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EXHIBIT 2.7
STOCK PURCHASE AGREEMENT
BY AND AMONG
GENERAL ROOFING SERVICES, INC.,
FIVE K INDUSTRIES, INC.
AND
ALL OF THE STOCKHOLDERS
OF
FIVE K INDUSTRIES, INC.
----------------------------
MAY 19, 1998
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TABLE OF CONTENTS
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ARTICLE I - SALE AND PURCHASE OF SHARES......................................................1
1.01 Sale and Purchase of Company Common Stock............................................1
1.02 Purchase Price.......................................................................2
1.03 Delivery of Purchase Price...........................................................2
1.04 Purchase Price Adjustment............................................................3
1.05 Excluded Assets......................................................................3
1.06 Stockholders' Representative.........................................................3
ARTICLE II - CLOSING.........................................................................4
2.01 Closing..............................................................................4
2.02 Deliveries by Stockholders to GRS....................................................4
2.03 Deliveries by GRS....................................................................4
2.04 Termination in Absence of Closing....................................................5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.........................................................................5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER..............................6
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF GRS............................................6
ARTICLE VI - OBLIGATIONS PRIOR TO CLOSING....................................................6
6.01 GRS' Access to Information and Assets................................................6
6.02 Company's Conduct of Business and Operations.........................................6
6.03 General Restrictions.................................................................7
6.04 Notice Regarding Changes.............................................................8
6.05 Consents and Best Efforts............................................................8
6.06 Casualty Loss........................................................................8
6.07 Employee Matters.....................................................................9
6.08 No Solicitation......................................................................9
6.09 Employment Agreements................................................................9
6.10 Lock-Up Agreement....................................................................9
ARTICLE VII - CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS...............................9
7.01 Conditions to Obligations of All Parties.............................................9
7.02 Conditions to Obligations of Stockholders...........................................10
7.03 Conditions to Obligations of GRS....................................................11
ARTICLE VIII - SURVIVAL.....................................................................12
8.01 Survival of Representations and Warranties of the Company and the
Stockholders........................................................................12
ARTICLE IX - INDEMNIFICATION................................................................13
9.01 Obligation of the Stockholders to Indemnify.........................................13
9.02 Obligation of GRS to Indemnify......................................................13
9.03 Notice and Opportunity to Defend....................................................13
9.04 Limitations on Indemnification......................................................14
9.05 Set-Off Rights......................................................................15
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TABLE OF CONTENTS
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ARTICLE X - POST-CLOSING OBLIGATIONS........................................................16
10.01 Further Assurances..................................................................16
10.02 Publicity...........................................................................16
10.03 Access to Records...................................................................16
ARTICLE XI - MISCELLANEOUS..................................................................16
11.01 Brokers.............................................................................16
11.02 Costs and Expenses..................................................................17
11.03 Notices.............................................................................17
11.04 Governing Law.......................................................................17
11.05 Representations and Warranties......................................................18
11.06 Entire Agreement, Amendments and Waivers............................................18
11.07 Binding Effect and Assignment.......................................................18
11.08 Remedies............................................................................18
11.09 Exhibits and Schedules..............................................................18
11.10 Multiple Counterparts...............................................................18
11.11 References..........................................................................18
11.12 Survival............................................................................19
11.13 Attorneys' Fees.....................................................................19
ARTICLE XII - DEFINITIONS...................................................................19
12.01 Affiliate...........................................................................19
12.02 Collateral Agreements...............................................................19
12.03 Company Assets......................................................................19
12.04 Contract Retention..................................................................19
12.05 Current Assets......................................................................20
12.06 Current Liabilities.................................................................20
12.07 Damages.............................................................................20
12.08 Environmental Law...................................................................20
12.09 Governmental Authorities............................................................20
12.10 GAAP................................................................................20
12.11 Hazardous Substances................................................................20
12.12 Knowledge...........................................................................20
12.13 Legal Requirements..................................................................20
12.14 Permits.............................................................................21
12.15 Properties..........................................................................21
12.16 Proportionate Share.................................................................21
12.17 Regulations.........................................................................21
12.18 Taxes...............................................................................21
12.19 Tax Returns.........................................................................21
12.20 Used................................................................................21
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LIST OF EXHIBITS
Exhibit A - Stockholders
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit D - Representations and Warranties of the Company and the Stockholders
Exhibit E - Representations and Warranties of each Stockholder
Exhibit F - Representations and Warranties of GRS
Exhibit G - Employment Agreement between for Xxxxxxx X. Xxxxx, III
Exhibit H - Opinion of Xxxxx & XxXxxxxx
Exhibit I - Opinion of Hendrick, Phillips, Xxxxxx & Xxxxxxx
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of May 19, 1998, by and among (i) General Roofing Services, Inc. a
Florida corporation (the "Buyer" or "GRS"),(ii) Five K Industries, Inc., a
Georgia corporation (the "Company"), and (iii) the stockholder of the Company
(the "Stockholder").
PRELIMINARY STATEMENTS:
A. The Board of Directors of GRS and the Stockholders deem it advisable
for their welfare and best interests that the Stockholders sell and GRS purchase
all of the issued and outstanding capital stock of the Company, consisting of 10
shares (the "Shares") of common stock, par value $1.00 per share ("Company
Common Stock"), upon the terms and subject to the conditions hereinafter set
forth.
B. Concurrently with the purchase and sale of the Shares hereby, and as
part of an overall plan, GRS is acquiring the issued and outstanding capital
stock of additional commercial roofing companies (the "Founding Companies")
throughout the United States, and all such transactions are intended to conform
to, and are being made, in connection with a Section 351 Plan of Exchange within
the meaning of the Internal Revenue Code.
C. Capitalized terms used herein which have not been defined prior to
such use shall have the respective meanings given such terms in Article XII
hereof.
AGREEMENT
In consideration of the premises, the mutual covenants and agreements
contained herein and the benefits to accrue to the parties hereto, and subject
to the satisfaction or waiver of the conditions contained herein, the parties
hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01. Sale and Purchase of Company Common Stock. .
(a) On the terms and subject to the conditions of this Agreement,
at the Closing referred to in Section 2.01 hereof, the Stockholder shall sell,
transfer, convey and deliver to GRS, and GRS shall purchase, acquire and accept
from the Stockholder, the number of shares of Company Common Stock set forth
opposite the name of the Stockholder on Exhibit A hereto under the heading
"Number of Shares of Company Common Stock Purchased", constituting all of the
issued and outstanding shares of Company Common Stock. The sale and purchase of
the Company Common Stock pursuant to this Agreement is sometimes hereinafter
referred to as the "Stock Purchase."
(b) To effect the transfers contemplated by Section 1.01(a)
hereof, at the Closing, each Stockholder shall deliver, or cause to be
delivered, to the Stockholders' Representative (as defined and provided for in
Section 1.06 hereof), for redelivery to GRS, stock certificates representing the
Company Common Stock being sold by such Stockholder hereunder, together with
stock powers duly executed in blank or otherwise in proper form acceptable to
GRS for transfer to GRS on the books of the Company, against payment therefor in
accordance with Section 1.03 hereof.
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Section 1.02 Purchase Price.
(a) Purchase Price.
The purchase price for the issued and outstanding shares of
Company Common Stock to be purchased by GRS hereunder (the "Purchase Price")
shall be an aggregate amount equal to $10,548,000. The Purchase Price shall be
subject to adjustment as provided in this Agreement and shall be allocated among
the Stockholders in accordance with their respective ownership interests as set
forth on Exhibit A hereof. The Purchase Price, as so adjusted, shall be
delivered to the Stockholders in accordance with their respective Proportionate
Share and to the Escrow Agent (as defined in Section 1.03(b) hereof), subject to
and in accordance with Section 1.03 hereof. The amount of the Purchase Price
allocated to each outstanding share of Company Common Stock is hereinafter
referred to as the "Stock Purchase Payment."
(b) The Stockholders shall cause to be prepared and delivered to
GRS within fifteen days prior to the Closing Date (i) an unaudited consolidated
balance sheet of the Company forecasted as of the Closing Date (the "Closing
Date Unaudited Balance Sheet"), and (ii) a certificate executed by the Company's
Chief Financial Officer (or another duly authorized officer of the Company) to
the effect that the Closing Date Unaudited Balance Sheet has been prepared from
the books and records of the Company and in a manner consistent with the
preparation of the Company Financial Statements (as defined in Section 3.06
hereof).
Section 1.03 Delivery of Purchase Price. At the Closing, the Purchase Price
shall be paid upon the surrender pursuant to Section 1.01(b) hereof of a
certificate or certificates representing all of the issued and outstanding
shares of Company Common Stock, as follows:
(a) An aggregate of $4,746,600, representing forty-five percent
(45%) of the Purchase Price, shall be paid directly to the holders thereof by
wire transfer in New York Clearing House Funds in accordance with Exhibit A
hereto.
(b) An aggregate of $5,801,400 shall be paid by the delivery to
(A) an escrow agent (the "Escrow Agent") selected by GRS and reasonably
acceptable to the Stockholders, on behalf of the Stockholders, of such number of
shares of the GRS' common stock, par value $.01 per share ("GRS Common Stock"),
as shall have a value equal to $2,109,600, representing twenty percent (20%) of
the Purchase Price (the "Escrow Fund"), based upon the public offering price of
the GRS Common Stock to be sold in its initial public offering (the "Offering")
and (B) to the Stockholders in accordance with Exhibit A hereto, of such number
of shares of GRS Common Stock as shall have a value equal to $3,691,800 based
upon the public offering price of the GRS Common Stock to be sold in the
Offering. All of the shares of GRS Common Stock to be so held in escrow shall be
held by the Escrow Agent for a period of one year following the Closing (the
"First Anniversary"), other than such number of shares as shall have a value of
$1,000,000 based upon the average closing price of the GRS Common Stock on
Nasdaq for the five business days immediately preceeding the First Anniversary
(the "Retained Shares"), which shall be held in escrow for a period of four
years from the Closing Date, in accordance with the terms of an Escrow Agreement
in the form of Exhibit B hereto (the "Escrow Agreement"). All of the shares of
GRS Common Stock received or to be received by the Stockholders shall be
restricted from transfer for a period of two years from the Closing Date in
accordance with the terms, and subject to the conditions, of a Lock-Up Agreement
in the form of Exhibit C hereto (the "Lock-Up Agreement"). The Stockholders
shall receive cash in lieu of fractional shares.
(c) Each certificate evidencing shares of GRS Common Stock issued
in connection with the Stock Purchase shall bear the following restrictive
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
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(the "1933 ACT"), NOR UNDER ANY STATE SECURITIES
LAWS AND SHALL NOT BE TRANSFERRED, SOLD, ASSIGNED
OR HYPOTHECATED UNTIL EITHER (I) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE
SECURITIES LAWS OR (II) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL
TO THE HOLDER OF SUCH SHARES, WHICH OPINION IS
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED
OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE 1933
ACT OR APPLICABLE STATE SECURITIES LAWS.
Section 1.04 Purchase Price Adjustment. [Intentionally omitted]
Section 1.05 Excluded Assets. Prior to the Closing, the Company shall be
permitted to distribute to the Stockholders as a dividend those assets (the
"Excluded Assets") which GRS and the Stockholders have agreed in writing are not
required by the Company in the conduct of its operations and which are listed in
Schedule 1.05 hereto.
Section 1.06 Stockholders' Representative.
(a) As used in this Agreement, the "Stockholders' Representative"
shall mean Xxxxxxx X. Xxxxx, III or any person appointed as a successor
Stockholders' Representative pursuant to Section 1.06(b) hereof.
(b) During the period ending upon the date when all obligations
under this Agreement have been discharged (including all indemnification
obligations hereunder and all obligations under the Escrow Agreement), the
Stockholders who, immediately prior to the Closing, held Company Common Stock
representing an aggregate number of shares of Company Common Stock which
exceeded 50% of the amount of such Company Common Stock outstanding immediately
prior to such time (a "Majority"), may, from time to time upon written notice to
the Stockholders' Representative and GRS, remove the Stockholders'
Representative or appoint a new Stockholders' Representative to fill any vacancy
created by the death, incapacitation, resignation or removal of the
Stockholders' Representative. Furthermore, if the Stockholders' Representative
dies, becomes incapacitated, resigns or is removed by a Majority, the Majority
shall appoint a successor Stockholders' Representative to fill the vacancy so
created. If the Majority is required to but has not appointed a successor
Stockholders' Representative within 20 business days from a request by GRS to
appoint a successor Stockholders' Representative, GRS shall have the right to
appoint a Stockholders' Representative to fill any vacancy so created, and shall
advise all those who were holders of Company Common Stock immediately prior to
the Closing of such appointment by written notice. A copy of any appointment by
the Majority of any successor Stockholders' Representative shall be provided to
GRS promptly after it shall have been effected.
(c) The Stockholders' Representative shall be authorized to take
any action and to make and deliver any certificate, notice, consent or
instrument required or permitted to be made or delivered under this Agreement or
under the documents referred to in this Agreement (an "Instrument") which the
Stockholders' Representative determines to be necessary, appropriate or
desirable, and, in connection therewith, to hire or retain, at the sole expense
of the Stockholders, such counsel, investment bankers, accountants,
representatives and other professional advisors as he determines in his sole and
absolute discretion to be necessary, advisable or appropriate in order to carry
out and perform his rights and obligations hereunder. The Stockholders hereby
grant the Stockholders' Representative the right and power to execute the Escrow
Agreement on their behalf with such changes or amendments thereto as the
Stockholders' Representative shall determine to be necessary or desirable in
their sole and absolute
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discretion. Any party receiving an Instrument from the Stockholders'
Representative shall have the right to rely in good faith upon such Instrument,
and to act in accordance with the Instrument without independent investigation.
(d) GRS shall have no liability to any Stockholder or otherwise
arising out of the acts or omissions of the Stockholders' Representative or any
disputes among the Stockholders or with the Stockholders' Representative. GRS
may rely entirely on its dealings with, and notices to and from, the
Stockholders' Representative to satisfy any obligations it might have to the
Stockholders under this Agreement, any agreement referred to herein or
otherwise.
(e) The Stockholders shall indemnify, defend and hold harmless the
Stockholders' Representative from and against any and all claims, demands,
actions, suits, causes of action, damages, costs and expenses (including,
without limitation, attorneys' fees) (collectively, "Claims") which are
hereafter made, sustained or brought against the Stockholders' Representative by
any person arising out of the acts or omissions of the Stockholders'
Representative or any disputes among the Stockholders, unless such Claims
allegedly occurred as a result of the willful misconduct or negligence by the
Stockholders' Representative.
