Exhibit 2.1
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of this
12th day of November, 2001 (the "Effective Date") by and between XXXXXXXX, XXXXX
AND HILLS, INC, a Florida corporation ("RS&H") on the one hand, and XXXXX X.
XXXXX LL, XXXXX X. XXXXXX, W. XXXXXX XXXXXX, and XXXXXX X. XXXXX, individual
residents of the State of Texas (each a "Seller" and collectively, "Sellers"),
on the other hand. RS&H and Sellers may be collectively referred to herein as
the "Parties" and individually referred to as a "Party").
PREMISES:
A. Sellers own all of the issued and outstanding shares (the "Shares") of
One Dollar ($1.00) par value common stock of Sylva Engineering Corporation, a
Texas corporation ("Sylva").
X. Xxxxx is engaged in the business of engineering and performing other
related professional services (the "Business").
C. Pursuant to the terms and conditions set forth herein, Sellers desire to
sell to RS&H, and RS&H desires to purchase from Sellers, all of the Shares.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
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1.1 Sale of Shares at the Closing. On the terms and subject to the
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conditions set forth in this Agreement, and in reliance upon the
representations, warranties, obligations and covenants contained herein, Sellers
hereby agree to sell, assign, transfer, convey and deliver to RS&H at the
"Closing" (as defined in Section 1.7), and RS&H hereby agrees to purchase and
receive from the Sellers at such time, all of the Shares, free and clear of any
and all "Liens" (as defined in Section 2.7).
1.2 Purchase Price. As full consideration for Sellers' sale of the Shares
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to RS&H pursuant to this Agreement, RS&H shall pay an aggregate purchase price
of up to a maximum of Two Million Six Hundred Thousand Dollars ($2,600,000.00),
subject to adjustment as set forth in Section 1.5 (the "Purchase Price"), as
follows:
(a) A total of Seven Hundred Thousand Dollars ($700,000.00) shall be paid
to Sellers (as allocated in accordance with Section 1.6) at the Closing by bank
check or wire transfer of immediately available funds to such banks and accounts
as shall be designated in writing to RS&H by Sellers;
(b) A non-negotiable 8 1/2% 4-year Subordinated Promissory Note of RS&H
(the "Note") in the principal amount of Seven Hundred Forty-five Thousand
Dollars ($745,000.00), in the form attached hereto as Exhibit A, shall be issued
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and delivered to Xxxxx Xxxxx LL at the Closing;
(c) A total of 15,000 shares of RS&H common stock (the "RS&H Shares"),
which shares were last valued at $17.00 per share by Willamette Management
Associates for purposes of setting the price at which registered shares of RS&H
are sold to and traded within the Xxxxxxxx, Xxxxx and Hills, Inc. Employees
401(k) Profit Sharing Plan, shall be issued and delivered to Sellers (as
allocated in accordance with Section 1.6) at the Closing, such RS&H Shares to be
subject to a Buy-Sell Agreement substantially in the form of Exhibit B attached
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hereto (the "Buy-Sell Agreement");
(d) A total of Two Hundred Thousand Dollars ($200,000.00) shall be withheld
by RS&H at the Closing (the "Security Deposit"), which amount shall be available
for RS&H as security for any and all of the obligations of Sellers under this
Agreement; and
(e) Up to a maximum of Seven Hundred Thousand Dollars ($700,000.00) shall
be paid to Sellers on the terms and subject to the conditions set forth in
Section 1.4 below (the "Earnout Consideration").
1.3 Transfer Taxes. Any and all transfer, sales, stamp, documentation or
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other similar taxes, assessments or fees which may arise or result from the
transfer of the Shares to RS&H shall be paid by Sellers.
1.4 Earnout Consideration. Subsequent to the Closing and subject to the
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conditions set forth in this Section 1.4, RS&H shall pay to Sellers such of the
Earnout Consideration as shall be earned by Sellers in accordance with the
following provisions:
(a) From and after the Closing, RS&H shall periodically generate a profit
and loss statement (each, a "P/L Statement") for its existing Houston office,
the Houston office of Sylva and the Austin office of Sylva on a combined basis
(such offices being referred to collectively as the "South Central Region" of
RS&H). Any new RS&H offices which commence operations after the Closing Date in
Texas will, for purposes of this Agreement, also be included in the definition
of the South Central Region, and their operating results will be included in the
applicable P/L Statements; provided, however, that such South Central Region
shall not be deemed to include, and the P/L Statements shall not include the
operating results of, any offices acquired by RS&H after the Closing Date as a
result of any merger with or acquisition of any entity, business or office.
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(b) For each of up to four (4) successive years (defined as 12 consecutive
RS&H monthly accounting periods) commencing with RS&H's 5-week December
accounting month immediately following the Closing Date, the Sellers shall be
entitled to earn, and RS&H will pay to Sellers, Earnout Consideration in an
amount equal to Ten Percent (10%) of the amount by which the South Central
Region's "Gross Margin" (as defined in subsection (f)) exceeds Two Million Eight
Hundred Thousand Dollars ($2,800,000.00) for each such 12-month period, as
reflected on the applicable P/L Statement.
(c) Any Earnout Consideration earned by Sellers hereunder will be paid to
Sellers (as allocated in accordance with Section 1.6) annually within sixty (60)
days of the end of each applicable 12-month period.
(d) In no event shall the Earnout Consideration payable to Sellers
hereunder exceed, in the aggregate, Seven Hundred Thousand Dollars
($700,000.00), and Sellers shall not be entitled to earn or receive payment of
any Earnout Consideration with respect to any period of time after the
expiration of four (4) years following the Closing Date.
(e) Sellers and their representatives shall have the right each year, upon
reasonable request and during normal business hours, to review the books of
account of RS&H for the purpose of verifying that the Earnout Consideration has
been properly calculated.
(f) For purposes of this Agreement, the following terms shall have the
following respective meanings:
(i) "Gross Margin" shall mean, with respect to the South Central
Region, an amount equal to "Net Service Revenue" (as defined in subsection (ii))
with respect to the South Central Region minus "Direct Labor Costs" (as defined
in subsection (iii)) with respect to the South Central Region.
(ii) "Net Service Revenue" shall mean, with respect to the South
Central Region, an amount equal to the difference which results when gross
revenues arising out of services performed under contracts originating in the
South Central Region, have deducted from them all other direct costs paid or
payable to third parties incurred with respect to such contracts, including,
without limitation, all fees, costs and expenses paid to subconsultants.
(iii) "Direct Labor Costs" shall mean, with respect to the South
Central Region, an amount equal to the hourly rate (annual base compensation
divided by 2,080) for each RS&H employee working on South Central Region
projects times the number of hours actually worked.
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(iv) For purposes of determining Gross Margin, Net Service Revenue and
Direct Labor Costs, the determination of whether or not a contract originated
out of the South Central Region shall be made in accordance with the standard
policies and practices of RS&H.
1.5 Purchase Price Adjustment.
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(a) The Purchase Price shall be decreased by the amount, if any, by which
Sylva's "Closing Net Book Value" (as defined below) is less than One Million Two
Hundred Fifty Thousand Dollars ($1,250,000.00). As used herein, the term
"Closing Net Book Value" shall equal (i) the aggregate book value of the assets
of Sylva reflected on Sylva's balance sheet as of the Closing Date (the "Closing
Balance Sheet"), less (ii) the aggregate value of Sylva's liabilities reflected
on the Closing Balance Sheet.
(b) No later than sixty (60) days after the Closing, the outside accounting
firm for RS&H, Deloitte & Touche LLP, and the outside accounting firm for Sylva,
Xxxxxx & Xxxxxxx Company, shall prepare jointly, in accordance with "GAAP" (as
defined in Section 1.10(a)), and deliver to the Parties, the Closing Balance
Sheet and their determination of the Closing Net Book Value and the adjustment
to the Purchase Price, if any, required by the provisions of Section 1.5(a). The
Closing Net Book Value and the adjustment to the Purchase Price, if any,
determined jointly by such accounting firms shall be conclusive and binding on
and non-appealable by the Parties.
