousand Five Hundred
Dollars ($67,500). Seller will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (d) of Section 8.2
until the total of all Damages actually paid or incurred by Buyer with respect
to such matters exceeds Sixty-Seven Thousand Five Hundred Dollars ($67,500),
and then only for the amount by which such Damages actually paid or incurred by
Buyer exceed Sixty-Seven Thousand Five Hundred Dollars ($67,500). However, this
Section 8.5 will not apply to any Breach of any of Seller's or the Stockholders
representations and warranties of which Seller had Knowledge at any time prior
to the date on which such representation and warranty is made or any
intentional Breach by Sellers or the Stockholders of any covenant or
obligation, and Seller and the Stockholders will be jointly and severally
liable for all Damages with respect to such Breaches nor shall it apply to
claims by Buyer with respect to Section 3.8 of this Agreement or to the
adjustment procedures set forth in Section 2.7 hereof. The maximum aggregate
obligation of Seller and the Stockholders to Buyer with respect to all matters
for which Buyer may seek indemnification under this Agreement shall not exceed
One Million Dollars ($1,000,000).
8.6 LIMITATIONS ON AMOUNT--BUYER
----------------------------
Buyer will have no liability (for indemnification or
otherwise) with respect to the matters described in clause (a) or (b) of
Section 8.3 until the total of all Damages actually paid or incurred by Seller
or the Stockholders with respect to such matters exceeds Sixty-Seven Thousand
Five Hundred Dollars ($67,500), and then only for the amount by which such
Damages actually paid or incurred by Seller or the Stockholders exceed
Sixty-Seven Thousand Five Hundred Dollars ($67,500). However, this Section 8.6
will not apply to any Breach of any of Buyer's representations and warranties
of which Buyer had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional Breach by Buyer of any
covenant or obligation, and Buyer will be liable for all Damages with respect
to such Breaches nor shall it apply to the adjustment procedures set forth in
Section 2.7 hereof. The maximum aggregate obligation of Buyer to Seller and the
Stockholders with respect to all matters for which Seller and the Stockholders
may seek indemnification under this Agreement shall not exceed One Million
Dollars ($1,000,000).
8.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
-------------------------------------------------
(a) Promptly after receipt by an indemnified
party under Section 8.2 or 8.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section
8.7(a) is brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the indemnifying
party will, unless the claim involves Taxes, be entitled to participate
36
- 32 -
in such Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Section 8 for any fees of other counsel or any
other expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense
of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made in
such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Seller and the Stockholders hereby consent
to the non-exclusive jurisdiction of any court in which a Proceeding is brought
against any Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on Seller or the
Stockholders with respect to such a claim anywhere in the world.
8.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
-------------------------------------------
A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought.
37
- 33 -
8.9 EXCLUSIVE REMEDIES
------------------
The indemnification remedy provided in this Section
8 shall constitute the sole and exclusive remedy available to any party to this
Agreement or other Indemnified Person with respect to any claim arising out of
or in any way related to the purchase and sale of the Assets or any other
matter governed by or contemplated in this Agreement, and shall limit all other
remedies that would otherwise be available to such party or Indemnified Person
but for this provision. However, nothing in this Section 8.9 is intended to
restrict any remedies which may be available to any party with respect to any
future breach of or other default under any separate agreement executed in
connection with any matter described in this Agreement, including (without
limitation) breaches of or defaults under the Employment Agreements, the
Consulting Agreement, the Non-Competition Agreements and the Registration
Rights Agreement.
9. GENERAL PROVISIONS
------------------
9.1 EXPENSES
--------
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, 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.
9.2 PUBLIC ANNOUNCEMENTS
--------------------
Any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Buyer and Seller mutually
determine. Seller and Buyer will consult with each other in good faith
concerning the means by which the Seller's employees, customers, and suppliers
and others having dealings with the Seller's Business will be informed of the
transactions contemplated hereby, and Buyer and Seller will have the right to
be present for any such communication.
9.3 NOTICES
-------
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt), or (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service, in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
38
- 34 -
Seller and Interim Quarters, Inc.
the Stockholders: c/o Kenneth L. and Ramona A. Hixon
4135 Cobblers Lane
Dallas, Texas 75287
with a copy to: Powell & Thomas P.C.
12700 Park Central Drive, Suite 205
Dallas, Texas 75251
Attention: Charles D. Powell, Esq.
Facsimile No.: 214/233-6986
with a further Arthur I. Brown, CPA
copy to: 13101 Preston Road
Suite 312
Dallas, Texas 75240
Buyer: Globe Business Resources, Inc.