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the satisfaction or waiver of the
conditions stated in Article VII hereof, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Miami time, on
the closing date of the Offering, estimated to be July 15, 1998 or, if the
conditions set forth in Sections 7.01 through 7.03 have not been satisfied or
waived on such date, no later than seven (7) days after all such conditions
shall have been satisfied or waived, at the offices of Xxxxx & XxXxxxxx, 000
Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000, unless another date or place
is agreed to in writing by the parties hereto. The date upon which the Closing
occurs is hereinafter referred to as the "Closing Date." The Closing shall be
deemed completed as of 11:59 p.m. Miami time on the Closing Date.
Section 2.02 Deliveries by Stockholders to GRS. At or prior to the Closing,
the Stockholders shall deliver to GRS:
(i) certificates representing all of the issued and
outstanding shares of Company Common Stock in proper
form for transfer to GRS;
(ii) the resignations of all members of the board
directors of the Company as set forth in Section
7.03(l);
(iii) the stock books, stock ledgers, minute books and
corporate seals of the Company;
(iv) a certificate executed by the Company to the effect
that the conditions set forth in Sections 7.03(b)
through 7.03(i), have been satisfied;
(v) the opinion of counsel set forth in Section 7.03(f);
(vi) the executed Collateral Agreements; and
(vii) evidence of the consents required pursuant to Section
7.03(n).
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Section 2.03 Deliveries by GRS. At or prior to the Closing, GRS shall
deliver to the Stockholders:
(i) by wire transfer in immediately available funds to
the Stockholders the payment described in Section
1.03(a) as being required to be paid by GRS at
Closing;
(ii) by delivery to the Stockholders the shares of GRS
Common Stock described in Section 1.03(b) as being
required to be delivered by GRS to the Stockholders
at Closing;
(iii) by delivery to the Escrow Agent the shares of GRS
Common Stock described in Section 1.03(b) as being
required to be delivered by GRS to the Escrow Agent
at Closing;
(iv) a certified copy of all necessary corporate action on
behalf of GRS approving its execution, delivery and
performance of this Agreement and the Collateral
Agreements to which it is a party pursuant to Section
7.02(a);
(v) a certificate executed by an authorized officer of
GRS to the effect that the conditions set forth in
Sections 7.02(b) and 7.02(c) have been satisfied;
(vi) the opinion of counsel set forth in Section 7.02(d);
and
(vii) the executed Collateral Agreements to which it is a
party.
Section 2.04 Termination in Absence of Closing. If by the close of business
on December 31, 1998 (the "Termination Date"), the Closing has not occurred,
then any party hereto may thereafter terminate this Agreement by written notice
to such effect, to the other parties hereto, without liability of or to any
party to this Agreement or any shareholder, director, officer, employee or
representatives of such party unless the reason for Closing having not occurred
is (i) such party's willful breach of the provisions of this Agreement, or (ii)
if all of the conditions to such party's obligations set forth in Article VII
have been satisfied or waived in writing by the date scheduled for the Closing
pursuant to Section 2.01, the failure of such party to perform its obligations
under this Article II on such date; provided, however, that any termination
pursuant to this Section 2.04 shall not relieve any party hereto who was
responsible for Closing having not occurred as described in clauses (i) or (ii)
above of any liability for (x) such party's willful breach of the provisions of
this Agreement, or (y) if all of the conditions to such party's obligations set
forth in Article VII have been satisfied or waived in writing by the date
scheduled for the Closing pursuant to Section 2.01, the failure of such party to
perform its obligations under this Article II on such date. Notwithstanding the
foregoing, the Stockholders expressly acknowledge and agree that market and
economic conditions are impossible to predict, and although GRS intends to
proceed with the Offering in an expeditious manner at this time, GRS shall not
be liable to the Stockholders or the Company if the Closing has not occurred
because the Offering has not been consummated prior to the Termination Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS as to the matters set forth on Exhibit D hereto, the full text of
which is incorporated herein by reference as if set forth fully herein.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as to the matters set forth
on Exhibit E hereto, the full text of which is incorporated herein by reference
as if set forth fully herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Stockholders as to the matters set forth
on Exhibit F hereto, the full text of which is incorporated herein by reference
as if set forth fully herein.
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
Section 6.01 GRS' Access to Information and Assets. The Stockholders shall
permit GRS and its authorized employees, agents, accountants, legal counsel and
other representatives, at GRS' own expense, to have access to the books,
records, employees, counsel, accountants, and other representatives of the
Company at all times reasonably requested by GRS for the purpose of conducting
an investigation ("GRS' Due Diligence Investigation") of the Company's financial
condition, corporate status, operations, business and Properties. The
Stockholders shall make available to GRS for examination and reproduction, at
GRS' own expense, all documents and data of every kind and character relating to
the Company and each Subsidiary in possession or control of, or subject to
reasonable access by, the Stockholders or the Company and each Subsidiary,
including, without limitation, all files, records, data and information relating
to the Company Assets (whether stored in paper, magnetic or other storage media)
and all agreements, instruments, contracts, assignments, certificates, orders,
and amendments thereto. Also, the Company shall allow GRS, at GRS' own expense,
access to, and the right to inspect, the Company Assets and the assets of each
Subsidiary (together with the Company Assets, the "Company Assets").
Section 6.02 Company's Conduct of Business and Operations. The Stockholders
shall keep GRS advised as to all material operations and proposed material
operations relating to the Company or the Company Assets. Except for
distributions permitted pursuant to Sections 1.05 and 3.02, the Company and each
Subsidiary shall (a) conduct its business in the ordinary course, (b) use its
best efforts to keep available to the Company the services of present employees,
(c) maintain and operate Company Assets in a good and workmanlike manner, (d)
pay or cause to be paid all costs and expenses (including but not limited to
insurance premiums) incurred in connection therewith in a timely manner, (e) use
reasonable efforts to keep all Company Contracts listed or required to be listed
on Schedule 3.12 in full force and effect, (f) comply with all of the covenants
contained in all such Company Contracts, (g) maintain in force until the Closing
Date insurance policies (subject to the provisions of Section 6.06) equivalent
to those in effect on the date hereof, and (h) comply in all material respects
with all applicable Legal Requirements. Except as otherwise contemplated in this
Agreement, the Stockholders shall use their best efforts to preserve the present
relationships of the Company and each Subsidiary with persons having significant
business relations therewith.
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Section 6.03 General Restrictions. From and after the date hereof, except
as otherwise expressly permitted in this Agreement, without the prior written
consent of GRS, neither the Company nor any Subsidiary shall:
(i) (A) except as permitted by Sections 1.05 and 3.02
hereof, declare, set aside or pay any dividends on, or make any other
distribution (whether in cash, stock or property) in respect of, any of its
capital stock, (B) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
view of or in substitution for shares of its capital stock, or (C) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend its Articles of Incorporation or By-laws (or
similar organizational documents);
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business of any corporation, partnership, joint
venture, association or other business organization or division thereof or
(B) any assets that are material, individually or in the aggregate, to the
Company or any Subsidiary, except purchases of assets in the ordinary course
of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise encumber or
otherwise dispose of, or agree to sell, transfer, lease, mortgage, encumber
or otherwise dispose of, any Properties except (A) in the ordinary course
of business consistent with past practice, or (B) pursuant to any Company
Contract or except as permitted by Sections 1.05 and 3.02 hereof;
(vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreements to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of the foregoing, except for borrowings incurred in the
ordinary course of business consistent with past practice, or (B) make any
loans, advances or capital contributions to, or investments in, any other
person;
(vii) make or agree to make any new capital expenditure or
expenditures which, individually is in excess of $25,000 or, in the
aggregate, are in excess of $50,000 (other than those required pursuant to
currently outstanding Contracts or in the ordinary course of business
consistent with past practice);
(viii) make any material tax election or settle or compromise
any material tax liability;
(ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the Company Financial Statements
(or the notes thereto) or incurred in the ordinary course of business
consistent with past practice, or waive any material benefits of, or
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agree to modify in any material respect, any confidentiality, standstill or
similar agreements to which the Company or any Subsidiary is a party;
(x) except in the ordinary course of business consistent
with past practice, modify, amend or terminate any Company Contract;
(xi) except in the ordinary course of business consistent
with past practice, enter into any contracts, agreements, arrangements or
understandings relating to performance by third parties of the Company's or
any Subsidiary's services;
(xii) except as required to comply with applicable law (A)
adopt, enter into, terminate or amend any benefit plan or other arrangement
for the benefit or welfare of any director, officer or current or former
employee, (B) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee (except in a manner
consistent with past practice), (C) pay any benefit not provided for under
any benefit plan, (D) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or benefit plan
(including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock, or the
removal of existing restrictions in any benefit plans or agreement or awards
made thereunder) or (E) take any action to fund or in any other way secure
the payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or benefit plan;
(xiii) make any change in any method of accounting or
accounting practice or policy other than those required by GAAP; or
(xiv) authorize any of, or commit or agree to take any of,
the foregoing actions.
Section 6.04 Notice Regarding Changes. The Stockholders shall promptly
inform GRS in writing of any change in facts and circumstances that could render
any of the representations, warranties or covenants made herein by the Company,
any Subsidiary or the Stockholders inaccurate or misleading if such
representations and warranties had been made upon the occurrence of the fact or
circumstance in question. GRS shall promptly inform the Stockholders in writing
of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
Section 6.05 Consents and Best Efforts. Each of the parties hereto shall use
all commercially reasonable good faith efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, and consult and fully cooperate
with and provide reasonable assistance to each other party and their respective
representatives in order to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable hereafter, including
without limitation, (i) using all commercially reasonable good faith efforts to
make all filings, applications, notifications, reports, submissions and
registrations with, and to obtain all consents, approvals, authorizations or
permits of, governmental entities or other persons or entities as are necessary
for the consummation of the transactions contemplated by this Agreement, and
(ii) taking such actions and doing such things as any other party hereto may
reasonably request in order to cause any of the conditions to such other party's
obligation to consummate the transactions contemplated hereby as specified in
Article VII of this Agreement to be fully satisfied.
Section 6.06 Casualty Loss. If, between the date of this Agreement and the
Closing, any of the Properties of the Company or any Subsidiary shall be
destroyed or damaged in whole or in part by fire, earthquake, flood, other
casualty or any other cause (a "Casualty Loss"), then the Stockholders shall, at
GRS' election, (i) cause the Company to cause such Properties to be repaired or
replaced prior to the Closing with Property of substantially the same condition
and function to the extent of insurance proceeds
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available for such repair or replacement, (ii) cause the Company to deposit in a
separate account an amount sufficient to cause such Property to be so repaired
or replaced to the extent of insurance proceeds available for such repair or
replacement, or (iii) if such Casualty loss has had a Material Adverse Effect
upon the Company, GRS may terminate this Agreement by giving written notice of
such termination to the Stockholders and the Company prior to Closing.
Section 6.07 Employee Matters. The Stockholders shall take (or cause the
Company to take) all actions necessary or appropriate to cause each plan or
benefit program or agreement in effect on the date of this Agreement to remain
in full force and effect until the Closing Date; provided, however, that, to the
extent requested in writing by GRS at least ten (10) days prior to the Closing
Date, the Stockholders shall cause the Company to cease to sponsor, maintain or
contribute to any plan or benefit program or agreement specified by GRS in such
written request.
Section 6.08 No Solicitation. The Stockholders, the Company and each
Subsidiary and their respective officers, directors, employees, representatives
and agents shall immediately cease any discussions or negotiations with any
parties that may be ongoing with respect to a Third Party Acquisition Proposal
(as defined below). Neither the Company, any Subsidiary nor any of the
Stockholders shall, nor shall they permit any of their Affiliates to, nor shall
they authorize or permit any of their officers, directors or employees or any
investment banker, attorney or other advisor or representatives retained by them
or any of their Affiliates to, (i) solicit, initiate or knowingly encourage the
submission of, any Third Party Acquisition Proposal, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action knowingly to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Third Party Acquisition Proposal. For purposes of
this Agreement, "Third Party Acquisition Proposal" means any inquiry, proposal
or offer from any person relating to any direct or indirect acquisition or
purchase of all or a portion or more of the assets of the Company or any
Subsidiary or all or a portion of any class of equity securities of the Company
or any Subsidiary or any offer to acquire or purchase that if consummated would
result in any person beneficially owning all or a portion of any class of equity
securities of the Company or any Subsidiary, or any merger, consolidation,
business combination, sale of assets, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any Subsidiary, other than the
transactions contemplated by this Agreement, or any other transaction the
consummation of which could reasonably be expected to impede, interfere with,
prevent or delay, or dilute materially the benefits to GRS of the transactions
contemplated hereby.
Section 6.09 Employment Agreement. On or before the Closing, Xxxxxxx X.
Xxxxx III shall have entered into an employment agreement in the form of Exhibit
G (the "Employment Agreement"), which shall include non-competition provisions,
to take effect on and after the Closing Date.
Section 6.10 Lock-Up Agreement. On or before the Closing, the Stockholders
shall have entered into the Lock-Up Agreement.
ARTICLE VII
CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS
Section 7.01 Conditions to Obligations of All Parties. The respective
obligations of each party to carry out the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) All filings with all Governmental Authorities required to be
made in connection with the transactions contemplated hereby shall have been
made, and all orders, permits, waivers, authorizations, exemptions, and
approvals of such entities required to be in effect on the date of the Closing
in connection with the transactions contemplated hereby shall have been issued,
and all such
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orders, permits, waivers, authorizations, exemptions or approvals shall be in
full force and effect on the date of the Closing; provided, however, that no
provision of this Agreement shall be construed as requiring any party to accept,
in connection with obtaining any other requisite approval, clearance or
assurance of non-opposition, avoiding any challenge, or negotiating settlement,
any condition that would materially change or restrict the manner in which the
Company, any Subsidiary or GRS conducts or proposes to conduct its business, and
no transfers of licenses shall occur prior to the Closing.
(b) None of the parties hereto shall be subject to any statute,
rule, regulation, decree, ruling, injunction or other order issued by any
Governmental Authorities of competent jurisdiction (collectively, an
"Injunction") which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
Section 7.02 Conditions to Obligations of Stockholders. The obligations of
the Stockholders to carry out the transactions contemplated by this Agreement
are subject, at the option of the Stockholders, to the satisfaction, or waiver
by Stockholders, of the following conditions:
(a) GRS shall have furnished the Stockholders with a certified copy
of all necessary corporate action on its behalf approving its execution,
delivery and performance of this Agreement and each of the Collateral
Agreements.