(c) If the Purchase Price is subject to downward adjustment pursuant to the
provisions of this Section 1.5, RS&H shall be entitled to recover the amount of
such downward adjustment by setting off such amount against the Security
Deposit. In the event the amount of such adjustment exceeds the then remaining
balance of the Security Deposit, Sellers shall, within thirty (30) days of the
final determination of the Closing Net Book Value, pay to RS&H the amount of
such excess.
1.6 Allocation of Purchase Price. All cash payments to be made to Sellers
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under this Agreement, including payments, if any, of the Security Deposit and
the Earnout Consideration, and the RS&H shares to be issued to Sellers under
this Agreement shall be allocated among Sellers in accordance with Schedule 1.6
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attached hereto.
1.7 Closing. Contemporaneously with the execution of this Agreement, the
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closing of the transactions provided for in this Agreement (the "Closing") shall
occur at the offices of Xxx X. Xxx, P.C. located at 0000 Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
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1.8 Deliveries of Sellers at Closing. At the Closing, Sellers shall deliver
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to RS&H:
(a) Stock certificates of Sylva representing the Shares, each of which
certificates shall be endorsed in blank or attached to a duly executed stock
power;
(b) A Certificate of good standing for Sylva issued by the Secretary of
State of the State of Texas as of a date no more than thirty (30) days prior to
the Closing Date;
(c) All minute books, stock record books, corporate seals, client lists,
files and other documents of Sylva;
(d) A certificate of no tax due and a certificate of good standing
issued by the Texas Comptroller of Public Accountants as of a recent date prior
to the Closing Date;
(e) An opinion of Xxx X. Xxx, counsel to Sellers, substantially in the
form attached hereto as Exhibit C;
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(f) A Certificate executed by Sellers dated as of the Closing, in form
and substance reasonably satisfactory to RS&H, certifying that no Texas
transfer, documentary or other taxes are payable with respect to the
consummation of this purchase and sale;
(g) Evidence reasonably satisfactory to RS&H that each Shareholders'
Agreement to which Sylva is a party has been terminated;
(h) Written resignations of all officers and directors of Sylva;
(i) Employment agreements, in the form attached hereto as Exhibit D,
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(the "Employment Agreements") executed by each of Xxxxx X. Xxxxx LL, and Xxxxx
X. Xxxxxx;
(j) The Buy-Sell Agreement, executed by each of Sellers;
(k) A payoff letter from each of the lenders listed on Schedule 1.8(k),
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which letter shall set forth all amounts owed by Sylva to such lender as of the
Closing Date, shall not contain any prepayment penalties or similar fees and
shall contain such payment, release of collateral and other terms as shall be
satisfactory to RS&H in its reasonable discretion; and
(l) Such other documents, agreements and certificates as may have been
reasonably requested by RS&H.
1.9 Deliveries of RS&H. At the Closing, RS&H shall pay or deliver to
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Sellers:
(a) The cash portion of the Purchase Price payable at the Closing,
the Note and certificates representing the RS&H Shares pursuant to and in
accordance with Section 1.2 hereof;
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(b) The Buy-Sell Agreement and the Employment Agreements, executed
by RS&H, and
(c) Such other documents, agreements and certificates as may have
been reasonably requested by Sellers.
1.10 Dispute Accountants.
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(a) Notwithstanding any other provision in this Agreement to the
contrary, any adjustment to the Purchase Price and any Earnout Consideration
payments earned hereunder, and the individual elements thereof, shall be
determined in accordance with generally accepted accounting principles ("GAAP"),
consistently applied.
(b) In the event of any dispute between RS&H and Sellers with
respect to any adjustment to the Purchase Price or the amount of any Earnout
Consideration earned hereunder, such dispute shall be referred to an independent
accounting firm mutually agreed to by RS&H and Sellers (the "Dispute
Accountants") for resolution. Any determination of the Dispute Accountants shall
be conclusive and binding upon and non-appealable by the Parties. The costs
of the Dispute Accountants will be born 50% by RS&H, on the one hand, and 50%
by the Sellers, on the other hand.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
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Notwithstanding any independent investigation or verification undertaken by
RS&H or its representatives (including, without limitation, any environmental
audits or reports), Xxxxx X. Xxxxx LL and Xxxxx X. Xxxxxx hereby jointly and
severally make to RS&H the representations and warranties contained in Sections
2.1-2.35 below, and each of W. Xxxxxx Xxxxxx and Xxxxxx X. Xxxxx hereby
individually makes the representations and warranties set forth in Sections 2.34
and 2.36 below.
2.1 Organization and Good Standing of Sylva. Sylva is a corporation duly
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organized, validly existing and in good standing under the laws of Texas, and it
has all requisite power and authority to own and operate its assets and
properties and to carry on its business as presently conducted. Sylva is not
qualified to transact business as a foreign corporation in any state, and Sylva
is not required, as a result of the ownership of its assets and properties or
the conduct of its business, to be so qualified to transact business in any
jurisdiction.
2.2 Power and Authority. Each Seller has full power and authority to
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enter into this Agreement, to perform his obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by Sellers has been duly authorized by all
requisite action on the part of each Seller, as appropriate, and Sylva, and no
other action or proceeding is necessary to authorize the execution, delivery and
performance of this Agreement by any Seller.
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2.3 Binding Effect. This Agreement has been duly executed and delivered by
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each Seller and constitutes the legal, valid and binding obligation of each
Seller, enforceable against each Seller in accordance with its terms.
2.4 No Violation; Consents. Neither the execution and delivery of this
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Agreement by any Seller or all Sellers, nor the performance by any Seller or all
Sellers of their obligations hereunder, will:
(a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of Sylva;
(b) violate, breach or otherwise constitute or give rise to a default
under any contract, commitment or other obligation to or by which any Seller
or Sylva is a party or is bound;
(c) violate or conflict with any statute, ordinance, law, rule,
regulation, judgment, order or decree of any court or other governmental or
regulatory authority to which any Seller or Sylva is subject; or
(d) require any consent, approval or authorization of, notice to, or
filing, recording, registration or qualification with any person, entity, court
or governmental or regulatory authority by any Seller or Sylva.
2.5 Capitalization. The authorized capital stock of Sylva consists
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solely of one hundred thousand (100,000) shares of One Dollar ($1.00) par value
common stock, of which only one thousand (1,000) shares are issued and
outstanding. All of such issued and outstanding shares of capital stock are
owned solely by Sellers and have been duly authorized and validly issued, are
fully paid and non-assessable, and were offered, issued and sold in compliance
with all applicable securities and other laws. There are no outstanding options,
warrants, calls, rights, commitments or agreements obligating any Seller or
Sylva to issue, deliver or sell any shares of the capital stock of Sylva, and
there are no outstanding securities or other rights which are convertible or
exchangeable into capital stock of or any other equity interest in Sylva.
Neither Sylva nor any Seller is subject to any obligation to repurchase or
otherwise acquire or retire or to register any shares of capital stock or any
other equity interest in Sylva.
2.6 Subsidiaries and Partners. Except as set forth in Schedule 2.6, Sylva
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has no interest in any partnership, joint venture, corporation, limited
liability company or other entity. Sylva has no wholly or majority owned
subsidiaries.
2.7 Title to Shares. Each Seller is the sole registered and beneficial
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owner of, and has good, valid and marketable title to, the number of Shares set
forth opposite such Seller's name on Schedule 2.7, free and clear of any and all
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liens, charges, security interests, hypothecations, restrictions on transfer,
preemptive rights, options, rights of first refusal, claims and other
encumbrances of any kind or nature (collectively, "Liens"). Each Seller has the
full right, power and authority to sell, transfer and deliver the Shares owned
by him to RS&H and at the Closing shall transfer to RS&H good, valid and
marketable title to all of the Shares owned by him, free and clear of any and
all Liens.
2.8 Corporate Structure and Corporate Books. The corporate books of Sylva
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completely and accurately reflect in all material respects the actions of Sylva,
and all such actions were duly and validly taken in compliance with the
applicable corporate laws of Texas.