1925 Greenwood Avenue
Cincinnati, Ohio 45246
Attention: David D. Hoguet, Chairman
Facsimile No.: 513/771-5354
with a copy to: Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Edward E. Steiner, Esq.
Facsimile No.: 513/579-6957.
9.4 FURTHER ASSURANCES; RECORDS RETENTION
-------------------------------------
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 party or parties may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
Buyer shall retain all files, books and other records of Seller relating to the
operation of Seller's Business after the Closing in a manner that is consistent
with Buyer's general records retention policy (under which Buyer currently
retains most records for seven (7) years) and shall, after the Closing, give
Seller and the Stockholders and their respective representative(s) access
thereto during regular business hours on reasonable prior notice.
39
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9.5 WAIVER
------
Except as otherwise provided in Sections 8.2 and
8.3, the rights and remedies of the parties to this Agreement 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 right unless in writing signed by the other party; (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.
9.6 ENTIRE AGREEMENT AND MODIFICATION
---------------------------------
This Agreement supersedes all prior agreements,
arrangements or understandings between the parties with respect to its subject
matter (including the Letter of Intent between Buyer and Seller dated April 26,
1996) 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 all the parties hereto.
9.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
--------------------------------------------------
Neither Buyer nor Seller may assign any of its
rights under this Agreement without the prior consent of the other parties,
which will not be unreasonably withheld, except that Buyer may assign any of
its rights under this Agreement to any Subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
9.8 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
40
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remain in full force and effect to the extent not held invalid or
unenforceable.
9.9 SECTION HEADINGS, CONSTRUCTION
------------------------------
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
9.10 TIME OF ESSENCE
---------------
With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
9.11 GOVERNING LAW
-------------
This Agreement will be governed by and construed
under the laws of the State of Delaware without regard to conflicts of laws
principles. Notwithstanding the foregoing, the parties hereto intend that Buyer
shall have the benefit of the provisions of Article 5.10.B of the Texas
Business Corporation Act.
9.12 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 WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
GLOBE BUSINESS RESOURCES, INC.
By: Blair D. Neller
-----------------------------
Blair D. Neller
President
41
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INTERIM QUARTERS, INC.
By: Kenneth L. Hixon
-----------------------------------
Kenneth L. Hixon
President
STOCKHOLDERS:
Kenneth L. Hixon
----------------------------------------
KENNETH L. HIXON
Ramona A. Hixon
----------------------------------------
RAMONA A. HIXON
42
GLOSSARY
"ADJUSTMENT AMOUNT" -- as defined in Section 2.5.
"BALANCE SHEET" -- as defined in Section 3.4.
"BREACH" -- a "Breach" of a representation, warranty,
covenant, obligation or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to have
occurred if there is or has been: (a) any inaccuracy in or breach of,
or any failure to perform or comply with, such representation,
warranty, covenant, obligation or other provision; or (b) any claim
(by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation,
or other provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"BUYER" -- as defined in the first paragraph of this
Agreement.
"CLOSING" -- as defined in Section 2.5.
"CLOSING DATE" -- the date and time as of which the Closing
actually takes place.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit
Obligation owed, adopted, or followed by Seller or an ERISA Affiliate
of Seller.
"COMPANY PLAN" means all Plans of which Seller or an ERISA
Affiliate of Seller is or was a Plan Sponsor, or to which Seller or an
ERISA Affiliate of Seller otherwise contributes or has contributed, or
in which Seller or an ERISA Affiliate of Seller otherwise participates
or has participated. All references to Plans are to Company Plans
unless the context requires otherwise.
"COMPANY VEBA" means a VEBA whose members include employees
of Seller or any ERISA Affiliate of Seller.
"CONSENT" -- any approval, consent, ratification, waiver or
other authorization (including any Governmental Authorization).
"DAMAGES" -- as defined in Section 8.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by
Seller and the Stockholders to Buyer concurrently with the execution
and delivery of this Agreement.
"ENCUMBRANCE" -- any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income
or exercise of any other attribute of ownership.
43
"ENVIRONMENT" -- soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant
and animal life, and any other environmental medium or natural
resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site
contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages,
losses, claims, demands and response, investigative,
remedial or inspection costs and expenses arising
under Environmental Law or Occupational Safety and
Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs
or corrective action, including any investigation,
cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by
applicable Environmental Law or Occupational Safety
and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or
any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative or
remedial measures required under Environmental Law
or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. Sec. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants
or hazardous substances or materials, violations of
discharge limits or other prohibitions and of the
commencements of activities, such as resource
extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or
materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes
that are generated;
44
(d) assuring that products are designed, formulated,
packaged and used so that they do not present
unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological
amenities;
(f) reducing to acceptable levels the risks inherent in
the transportation of hazardous substances,
pollutants, oil or other potentially harmful
substances;
(g) cleaning up pollutants that have been released,
preventing the threat of release or paying the costs
of such clean up or prevention; or
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or
the Environment, or permitting self-appointed
representatives of the public interest to recover
for injuries done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant
to that Act or any successor law.