(b) All representations and warranties of GRS contained in this
Agreement qualified by materiality shall be true and correct in all respects at
Closing and all other representations and warranties of GRS contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing, as if such representations and warranties were made at and as of the
Closing, except for changes contemplated by the terms of this Agreement except
as and to the extent that the facts and conditions upon which such
representations and warranties are based are expressly required or permitted to
be changed by the terms thereof, and GRS shall have performed and satisfied in
all material respects all covenants and agreements required by this Agreement to
be performed and satisfied by GRS at or prior to the Closing; provided, however,
that no Stockholder shall be entitled to refuse to consummate the transaction in
reliance upon its own breach or failure to perform.
(c) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of the Stockholders or the
Company) shall be pending or threatened before any Governmental Authority
seeking to restrain the Stockholders from effectuating the Stock Purchase or
prohibit the Closing or seeking Damages against the Stockholders or the Company
as a result of the consummation of the transactions contemplated by this
Agreement.
(d) The Company shall have received the opinion of Xxxxx &
XxXxxxxx, counsel to GRS, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Company, as to the matters set forth on Exhibit
H. In rendering such opinion, Xxxxx & XxXxxxxx may rely as to factual matters on
certificates of officers and directors of GRS and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to the Company.
(e) GRS shall have executed the Escrow Agreement.
(f) GRS shall have executed and delivered to Stockholders and the
Company the documents and funds referred to in Section 2.03 hereof.
(g) The Offering shall have been consummated on or before the
Termination Date.
(h) GRS shall have furnished the Stockholders and the Company with
an opinion letter from Deloitte & Touche to GRS which provides that the
consummation of the transactions described in this Agreement will qualify as a
Section 351 Plan of Exchange within the meaning of the Internal Revenue Code.
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Section 7.03 Conditions to Obligations of GRS. The obligations of GRS to
carry out the transactions contemplated by this Agreement are subject, at the
option of GRS, to the satisfaction, or waiver by GRS, of the following
conditions:
(a) All of the Company Common Stock shall have been tendered to
GRS.
(b) All representations and warranties of Stockholders and the
Company contained in this Agreement qualified by materiality shall be true and
correct in all respects at Closing and all other representations and warranties
of the Stockholders and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing, except for
changes contemplated by the terms of this Agreement except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms thereof,
and the Stockholders and the Company shall have performed and satisfied in all
material respects all agreements and covenants required by this Agreement to be
performed and satisfied by Stockholders and the Company at or prior to the
Closing; provided, however, that GRS shall not be entitled to refuse to
consummate the transaction in reliance upon its own breach or failure to
perform.
(c) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by or on behalf of GRS) shall be pending or
threatened before any court or governmental agency seeking to restrain GRS or
prohibit the Closing or seeking Damages against GRS, the Stockholders, the
Company, any Subsidiary or their respective Properties as a result of the
consummation of the transactions contemplated by this Agreement.
(d) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
that have not expired or been waived.
(e) Except for matters disclosed in the Schedules hereto, from the
date hereof up to and including the Closing there shall not have been:
(i) any change in the business, operations, prospects or
financial condition of the Company or any Subsidiary that had or would
reasonably be likely to have a material adverse effect on the business,
operations, prospects, Properties, securities or financial condition of the
Company or any Subsidiary; and
(ii) any damage, destruction or loss to the Company or any
Subsidiary (whether or not covered by insurance) that had or would reasonably be
likely to have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company or any Subsidiary.
(f) GRS shall have received the opinion of Hendrick, Phillips,
Xxxxxx & Xxxxxxx ("Sellers' Counsel"), counsel to the Company and the
Stockholders, dated as of the Closing Date, in form and substance reasonably
satisfactory to GRS, as to the matters set forth on Exhibit I. In rendering such
opinion, Sellers' Counsel may rely as to factual matters on certificates of
officers, directors and shareholders of the Company and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to GRS.
(g) GRS shall have received the Company Financial Statements.
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(h) The Net Book Value of the Company as of the Closing Date shall
be at least $1,356,000. For purposes of this Agreement, Net Book Value shall
mean the excess of the Company's total assets over its total liabilities
determined in accordance with GAAP.
(i) The Modified Working Capital of the Company as of the Closing
Date shall not be less than $706,153. For purposes of this Agreement, Modified
Working Capital shall mean the Company's (i) Current Assets less (ii) its
Current Liabilities and long-term indebtedness determined in accordance with
GAAP.
(j) The Stockholders shall have executed and delivered to GRS the
Escrow Agreement.
(k) GRS shall have received the executed Employment Agreement for
Xxxxxxx X. Xxxxx, III.
(l) GRS shall have received the resignation of all of the members
of the board of directors of the Company, or any Subsidiary, on the one hand,
effective as of the Closing Date.
(m) All proceedings to be taken by Stockholders, the Company or any
Subsidiary, on the one hand, in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory in form and
substance to GRS and its counsel, and GRS and said counsel shall have received
all such counterpart originals or certified or other copies of such documents as
it or they may reasonably request.
(n) GRS shall have received written evidence, in form and substance
satisfactory to GRS, of the consent to the transactions contemplated by this
Agreement of all governmental, quasi-governmental and private third parties
(including, without limitation, persons or other entities leasing real or
personal property to the Company or any Subsidiary), except where the failure to
have obtained any such consent would not have an adverse effect on the Company
or GRS following the Closing.
(o) GRS shall be satisfied in its sole and absolute discretion with
GRS' Due Diligence Investigation of the Company and shall have notified the
Company in writing on or before July 1, 1998 that it has waived this condition
precedent.
(p) GRS shall have determined, in its reasonable discretion, that
all agreements between the Company or any Subsidiary, on the one hand, and the
Stockholders, shall be on terms as favorable to the Company or such Subsidiary
as the Company and such Subsidiary could have obtained pursuant to agreements
with unaffiliated third parties.
(q) The Offering shall have been consummated on or before the
Termination Date.
ARTICLE VIII
SURVIVAL
Section 8.01. Survival of Representations and Warranties of the Company and
the Stockholders. Notwithstanding any right of any party hereto fully to
investigate the affairs of any other party hereto and notwithstanding any
knowledge of facts determined or determinable by any party hereto pursuant to
such investigation or right of investigation, each of GRS, on the one hand, and
the Company and the Stockholders, on the other hand, has the right to rely fully
upon the representations, warranties, covenants and agreements of GRS or the
Company and the Stockholders, as the case may be, contained in this Agreement,
or in any certificate delivered pursuant to any of the foregoing; provided, that
no party hereto shall be entitled to rely on any representation or warranty made
by any other party hereto herein to the extent that such party has actual
knowledge, and the other party or parties (or any of them) are not
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aware, that such representation or warranty is untrue or incorrect in any
material respect. All such representations, warranties, covenants and agreements
shall survive the execution and delivery of this Agreement and the Closing
hereunder, and, except as otherwise specifically provided in this Agreement and,
except for all representations and warranties of the Stockholders contained in
Article IV and except with respect to the Basket Exclusions (as defined in
Section 9.04 (which shall survive for a period of four years from the Closing
Date)), shall thereafter terminate and expire on the first anniversary of the
date hereof.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Obligation of the Stockholders to Indemnify. Subject to the
limitations contained in Article VIII and Article IX hereof, the Stockholders,
jointly and severally, agree to indemnify, defend and hold harmless GRS (and its
Affiliates, successors and assigns and their respective officers and directors)
from and against all losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements, but offset by any proceeds from insurance and taking into account
the present value of any tax savings to GRS or the Company resulting from such
losses, liabilities, damages, deficiencies, costs or expenses) ("Losses") based
upon, arising out of or otherwise in respect of (i) any inaccuracy in or any
breach of any representation, warranty, covenant or agreement of the Company or
the Stockholders contained in this Agreement, (ii) liabilities for Taxes and
(iii) any liability arising out of any subsequent adjustment by any tax
authorities with respect to items attributable to periods prior to the Closing
Date. Provided, however, that for purposes of this Article IX, liabilities for
Taxes shall not include liability for Taxes to the extent reflected as a
liability on the Company Balance Sheet or the Closing Date Unaudited Balance
Sheet; all of which shall be paid by the Company or GRS.
Section 9.02 Obligation of GRS to Indemnify. GRS agrees to indemnify,
defend and hold harmless the Company and the Stockholders from and against any
Losses based upon, arising out of or otherwise in respect of any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of GRS
contained in this Agreement.
Section 9.03 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by any
party hereto (the "Indemnitee") of notice of any demand, claim or circumstances
which, with the lapse of time, would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 9.01 or
9.02 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the objection of the other, provided, however, that consent to
settlement or compromise shall not be
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unreasonably withheld. In any event, the Indemnitee and the Indemnifying Party
may participate, at their own expense, in the defense of such Asserted
Liability. If the Indemnifying Party chooses to defend the claim, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
(c) Disputes with Customers or Suppliers. Anything in Section
9.03(b) to the contrary notwithstanding, in the case of any Asserted Liability
by any supplier, distributor, sales agent or customer of the Company with
respect to the business conducted by the Company prior to the Closing in
connection with which GRS may make a claim against the Stockholders for
indemnification pursuant to Section 9.01, GRS shall give a Claims Notice with
respect thereto but, unless GRS and the Indemnifying Party otherwise agree, the
Stockholders shall have the exclusive right at its option to defend, at its own
expense, any such matter, subject to the duty of the Stockholders to consult
with GRS and its attorneys in connection with such defense and provided that no
such matter shall be compromised or settled by the Stockholders without the
prior consent of GRS, which consent shall not be unreasonably withheld. GRS
shall have the right to recommend in good faith to the Stockholders proposals to
compromise or settle claims brought by a supplier, distributor or customer, and
the Stockholders agree to present such proposed compromises or settlements to
such supplier, distributor or customer. All amounts required to be paid in
connection with any such Asserted Liability pursuant to the determination of any
court, governmental or regulatory body or arbitrator, and all amounts required
to be paid in connection with any such compromise or settlement consented to by
GRS, shall be borne and paid by the Stockholders. The parties agree to cooperate
fully with one another in the defense, compromise or settlement of any Asserted
Liability.
Section 9.04 Limitations on Indemnification. The indemnification provided
for in Sections 9.01 and 9.02 shall be subject to the following limitations:
(i) The Stockholders shall not be obligated to pay any
amounts for indemnification under this Article IX arising out of any Losses
based upon, arising out of or otherwise in respect of any inaccuracy or breach
disclosed in writing to GRS and specifically waived in writing by GRS prior to
the Closing.
(ii) Neither GRS, the Company nor the Stockholders shall be
obligated to pay any amounts for indemnification under this Article IX, except
those based upon, arising out of or otherwise in respect of Sections 3.02, 3.13,
3.21, 3.28, 5.22, 5.29, 9.01 (ii) and (iii), 11.01 and 11.02 and Article IV
hereof (the "Basket Exclusions"), until the aggregate indemnification payments,
exclusive of the Basket Exclusions, equals one percent (1%) of the Purchase
Price (the "Basket Amount"), whereupon GRS, or the Company and Stockholders, as
the case may be, shall be obligated to pay any indemnification payments,
including the Basket Amount, in full. It is expressly understood that the Basket
Amount shall serve as a "trigger" for indemnification and not as a "deductible"
(for example, if the indemnity claims for which GRS or the Stockholders would,
but for the provisions of this subparagraph (ii), be liable is in the aggregate
amount of $100,000, and 1% of the Purchase Price is $70,000, the Stockholders
would then be liable for the entire $100,000 and not just $30,000). This Section
9.04(ii) will not apply to any breach of any representations and warranties of
which any party had actual Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional breach by any party of
any covenant or obligation, and GRS or the Stockholders, as the case may be,
will be jointly and severally liable for all damages with respect to such
breaches.
(iii) GRS, the Company and Stockholders shall be obligated to
pay the Basket Exclusions without regard to the individual or aggregate amounts
thereof and without regard to whether the aggregate amount of all other
indemnification payments shall have exceeded, in the aggregate, the Basket
Amount.
(iv) (A) Notwithstanding anything to the contrary in this
Agreement, except with respect to any breach of the representations and
warranties set forth in Article IV hereof, the
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Stockholders shall not have any obligation to indemnify GRS (or its directors,
officers, affiliates, successors or assigns) for any breach of any
representation, warranty or covenant under this Agreement, for any liabilities
for Taxes, or for any liability arising out of any subsequent adjustment by any
tax authorities with respect to items attributable to periods prior to the
Closing Date, for any amount of Losses which cannot be satisfied out of the
Escrow Fund established under the Escrow Agreement and in accordance with the
procedures set forth in the Escrow Agreement; and the Stockholders shall have no
personal liability for such Losses beyond the GRS Common Stock held in the
Escrow Fund.
(B) Notwithstanding anything to the contrary in this
Agreement, except with respect to the representation and warranty of GRS set
forth in Section 5.29, GRS shall not have any obligation to indemnify the
Company or the Stockholders for any breach of any representation, warranty or
covenant under this Agreement for any amount of Losses in excess of the
Indemnity Cap. For purposes of this Agreement the "Indemnity Cap" shall mean the
lesser of $3,812,579 or an amount equal to the value of the GRS Common Stock
held in the Escrow Fund established under the Escrow Agreement valued in
accordance with the procedures set forth in the Escrow Agreement; and GRS shall
have no liability for such Losses beyond the Indemnity Cap.
(v) After the Closing, the indemnification rights set forth
in this Article IX shall be each party's sole and exclusive remedy against the
other party for any breach of any representation, warranty or covenant contained
in this Agreement, including but not limited to matters arising out of Section
9.01(ii) and (iii) hereof. Notwithstanding the foregoing, nothing herein shall
prevent any party from bringing an action based upon allegations of fraud in
connection with this Agreement. In the event an action based upon allegations of
fraud is brought, the prevailing party's attorneys' fees and costs shall be paid
by the nonprevailing party.
(vi) GRS shall be deemed to have suffered Losses with respect
to accounts receivable reflected on the Closing Date Unaudited Balance Sheet
only if and to the extent that such accounts receivable, except for Contract
Retention, remain uncollected 180 days from the Closing Date. Contract Retention
will be considered uncollectible, and be deemed a Loss, if it remains
uncollected 350 days from the Closing Date. Because the Purchase Price is
predicated upon the Company's adjusted earnings before interest and taxes
("EBIT"), GRS shall be deemed to have suffered Losses in an amount equal to the
amount of such accounts receivable and Contract Retention which have not been
collected within the time periods specified above. Any Losses claimed on such
accounts receivable or Contract Retention will be credited back to the Escrow
Fund based on the foregoing formula to the extent such accounts receivable or
Contract Retention are recovered within the period of the Escrow Agreement. To
the extent that GRS suffers Losses from the failure to collect accounts
receivable of the Company and such Losses result in a set-off from the Escrow
Fund, the related accounts receivable shall be assigned to the Stockholders
following, and to the extent of, such set-off.