2.9 Financial Statements. Attached hereto as Schedule 2.9 are true, correct
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and complete copies of (i) the audited financial statements of Sylva (including
Balance Sheets, Statements of Income and Retained Earnings, and Statements of
Cash Flows) as of and for the years ended as of December 31, 1999 and
December 31, 2000, respectively, and (ii) the audited interim financial
statements of Sylva (including Balance Sheet, Statement of Income and Retained
Earnings, and Statement of Cash Flows) as of and for the six (6) month period
ended as of June 30, 2001 ((i) and (ii) being referred to collectively
herein as the "Financial Statements"). The Financial Statements were prepared
in accordance with GAAP, consistently applied, are consistent with the books
and records of Sylva, and present fairly the financial position, results of
operations and cash flow of Sylva as of the dates thereof and for the periods
covered thereby.
2.10 Liabilities. Except as and to the extent reflected in the audited
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Financial Statements of Sylva as of and for the six (6) month period ended as of
June 30, 2001, Sylva does not have any debt, liability or obligation of any kind
(whether accrued, absolute, known or unknown, contingent or otherwise, whether
due or to become due, and whether or not required to be accrued or reserved
against under GAAP), arising out of transactions, events or actions occurring or
any state of facts existing on or before the date hereof, other than immaterial
liabilities arising since June 30, 2001 in the ordinary course of the Business
consistent with past practices. Sylva does not have any obligations (absolute or
contingent) to provide funds on behalf of, or to guaranty or assume any debt,
liability or obligation of, any person or entity.
2.11 Assets. The assets and properties of Sylva (whether tangible or
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intangible and whether real or personal) (the "Assets") as of the date hereof
are fairly and adequately reflected in the June 30, 2001 Financial Statements,
except for the effect of any immaterial acquisition or disposition of equipment
in the ordinary course of the Business consistent with past practices since June
30, 2001. Schedule 2.11 lists all items of tangible personal property included
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in the Assets and the location thereof. Other than the "Leased Assets" (as
defined below), the Assets include all of the assets, properties and rights
which are used or employed in connection with the operation of, and which are
required by Sylva to operate, the Business as it is presently conducted. Sylva
has good, valid and marketable title to all of the Assets, free and clear of all
Liens. Schedule 2.11 also identifies all of the assets and properties which are
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leased by Sylva from any person or entity (collectively, the "Leased Assets")
and the lessor thereof, indicating whether each such lease is characterized
under GAAP as a capital or operating lease. As of the date hereof, Sylva has the
right to use all of the Leased Assets in connection with the operation of the
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Business pursuant to valid and enforceable lease agreements, each of which is
listed on Schedule 2.11. All of the Assets and the Leased Assets are in good
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operating condition and repair (ordinary wear and tear excepted).
2.12 Real Property.
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(a) Sylva does not own any real property.
(b) Schedule 2.12(b) lists each written lease and a brief description
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of the material terms of each oral lease (collectively, the "Facility Leases")
of real property (the "Leased Real Property") leased by Sylva. Sylva holds an
unencumbered interest in the leasehold estate of all Leased Real Property. Each
Facility Lease is valid, in full force and effect, and enforceable in accordance
with its terms and constitutes a legal and binding obligation of each party
thereto. Sylva has neither given nor received any notice of default, termination
or partial termination under any Facility Lease, and there is no existing or
continuing default by Sylva or, to the knowledge of Sylva or Sellers, any other
party in the performance or payment of any obligation under any Facility Lease.
Sylva has complied in all material respects with the provisions of each Facility
Lease. Sylva has not leased or subleased any portion of the Leased Real Property
to any other person or entity.
(c) The Leased Real Property includes all real property and rights
therein which are used or occupied in connection with the operation of, and
which are required by Sylva to operate, the Business as it is presently
conducted.
(d) Neither Sylva nor any Seller has received any notice that any
zoning or similar land use restrictions are presently in effect or proposed by
any governmental authority which would impair the use or occupancy of any of the
Leased Real Property for the purposes for which such Leased Real Property is
currently being used, and Sylva's use of the Leased Real Property is in
compliance with all applicable building, zoning and land use laws and
regulations. No condemnation or taking by eminent domain of any Leased Real
Property is pending or, to the knowledge of Sylva or Sellers, threatened.
(e) None of the Leased Real Property is subject to any easement, right
of way, license, grant, building or use restriction, exception, reservation,
limitation or other impediment which adversely interferes with or impairs the
present and continued use thereof, and Sylva enjoys peaceful and undisturbed
possession of all such Leased Real Property.
2.13 Intellectual Property. Schedule 2.13 contains a complete list of all
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patents, inventions, copyrights, technology, trade secrets, trademarks, service
marks, corporate names, trade names, computer programs, software and other
intellectual property owned or used by Sylva, and all registrations,
applications and renewals of registrations for each of the foregoing
(collectively, "Intellectual Property"). Sylva owns, free and clear of all
Liens, all rights in and to, or holds a valid license to use and protect, all
such Intellectual Property. Schedule 2.13 identifies any such Intellectual
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Property which is owned, in whole or in part, by any person or entity other than
Sylva and any Intellectual Property in or to which Sylva has granted any license
or other rights to any other person or entity, and Schedule 2.13 briefly
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describes the terms of all such arrangements. Sylva has not violated or
infringed any patent, copyright, trade secret, trademark, service xxxx or other
intellectual property rights of any other person or entity, and there are no
claims pending or, to the knowledge of Sylva or Sellers, threatened against
Sylva or any Seller asserting that the use of any Intellectual Property by Sylva
infringes the rights of any other person or entity. Sylva has not made or
asserted any claim of violation or infringement of any Intellectual Property
against any other person or entity, and neither Sylva nor any Seller is aware of
any such violation or infringement.
2.14 Notes and Accounts Receivable. All notes receivable, accounts
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receivable and other receivables of Sylva (the "Accounts Receivable") reflected
on the June 30, 2001 Financial Statements were valid and represented bona fide
claims against clients for services performed or other charges arising on or
before June 30, 2001, and all of the services performed that gave rise to such
Accounts Receivable were delivered or performed in accordance with the
applicable orders, contracts, or client requirements. Schedule 2.14 sets forth
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all Accounts Receivable as of November 7, 2001. All of such Accounts Receivable
are valid and represent bona fide claims against clients for services performed
or other charges arising on or before such date and will be collected in due
course, and all of the services performed that gave rise to such Accounts
Receivable were delivered or performed in accordance with the applicable orders,
contracts, or client requirements. None of such Accounts Receivable are subject
to any defenses, counterclaims or rights of offset. All changes in the Accounts
Receivable since June 30, 2001 were incurred in the ordinary course of the
Business consistent with past practices. All Accounts Receivable are evidenced
by written agreements, invoices or other documents. Sylva has not written off
any Accounts Receivable since June 30, 2001.
2.15 Inventories. Sylva does not maintain inventories of any goods for
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resale nor is Sylva in possession or control of inventory items belonging to any
third party.
2.16 Contracts and Commitments. Schedule 2.16 contains a list which
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identifies and briefly describes all written and oral contracts, agreements,
leases, guaranties or commitments to which Sylva is a party or by which Sylva is
bound: (a) involving the payment by or to Sylva of more than $5,000 in any
twelve (12) month period; (b) which may not be terminated by Sylva on less than
ninety (90) days' notice; (c) which may not be terminated by Sylva at will
without incurring any obligation in excess of $5,000 therefor, whether as a
termination fee or otherwise; (d) creating any joint venture or partnership; (e)
relating to the voting of shares or election of directors of Sylva; (f) relating
to the borrowing of money or placing a Lien on any of the assets or properties
at Sylva; (g) prohibiting Sylva from freely engaging in any business or
soliciting customers anywhere in the world; (h) involving any guaranty of any
obligation for borrowed money or otherwise; or (i) which is otherwise material
to the operation of the Business or was not entered into in the ordinary course
of the Business consistent with past practice. Each such contract, agreement,
lease, guaranty or commitment is in full force and effect, is valid and
enforceable in accordance with its terms, constitutes a legal and binding
obligation of the respective parties thereto, and is not the subject of any
notice of default, termination or partial termination. There is no existing or
continuing default by any party in the performance or payment of any obligation
under any such contract, agreement, lease, guaranty or commitment. Sylva has
complied in all material respects with the provisions of each such contract,
agreement, lease, guaranty and commitment to which it is a party or by which it
is bound.