"ERISA AFFILIATE" means, with respect to Seller, any other
person that, together with Seller, would be treated as a single
employer under IRC Sec. 414.
"FACILITIES" -- any real property, leaseholds, or other
interests currently or formerly owned or operated by Seller in the
conduct of the Seller's Business and any buildings, plants,
structures, or equipment (including motor vehicles) currently or
formerly owned or operated by Seller in the conduct of the Seller's
Business.
"GAAP" -- generally accepted United States accounting
principles, applied on a consistent basis.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent,
license, permit, waiver, or other authorization issued, granted, given
or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district
or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch,
department, official or entity and any court or
other tribunal);
45
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of
any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation,
handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of
groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Acquired Companies.
"HAZARDOUS MATERIALS" -- any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive or toxic or a pollutant or a contaminant
under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.22.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986 or any successor
law and regulations issued by the IRS pursuant to the Internal Revenue
Code or any successor law.
"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"KNOWLEDGE" -- an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) an individual who is not grossly negligent could be
expected to discover or otherwise become aware of
such fact or other matter in the course of
conducting a reasonably comprehensive investigation
concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer,
partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other
matter. Notwithstanding the foregoing, the "Knowledge of Seller" shall
mean the "Knowledge" (as defined above) of KLH, RAH, Arthur I. Brown,
CPA, David Newhouse (solely as to Seller's Tarrant County
46
customers), Craig Partin (solely as to Seller's Dallas customers),
Carl Gosset (solely as to matters falling within the scope of his
responsibilities) and Wanda Champenois (solely as to matters falling
within the scope of her responsibilities).
"LEGAL REQUIREMENT" -- any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute, or treaty.
"MULTI-EMPLOYER PLAN" has the meaning given in ERISA
section 3(37)(A).
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement
designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide
safe and healthful working conditions.
"ORDER" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made or rendered by any
court, administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices of
such Person and is taken in the ordinary course of
the normal day-to-day operations of such Person;
(b) such action is not required to be specifically
authorized by the board of directors of such Person
(or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any specific
authorization by the board of directors (or by any
Person or group of Persons exercising similar
authority), in the ordinary course of the normal
day-to-day operations of other Persons that are in
the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate
of incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar
document adopted or filed in connection with the creation, formation,
or organization of a Person; and (e) any amendment to any of the
foregoing.
"OTHER BENEFIT OBLIGATIONS" means all obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, or
agents,
47
other than obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service
rendered, sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC Sec. 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PENSION PLAN" has the meaning given in ERISA Sec. 3(2)(A).
"PERSON" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"PLAN" has the meaning given in ERISA Sec. 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Sec. 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to
meet the requirements of IRC Sec. 401(a).
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's family;
(b) any Person that is directly or indirectly controlled
by such individual or one or more members of such
individual's family;
(c) any Person in which such individual or members of
such individual's family hold (individually or in
the aggregate) a material interest; and
(d) any Person with respect to which such individual or
one or more members of such individual's family
serves as a director, officer, partner, executor or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly
or indirectly under common control with such
specified Person;
(b) any Person that holds a material interest in such
specified Person;
48
(c) each Person that serves as a director, officer,
partner, executor, or trustee of such specified
Person (or in a similar capacity);
(d) any Person in which such specified Person holds a
material interest;
(e) any Person with respect to which such specified
Person serves as a general partner or a trustee (or
in a similar capacity); and
(f) any Related Person of any individual described in
clause (b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual, and (b) "material
interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other
equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"SELLER" -- as defined in the first paragraph of this
Agreement.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
"TAX RETURN" -- any return (including any information
return), report, statement, schedule, notice, form, or other document
or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Body in connection with the
determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
49
"THREAT OF RELEASE" -- a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED" -- a claim, Proceeding, dispute, action, or
other matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been
given (orally or in writing), or if any other event has occurred or
any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken or otherwise pursued
in the future.
"TITLE IV PLANS" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Sec. 1301 et seq., other than
Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Sec. 501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Sec. 3(1).