Section 9.05 Set-Off Rights.
(a) Each Stockholder specifically agrees that, subject to Section
9.04 and, paragraphs (b) and (c) of this Section 9.05, any valid claims for
indemnification by GRS against the Stockholders (or any of them) hereunder shall
be first satisfied against the Escrow Fund pursuant to the Escrow Agreement.
(b) GRS shall give Stockholders not less than fifteen (15) days'
notice (the "GRS Notice") of its intention to deduct or set-off any amounts
pursuant to this Section 9.05, including in such notice a description of GRS'
indemnification claim. If none of the Stockholders object in writing to such
deduction or set-off at least two business days prior to the date of the
proposed set-off set forth in the GRS Notice (the "Set-Off Date"), then such
proposed deduction or set-off shall become effective on such date and shall not
be subject to further review, challenge or adjustment absent fraud.
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(c) If any of the Stockholders timely object in writing to the
set-off proposed in the GRS Notice, and if GRS and the objecting Stockholder(s)
are unable to resolve such dispute on or prior to the Set-Off Date, then (i) the
proposed deduction or set-off shall be effective only as to undisputed amounts,
and (ii) any undisputed amounts shall be retained in escrow to be held and
disbursed by the Escrow Agent in accordance with the terms of the Escrow
Agreement. In the event that a dispute among the parties arises pursuant to this
Section 9.05(c), the party who is later determined to have been in error in
attempting to enforce or dispute the payment or set-off shall (i) pay the
reasonable legal and accounting fees, costs and expenses incurred by the
prevailing party in presenting, arguing and resolving such dispute and (ii) pay
to the party to which such payment or set-off is determined to be payable an
amount sufficient to equal a return at the rate of ten percent (10%) per annum
on the disputed amount from the date payment of such amount was originally due
through the date payment is actually made.
ARTICLE X
POST-CLOSING OBLIGATIONS
Section 10.01 Further Assurances. Following the Closing, each of the
Company, the Stockholders and GRS shall execute and deliver such documents, and
take such other action, as shall be reasonably requested by any other party
hereto to carry out the transactions contemplated by this Agreement.
Section 10.02 Publicity. None of the parties hereto shall issue or make, or
cause to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by each of the other parties, and
the parties shall endeavor jointly to agree on the text of any announcement or
circular so approved or required.
Section 10.03 Access to Records. From and after the Closing, (i) each of
the Stockholders shall (A) permit GRS and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, files, agreements and other information in the possession of the
Stockholders or their respective Affiliates, and (B) use his or her best efforts
to permit GRS and its authorized employees, agents, accountants, legal counsel
and other representatives to have access to the employees, counsel, accountants
and other representatives of the Stockholders and their respective Affiliates,
in each case, to the extent and at all times reasonably requested by GRS for the
purpose of investigating or defending any claim made against the Stockholders or
the Company in connection with periods ending on or before the Closing Date and
(ii) GRS shall use its best efforts to permit the Stockholders and their
respective authorized employees, agents, accountants, legal counsel and other
representatives to have access to the employees, counsel, accountants and other
representatives of GRS, the Company and their Affiliates, in each case, to the
extent and at all times reasonably requested by the Stockholders, or any of
them, for the purpose of investigating or defending any claim made against the
Stockholders in connection with Article IX.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Brokers. Regardless of whether the Closing shall occur, (i)
each Stockholder shall jointly and severally indemnify and hold harmless GRS and
the Company from and against any and all liability for any brokers or finders'
fees arising with respect to brokers or finders retained or engaged by the
Company or any of the Stockholders in respect of the transactions contemplated
by this Agreement, , and (ii) GRS shall indemnify and hold harmless the
Stockholders from and against any and all liability for
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any brokers' or finders' fees arising with respect to brokers or finders
retained or engaged by GRS in respect of the transactions contemplated by this
Agreement.
Section 11.02 Costs and Expenses. Each of the parties to this Agreement
shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby; provided, that GRS shall pay the costs and expenses of
preparing the Company Financial Statements.
Section 11.03 Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
GRS: General Roofing Services, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
---------------
Xxxxx & XxXxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Telecopy No.: (000) 000-0000
THE STOCKHOLDERS: To such Stockholder
c/o Xxxxxxx X. Xxxxx, III
Five-K Industries, Inc.
0000 Xxxxxx Xxxx, XX
Xxxxxx, XX 00000
Telecopy No.:(000) 000-0000
With a copy to:
---------------
Xxxx X. Xxxxxx, Esq.
Hendrick, Phillips, Xxxxxx & Xxxxxxx
1800 Peachtree Center Tower
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, Notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
Section 11.04 Governing Law. Except as otherwise provided in this Section
11.04 the provisions of this Agreement and the documents delivered pursuant
hereto shall be governed by and construed in accordance with the laws of the
State of Florida (excluding any conflict of law rule or principle that would
refer to the laws of another jurisdiction). If a dispute arises out of or
relates to this Agreement,
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or the breach thereof, and if said dispute cannot be settled through direct
discussions, the parties agree to first endeavor to settle the dispute in an
amicable manner by mediation administered by the American Arbitration
Association under its then prevailing Commercial Mediation Rules, before
resorting to arbitration. Thereafter, any unresolved controversy or claim
arising out of or relating to this Agreement, or the breach thereof, shall be
settled by arbitration administered by the American Arbitration Association in
accordance with its then prevailing Commercial Arbitration Rules. The
enforcement, interpretation and procedural and substantive effect of the
obligation to arbitrate created by paragraph 19 of this Agreement shall be
governed by the Federal Arbitration Act as amended from time to time, 9 U.S.C.
Section Section 1 et seq. The parties hereby disclaim any intention to have the
substantive or procedural law of any state or other jurisdiction, other than the
law of the United States as embodied in the Federal Arbitration Act, applied to
such obligation.
Section 11.05 Representations and Warranties. Each of the representations
and warranties of each of the parties to this Agreement shall be deemed to have
been made at the date hereof and at and as of the Closing Date.
Section 11.06 Entire Agreement, Amendments and Waivers. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
Section 11.07 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party. Nothing in this Agreement, express or implied, is intended to confer upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
Section 11.08 Remedies. The rights and remedies provided by this Agreement
are cumulative, and the use of any one right or remedy by any party hereto shall
not preclude or constitute a waiver of its right to use any or all other
remedies. Such rights and remedies are given in addition to any other rights and
remedies a party may have by law, statute, or otherwise.
Section 11.09 Exhibits and Schedules. The exhibits and schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one schedule shall be deemed restricted only to the
Section to which such disclosure specifically relates except where (i) there is
an explicit cross-reference to another Schedule, and (ii) GRS could reasonably
be expected to ascertain the scope of the modification to a representation
intended by such cross-reference.
Section 11.10 Multiple Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.11 References. Whenever required by the context, and as used in
this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
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References to monetary amounts and specific named statutes are intended to be
and shall be construed as references to United States dollars and statutes of
the United States of the stated name, respectively, unless the context otherwise
requires.
Section 11.12 Survival. Any provision of this Agreement which contemplates
performance or the existence of obligations after the Closing Date, and any and
all representations and warranties set forth in this Agreement, shall not be
deemed to be merged into or waived by the execution and delivery of the
instruments executed at the Closing, but shall expressly survive Closing for the
time period set forth in Section 8.01 hereof and shall be binding upon the party
or parties obligated thereby in accordance with the terms of this Agreement,
subject to any limitations expressly set forth in this Agreement.
Section 11.13 Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
ARTICLE XII
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective meanings
ascribed to such terms in this Article XII, unless otherwise defined in this
Agreement.
Section 12.01 Affiliate. The term "Affiliate" shall mean, with respect to
any person, any other Person controlling, controlled by or under common control
with such person. The term "Control" as used in the preceding sentence means,
with respect to a corporation, the right to exercise, directly or indirectly,
more than fifty percent (50%) of the voting rights attributable to the shares of
the controlled corporation and, with respect to any person other than a
corporation, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such person.
Section 12.02 Collateral Agreements. The term "Collateral Agreements" shall
mean any or all of the following agreements, the forms of which are attached
hereto as exhibits to this Agreement:
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit G - Employment Agreement between for Xxxxxxx X. Xxxxx, III
and any and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
Section 12.03 Company Assets. The term "Company Assets" shall mean, with
respect to the Company, all of the Properties, Company Contracts, and Permits,
that were Used by the Company as of the Balance Sheet Date and those Used by the
Company at any time after that date until the Closing Date.
Section 12.04 Contract Retention. The term "Contract Retention" shall mean
any amounts withheld by customers from contract progress billing until final and
satisfactory contract completion as determined by such customers.
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Section 12.05 Current Assets. The term "Current Assets" shall mean, with
respect to the Company, cash and other assets that are expected to be converted
into cash, sold or exchanged within one year from the Closing Date, including
marketable securities, receivables, inventory and current prepayments .
Section 12.06 Current Liabilities. The term "Current Liabilities" shall
mean, with respect to the Company, all obligations of the Company that are
required by their terms to be repaid within one year from the Closing Date.
Section 12.07 Damages. The term "Damages" shall mean any and all damages,
liabilities, obligations, penalties, fines, judgments, claims, deficiencies,
losses, costs, expenses and assessments (including without limitation income and
other Taxes, interest, penalties and attorneys' and accountants' fees and
disbursements).
Section 12.08 Environmental Law. "Environmental Law" shall mean any
governmental statute, law, ordinance, code, rule, regulation, order or decree
relating to or imposing liability or standards of conduct as may now be in
effect regarding any air emission, water discharge or use, storage, handling,
generation or disposal of any Hazardous Substances, including, without
limitation, the following, and all regulations promulgated thereunder or in
connection therewith: the Comprehensive Environmental Response, Compensation,
and Liability Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the Used Oil Recycling
Act, the Occupational Safety and Health Act, the Federal Safe Drinking Water
Act, the Federal Water Pollution Control Act, the Oil Pollution Act, the
Emergency Planning and Community Right-to-Know Act, and all other federal,
state, tribal and local laws, rules and regulations relating to protection of
human health and the environment, reclamation of land, wetlands and waterways or
relating to the use, storage, emissions, discharge, clean-up or release of
Hazardous Substances on or into the work-place or the environment (including,
without limitation, ambient air, oceans, waterways, wetlands, surface water,
ground water (tributary and nontributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of contaminants, as all of the
foregoing may be amended, supplemented and reauthorized from time to time.
Section 12.09 Governmental Authorities. The term "Governmental
Authorities" shall mean any nation or country (including but not limited to the
United States) and any commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
Section 12.10 GAAP. The term "GAAP" shall mean generally accepted accounting
principles applied on a basis consistent with past practices (except for the
omission of footnotes in any interim financial statements).
Section 12.11 Hazardous Substances. "Hazardous Substances" shall mean
industrial, toxic or hazardous substances or wastes or other pollutants,
contaminants, petroleum products, asbestos, polychlorinated biphenyls ("PCBs")
or chemicals, all as defined and regulated under Environmental Law.
Section 12.12 Knowledge. The term "Knowledge" shall mean the actual
knowledge of a party or, in the case of the Company or GRS, any of their
respective directors or executive officers with respect to the representation
being made, and such knowledge of any such persons as reasonably should have
obtained upon due investigation and inquiry into the representation being made.
Section 12.13 Legal Requirements. The term "Legal Requirements", when
described as being applicable to any person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or Properties.
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Section 12.14 Permits. The term "Permits" shall mean any and all permits or
orders under any Legal Requirement or otherwise granted by any Governmental
Authority.
Section 12.15 Properties. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible).
Section 12.16 Proportionate Share. The term "Proportionate Share" shall mean
each Stockholder's respective percentage ownership interest in the Company as
set forth on Exhibit A.
Section 12.17 Regulations. The term "Regulations" shall mean any and all
regulations promulgated by the Department of the Treasury pursuant to the Code.
Section 12.18 Taxes. The term "Taxes" means any federal, states, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
Section 12.19 Tax Returns. The term "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 12.20 Used. The term "Used" shall mean, with respect to the
Properties, Company Contracts or Permits of the Company, those owned, leased,
licensed or otherwise held by the Company which were acquired for use or held
for use by the Company in connection with the Company's business and operations,
whether or not reflected on the Company's books of account.
EXECUTED as of the date first written above.
GENERAL ROOFING SERVICES, INC.
By:/s/ Xxxxx Xxxxxxx
---------------------------
Xxxxx Xxxxxxx, President
FIVE K INDUSTRIES, INC.
By:/s/ Xxxxxxx X. Xxxxx, III
---------------------------
Xxxxxxx X. Xxxxx, III
President
STOCKHOLDER:
/s/ Xxxxxxx X. Xxxxx, III
------------------------------
Xxxxxxx X. Xxxxx, III
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EXHIBIT A
Number of Shares of Company Percentage (%)
Name Common Stock Purchased of Ownership
---- ---------------------- ------------
Xxxxxxx X. Xxxxx, III .......... 10 ............................ 100%
Total .................. 10 ............................ 100%
-- ----
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EXHIBIT D
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS that:
Section 3.01 Corporate Existence and Qualification: Corporate Documents
(a) The Company and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of Georgia, and
is not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to so qualify would have a material adverse
effect on the Company. The Company and each Subsidiary has all required
corporate power and authority to own its Properties and to carry on its business
as presently conducted. The Articles of Incorporation and By-laws of the Company
and each Subsidiary, copies of which are attached as Schedule 3.01(a), are
complete and reflect all amendments thereto through the date hereof.
(b) The stock and minute books of the Company and each Subsidiary
that have been made available to GRS for review contain a complete and accurate
record of all stockholders of the Company and each Subsidiary and all material
actions of the stockholders and directors (and any committees thereof) taken at
meetings of stockholders or directors of the Company and each Subsidiary.
(c) The Company does not have any subsidiaries, participate in any
partnership or joint venture, except as disclosed in Schedule 3.12, or own any
outstanding capital stock of any other corporation other than Therell-Xxxxx
Roofing, Inc.
Section 3.02 Capitalization and Ownership.