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2.17 Suppliers. Schedule 2.17 contains a complete and accurate list of all
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suppliers of Sylva with aggregate sales to Sylva during the past two years in
excess of $10,000 and any agreements with such suppliers to which Sylva is a
party. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby shall give rise to any right to terminate, or
to any breach or default under, any such supplier arrangement. Sylva has not
received any notice from any such supplier that it intends to terminate,
decrease or otherwise adversely alter its relationship with Sylva, and neither
Sylva nor any Seller knows of any reason why any such supplier would not
continue to do business with Sylva, after the Closing under substantially
similar terms as it does business with Sylva as of the date hereof.
2.18 Services. Schedule 2.18 lists all of the contracts for engineering
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services entered into by Sylva during the past three (3) years. Sylva is not a
party to or otherwise bound by any contract for the performance of any services
by Sylva not set forth on Schedule 2.18.
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2.19 Ordinary Course of the Business. Except as set forth on Schedule 2.19,
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Sylva has operated the Business in the ordinary course consistent with past
practices since June 30, 2001. Without limiting the generality of the foregoing,
since June 30, 2001:
(a) there has been no material adverse change in the Business or in the
assets, liabilities, results of operations or financial condition of Sylva;
(b) there has been no destruction or loss of or to any of the assets or
properties of Sylva;
(c) there has been no sale, transfer or other disposition of any asset
of Sylva;
(d) the books, accounts and records of Sylva have been maintained in
the usual, regular and ordinary manner on a basis consistent with prior years;
(e) there has been no labor dispute, organizational effort by any
union, unfair labor practice charge or employment discrimination charge, nor
institution or threatened institution of any effort, complaint or other
proceeding in connection therewith, involving Sylva or affecting the operation
of the Business;
(f) there has been no amendment, termination or waiver of any right of
Sylva under any contract or agreement or governmental license, permit or
authorization;
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(g) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of Sylva;
(h) there has been no: (A) increase in the compensation or in the rate
of compensation or commissions payable or to become payable by Sylva to any
director or officer; (B) general increase in the compensation or in the rate of
compensation or commissions payable or to become payable by Sylva to any
salesmen, distributors or agents other than in the ordinary course of the
Business consistent with past practices; (C) general increase in the
compensation or in the rate of compensation payable or to become payable to
hourly employees or salaried employees of Sylva other than in the ordinary
course of the Business consistent with past practices; (D) officer, director,
employee or consultant (except for subconsultants hired with respect to current
projects) hired or retained by Sylva at a salary or cost in excess of $50,000
per year; or (E) increase in any payment of or commitment to pay any bonus,
profit sharing or other extraordinary compensation to any officer, director,
employee or consultant of Sylva, other than in the ordinary course of the
Business consistent with past practices;
(i) there has been no change in the articles of incorporation or bylaws
of Sylva;
(j) there has been no Lien created on or in any assets or properties of
Sylva or assumed by Sylva with respect to any of its assets or properties;
(k) Sylva has incurred no indebtedness for borrowed money other than
trade payables arising in the ordinary course of the Business consistent with
past practice;
(l) there has been no creation of, amendment to or contributions,
grants, payments or accruals for or to the credit of any employee of Sylva with
respect to any bonus, incentive compensation, deferred compensation, profit
sharing, retirement, pension, group insurance or other benefit plan, or any
union, employment or consulting agreement or arrangement; and
(m) Sylva has neither made nor committed to make any capital
expenditure in excess of $5,000.
2.20 Litigation. Except as set forth on Schedule 2.20, there is no
---------- --------------
litigation, action, suit, arbitration, mediation, hearing, other legal or
regulatory proceeding or governmental investigation pending or, to the knowledge
of Sylva or Sellers, threatened by or against Sylva or any Seller which may
result in any liability to RS&H or Sylva, or which otherwise affects the Assets,
the Business, or the ability of any Seller to perform its obligations under this
Agreement. No judgment, award, order or decree has been rendered against Sylva
or any Seller which affects the Assets, the Business or Sellers' ability to
perform its obligations under this Agreement or which has not been paid or
discharged in full prior to the date hereof.
12
2.21 Compliance with Laws. Sylva and each Seller has complied in all
--------------------
respects with all statutes, laws, rules, regulations, orders, decrees and
ordinances (collectively, "Laws") applicable to Sylva or the operation of the
Business, including, without limitation, all Laws relating to environmental,
trade regulation, labor, benefits and employee matters. Neither Sylva nor any
seller has received any written notice alleging any violation of such Laws.
2.22 Permits and Licenses. Sylva holds all permits, licenses, approvals and
--------------------
authorizations from all governmental or regulatory authorities which are
necessary to conduct the Business as presently conducted and in a manner
consistent with its past practices. Sylva is in compliance with the terms of all
permits, licenses, approvals and authorizations which are necessary to operate
the Business as presently conducted and consistent with past practices or which
are otherwise material to Sylva or to the operation of the Business, each of
which is listed on Schedule 2.22 and is in full force and effect (with no
--------------
suspension thereof pending or threatened).
2.23 Taxes.
-----
(a) Except as set forth on Schedule 2.23(a), (i) Sylva has duly and
----------------
timely filed all "Tax" (as hereinafter defined) reports, returns, estimates,
declarations of estimated tax, information statements and returns relating to,
and required to be filed on or prior to the date hereof by or with respect to
Sylva, the Assets, and/or the operation of the Business, including information
returns or reports with respect to backup withholding and other payments to
third parties ("Returns"), and all of such Returns are true, correct and
complete in all respects; (ii) Sylva has paid on a timely basis all applicable
Taxes that were due and payable by or with respect to Sylva, the Assets, and/or
the operation of the Business for any period of time prior to the date hereof,
and no other Taxes are due and payable by or with respect to Sylva, the Assets,
and/or the operation of the Business for items or periods covered by such
Returns; (iii) Sylva has withheld and paid over all Taxes required to have been
withheld and paid over by or with respect to Sylva, the Assets, and/or the
operation of the Business, and complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party; and (iv) there are no
Liens on any of the properties or assets of Sylva with respect to Taxes, other
than Liens for Taxes not yet due and payable. For purposes of this Agreement,
"Taxes" shall mean any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, 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.
(b) Except as set forth on Schedule 2.23(b), Sylva is not currently
----------------
and, since its formation, has never been a party or subject to any Tax audit,
investigation, levy, assessment, action, proceeding or claim, and no notice of
the possible institution of any Tax audit, investigation, levy, assessment,
action, proceeding or claim has been received by Sylva or, to the extent
relating to Sylva or the Business, any Seller. No extension of a statute of
limitations relating to Taxes is in effect with respect to Sylva.
13
(c) Sylva is not (nor has it ever been) a party to any tax sharing
agreement. Sylva does not have any liability for the Taxes of any person or
entity other than itself either as a result of being a transferee or successor,
by contract or otherwise.
(d) The unpaid Taxes of Sylva (i) did not, as of June 30, 2001, exceed
the reserve for Tax liability reflected in the Latest Financial Statements, and
(ii) do not exceed that reserve as adjusted through the date hereof in
accordance with the past custom and practice of the Company. The amounts so
accrued completely and accurately reflect the amount of any such unpaid Taxes,
and the amount of cash reserved for the payment of such unpaid Taxes by Sylva is
sufficient for payment thereof.
(e) Sylva has not filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), concerning collapsible
corporations. Sylva has not made any payments, Sylva is not obligated to make
any payments, nor is Sylva a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280G. Sylva has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Sylva has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
2.24 Insurance. Schedule 2.24 contains a complete list and description
--------- --------------
(including the expiration date, premium amount and coverage thereunder) of any
and all policies of insurance and bonds presently maintained by, or providing
coverage for, Sylva or any of its officers, employees or directors, all of which
are and will be maintained in full force and effect through the Closing Date,
together with a complete list of all claims made within the last three (3) years
and all pending claims under any of such policies or bonds. All material terms,
obligations and provisions of each of such policies and bonds have been complied
with, all premiums due thereon have been paid, and no notice of cancellation
with respect thereto has been received by Sylva or any Seller. Such policies and
bonds provide adequate coverage to insure the Assets and the Business and the
activities of the officers and directors of Sylva against such risks and in such
amounts as are prudent and customary. A true, correct and complete copy of each
such insurance policy and bond (or a summary thereof) is attached hereto as
Schedule 2.24.
-------------
2.25 Environmental.
-------------
(a) Neither Sylva nor any of its affiliates has violated or has any
liability (whether known or unknown, accrued, absolute, contingent or otherwise,
whether due or to become due, and whether or not required to be an accrued or
reserved against under GAAP), and there is no past or present condition,
circumstance, practice, activity, incident, action or plan which would result in
any such liability to Sylva or RS&H, in connection with or under any
14
"Environmental Law" (as hereinafter defined). For purposes of this Agreement,
"Environmental Law" means any applicable federal, state, local or foreign Law,
order, judgment, decree or injunction relating to (i) pollution or the
protection of the environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface or subsurface land), (ii) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, protection, release, spill or
discharge or disposal of pollutants, wastes, contaminants, or "Hazardous
Substances" (as hereinafter defined), or (iii) workplace safety or health. For
purposes of this Agreement, the term "Hazardous Substances" includes (i)
petroleum, petroleum byproducts and any petroleum fractions; (ii) any substance
or any material containing a substance, defined or regulated as hazardous or
toxic or words of similar meaning or effect under any applicable Law, statute,
order, judgment, decree or injunction; (iii) any other materials to which
liability or standards of conduct are imposed pursuant to any Environmental Law.
(b) There are no actions, suits, demands, notices, claims,
investigations or proceedings pending or, to the knowledge of Sylva or Sellers,
threatened relating to Sylva, the Business or Assets, which could (i) interfere
with the operation of the Business, (iii) prevent continued compliance by Sylva
with any Environmental Law or "Environmental Permits" (as defined below"), or
(ii) impose any liability upon Sylva or RS&H pursuant to any Environmental Law.
(c) Sylva has obtained all permits, licenses, approvals and other
authorizations (collectively, the "Environmental Permits") which are necessary
for or otherwise material to the operation of the Business as it is now or has
ever been conducted under any Environmental Law.
2.26 Compensation Structure. Schedule 2.26 contains a true and complete list
---------------------- -------------
of the names, titles, and compensation of each full and part-time employee of
Sylva (including, without limitation, the date each was hired, and all salary,
wages, bonuses, accrued vacation, and other fringe benefits which such employee
receives), and the name, compensation of and services provided by each
consultant of Sylva. No such employee or consultant has informed or advised
Sylva (nor is Sylva or any Seller otherwise aware) that he or she does not
intend to continue his or her employment or other arrangement with Sylva after
the date hereof or after the Closing. Sylva has obtained all registrations and
filings and has taken all necessary actions required under all applicable social
security, labor, immigration social contribution and withholding Laws and
regulations with respect to its employees, and Sylva has paid each of its
ex-employees upon the termination of his or her employment all amounts it was
required to pay by Law, by agreement or otherwise. Except as set forth on
Schedule 2.26, (i) Sylva is not a party to any written agreement with any
--------------
employee or consultant, and (ii) all employees of Sylva may be terminated at any
time for any reason or no reason without further obligation or consequence.
2.27 Employee Benefits.
-----------------
(a) Schedule 2.27(a) lists all bonus, stock option, stock purchase,
---------------------
restricted stock, deferred compensation, retiree medical or life insurance,
retirement, severance or other benefit plans, programs or arrangements to which
Sylva is a party or which are maintained, contributed to or sponsored by Sylva
15
for the benefit of any current or former employee, officer or director of Sylva
(all such plans are sometimes referred to herein collectively as the "Plans" and
individually as a "Plan").
(b) Except as set forth on Schedule 2.27(b), (i) no audit,
-------------------
investigation or review by any governmental or other law enforcement agency is
pending or has been proposed with respect to any Plan; and (ii) each Plan has
been administered in compliance with its terms and all applicable requirements
of Law. No Plan nor any trustee, administrator or fiduciary thereof has at any
time been involved in any transaction relating to such Plan which would
constitute a breach of fiduciary duty under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or a "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA.
(c) All reports and other documents required to be filed with any
governmental agency or distributed to any Plan participants or beneficiaries
have been duly filed or distributed on a timely basis.
(d) No Plan is a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA, nor is any Plan is subject to Title IV of ERISA.
(e) Except for obligations under the Consolidated Omnibus Budget
Reconciliation Act of 1985, Sylva does not have any obligation to provide, or
liability for, health care, life insurance or other benefits after termination
of employment for former or present employees.
(f) All required employer contributions, premium payments and employee
contributions under the Plans have been made and remitted to the funding agents
or accrued or booked thereunder within the time prescribed by any such Plan and
applicable Laws.
(g) Other than routine claims for benefits payable to participants or
beneficiaries in accordance with the terms of the Plans, there are no claims
pending or, to the knowledge of Sylva or Sellers, threatened by any participant
or beneficiary against Sylva, any of the Plans or any fiduciary of any of the
Plans, or with respect to the terms and conditions of employment or termination
of employment, and no basis for any such claim or claims exists.
2.28 Labor-Related Matters. Sylva is not a party to any collective
----------------------
bargaining agreement or agreement of any kind with any union or labor
organization. Sylva is not in violation of or default under any collective
bargaining or other similar agreement. There are no unfair labor practice
charges pending or threatened against Sylva and there are no charges,
complaints, claims or proceedings pending or, to the knowledge of Sylva and
Sellers, threatened against Sylva with respect to any alleged violation of any
legal duty (including but not limited to any wage and hour claims, employment
discrimination claims or claims arising out of any employment relationship) as
to employees of Sylva or as to any person seeking employment therefrom, and no
such violations exist, and no basis for any such charges, complaints or claims
exists.
16
2.29 Directors and Officers. Schedule 2.29 correctly lists all of the
------------------------ ---------------
present officers and directors of Sylva.
2.30 Transactions With Management. Except as set forth on Schedule 2.30,
------------------------------ -------------
Sylva is neither a party to nor has any contracts with or commitments to any
Seller or any of Sylva's current or former shareholders, directors, officers,
employees or agents, including any business directly or indirectly controlled by
any such person (other than employment agreements with current officers,
directors, and employees of the Sylva disclosed on Schedule 2.26.)
-------------
2.31 Bank Accounts. Schedule 2.31 contains a complete and accurate list
-------------- --------------
of the names and addresses of every bank and other institution in which Sylva
maintains an account or safety deposit box, the account numbers of each such
account, and the names of all persons who are authorized to draw thereon or have
access thereto.
2.32 Propriety of Past Payments. No funds or assets of Sylva have ever been
--------------------------
used for illegal purposes. No unrecorded fund or asset of Sylva has been
established for any purpose which would violate any Law or which would have a
material adverse effect on Sylva. No accumulation or use of any funds of Sylva
which would violate any Law or which would have a material adverse effect on
Sylva has been made without being accounted for in the books and records of
Sylva. All payments by or on behalf of Sylva have been duly and properly
recorded and accounted for in its books and records in accordance with its
policies with respect thereto. No false or artificial entry has been made in the
books and records of Sylva, and no payment has been made by or on behalf of
Sylva or any Seller with the advance knowledge and understanding that any part
of such payment would be used for any unlawful purpose. Neither Sylva, any
Seller, nor any person or entity acting on behalf of Sylva or any Seller has
made, directly or indirectly, any illegal contributions to any political party,
official or candidate.
2.33 Insolvency Proceedings. No insolvency proceedings of any kind or
-----------------------
nature, including, without limitation, bankruptcy, receivership, reorganization,
or other arrangements with creditors, whether voluntary or involuntary, with
respect to Seller, Sylva or the Business are pending or, threatened.