As of the date of this Agreement, the entire authorized capital stock
of the Company consists of 100,000 shares of Company Common Stock. The issued
and outstanding shares of Company Common Stock are owned of record and
beneficially by the Stockholders shown on Exhibit A hereof. All of the presently
outstanding shares of capital stock of the Company have been validly authorized
and issued and are fully paid and nonassessable. The Company has not issued any
other shares of its capital stock and there are no outstanding options,
warrants, subscriptions or other rights or obligations to purchase or acquire
any of such shares, nor any outstanding securities convertible into or
exchangeable for such shares, except as set forth on Schedule 3.02. Except as
contemplated under this Agreement, there are no agreements to which the Company
is a party regarding the issuance, registration, voting or transfer of its
outstanding shares of its capital stock. Except for possible dividends to be
issued in connection with the Excluded Assets as described in Section 1.05 and
dividends related to the payment of the Stockholders' tax liabilities with
respect to earnings of the Company up to the Closing Date, each and all of which
shall be subject to the prior written approval of GRS, no dividends are accrued
but unpaid on any capital stock of the Company.
Section 3.03 No Preemptive Rights; Registration Rights. There are no
preemptive rights affecting the issuance or sale of the Company Common Stock.
Section 3.04 No Company Defaults or Consents. Except as otherwise set forth
in Schedule 3.04 attached hereto, neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions or
provisions of the Articles of Incorporation or bylaws of the Company or any
Subsidiary;
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(ii) violate any Legal Requirements applicable to the Company
or any Subsidiary;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Company Contract or
Permit applicable to the Company or any Subsidiary;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares of capital stock or any Property of the Company or any
Subsidiary; or
(v) require any of the Stockholders or the Company or any
Subsidiary to obtain or make any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any Governmental Authority. Any and all
consents required to be obtained by the Company or any Subsidiary as set forth
in Schedule 3.04 shall be obtained and copies thereof delivered to GRS upon
execution of this Agreement.
Section 3.05 No Proceedings. Except as set forth on Schedule 3.05, no suit,
action or other proceeding is pending or, to the Knowledge of the Company or the
Stockholders, threatened before any Governmental Authority seeking to restrain
any of the Stockholders or prohibit their entry into this Agreement or prohibit
the Closing, or seeking damages against the Company or any Subsidiary or their
Properties, as a result of the consummation of the transactions contemplated by
this Agreement.
Section 3.06 Financial Statements. Attached as Schedule 3.06 are true and
correct copies of the Company's (i) Closing Date Unaudited Balance Sheet, (ii)
unaudited consolidated balance sheets as of March 31, 1998 (the "Company Balance
Sheet") and the related statements of income and stockholders' equity for the
twelve months ended March 31, 1998 (the "Company Financial Statements"), as well
as (iii) the Company's consolidated balance sheet and statements of income,
stockholders' equity and cash flow as of and for each of the three fiscal years
ended March 31, 1997 (the "Company Financial Statements"). The Company Financial
Statements (i) have been prepared from the books and records of the Company,
(ii) present fairly the consolidated financial condition of the Company and its
results of operations as at and for the respective periods then ended, and (iii)
have been prepared in accordance with GAAP.
Section 3.07 Liabilities and Obligations. Except as set forth in Schedule
3.07, the Company Financial Statements reflect all consolidated liabilities of
the Company as determined in accordance with generally accepted accounting
principles arising out of transactions effected or events occurring on or prior
to the date of the Company Balance Sheet, except for liabilities not exceeding
$10,000 in the aggregate. All reserves shown in the Company Financial Statements
are appropriate and reasonable to provide for losses thereby contemplated.
Except as set forth in the Company Financial Statements (including the Notes
thereto), the Company is not liable upon or with respect to, or obligated in any
other way to provide funds in respect of or to guarantee or assume in any
manner, any debt, obligation or dividend of any person, corporation,
association, partnership, joint venture, trust or other entity.
Section 3.08 Accounts Receivable. Except as otherwise set forth in Schedule
3.08, the accounts receivable reflected on the Company Balance Sheet and all
accounts receivable arising between the date of the Balance Sheet (the "Interim
Balance Sheet Date") and the date hereof, arose from bona fide transactions in
the ordinary course of business, and the goods and services involved have been
sold, delivered and performed to the account of the obligors, and no further
filings (with Governmental Authorities, insurers or others) are required to be
made, no further goods are required to be provided and no further services are
required to be rendered in order to complete the sales and fully render the
services and to entitle the Company or any Subsidiary to collect the accounts
receivable in full. No such account has been assigned or pledged to any other
person, firm or corporation, and, except only to the extent fully
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reserved against as set forth in the Company Balance Sheet, no defense or setoff
to any such account has been asserted by the account obligor.
Section 3.09 Employee Matters.
(a) Schedule 3.09(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of the Company and
each Subsidiary, regardless of compensation levels, and other employees who are
currently compensated at a rate in excess of $50,000 per year (including any
reasonably anticipated bonus) or who earned in excess of $50,000 during the
Company's fiscal year ended December 31, 1997 (collectively, the "Company Key
Employees"). In addition, Schedule 3.09(a) contains a complete and accurate
description of (i) all increases in compensation of the Company Key Employees
during the fiscal years of the Company ending December 31, 1997 and 1996,
respectively, and (ii) any promised increases in compensation of the Company Key
Employees that have not yet been effected.
(b) Schedule 3.09(b) contains a complete and accurate list of all
Compensation Plans sponsored by the Company and each Subsidiary or to which the
Company and each Subsidiary contributes on behalf of its employees, other than
Employee Benefit Plans listed in Schedule 3.10. As used herein, "Compensation
Plans" shall mean and include, without limitation, plans, arrangements or
practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options.
(c) Schedule 3.09(c) contains a complete and accurate list of all
Employment Agreements. As used in this Section 3.09(c) and in Section 3.09(e)
hereof, "Employment Agreements" shall mean and include, without limitation,
employee leasing agreements, employee services agreements and noncompetition
agreements to which the Company or any Subsidiary is a party and which are in
writing.
(d) The Company has provided GRS with a complete and accurate list
of all significant written employee policies and procedures of the Company.
(e) To the Knowledge of the Company, no unwritten material
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans, Employment Agreements or
employee policies and procedures.
(f) To the Knowledge of the Company, except as set forth in
Schedule 3.09(f), the Company (i) has been and is in material compliance with
all laws, rules, regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and hours, and (ii) is
not liable in any material amount for any arrears of wages or penalties for
failure to comply with any of the foregoing. Neither the Company nor any
Subsidiary has engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices. To the Knowledge of the Company, there are
no (i) material unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, race or handicap discrimination charges or
complaints pending or threatened against the Company or any Subsidiary before
the National Labor Relations Board or any similar state or foreign commission or
agency or (ii) existing or threatened material labor strikes, disputes,
grievances, controversies or other labor troubles affecting the Company or any
Subsidiary.
(g) Except as set forth on Schedule 3.09(g), (i) neither the
Company nor any Subsidiary has ever been a party to any agreement with any
union, labor organization or collective bargaining unit, (ii) no employees of
the Company or any Subsidiary are represented by any union, labor organization
or collective bargaining unit and, (iii) no employees of the Company or any
Subsidiary have threatened to organize or join a union, labor organization or
collective bargaining unit.
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(h) Except as disclosed on Schedule 3.09(h), no Company Key
Employee has indicated his or her desire or intent to terminate employment with
the Company, and the Company has no present intent of terminating the employment
of any Company Key Employee.
Section 3.10 Employee Benefit Matters.
(a) Schedule 3.10 contains a complete and accurate list of all
Employee Benefit Plans sponsored by the Company or any Subsidiary or to which
the Company or any Subsidiary contributes on behalf of its employees and all
Employee Benefit Plans previously sponsored or contributed to on behalf of its
employees within the three years preceding the date hereof. No unwritten
amendment exists with respect to any Employee Benefit Plan. For purposes of this
Agreement an "Employee Benefit Plan" means each employee benefit plan, as such
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
(b) Each Employee Benefit Plan has been administered and maintained
in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on the Company or
any Subsidiary. No Employee Benefit Plan is currently the subject of an audit,
investigation, enforcement action or other similar proceeding conducted by any
state or federal agency. No prohibited transactions (within the meaning of
Section 4975 of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder (the "Code")) have occurred with respect to
any Employee Benefit Plan. No pending or, to the Knowledge of the Company,
threatened, claims, suits or other proceedings exist with respect to any
Employee Benefit Plan other than normal benefit claims filed by participants or
beneficiaries.
(c) The Company has received a favorable determination letter or
ruling from the Internal Revenue Service for each Employee Benefit Plan intended
to be qualified within the meaning of Section 401 (a) of the Code and/or tax
exempt within the meaning of Section 501(a) of the Code, which letter or ruling
is current and covers all required amendments to each such Employee Benefit Plan
through the Closing Date. No proceedings exist or, to the Knowledge of the
Company, have been threatened that could result in the revocation of any such
favorable determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither the Company, any Subsidiary nor
any member of a Controlled Group has any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA. Except as described on Schedule 3.10(d), neither the Company, any
Subsidiary nor any member of a Controlled Group is or ever has been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) Except as described on Schedule 3.10(f), neither the Company
nor any Subsidiary has any obligation or commitment to provide medical, dental
or life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired from employment with the
Company or any Subsidiary.
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Section 3.11 Absence of Certain Changes. Except as set forth in Schedule
3.11, from March 31, 1998 (the "Company Balance Sheet Date") to the date of this
Agreement, neither the Company nor any Subsidiary has:
(a) suffered any material adverse change, whether or not caused by
any deliberate act or omission of the Company, or any Stockholder, in its
condition (financial or otherwise), operations, assets, liabilities, business or
prospects;
(b) contracted for the purchase of any capital assets having a cost
in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or sold
any debt securities, except in the ordinary course of business consistent with
past practice;
(d) incurred or discharged any liabilities or obligations except in
the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its Properties or Company Assets,
except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any Company
Assets (whether or not covered by insurance) that has materially adversely
affected, or could materially adversely affect, its business;
(h) acquired or disposed of any Company Assets except in the
ordinary course of business consistent with past practice or as permitted by
Section 1.05 hereof;
(i) written up or written down the carrying value of any of the
Company Assets, except in the ordinary course of business consistent with past
practice;
(j) changed any accounting principles methods or practices followed
or changed the costing system or depreciation methods of accounting for the
Company Assets;
(k) waived any material rights or forgiven any material claims;
(l) lost, terminated or experienced any change in the relationship
with any employee, customer, joint venture partner or supplier, which
termination or change has materially and adversely affected, or could reasonably
be expected to materially and adversely affect, its business or Company Assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business consistent with past practice;
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(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity except as permitted by
Section 1.05;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to change the terms and conditions of any such rights or paid any dividends or
made any distribution to the holders of the Company's capital stock except as
permitted by Section 1.05;
(r) entered into any material agreement with any person or group,
or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit Plan; or
(t) entered into any agreement (written or oral) to do any of the
foregoing, except in the ordinary course of business consistent with past
practice.
Section 3.12 Commitments. (a) Except the material contracts, agreements,
commitments and other arrangements, whether oral or written, to which the
Company or any Subsidiary is a party (the "Company Contracts") set forth in
Schedule 3.12, neither the Company nor any Subsidiary has entered into, nor is
the capital stock, the assets or the business of the Company or any Subsidiary
bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement, except in
the ordinary course of business;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any director or
officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
investment bankers, financial advisors, business brokers, public relations or
advertising agencies, accountants or attorneys, except with respect to
confidentiality agreements;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee, except in the ordinary course of business and
excluding the real estate leases set forth on Schedule 3.15(c);
(x) agreement between the Company, any Subsidiary and any
Affiliate;
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(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Company or any Subsidiary;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that involves either
an unperformed commitment in excess of $5,000 or that terminates more than
thirty (30) days after the date hereof, except in the ordinary course of
business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 3.23 hereof; or
(xvii) any other agreement or commitment not made in the
ordinary course of business that is material to the business or financial
condition of the Company or any Subsidiary.
True, correct and complete copies of the written Company Contracts, and true,
correct and complete written descriptions of the oral Company Contracts, have
heretofore been delivered or made available to GRS in accordance with, and
subject to the limitations of, GRS' Due Diligence Investigation. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by the Company, and no material penalties
have been incurred nor are amendments pending, with respect to the Company
Contracts. The Company Contracts are in full force and effect and are valid and
enforceable obligations of the Company, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity). The Company has not received
notice of any material default with respect to any Company Contracts. For the
purposes of this Section 3.12(a), the term "material" shall mean a condition the
existence or breach of which could result in damage or loss to the Company
valued in excess of $5,000 individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, the Company has not received
notice of any plan or intention of any other party to any Company Contract to
exercise any right to cancel or terminate any Company Contract. The Company does
not currently contemplate, and has no reason to believe any person or entity
currently contemplates, any amendment or change to any Company Contract. None of
the customers, joint venture partners or suppliers of the Company has refused,
or communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, the Company.
Section 3.13 Insurance. The Company has had in effect, and will maintain
through the Closing Date, comprehensive insurance coverage with respect to all
completed operations of the Company and each Subsidiary. The Company has
previously made available to GRS all insurance policies of the Company. All of
such policies are valid and enforceable against the Company, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless of
whether such equitable principles are applied in a proceeding at law or in
equity).
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Section 3.14 Patents, Trade-marks, Service Marks and Copyrights.
(a) The Company owns all patents, trade-marks, service marks and
copyrights (collectively "Proprietary Rights"), if any, necessary to conduct its
business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in Schedule 3.14(a) is a
true and correct description of all Proprietary Rights.
(b) The Company and each Subsidiary has the sole and exclusive
right to use the Proprietary Rights without infringing or violating the rights
of any third parties and, upon the consummation of the Stock Purchase, GRS will
have the right to use all Proprietary Rights without any obligation to pay any
additional amounts whatsoever. Use of the Proprietary Rights does not require
the consent of any other person and the Proprietary Rights are freely
transferable. No claim has been asserted by any person to the ownership of or
right to use any Proprietary Right or challenging or questioning the validity or
effectiveness of any license or agreement constituting a part of any Proprietary
Right. Each of the Proprietary Rights is valid and subsisting, has not been
canceled, abandoned or otherwise terminated and, if applicable, has been duly
issued or filed.
Section 3.15 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by the
Company and each Subsidiary is set forth in Schedule 3.15(a).
(b) Except as disclosed on Schedule 3.15(b), the Company and each
Subsidiary has good and marketable title to the Company Assets, including,
without limitation, those reflected on the Company Balance Sheet (other than
those since disposed of in the ordinary course of business), free and clear of
all security interests, liens, charges and other encumbrances, except for (i)
liens for taxes not yet due and payable or being contested in good faith in
appropriate proceedings, and (ii) encumbrances that are incidental to the
conduct of its businesses or ownership of property, not incurred in connection
with the borrowing of money or the obtaining of credit, and which do not in the
aggregate materially detract from the value of the assets affected or materially
impair their use by the Company or any Subsidiary. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company or any Subsidiary are in operating condition and repair, normal wear and
tear excepted, are adequate and sufficient for the Company's and each
Subsidiary's business and conform in all material respects with all applicable
ordinances, regulations and laws relating to their use and operation.