2.34 Securities Matters.
------------------
(a) Each Seller (i) understands and acknowledges that the RS&H Shares
and the Note to be issued at the Closing have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws, are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering
and are "restricted securities" under SEC Rule 144 under the Securities Act,
which may not be sold in the absence of registration under the Securities Act
and any applicable state securities law or an exemption therefrom, (ii) is
acquiring the RS&H Shares and/or the Note solely for his own account for
investment purposes and not with a view to the distribution or resale thereof;
(iii) is a sophisticated investor with such knowledge and experience in business
and financial matters that he is capable of evaluating the merits and the risks
17
inherent in acquiring and holding the RS&H Shares and/or the Note; (iv) has
received certain information concerning RS&H and has had the opportunity to
obtain additional information as desired in order to evaluate the merits and
risks inherent in acquiring and holding the RS&H Shares and/or the Note; and (v)
is able to bear the economic risk and lack of liquidity inherent in acquiring
and holding the RS&H Shares and/or the Note.
(b) Each Seller acknowledges that he has received copies of each of the
"RS&H SEC Documents" and the "Supplemental Disclosure Letter" (as such terms are
defined in Section 3.7).
(c) Each Seller understands and acknowledges that certificates
representing the RS&H Shares to be issued at the Closing will bear legends
substantially to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF
A BUY-SELL AGREEMENT, COPIES OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF THE COMPANY. ANY ATTEMPTED TRANSFER OR PLEDGE OF THE
SHARES REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE TERMS OF
SUCH BUY-SELL AGREEMENT SHALL BE NULL AND VOID AND SHALL NOT BE
RECOGNIZED BY THE COMPANY.
2.35 Representations and Warranties. Sellers have delivered to RS&H a true,
------------------------------
correct and complete copy of all contracts, Plans and other documents listed or
described in the Schedules to this Agreement. No representation or warranty made
by Sellers in this Agreement or pursuant hereto contains any untrue statement,
and such representations and warranties do not omit any statement necessary in
order to make any statement contained therein not misleading.
2.36 Additional Representations and Warranties. Each of W. Xxxxxx Xxxxxx
--------------------------------------------
and Xxxxxx X. Xxxxx hereby individually represents and warrants as follows:
(a) Such Seller has full power and authority to enter into this
Agreement, to perform his obligations hereunder and to consummate the
transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by such Seller
and constitutes the legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms.
18
(c) Such Seller is the sole registered and beneficial owner of, and has
good, valid and marketable title to, the number of Shares set forth opposite
such Seller's name on Schedule 2.7, free and clear of any and all Liens. Such
Seller has the full right, power and authority to sell, transfer and deliver the
Shares owned by him to RS&H and at the Closing shall transfer to RS&H good,
valid and marketable title to all of the Shares owned by him, free and clear of
any and all Liens.
(d) Such Seller has no actual knowledge of any facts, events or
circumstances which would cause any of the representations and warranties set
forth in Sections 2.1-2.33 to be untrue or inaccurate in any material respect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF RS&H
--------------------------------------
Notwithstanding any independent investigation or verification
undertaken by Sellers or any of their respective representatives, RS&H hereby
represents and warrants to the Sellers as follows:
3.1 Organization and Good Standing. RS&H is a corporation duly organized,
------------------------------
validly existing and in good standing under the laws of the State of Florida.
3.2 Power and Authorization. RS&H has full corporate power and authority to
-----------------------
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by RS&H and RS&H's performance of its obligations hereunder have
been duly authorized by all necessary corporate action on the part of RS&H. No
other action is necessary to authorize the execution, delivery and performance
of this Agreement by RS&H.
3.3 Binding Effect. This Agreement has been duly executed and delivered by
--------------
RS&H and constitutes the legal, valid and binding obligation of RS&H,
enforceable in accordance with its terms.
3.4 No Violation; Consents. Neither the execution and delivery of this
------------------------
Agreement by RS&H nor the performance by RS&H of its obligations hereunder will:
(a) violate or conflict with any provision of the articles of
incorporation or Bylaws of RS&H,
(b) violate, breach or otherwise constitute or give rise to a default
under any contract, commitment or other obligation to or by which RS&H is a
party or is bound, except to the extent any such violation, breach or default
would not have a material adverse effect on RS&H,
19
(c) violate or conflict with any statute, ordinance, law, rule,
regulation, judgment, order or decree of any court or other governmental or
regulatory authority to which RS&H is subject; or
(d) require any consent, approval or authorization of, notice to, or
filing, recording, registration or qualification with any third party, court or
governmental or regulatory authority.
3.5 Litigation. There is no litigation, action, suit, arbitration,
----------
mediation, hearing, governmental investigation or similar proceeding pending or,
to RS&H's knowledge, threatened by or against RS&H, that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, any of the transactions contemplated by this Agreement.
3.6 RS&H Shares. The RS&H Shares, when issued to Sellers at the Closing in
-----------
accordance with this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable.
3.7 SEC Documents; Financial Statements.
-----------------------------------
(a) RS&H has filed all statements, reports, registration statements,
proxy statements and other documents required to be filed by RS&H with the
Securities and Exchange Commission (the "SEC") since January 1, 2000
(collectively, the "RS&H SEC Documents") and has made available to each Seller
(i) a true, correct and complete copy of each of the RS&H SEC Documents in the
form filed with the SEC by RS&H, and (ii) a letter dated November 7, 2001
disclosing certain information as to the financial condition of and pending
liquidation proceedings involving Reliance Insurance Co. (the "Supplemental
Disclosure Letter").
(b) The RS&H SEC Documents (i) were prepared in all material respects
in compliance with the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, contain
any untrue statement of a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent any such
misstatement or omission has been corrected or superseded by a subsequent RS&H
SEC Document or any disclosure made by RS&H to Seller.
20
3.8 Securities Matters. RS&H (a) understands that the Shares have not been,
------------------
and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering and are
"restricted securities" under SEC Rule 144 under the Securities Act, which may
not be sold in the absence of registration under the Securities Act and any
applicable state securities law or an exemption therefrom; (b) is acquiring the
Shares solely for its own account for investment purposes and not with a view to
the distribution or resale thereof; (c) is a sophisticated investor with such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks inherent in acquiring and holding the Shares;
(d) has received certain information concerning Sylva and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and risks inherent in acquiring and holding the Shares; and (e) is able
to bear the economic risk and lack of liquidity inherent in holding the Shares.
3.9 Representations and Warranties. Except as set forth herein, RS&H has
--------------------------------
not made and Seller is not relying on any representations or warranties of RS&H
with respect to the RS&H Note or Shares or the business, assets, liabilities,
results of operation or financial condition of RS&H.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
4.1 Non-Disclosure Covenants.
------------------------
(a) For purposes of this Agreement, the following terms shall have the
following respective meanings:
(i) "Confidential Information" shall mean all valuable,
proprietary and confidential information in any way relating to Sylva, the
Business or RS&H or belonging to or pertaining to Sylva, the Business or RS&H
that does not constitute a "Trade Secret" (as hereinafter defined) and that is
not generally known by or available to Sylva's or RS&H's competitors.
(ii) "Trade Secrets" shall mean all "trade secrets" in any way
relating to Sylva, the Business or RS&H or belonging to or pertaining to Sylva,
the Business or RS&H as defined under applicable law.
(b) In recognition of RS&H's need to protect its legitimate business
interests, and as covenants ancillary to the sale of a business, each Seller
hereby covenants and agrees that he shall not, without the prior written consent
of RS&H in each instance, use, disclose, transfer, assign, disseminate,
reproduce, copy or otherwise communicate, directly or indirectly, in any way or
for any purposes, for itself or for any other person or entity: (a) any
Confidential Information for a period of three (3) years after the Closing; or
(b) any Trade Secret at any time during which such information shall constitute
a trade secret under applicable law.
21
(c) If any Seller becomes legally compelled to disclose any
Confidential Information or Trade Secrets (whether by judicial or administrative
order, applicable law, rule or regulation, or otherwise), such Seller will use
its reasonable efforts to provide RS&H with prior notice thereof so that RS&H
may seek a protective order or other appropriate remedy to prevent or limit such
disclosure; provided, however, that such Seller will use its reasonable efforts
to maintain the confidentiality of such Confidential Information or Trade
Secrets. If such protective order or other remedy is not obtained prior to the
time such disclosure is required, such Seller will only disclose that portion of
such Confidential Information and Trade Secrets which it is legally required to
disclose.