(c) A listing of all real property leases, their terms and total
lease payments is attached hereto as Schedule 3.15(c). The Company and each
Subsidiary enjoys peaceful and undisturbed possession under all real property
leases under which the Company and each Subsidiary is operating, and all such
leases are valid and subsisting and none of them is in default, except for those
defaults which, individually or in the aggregate, would not have a material
adverse effect upon the Company.
Section 3.16 Compliance with Laws. The Company and each Subsidiary has all
material franchises, Permits, licenses and other rights and privileges necessary
to permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of the Company and each Subsidiary have
been and are being conducted in accordance in all material respects with all
applicable laws, rules and regulations, and neither the Company or any
Subsidiary is in violation of any judgment, law or regulation except where any
such violation would not have a material adverse effect on the Company's
consolidated results of operations, business, assets or financial condition.
Section 3.17 Litigation: Default. Except as otherwise set forth in
Schedule 3.17, there are no claims, actions, suits, investigations or
proceedings against the Company or any Subsidiary pending or, to the Knowledge
of the Company or any Subsidiary, threatened in any court or before or by any
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35
Governmental Authority, or before any arbitrator, that could reasonably be
expected to have a materialadverse effect (whether covered by insurance or not)
on the business, operations, prospects, Properties, securities or financial
condition of the Company or any Subsidiary. Except as otherwise set forth in
Schedule 3.17, neither the Company or any Subsidiary is in default under, and no
condition exists (whether covered by insurance or not) that with or without
notice or lapse of time or both would (i) constitute a default under, or breach
or violation of, any Company Contract of the Company and each Subsidiary or any
Legal Requirement or Permit applicable to the Company or any Subsidiary, or (ii)
accelerate or permit the acceleration of the performance required under, or give
any other party the right to terminate, any Company Contract, other than
defaults, breaches, violations or accelerations that would not have a material
adverse effect on the business, operations, prospects, Properties, securities or
financial condition (a "Material Adverse Effect") of the Company or any
Subsidiary.
Section 3.18 Environmental Matters.
(a) Except as listed in Schedule 3.18(a), to the Knowledge of the
Company, there are no PCBs, TCE, PCE, or asbestos containing materials
generated, used, treated, stored, maintained, disposed of, or otherwise
deposited in, or located on any premises at which the business of the Company
and each Subsidiary (the "Company Business") is or was, or at which the business
or, to the Knowledge of the Company, its predecessors was, located which would
have a Material Adverse Effect on the Company.
(b) Except as described in Schedule 3.18(b), there are and were no
underground storage tanks used, stored, maintained, located on any premises at
which Company Business is or was, or, to knowledge of the Company, at which the
business of its predecessors was, located which would have a Material Adverse
Effect on the Company. With respect to underground storage tanks, Schedule
3.18(b) sets forth the size, location, construction, installation date, use and
testing history of all underground storage tanks (whether or not excluded from
regulation under Environmental Law), including all underground storage tanks in
use, out of service, closed, abandoned, decommissioned, or sold to a third
party.
(c) Except as listed in Schedule 3.18(c), to the Knowledge of the
Company, there has been no "release" as defined in 42 U.S.C. 9601(22) or, to the
best knowledge of the Company, threat of a "release" of any Hazardous Substance
on, from or under any premises from which (i) the Company's operations have been
or are being conducted related to the Company Business. or (ii) to the Knowledge
of the Company, the operations of any predecessor of the Company or any
Subsidiary which would have a Material Adverse Effect on the Company or any
Subsidiary.
(d) Except as listed in Schedule 3.18(d), the Company and its
predecessors have not received written notice alleging any potential liability
with respect to the contamination, investigation, or cleanup of any site at
which Hazardous Substances have been or have alleged to have been generated,
treated, stored, discharged, emitted or disposed of and, to the Knowledge of the
Company, there are no past or present events, facts, conditions or circumstances
which may interfere with or prevent material compliance by the Company or any
Subsidiary with Environmental Law, or with any order, decree, judgment,
injunction, notice or demand issued, entered, promulgated or approved
thereunder, or which may give rise to any liability under applicable law
including, without limitation, any Environmental Law, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, notice of
violation, study or investigation, based on or related to the manufacture,
process, distribution, use, treatment, storage, disposal, transport or handling,
or the emission, discharge, release or threatened release into the environment
of Hazardous Substances by the Company or, to the Knowledge of the Company, by
any predecessor of the Company, as a result of any act or omission of the
Company or any Subsidiary or predecessors related to the Company Business.
(e) Except as disclosed in Schedule 3.18(e), all of the Company's
and, to the Knowledge of the Company, its predecessor's, Hazardous Substances
disposal and recycling practices
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related to the Company Business have been accomplished in material compliance
with all applicable Environmental Laws.
The Company's representation(s) with respect to this Section 3.18 shall not
be interpreted to imply that GRS has constructive knowledge regarding any aspect
of the Company Business with respect to environmental matters nor to limit the
scope of any of the Company's or any Stockholders' representations under this
Agreement. No such due diligence examination or related activities of, or on
behalf of, GRS however, shall constitute a waiver or relinquishment by GRS of
its right to rely upon the Company's or any Stockholders' representations,
warranties, covenants and agreements as made herein or pursuant hereto, and no
such disclosure shall constitute an assumption by GRS of any conditions or
liabilities, and such disclosure shall not relieve the Company or any
Stockholder of its duties and obligations hereunder.
Section 3.19 Banks. Schedule 3.19 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which the Company or any Subsidiary has an account, credit line or safe deposit
box or vault, (ii) the names of all persons authorized to draw thereon or to
have access to any safe deposit box or vault, (iii) the purpose of each such
account, safe deposit box or vault, and (iv) the names of all persons authorized
by proxies, powers of attorney or other like instrument to act on behalf of the
Company or any Subsidiary in matters concerning any of its business or affairs.
Except as otherwise set forth in Schedule 3.19, no such proxies, powers of
attorney or other like instruments are irrevocable.
Section 3.20 Suppliers and Customers Sales. Schedule 3.20 sets forth all
the Company's and each Subsidiary's material suppliers, together with the dollar
amount of goods purchased by the Company from each such supplier during the
twelve month period ended March 31, 1998, as well as each of the principal
customers of the Company and each Subsidiary. Except as otherwise set forth in
Schedule 3.20, since December 31, 1997, there has been no material adverse
change in the business relationship of the Company or any Subsidiary with any
supplier or customer named in Schedule 3.20. No customer or supplier named in
Schedule 3.20 has terminated or materially altered, or notified the Company or
any Subsidiary of any intention to terminate or materially alter, its
relationship with the Company, and the Company has no reason to believe that any
such customer or supplier will terminate or materially alter its relationship
with the Company or any Subsidiary or to materially decrease its services or
supplies to the Company or any Subsidiary or its direct or indirect usage of the
services of the Company or any Subsidiary. For purposes of Sections 3.20 and
3.23, "material suppliers" refers to suppliers from whom the Company purchased
five percent (5%) or more of the total amount of the goods purchased by the
Company or any Subsidiary during the twelve month period ended March 31, 1998,
and "principal customers" refers to customers who accounted for 5% or more of
the Company's total consolidated revenues during the twelve month period ended
March 31, 1998.
Section 3.21 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by the
Company, any Subsidiary or any Stockholder.
Section 3.22 Disclosure; Due Diligence. This Agreement and the Exhibits and
Schedules hereto, when taken as a whole with other documents and certificates
furnished by the Company, any Subsidiary or the Stockholders to GRS or its
counsel, do not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements therein not misleading;
provided, however, certain materials provided to GRS contain projections and
estimates of future events, and such projections and estimates have been based
upon certain assumptions that management of the Company made in good faith and
believed are reasonable at the time such materials were prepared.
Section 3.23 Ownership Interests of Interested Persons. Except as set forth
in Schedule 3.23, no director or executive officer of the Company or any
Subsidiary or their respective spouses or children, owns directly or indirectly,
on an individual or joint basis, any material interest in, or serves as an
officer or director of, any principal customer or material supplier which has a
business relationship with the
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Company or any Subsidiary or any organization that has a material contract or
arrangement with the Company or any Subsidiary.
Section 3.24 Investments in Competitors. No director or executive officer
of the Company or any Subsidiary owns directly or indirectly any material
interest or has any investment equal to 5% or more of the outstanding voting
securities in any corporation, business or other person that is a direct
competitor of the Company or any Subsidiary.
Section 3.25 Certain Payments. Neither the Company or any Subsidiary, nor
any director, officer or employee of the Company or any Subsidiary, has paid or
caused to be paid, directly or indirectly, in connection with the business of
the Company: (a) to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or (b) any
material contribution to any political party or candidate (other than from
personal funds of directors, officers or employees not reimbursed by their
respective employers or as otherwise permitted by applicable law).
Section 3.26 Government Inquiries. Except as set forth on Schedule 3.26,
there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by the Company or any Subsidiary
from, or any material statement, report or other document filed by the Company
or any Subsidiary with, the federal government or any federal administrative
agency (including but not limited to, the Justice Department, Internal Revenue
Service, Department of Labor, Occupational Safety and Health Administration,
Federal Trade Commission, National Labor Relations Board, and Interstate
Commerce Commission), any state securities administrator or any local or state
taxing authority.
Section 3.27 Other Transactions. Neither the Company or any Subsidiary has
entered into any agreements or arrangements and there are no pending offers or
discussions concerning or providing for the merger or consolidation of the
Company or all or any substantial portion of its assets, the sale by the Company
or any Subsidiary or any Stockholder of any securities of the Company or any
Subsidiary or any similar transaction affecting the Company or any Subsidiary or
the Stockholders.
Section 3.28 Tax Matters.
(a) Except as set forth in Schedule 3.28 hereto:
(i) the Company and each Subsidiary has timely filed all
federal income Tax Returns, and all other material Tax Returns which it is
required to file under applicable laws and regulations;
(ii) all such Tax Returns are true and accurate in all
material respects;
(iii) the Company and each Subsidiary has paid all Taxes due
and owing by it (whether or not such Taxes are required to be shown on a Tax
Return) and has withheld and paid over to the appropriate taxing authority all
Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party, except where the amounts
of such unpaid Taxes or the amounts that have not been withheld and paid over do
not, in the aggregate, exceed $25,000;
(iv) the accrual for Taxes on the Closing Date Unaudited
Balance Sheet is sufficient to pay in full all liabilities for Taxes of the
Company and each Subsidiary related to periods prior to the Closing;
(v) the federal income Tax Returns of the Company have been
filed through March 31, 1997, and, as of the date hereof, none of such Tax
Returns has been audited; and
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(vi) the Company and each Subsidiary has disclosed in its
federal income Tax Returns, or has substantial authority for, all positions
taken therein that could give rise to a substantial understatement of federal
income tax within the meaning of IRC Section 6662.
(b) To the Knowledge of the Company, no claim has been made by a
taxing authority in a jurisdiction where the Company does not file Tax Returns
that the Company and each Subsidiary is or may be subject to taxation by that
jurisdiction.
(c) To the Knowledge of the Company:
(i) there are no foreign, federal, state or local Tax
audits or administrative or judicial proceedings pending or being conducted with
respect to the Company or any Subsidiary;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by the Company or any Subsidiary from any foreign, federal, state or
local taxing authority; and
(iii) there are no material unresolved claims concerning the
Company's or any Subsidiary's Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to the Company in connection with any Tax Returns
covering the Company or any Subsidiary, except where such waiver would not have
a material adverse effect on the Company or any Subsidiary.
(e) Neither the Company nor any Subsidiary has executed or entered
into a closing agreement pursuant to IRC Section 7121 or any predecessor
provision thereof or any similar provision of state, local or foreign law; nor
has the Company agreed to or is required to make any adjustments pursuant to IRC
Section 481(a) or any similar provision of state, local or foreign law by reason
of a change in accounting method initiated by the Company or any Subsidiary. The
Company has no knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any knowledge with respect to any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company.
(f) Neither the Company nor any Subsidiary has made an election
under IRC Section 341(f).
(g) Neither the Company nor any Subsidiary is liable for the Taxes
of another person.
(h) Neither the Company nor any Subsidiary is a party to any Tax
sharing agreement.
(l) Neither the Company nor any Subsidiary has made any payments
nor is it obligated to make payments nor is it a party to an agreement that
could obligate it to make any payments that would not be deductible under IRC
Section 280G.
(m) The following provisions shall govern the allocation of
responsibility as between GRS and the Company for certain tax matters following
the Closing Date:
(i) Tax Periods Ending on or Before the Closing Date. The
Company shall prepare or cause to be prepared and file or cause to be filed all
federal and state income Tax Returns for the Company and its Subsidiaries, if
any, for tax periods ending on or prior to the Closing Date which are filed
after the Closing Date. The Company shall permit GRS to review, comment and
approve each such Tax Return described in the preceding sentence prior to
filing.
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(n) GRS, the Company and its Subsidiaries, if any, and the Stockholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section
3.28 and any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding an making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.
(o) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) imposed upon the
Stockholders by the United States, the State of Georgia, or other local taxing
authority within the State of Georgia in connection with this Agreement, shall
be paid by Stockholders when due, and the Stockholders will, at their own
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, GRS will, and will cause its
Affiliates to join in the execution of any such Tax Returns and other
documentation.
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EXHIBIT E
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as follows:
Section 4.01 Title to the Shares. As of the Closing Date, such Stockholder
shall own beneficially and of record, free and clear of any lien, option or
other encumbrance, the shares of Company Common Stock set forth opposite such
Stockholders' name on Exhibit A hereof, and, upon consummation of the Stock
Purchase, GRS will acquire good and valid title thereto, free and clear of any
lien or other encumbrance.
Section 4.02 Authority to Execute and Perform Agreement. Such Stockholder
has the full legal right and power and all authority and approval required to
enter into, execute and deliver this Agreement and to perform fully such
Stockholders' obligations hereunder. This Agreement has been duly executed and
delivered by such Stockholder and is a valid and binding obligation of such
Stockholder enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless of
whether such equitable principles are applied in a proceeding at law or in
equity). The execution and delivery by such Stockholder of this Agreement and
the performance by such Stockholder of this Agreement in accordance with its
terms and conditions will not (i) require the approval or consent of any
foreign, federal, state, county, local or other governmental or regulatory body
or the approval or consent of any other person; or (ii) conflict with or result
in any breach or violation of any of the terms and conditions of, or constitute
(or with notice or lapse of time or both constitute) a default under, any
statute, regulation, order, judgment or decree applicable to such Stockholder or
to the shares of Company Common Stock held by such Stockholder, or any
instrument, contract or other agreement to which such Stockholder is a party or
by or to which such Stockholder is or the shares of Company Common Stock held by
such Stockholder are bound or subject.
Section 4.03 No Stockholder Defaults or Consents. The execution and
delivery of this Agreement and the Collateral Agreements by such Stockholder and
the performance by such Stockholder who is a party thereto of his or her
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree or any indenture, agreement or other instrument to
which such Stockholder is a party, or by which such Stockholder or any
properties or assets of such Stockholder is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the properties or assets of such
Stockholder. Any and all consents required to be obtained by such Stockholder as
set forth in Schedule 4.03 shall be obtained and copies thereof delivered to GRS
upon execution of this Agreement.
Section 4.04 Investment Representations
(a) Such Stockholder is acquiring the shares of GRS Common Stock to
be issued to it pursuant to the Stock Purchase (the "GRS Shares") for its own
account and not on behalf of any other person; such Stockholder is aware and
acknowledges that the GRS Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and may not be offered or sold
unless the GRS Shares are registered under the Securities Act or an exemption
from the registration requirements of the Securities Act is available;
41
(b) Such Stockholder has been furnished all information that it
deems necessary to enable it to evaluate the merits and risks of an investment
in GRS; such Stockholder has had a reasonable opportunity to ask questions of
and receive answers from GRS concerning GRS and the GRS Shares, and all such
questions, if any, have been answered to the full satisfaction of such
Stockholder;
(c) No person or entity other than such Stockholder has (i) any
rights in and to the GRS Shares, which rights were obtained through or from such
Stockholder or (ii) any rights to acquire the GRS Shares, which rights were
obtained through or from such Stockholder;
(d) Such Stockholder has such knowledge and expertise in financial
and business matters (including knowledge and expertise in the roofing industry)
that it is capable of evaluating the merits and risks involved in an investment
in the GRS Shares: and such Stockholder is financially able to bear the economic
risk of the investment in the GRS Shares, including a total loss of such
investment;
(e) Such Stockholder represents that it has adequate means of
providing for its current needs and has no need for liquidity in its investment
in the GRS Shares; such Stockholder has no reason to anticipate any material
change in its financial condition for the foreseeable future;
(f) Such Stockholder is aware that the acquisition of the GRS
Shares is an investment involving a risk of loss and that there is no guarantee
that such Stockholder will realize any gain from this investment, and that such
Stockholder could lose the total amount of its investment;
(g) Such Stockholder understands that no United States federal or
state agency has made any finding of determination regarding the fairness of the
offering of the GRS Shares for investment, or any recommendation or endorsement
of the offering of the GRS Shares;
(h) Except as permitted by the Lock-Up Agreement, such Stockholder
is acquiring the GRS Shares for investment, with no present intention of
dividing or allowing others to participate in such investment or of reselling,
or otherwise participating, directly or indirectly, in a distribution of the GRS
Shares, and shall not make any sale, transfer or pledge thereof without
registration under the Securities Act and any applicable securities laws of any
state or unless an exemption from registration is available;
(i) Except as set forth herein, no representations or warranties
have been made to such Stockholder by GRS or any agent, employee or Affiliate of
GRS, and in entering into this transaction such Stockholder is not relying upon
any information, other than from the results of independent investigation by
such Stockholder;
(j) Such Stockholder understands that the GRS Shares are being
offered to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that GRS is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Stockholder set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Stockholder to acquire the GRS Shares; and
(k) Except as permitted by the Lock-Up Agreement, such Stockholder
will not sell, assign or transfer any of the GRS Shares except (i) pursuant to
an effective registration statement under the Securities Act, (ii) in a
transaction which, in the opinion of the general counsel of GRS or other counsel
reasonably satisfactory to GRS, is not required to be registered under the
Securities Act.
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EXHIBIT F
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Company and the Stockholders that:
Section 5.01 Corporate Existence and Qualification: Corporate Documents.
(a) GRS is a corporation duly organized, validly existing and in
good standing under the laws of Florida, and is not required to be qualified to
do business as a foreign corporation in any other jurisdiction where the failure
to so qualify would have a material adverse effect on GRS. GRS has all required
corporate power and authority to own its properties and to carry on its business
as presently conducted. The Articles of Incorporation and By-laws of GRS, copies
of which are attached as Schedule 5.01(a), are complete and reflect all
amendments thereto through the date hereof.
(b) The stock and minute books of GRS that have been made available
to the Stockholder for review contain a complete and accurate record of all
stockholders of GRS, and all material actions of the stockholders and directors
(and any committees thereof) of GRS.
(c) Except as set forth on Schedule 5.01(c), GRS does not have any
subsidiaries, participate in any partnership or joint venture, or own any
outstanding capital stock of any other corporation.
Section 5.02 Authority, Approval and Enforceability. This Agreement has
been duly executed and delivered by GRS and GRS has all requisite power and
legal authority to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered in connection
with the transactions provided for hereby, to consummate the transactions
contemplated hereby and by the Collateral Agreements, and to perform its
obligations hereunder and under the Collateral Agreements. This Agreement and
each Collateral Agreement to which GRS is a party constitutes, or upon execution
and delivery will constitute, the legal, valid and binding obligation of GRS,
enforceable in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 5.03 Capitalization and Ownership.
(a) As of the date of this Agreement, the entire authorized capital
stock of GRS consists of 100,000,000 shares of which 90,000,000 have been
designated as GRS Common Stock and 10,000,000 have been designated as Preferred
Stock. All of the presently outstanding shares of capital stock of GRS have been
validly authorized and issued and are fully paid and nonassessable. Except as
set forth on Schedule 5.03, GRS has not issued any other shares of its capital
stock and there are no outstanding options, warrants, subscriptions or other
rights or obligations to purchase or acquire any of such shares, nor any
outstanding securities convertible into or exchangeable for such shares. No
dividends are accrued but unpaid on any capital stock of GRS.
Section 5.04 No Preemptive Rights. There are no preemptive rights affecting
the issuance or sale of the capital stock of GRS.
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Section 5.05 No GRS Defaults or Consents. Except as otherwise set forth
in Schedule 5.05 attached hereto, neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms, conditions
or provisions of the articles of incorporation or bylaws of GRS;
(ii) violate any Legal Requirements applicable to GRS;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Contract or Permit
applicable to GRS;
(iv) result in the creation of any lien, charge or other
encumbrance on the shares of capital stock or any Property of GRS; or
(v) require GRS to obtain or make any waiver, consent,
action, approval or authorization of, or registration, declaration, notice or
filing with, any private non-governmental third party or any Governmental
Authority. Any and all consents required to be obtained by GRS as set forth in
Schedule 5.05 shall be obtained and copies thereof delivered to the Company and
the Stockholders upon execution of this Agreement.
Section 5.06 No Proceedings. Except as set forth on Schedule 5.06, no suit,
action or other proceeding is pending or, to the Knowledge of GRS, threatened
before any Governmental Authority seeking to restrain GRS or prohibit its entry
into this Agreement or prohibit the Closing, or seeking damages against GRS or
its Properties, as a result of the consummation of the transaction contemplated
by this Agreement.
Section 5.07 [Reserved]
Section 5.08 Liabilities and Obligations. Except as set forth in Schedule
5.08, GRS' balance sheet at October 31, 1997 and 1996 (the "GRS Balance Sheets")
and the related statements of income, stockholders' equity and cash flow for the
fiscal years ended October 31, 1997, 1996 and 1995 (the "GRS Financial
Statements") reflect all liabilities of GRS as determined in accordance with
generally accepted accounting principles arising out of transactions effected or
events occurring on or prior to the date of the GRS Balance Sheet, except for
liabilities not exceeding $10,000 in the aggregate. All reserves shown in the
GRS Financial Statements are appropriate and reasonable to provide for losses
thereby contemplated. Except as set forth in the GRS Financial Statements, GRS
is not liable upon or with respect to, or obligated in any other way to provide
funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity.
Section 5.09 Accounts Receivable. Except as otherwise set forth in Schedule
5.09, the accounts receivable reflected on the GRS Balance Sheet and all
accounts receivable arising between December 31, 1997 and the date hereof, arose
from bona fide transactions in the ordinary course of business, and the goods
and services involved have been sold, delivered and performed to the account of
the obligors, and no further filings (with Governmental Authorities, insurers or
others) are required to be made, no further goods are required to be provided
and no further services are required to be rendered in order to complete the
sales and fully render the services and to entitle GRS to collect the accounts
receivable in full. No such account has been assigned or pledged to any other
person, firm or corporation, and, except only to the extent fully reserved
against as set forth in the Interim GRS Balance Sheet, no defense or setoff to
any such account has been asserted by the account obligor.
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Section 5.10 Employee Matters.
(a) Schedule 5.10(a) contains a complete and accurate list of the
names, titles and compensation of all executive officers of GRS, regardless of
compensation levels, and other employees who are currently compensated at a rate
in excess of $50,000 per year (including any reasonably anticipated bonus) or
who earned in excess of $50,000 during GRS' fiscal year ended October 31, 1996
(collectively, the "GRS Key Employees"). In addition, Schedule 5.10(a) contains
a complete and accurate description of (i) all increases in compensation of the
GRS Key Employees during the fiscal years of GRS ending October 31, 1997 and
October 31, 1996, respectively, and (ii) any promised increases in compensation
of the GRS Key Employees of GRS that have not yet been effected.
(b) Schedule 5.10(b) contains a complete and accurate list of all
Compensation Plans sponsored by GRS or to which GRS contributes on behalf of its
employees, other than Employee Benefit Plans listed in Schedule 5.11. As used in
this Section 5.10, "Compensation Plans" shall mean and include, without
limitation, plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options.
(c) Schedule 5.10(c) contains a complete and accurate list of all
Employment Agreements. As used in this Section 5.10 and in Section 5.10(e)
hereof, "Employment Agreements" shall mean and include, without limitation,
employee leasing agreements, employee services agreements and noncompetition
agreements to which GRS is a party.
(d) GRS has provided the Company and the Stockholders with a
complete and accurate list of all significant written employee policies and
procedures.
(e) To the Knowledge of GRS, no unwritten material amendments have
been made, whether by oral communication, pattern of conduct or otherwise, with
respect to any Compensation Plans, Employment Agreements or employee policies
and procedures.
(f) To the Knowledge of GRS, except as set forth in Schedule
5.10(f), GRS (i) has been and is in material compliance with all laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, and (ii) is not liable in any
material amount for any arrears of wages or penalties for failure to comply with
any of the foregoing. GRS has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age
or handicap in its employment conditions or practices. To the Knowledge of GRS,
there are no (i) material unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, race or handicap discrimination charges
or complaints pending or threatened against GRS before the National Labor
Relations Board or any similar state or foreign commission or agency or (ii)
existing or threatened material labor strikes, disputes, grievances,
controversies or other labor troubles affecting GRS.
(g) GRS has not ever been a party to any agreement with any union,
labor organization or collective bargaining unit. No employees of GRS are
represented by any union, labor organization or collective bargaining unit. The
employees of GRS have not threatened to organize or join a union, labor
organization or collective bargaining unit.
(h) Except as disclosed on Schedule 5.10(h), no GRS Key Employee
has indicated his or her desire or intent to terminate employment with GRS, and
GRS has no present intent of terminating the employment of any GRS Key Employee.
Section 5.11 Employee Benefit Matters.
(a) Schedule 5.11 contains a complete and accurate list of all
Employee Benefit Plans sponsored by GRS or to which GRS contributes on behalf of
its employees and all Employee
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Benefit Plans previously sponsored or contributed to on behalf of its employees
within the three years preceding the date hereof. No unwritten amendment exists
with respect to any Employee Benefit Plan.
(b) Each Employee Benefit Plan has been administered and maintained
in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on GRS. No Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency. No
prohibited transactions (within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code")) have occurred with respect to any Employee Benefit Plan. No
pending or, to the Knowledge of GRS, threatened, claims, suits or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
(c) GRS has received a favorable determination letter or ruling
from the Internal Revenue Service for each Employee Benefit Plan intended to be
qualified within the meaning of Section 401 (a) of the Code and/or tax exempt
within the meaning of Section 501(a) of the Code, which letter or ruling is
current and covers all required amendments to each such Employee Benefit Plan
through the Closing Date. No proceedings exist or, to the Knowledge of GRS, have
been threatened that could result in the revocation of any such favorable
determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither GRS or any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA. GRS nor
any member of a Controlled Group is or ever has been obligated to contribute to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) GRS has no obligation or commitment to provide medical, dental
or life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired from employment with GRS.
Section 5.12 Absence of Certain Changes. Except as set forth in Schedule
5.12, from the date of the GRS Balance Sheet to the date of this Agreement, GRS
has not:
(a) suffered any material adverse change, whether or not caused by
any deliberate act or omission of GRS or any stockholder of GRS, in its
condition (financial or otherwise), operations, assets, liabilities, business or
prospects;
(b) contracted for the purchase of any capital assets having a cost
in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or sold
any debt securities, except in the ordinary course of business consistent with
past practice;
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(d) incurred or discharged any liabilities or obligations except in
the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets, except in
the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any of its
assets (whether or not covered by insurance) that has materially adversely
affected, or could materially adversely affect, its business;
(h) acquired or disposed of any of its assets except in the
ordinary course of business consistent with past practice;
(i) written up or written down the carrying value of any of its
assets, except in the ordinary course of business consistent with past practice;
(j) changed any accounting principles methods or practices followed
or changed the costing system or depreciation methods of accounting for its
assets;
(k) waived any material rights or forgiven any material claims;
(l) lost, terminated or experienced any change in the relationship
with any employee, customer, joint venture partner or supplier, which
termination or change has materially and adversely affected, or could reasonably
be expected to materially and adversely affect, its business or its assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to change the terms and conditions of any such rights paid any dividends or made
any distribution to the holders of GRS' capital stock;
(r) entered into any material agreement with any person or group,
or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit Plan; or
(t) entered into any agreement (written or oral) to do any of the
foregoing, except in the ordinary course of business consistent with past
practice.