4.2 Nonsolicitation Covenants. In recognition of RS&H's need to protect its
-------------------------
legitimate business interests, and as covenants ancillary to the sale of a
business, each Seller expressly covenants and agrees that, during his employment
by RS&H and for a period of three (3) years thereafter, he will not, either
directly or indirectly, for himself or in conjunction with or on behalf of any
person or entity other than RS&H or Sylva, solicit for employment or attempt to
solicit for employment, or hire, any employee of RS&H or Sylva to work for any
other individual or entity whatsoever.
4.3 Acknowledgments; Remedies.
-------------------------
(a) Each of the Parties hereby acknowledges and agrees that the
covenants set forth in Sections 4.1 and Section 4.2 (the "Protective Covenants")
constitute the most reasonable and equitable restrictions possible in order to
protect RS&H's legitimate business interests and its substantial investment in
Sylva, given the substantial consideration which Sellers are receiving
hereunder, the complexity of the Business and the business of RS&H, the
competitive nature of the industry in which RS&H and Sylva are engaged, and
Sellers' access to Trade Secrets and Confidential Information.
(b) Each of the applicable Parties further acknowledges and agrees that
any breach of the Protective Covenants may cause irreparable harm to RS&H and
that monetary damages may not be an adequate remedy for any breach of the
Protective Covenants, and that RS&H may (in its sole discretion), without
limiting any other remedies available to RS&H at law, in equity or under this
Agreement, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relieve in order to enforce or prevent
any violation (or threatened violation) of the Protective Covenants.
(c) In the event any Protective Covenant shall be determined by a court
or tribunal of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical area
or by reason of its being too extensive in any other respect, it is the
intention of the Parties that such provision be interpreted to extend only over
the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it may be enforceable and/or to the
maximum extent in all other respects as to which it may be enforceable, all as
determined by such court or tribunal in such action.
22
4.4 Brokers; Expenses. RS&H and each Seller hereby represents and warrants
-----------------
to the other Parties that it has not incurred any liability for brokerage fees,
finder's fees, agent's commissions or other similar forms of compensation in
connection with or in any way related to execution of this Agreement or the
consummation of the transactions contemplated hereby. Each party hereto shall
pay its own fees and expenses (including the fees and expenses of its attorneys,
accountants, investment bankers, brokers, financial advisors and other
professionals) incurred in connection with the preparation, negotiation and
execution of this Agreement and the consummation of all transactions
contemplated hereby.
4.5 Best Efforts; Further Assurances. Subject to the terms and conditions
--------------------------------
contained herein, each of the Parties agrees to use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable Laws to consummate
and make effective the transactions contemplated by this Agreement and any tax
election which RS&H and Sellers may agree to make with respect to such
transactions. In the event that at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, the appropriate party
shall take all such actions without any further consideration therefor.
4.6 Benefit Plans. Upon the Closing and continuing at least through
--------------
December 31, 2001, the employees of Sylva shall be entitled to continue to
participate in all presently existing Sylva employee benefit Plans with the
exception of any bonus compensation plans (which bonus compensation plans, if
any, have been terminated). The employees of Sylva shall leave the Plans of
Sylva and enter the applicable RS&H employee benefit plans pursuant to the terms
of such plans on such date as RS&H deems appropriate.
4.7 Publicity. Neither Party shall issue any press release, written public
---------
statement or announcement relating to this Agreement or the transactions
contemplated hereby without the prior approval of RS&H and Xxxxx Xxxxx in each
instance, except to the extent such disclosure is required by law (in which case
only prior notice thereof need be given).
ARTICLE 5
INDEMNIFICATION
---------------
5.1 Indemnification by Sellers.
--------------------------
(a) Subject to this Article 5, Xxxxx X. Xxxxx LL and Xxxxx X. Xxxxxx,
jointly and severally, hereby indemnify and agree to promptly defend and hold
harmless RS&H and its officers, directors, shareholders, employees, agents and
affiliates (collectively, the "RS&H Indemnified Parties") from and against any
and all claims, costs, expenses (including, without limitation, attorneys' fees
and court costs), judgments, penalties, fines, damages, losses and liabilities
of any kind or nature (collectively, "Losses") incurred by any of the RS&H
Indemnified Parties resulting from, arising out of or related to any of the
following:
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(i) any breach of any representation or warranty made by any
Sellers herein or in any Exhibit, Schedule, document or agreement executed by
any Seller and delivered to RS&H pursuant hereto;
(ii) any breach of any covenant or agreement of any Seller
contained herein or in any Exhibit, Schedule, document or agreement executed by
any Seller and delivered to RS&H pursuant hereto; or
(iii) all attorney's fees, court costs and other expenses,
including the satisfaction of any judgments entered or settlements reached, in
connection with that lawsuit pending in the District Court of Xxxxxx County,
Texas, Case No. 98-42530, filed by Medallion International Corporation, as
plaintiff, against Sylva and Xxxxx Xxxxx LL, as defendants, and/or any
subsequent lawsuit filed with respect to or arising out of same; provided,
however, that any such subsequent lawsuit shall first be submitted to any
applicable liability insurance carrier for handling.
(b) Subject to this Article 5, each of W. Xxxxxx Xxxxxx and Xxxxxx X.
Xxxxx, hereby indemnifies and agrees to promptly defend and hold harmless the
RS&H Indemnified Parties from and against any and all Losses incurred by any of
the RS&H Indemnified Parties resulting from, arising out of or related to any of
the following:
(i) any breach of any representation or warranty made by such
Seller herein or in any Exhibit, Schedule, document or agreement executed by
such Seller and delivered to RS&H pursuant hereto; or
(ii) any breach of any covenant or agreement of such Seller
contained herein or in any Exhibit, Schedule, document or agreement executed by
such Seller and delivered to RS&H pursuant hereto.
(c) In the event RS&H shall be entitled to indemnification from any
Seller under this Section 5.1, RS&H may set off the amount to which it is
entitled against the Security Deposit, the Note and any earned but unpaid
Earnout Consideration. The existence of such right of set-off shall not limit
any other remedy available to RS&H at law, in equity or under this Agreement.
(d) Notwithstanding anything else contained herein to the contrary, the
maximum aggregate liability of any Seller to RS&H pursuant to this Agreement
shall be an amount equal to the portion of the Purchase Price received or
receivable by such Seller hereunder.
5.2 Indemnification by RS&H. Subject to this Article 5, RS&H hereby
-------------------------
indemnifies and agrees to promptly defend and hold harmless Sellers and their
respective officers, directors, shareholders, employees, agents and affiliates,
24
from and against any and all Losses incurred by any of them resulting from,
arising out of, or related to any of the following:
(a) any breach of any representation or warranty made by RS&H herein or
in any Exhibit, Schedule, document or agreement executed by RS&H and delivered
to Sellers pursuant hereto; or
(b) any breach of any covenant or agreement of RS&H contained herein or
in any Exhibit, Schedule, document or agreement executed by RS&H and delivered
to Sellers pursuant hereto.
5.3 Administration of Claims.
------------------------
(a) Whenever any Party is entitled to indemnification under this
Article 5, the Party entitled to indemnification (the "Indemnified Party") shall
promptly notify the appropriate other Party (the "Indemnifying Party") of the
claim and, when known, the facts constituting the basis for such claim. In the
event of any claim for indemnification hereunder resulting from or in connection
with any claim or legal proceeding by a person who is not a party to this
Agreement (a "Third Party Claim"), such notice shall also specify, if known, the
amount or a good faith estimate of the amount of the Losses or potential Losses
arising therefrom. The Indemnified Party shall be entitled to receive interest
from the Indemnifying Party at a rate per annum equal to eight percent (8%)
percent on any claim hereunder from the date it notifies the Indemnifying Party
of such claim until such claim is actually paid.