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Section 5.13 Commitments. (a) Except the material contracts, agreements,
commitments and other arrangements, whether oral or written, to which GRS is a
party (the "GRS Contracts") set forth in Schedule 5.13, GRS has not entered
into, nor is the capital stock, the assets or the business of GRS bound by,
whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement, except in
the ordinary course of business consistent with past practice;
(iii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iv) employment, consulting or compensation agreement or
arrangement, including the election or retention in office of any director or
officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent to
another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest in or
contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission agents,
investment bankers, financial advisors, business brokers, public relations or
advertising agencies, accountants or attorneys, except with respect to
confidentiality agreements;
(ix) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee, except in the ordinary course of business and
excluding the real estate leases set forth on Schedule 5.16(c);
(x) agreement between GRS and any Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of GRS;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that involves either
an unperformed commitment in excess of $5,000 or that terminates more than
thirty (30) days after the date hereof, except in the ordinary course of
business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 5.24; or
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(xvii) any other agreement or commitment not made in the
ordinary course of business that is material to the business or financial
condition of GRS.
True, correct and complete copies of the written GRS Contracts, and
true, correct and complete written descriptions of the oral GRS Contracts, have
heretofore been delivered or made available to the Stockholders. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by GRS, and no material penalties have been
incurred nor are amendments pending, with respect to the GRS Contracts. The GRS
Contracts are in full force and effect and are valid and enforceable obligations
of GRS, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity). GRS has not received notice of any
material default with respect to any GRS Contracts. For the purposes of this
Section 5.13(a), the term "material" shall mean a condition the existence or
breach of which could result in damage or loss to GRS valued in excess of $5,000
individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, GRS has not received notice of
any plan or intention of any other party to any GRS Contract to exercise any
right to cancel or terminate any GRS Contract. GRS does not currently
contemplate, and has no reason to believe any person or entity currently
contemplates, any amendment or change to any GRS Contract. None of the
customers, joint venture partners or suppliers of GRS has refused, or
communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, GRS.
Section 5.14 Insurance. GRS has previously delivered or made available to
the Stockholders all insurance policies of GRS. All of such policies are valid
and enforceable against GRS, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
Section 5.15 Patents, Trade-marks, Service Marks and Copyrights.
(a) GRS owns all patents, trade-marks, service marks and copyrights
(collectively "Proprietary Rights"), if any, necessary to conduct its business,
or possesses adequate licenses or other rights, if any, therefor, without
conflict with the rights of others. Set forth in Schedule 5.15(a) is a true and
correct description of all Proprietary Rights.
(b) GRS has the sole and exclusive right to use the Proprietary
Rights without infringing or violating the rights of any third parties. Use of
the Proprietary Rights does not require the consent of any other person and the
Proprietary Rights are freely transferable. No claim has been asserted by any
person to the ownership of or right to use any Proprietary Right or challenging
or questioning the validity or effectiveness of any license or agreement
constituting a part of any Proprietary Right. Each of the Proprietary Rights is
valid and subsisting, has not been canceled, abandoned or otherwise terminated
and, if applicable, has been duly issued or filed.
Section 5.16 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by GRS is
set forth in Schedule 5.16(a).
(b) Except as disclosed on Schedule 5.16(b), GRS has good and
marketable title to its respective assets, (other than those disposed of since
the date of the GRS Balance Sheet in the
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ordinary course of business), free and clear of all security interests, liens,
charges and other encumbrances, except for (i) liens for taxes not yet due and
payable or being contested in good faith in appropriate proceedings, and (ii)
encumbrances that are incidental to the conduct of its businesses or ownership
of property, not incurred in connection with the borrowing of money or the
obtaining of credit, and which do not in the aggregate materially detract from
the value of the assets affected or materially impair their use by GRS. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by GRS are in good operating condition and repair, normal wear
and tear excepted, are adequate and sufficient for GRS' business and conform in
all material respects with all applicable ordinances, regulations and laws
relating to their use and operation.
(c) A listing of all real property leases, their terms and total
lease payments is attached hereto as Schedule 5.16(c). GRS enjoys peaceful and
undisturbed possession under all real property leases under which GRS is
operating, and all such leases are valid and subsisting and none of them is in
default, except for those defaults which, individually or in the aggregate,
would not have a material adverse effect upon GRS.
Section 5.17 Compliance with Laws. GRS has all material franchises,
Permits, licenses and other rights and privileges necessary to permit it to own
its Properties and to conduct its businesses as presently conducted. The
business and operations of GRS have been and are being conducted in accordance
in all material respects with all applicable laws, rules and regulations, and
GRS is not in violation of any judgment, law or regulation except where any such
violation would not have a material adverse effect on GRS' results of
operations, business, assets or financial condition.
Section 5.18 Litigation: Default. Except as otherwise set forth in Schedule
5.18, there are no claims, actions, suits, investigations or proceedings against
GRS pending or, to the Knowledge of GRS, threatened in any court or before or by
any Governmental Authority, or before any arbitrator, that could reasonably be
expected to have a material adverse effect (whether covered by insurance or not)
on the business, operations, prospects, Properties, securities or financial
condition of GRS. Except as otherwise set forth in Schedule 5.18, GRS is not in
default under, and no condition exists (whether covered by insurance or not)
that with or without notice or lapse of time or both would (i) constitute a
default under, or breach or violation of, any Legal Requirement, or Permit
applicable to GRS or any GRS Contract applicable to GRS, or (ii) accelerate or
permit the acceleration of the performance required under, or give any other
party the right to terminate, any GRS Contract, other than defaults, breaches,
violations or accelerations that would not have a material adverse effect on the
business, operations, prospects, Properties, securities or financial condition
of GRS.
Section 5.19 Environmental Matters.
(a) Except as listed in Schedule 5.19(a), to the Knowledge of GRS,
there are no PCBs, TCE, PCE, or asbestos containing materials generated, used,
treated, stored, maintained, disposed of, or otherwise deposited in, or located
on any premises at which GRS' business (the "GRS Business") is or was, or at
which the business or, to the Knowledge of GRS, its predecessors was, located,
which would have a Material Adverse Effect on GRS.
(b) Except as described in Schedule 5.19(b), there are and were no
underground storage tanks used, stored, maintained, located on any premises at
which the GRS Business is or was, or, to knowledge of GRS, at which the business
of its predecessors was, located, which would have a Material Adverse Effect on
GRS. With respect to underground storage tanks, Schedule 5.19(b) sets forth the
size, location, construction, installation date, use and testing history of all
underground storage tanks (whether or not excluded from regulation under
Environmental Law), including all underground storage tanks in use, out of
service, closed, abandoned, decommissioned, or sold to a third party.
(c) Except as listed in Schedule 5.19(c), to the Knowledge of GRS,
there has been no "release" as defined in 42 U.S.C. 9601(22) or, to the best
knowledge of GRS, threat of a "release" of
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any Hazardous Substance on, from or under any premises from which (i) GRS'
operations have been or are being conducted related to the GRS Business. or (ii)
to the Knowledge of GRS, the operations of any predecessor of GRS, which would
have a Material Adverse Effect on GRS.
(d) Except as listed in Schedule 5.19(d), neither GRS nor their
respective predecessors have received written notice alleging any potential
liability with respect to the contamination, investigation, or cleanup of any
site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, discharged, emitted or disposed of and, to the
Knowledge of GRS, there are no past or present events, facts, conditions or
circumstances which may interfere with or prevent material compliance by GRS
with Environmental Law, or with any order, decree, judgment, injunction, notice
or demand issued, entered, promulgated or approved thereunder, or which may give
rise to any liability under applicable law including, without limitation, any
Environmental Law, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of Hazardous Substances by GRS or, to
the Knowledge of GRS, any predecessor, as a result of any act or omission of GRS
or any predecessors related to the GRS Business.
(e) Except as disclosed in Schedule 5.19(e), all of GRS' and, to
the Knowledge of GRS, their respective predecessor's, Hazardous Substances
disposal and recycling practices related to the GRS Business have been
accomplished in material compliance with all applicable Environmental Laws.
GRS' representation(s) with respect to this Section 5.19 shall not be
interpreted to imply that the Stockholders have constructive knowledge regarding
any aspect of the GRS Business with respect to environmental matters nor to
limit the scope of any of GRS' representations under this Agreement. No such due
diligence examination or related activities of, or on behalf of, the
Stockholders however, shall constitute a waiver or relinquishment by the
Stockholders of their right to rely upon GRS' representations, warranties,
covenants and agreements as made herein or pursuant hereto, and no such
disclosure shall constitute an assumption by the Stockholders of any conditions
or liabilities, and such disclosure shall not relieve GRS of its duties and
obligations hereunder.
Section 5.20 Banks. Schedule 5.20 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which GRS has an account, credit line or safe deposit box or vault, (ii) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of GRS in matters concerning
any of its business or affairs. Except as otherwise set forth in Schedule 5.20,
no such proxies, powers of attorney or other like instruments are irrevocable.
Section 5.21 Suppliers and Customers Sales. Schedule 5.21 sets forth all of
GRS' material suppliers, together with the dollar amount of goods purchased by
GRS from each such supplier during the twelve month period ended December 31,
1997 and the four month period ended April 30, 1998, as well as each of the
principal customers of GRS. Except as otherwise set forth in Schedule 5.21,
since December 31, 1997, there has been no material adverse change in the
business relationship of GRS with any supplier or customer named in Schedule
5.21. No customer or supplier named in Schedule 5.21 has terminated or
materially altered, or notified GRS of any intention to terminate or materially
alter, its relationship with GRS and GRS has no reason to believe that any such
customer or supplier will terminate or materially alter its relationship with
GRS or to materially decrease its services or supplies to GRS or its direct or
indirect usage of the services or products of GRS. For purposes of Sections 5.21
and 5.24 "material suppliers" refers to suppliers from whom GRS purchased five
percent (5%) or more of the total amount of the goods purchased by GRS during
the twelve month period ended December 31, 1997 and the four month period ended
April 31, 1998, and "principal customers" refers to customers who accounted
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for 5% or more of GRS' revenues during the twelve month period ended December
31, 1997 and the four month period ended March 31, 1998.
Section 5.22 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
GRS.
Section 5.23 Disclosure; Due Diligence. This Agreement and the Exhibits and
Schedules hereto, when taken as a whole with other documents and certificates
furnished by GRS to the Stockholders or their counsel, do not contain any untrue
statement of material fact or omit any material fact necessary in order to make
the statements therein not misleading; provided, however, certain materials
provided to the Stockholders contain projections and estimates of future events,
and such projections and estimates have been based upon certain assumptions that
management of GRS made in good faith and believed are reasonable at the time
such materials were prepared.
Section 5.24 Ownership Interests of Interested Persons. Except as set forth
in Schedule 5.24, no director or executive officer of GRS or their respective
spouses or children, owns directly or indirectly, on an individual or joint
basis, any material interest in, or serves as an officer or director of, any
principal customer or material supplier which has a business relationship with
GRS or any organization that has a material contract or arrangement with GRS.
Section 5.25 Investments in Competitors. No director or executive officer
of GRS owns directly or indirectly any material interests or has any investment
equal to 5% or more of the outstanding voting securities in any corporation,
business or other person that is a direct competitor of GRS.
Section 5.26 Certain Payments. Neither GRS, nor any director, officer or
employee of GRS has paid or caused to be paid, directly or indirectly, in
connection with the business of GRS: (a) to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or (b), any material contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
Section 5.27 Government Inquiries. Except as set forth on Schedule 5.27,
there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by GRS from, or any material
statement, report or other document filed by GRS with, the federal government or
any federal administrative agency (including but not limited to, the Justice
Department, Internal Revenue Service, Department of Labor, Occupational Safety
and Health Administration, Federal Trade Commission, National Labor Relations
Board, and Interstate Commerce Commission), any state securities administrator
or any local or state taxing authority.
Section 5.28 Tax Matters.
(a) Except as set forth in Schedule 5.28 hereto, GRS:
(i) has filed all federal income Tax Returns, and all other
material Tax Returns which it is required to file under applicable laws and
regulations;
(ii) all such Tax Returns are true and accurate in all
material respects;
(iii) has paid all Taxes due and owing by it (whether or not
such Taxes are required to be shown on a Tax Return) and has withheld and paid
over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party, except where the amounts of such unpaid Taxes or the amounts
that have not been withheld and paid over do not, in the aggregate, exceed
$25,000;
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(iv) the accrual for Taxes on the Unaudited GRS Balance
Sheet (excluding any amount recorded which is attributable to timing differences
between book and Tax income) would be adequate to pay all material Tax
liabilities of GRS if its current tax year were treated as ending on the date of
the Unaudited GRS Balance Sheet;
(v) the federal income Tax Returns of GRS have been filed
through the date hereof, and, as of the date hereof, none of such Tax Returns
has been audited.
(b) To the Knowledge of GRS, no claim has been made by a taxing
authority in a jurisdiction where GRS does not file Tax Returns that GRS is or
may be subject to taxation by that jurisdiction.
(c) To the Knowledge of GRS;
(i) there are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being conducted with
respect to GRS;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by GRS from any foreign, federal, state or local taxing authority; and
(iii) there are no material unresolved claims concerning GRS'
Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to GRS in connection with any Tax Returns covering GRS,
except where such waiver would not have a material adverse effect on GRS.
(e) GRS has not executed or entered into a closing agreement
pursuant to IRC Section 7121 or any predecessor provision thereof or any similar
provision of state, local or foreign law; nor has GRS agreed to or is required
to make any adjustments pursuant to IRC Section 481(a) or any similar provision
of state, local or foreign law by reason of a change in accounting method
initiated by GRS. GRS has no knowledge that the IRS has proposed any such
adjustment or change in accounting method, or has any knowledge with respect to
any application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of GRS.
(f) GRS has not made an election under IRC Section 341(f).
(g) GRS is not liable for the Taxes of another person.
(h) GRS is not a party to any tax sharing agreement.
(l) GRS has not made any payments nor is it obligated to make
payments nor is it a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC Section 280G.
Section 5.29 Participation in Secondary Offering. In the event that after
the Offering GRS files a registration statement with the Securities and Exchange
Commission with respect to a subsequent public offering (the "Secondary
Offering") of shares of GRS Common Stock, and any shareholders of GRS
participate in the Secondary Offering through the sale of their respective
shares of GRS Common Stock, then (i) Xxxxx Xxxxxxx shall first be entitled to
participate in the Secondary Offering with respect to 250,000 shares of GRS
Common Stock (in recognition of the fact that Xx. Xxxxxxx is not receiving any
cash proceeds from the sale of the common stock of the Founding Companies owned
by him) and (ii) thereafter the Stockholders shall be entitled to participate in
the Secondary Offering by including therein such
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number of shares of GRS Common Stock owned by the Stockholders as shall equal
(i)(A) the total number of shares of GRS Common Stock owned by such Stockholders
divided by (B) the total number of shares of GRS Common Stock owned by all
shareholders of the Founding Companies, multiplied by (ii)the total number of
shares of GRS Common Stock owned by shareholders of the Company which are to be
included in the Secondary Offering.
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