(b) No Party shall settle or compromise or voluntarily enter into any
binding agreement to settle or compromise, or consent to entry of any judgment
arising from, any such indemnifiable claim or proceeding except with the prior
written consent of the other Party, which will not be unreasonably withheld, and
in accordance with this Section 5.3. With respect to any Third Party Claim, the
Indemnifying Party shall undertake the defense thereof by representatives of its
own choosing reasonably satisfactory to the Indemnified Party. The Indemnified
Party or any other party shall have the right to participate in any such defense
of a Third Party Claim with advisory counsel of its own choosing at its own
expense. In the event the Indemnifying Party, after half of the period for the
presentation of a defense against any such Third Party Claim, fails to begin to
diligently defend it (or at any time thereafter ceases to diligently defend it),
the Indemnified Party will have the right to undertake the defense, compromise
or settlement of such Third Party Claim on behalf of, and for the account of,
the Indemnifying Party, at the expense and risk of the Indemnifying Party.
5.4 Survival of Representations and Warranties. Except as otherwise
----------------------------------------------
expressly set forth in this Agreement, the representations and warranties of
Sellers contained in Article 2 of this Agreement, the representations and
warranties of RS&H contained in Article 3 of this Agreement, and all claims and
causes of action with respect thereto, shall survive the Closing until the
expiration of three (3) years after the Closing Date; provided, however, that
(i) RS&H's rights under Sections 5.1(a)(ii), 5.1(a)(iii) and 5(b)(ii) the
representations and warranties set forth in Sections 2.1, 2.2, 2.3, 2.5, 2.7,
25
2.34 and 2.36(a-c) and any representation, warranty, covenant or agreement set
forth outside of Article 2 or Article 3 in this Agreement (and all claims and
causes of action with respect thereto) shall survive the Closing indefinitely,
and (ii) the representations and warranties as set forth in Sections 2.23 and
2.27 (and all claims and causes of action with respect thereto) shall survive
the Closing for a period of six (6) months after all applicable statutes of
limitations on any claims related to or arising out of the respective matters
set forth therein have expired. Any claim for indemnification under this Article
5 must be asserted during the survival period applicable thereto, if any. In the
event notice of any claim for indemnification is given within the applicable
survival period, an Indemnifying Party's obligations with respect to such
indemnification claim shall survive until such time as such claim is finally
resolved.
5.5 Subrogation. In the event an Indemnifying Party pays an Indemnified
-----------
Party's Losses pursuant to this Article 5, such Indemnifying Party shall be
subrogated to the rights the Indemnified Party has against any insurer or other
third party with respect thereto (and, upon the reasonable request of the
Indemnifying Party, the Indemnified Party shall take appropriate actions
necessary to transfer and assign such rights to the Indemnifying Party). Any
such payments by an Indemnifying Party shall not affect any rights of
contribution to which it may be entitled by law.
5.6 Release of Security Deposit. Any remaining portion of the Security
------------------------------
Deposit, after application of all set-offs and deductions provided for in this
Agreement, less any amounts with respect to which RS&H has in good faith
asserted a claim, but not yet received, indemnification hereunder, shall be
released to Sellers (as allocated in accordance with Section 1.6) on the date
that is eighteen (18) months following the Closing Date or upon a final
adjudication or settlement of the Medallion International Corporation lawsuit
referred to in Section 5.1(a)(iii) above, whichever occurs later. Any amount
withheld with respect to pending claims for indemnification which remains after
application of all set-offs and deductions with respect to such claims shall be
distributed to the Sellers promptly following final resolution of such claims.
ARTICLE 6
MISCELLANEOUS
-------------
6.1 Notices.
-------
(a) All notices, consents, requests and other communications hereunder
shall be in writing and shall be sent by hand delivery, by certified or
registered mail (return-receipt requested), or by a recognized national
overnight courier service as set forth below:
26
If to RS&H : Xxxxxxxx, Xxxxx and Hills, Inc
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
With a copy to: Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
If to Sellers: Xxxxx X. Xxxxx LL
00000 Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
W. Xxxxxx Xxxxxx
00000 Xxxxxxxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
With a copy to: Xxx X. Xxx, Esquire
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
(b) Notices delivered pursuant to Section 6.1(a) shall be deemed given:
(i) at the time delivered, if personally delivered; (ii) at the time received,
if mailed; and (iii) one (1) business day after timely delivery to the courier,
if by overnight courier service.
(c) Any Party hereto may change the address to which notice is to be
sent by written notice to the other Party in accordance with this Section 6.1.
6.2 Entire Agreement. This Agreement, including all Exhibits and Schedules
----------------
hereto (all of which are incorporated herein by this reference), contains the
entire agreement and understanding concerning the subject matter hereof between
the Parties and specifically supersedes that certain letter of intent, dated
June 8, 2001, among RS&H, Xxxxx, Xxxxx X. Xxxxx, P.E., and J.R. Xxxxxx, X.X.
27
6.3 Waiver; Amendment. No waiver, termination or discharge of this
------------------
Agreement, or any of the terms or provisions hereof, shall be binding upon any
party hereto unless confirmed in writing. No waiver by any party hereto of any
term or provision of this Agreement or of any default hereunder shall affect
such party's rights thereafter to enforce such term or provision or to exercise
any right or remedy in the event of any other default, whether or not similar.
This Agreement may not be modified or amended except by a writing executed by
all Parties.
6.4 Severability. If any provision of this Agreement shall be held void,
------------
voidable, invalid or inoperative, no other provision of this Agreement shall be
affected as a result thereof, and, accordingly, the remaining provisions of this
Agreement shall remain in full force and effect as though such void, voidable,
invalid or inoperative provision had not been contained herein.
6.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Texas, without regard to conflict of
laws principles.
6.6 Assignment. No party hereto may assign this Agreement, in whole or in
----------
part, without the prior written consent of the other Parties, and any attempted
assignment not in accordance herewith shall be null and void and of no force or
effect; provided, however, that RS&H may assign this Agreement to a wholly
owned, direct or indirect, subsidiary of RS&H, which assignment shall not
relieve RS&H of responsibility for its obligations hereunder.
6.7 Binding Effect. This Agreement shall be binding upon and shall inure to
--------------
the benefit of the Parties and their respective successors and permitted
assigns.
6.8 Cumulative Remedies. All rights and remedies of each party hereto are
-------------------
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
6.9 Headings. The titles, captions and headings contained in this Agreement
--------
are inserted for convenience of reference only and are not intended to be a part
of or to affect in any way the meaning or interpretation of this Agreement.
6.10 Reference with Agreement. Numbered or lettered articles, sections,
--------------------------
paragraphs, subsections, schedules and exhibits herein contained refer to
articles, sections, paragraphs, subsections, schedules and exhibits of this
Agreement unless otherwise expressly stated. The words "herein," "hereof,"
"hereunder," "hereby," "this Agreement" and other similar references shall be
construed to mean and include this Agreement and all Exhibits and Schedules and
all amendments to any of them unless the context shall clearly indicate or
require otherwise.
6.12 Interpretation. This Agreement shall not be construed more strongly
--------------
against either party hereto regardless of which party is responsible for its
preparation, it being agreed that this Agreement was fully negotiated by all
Parties.
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6.13 Definition of Knowledge. Any reference in this Agreement or in any
-------------------------
certificate delivered pursuant hereto to any or all Sellers' or Sylva's
"knowledge" (or other similar expressions relating to the knowledge or awareness
of any or all Sellers or Sylva) shall include all matters which Sylva, any
Seller or any of Sylva's or any Seller's officers, directors or employees
actually knew or should have known after diligent inquiry.
6.14 Counterparts; Fax Signatures. This Agreement may be executed in one or
----------------------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute the same Agreement. Any signature page of any
such counterpart, or any electronic facsimile thereof, may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the undersigned have caused their respective duly
authorized representatives to execute this Agreement as of the day and year
first above written.
"RS&H "
XXXXXXXX, XXXXX AND HILLS, INC.
By: __________________________
Name: ________________________
Title: _______________________
"SELLERS"
------------------------------------------(Seal)
Xxxxx X. Xxxxx LL
------------------------------------------(Seal)
Xxxxx X. Xxxxxx
------------------------------------------(Seal)
W. Xxxxxx Xxxxxx
------------------------------------------(Seal)
Xxxxxx X. Xxxxx
