STOCK PURCHASE AGREEMENT
AMONG
EIF Holdings, Inc.
AND
Xxx X. Manta
Xxxxxx X. Manta
Xxxxxxx X. Xxxxxx
Xxxx X. Manta
Xxxxx XxXxxxx
Xxxx X. Manta, as Trustee of
Xxxxxxx Manta Trust
Xxxx X. Manta, as Trustee of
Xxxxx Manta Trust
Xxxx X. Manta, as Trustee of
Alexander Manta Trust
Xxx X. Manta
Xxx X. Xxxxxxxx
September 30, 1997
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STOCK PURCHASE AGREEMENT
Agreement entered into as of September 30, 1997 (the "Agreement"), by and
among EIF Holdings, Inc., a Hawaii corporation (the "Buyer"), and Xxx X. Manta,
Xxxxxx X. Manta, Xxxxxxx X. Xxxxxx, Xxxx X. Manta, Xxxxx XxXxxxx, Xxxx X. Manta,
as Trustee of Xxxxxxx Manta Trust, Xxxx X. Manta, as Trustee of Xxxxx Manta
Trust, Xxxx X. Manta, as Trustee of Alexander Manta Trust, Xxx X. Manta, and Xxx
X. Xxxxxxxx (collectively, the "Sellers" and each individually, a "Seller"). The
Buyer and the Sellers are referred to collectively herein as the "Parties", and
each individually is sometimes referred to herein as a "Party."
Recitals
The Sellers in the aggregate own all of the outstanding capital stock of
X.X. Manta, Inc., an Illinois corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of the Company in return for cash and the Convertible
Promissory Notes.
Agreement
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Additional Stock Option Agreements" has the meaning set forth in ss.6(j)
below.
"Adverse Consequences" means all damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses, incurred by an Indemnified Party (as defined in ss.8(e)(i)).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface above.
"Applicable Rate" means the corporate base rate of interest published
from time to time in the Money Rates column of the Wall Street Journal plus 2%
per annum.
"Amendment" has the meaning set forth in ss.6(e).
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"Assignment Agreement" has the meaning set forth in ss.5(j) below.
"Associate" when used to indicate a relationship with any person means
(i) any corporation, partnership, limited liability company or other entity of
which such person is an officer, manager, member or partner or is, directly or
indirectly, the beneficial owner of any class of equity securities, partnership
interest or membership interest; or (ii) any trust or other estate in which such
person has a beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; or (iii) any relative or spouse of such person,
or any relative of such spouse; or (iv) any corporation, partnership, limited
liability company of which any relative or spouse of such person, or any
relative of such spouse, is an officer, manager, member or partner or is,
directly or indirectly, the beneficial owner of any class of equity securities,
partnership interest or membership interest; or (v) any trust or other estate in
which any relative or spouse of such person, or any relative of such spouse, has
a beneficial interest or as to which such person serves as a trustee or in a
similar fiduciary capacity.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or which is reasonably likely
to form the basis for any specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Buyer Common Stock" has the meaning set forth in ss.3(b)(iv) below.
"Buyer's Financial Statements" has the meaning set forth in ss.3(b)(viii)
below.
"Buyer's Transaction Documents" means this Agreement, the Employment
Agreements, the Registration Rights Agreement, the Convertible Promissory Notes,
the Retention Bonus Agreements, the Stock Option Agreements, the Guaranty, and
any and all other documents required to be executed and delivered by Buyer at
the Closing.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Confidential Information" means any information concerning the
businesses and affairs of the Company which the Company currently regards or
treats as confidential and proprietary and that is not generally available to
the public as of the date of this Agreement.
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"Consulting Agreement" has the meaning set forth in ss.6(k) below.
"Controlled Group of Corporations" has the meaning set forth in Code
ss.1563.
"Convertible Promissory Notes" has the meaning set forth in ss.2(b) below.
"Convertible Securities" has the meaning set forth in the definition of
"Sufficient Buyer Common Stock Amount."
"Customer Contracts" means all of the Company's contracts, purchase orders,
customer accounts, time and material accounts, and other rights to provide
services to customers of the Company, whether oral or written, in force and
effect as of the Closing Date, other than (i) fixed price or lump-sum contracts
and agreements which provide for lump-sum or fixed-price payments to the Company
of less than $300,000, or (ii) "time and materials" contracts and agreements in
respect of which the Company has earned revenue of less than $300,000 for the
twelve (12) months prior to the date hereof or in respect of which the Company
is anticipated to earn revenue of less than $300,000 for the twelve (12) months
prior to the Closing Date.
"Disclosure Schedule" has the meaning set forth in ss.4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.3(1).
"Employment Agreement" has the meaning set forth in ss.6(k) below.
"Encumbrances" means any liens, charges, mortgages, suretyships,
attachments, encumbrances, pledges, Security Interests, Taxes, options,
warrants, purchase rights, contracts, commitments, equities, demands, claims,
exceptions, usufructs, title defects, licenses, conditions, equitable interests,
preemptive rights, rights of first refusal, restrictions of any kind including,
but not limited to, any restriction on use, voting, transfer, receipt of income,
or exercise of any other attribute of ownership, or any voting trusts or
shareholder agreements, options, calls, or any other restrictions or third party
rights.
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"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended through the Closing Date, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Reports" means (i) that certain Scope of Work Letter dated April
27, 1994 by RERC Environmental ("RERC"); (ii) that certain Letter dated
September 9, 1994 by RERC; (iii) that certain Limited Environmental Site
Characterization dated May 2, 1995 prepared by Environmental Protection
Industries; and (iv) that certain Limited Environmental Review dated June 17,
1996 prepared by Property Solutions Incorporated.
"Financial Statement" has the meaning set forth in ss.4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"General Release" has the meaning set forth in ss.7(a)(vii) below.
"Guaranty" has the meaning set forth in ss.7(b)(xiii) below.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in ss.8(e) below.
"Indemnifying Party" has the meaning set forth in ss.8(e) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
Page 10
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Xxxx X. Manta Waiver" has the meaning set forth in ss.5(j) below.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operations, results of operations or future
prospects of the Company. For purposes hereof, no Liability shall be considered
to constitute a Material Adverse Effect if it is less than $50,000.00.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.4(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Non-Compete Period" means, with respect to each Seller, the period
commencing on the Closing Date and ending on the earlier of (i) the fifth
anniversary of the Closing Date, (ii) for those Sellers who have entered into an
Employment Agreement, the date on which such Seller is no longer subject to the
non-compete provisions set forth in Section 4.2 of such Seller's Employment
Agreement, or (iii) the date on which the Company shall discontinue operating
its business (provided, however, that any sale of the Company's business, either
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through a sale of all or a majority of the stock of the Company or all or
substantially all of the assets of the Company, shall in no manner and in no
event constitute a discontinuation of the Company's business).
"Notice Recipient" means, with respect to each Party, the individual
specified to receive notice in accordance with ss.11(h) hereof.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Officer Loans" has the meaning set forth in ss.2(b) below.
"Parties" and "Party" have the respective meanings set forth in the preface
above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" means (i) liens for Taxes, assessments and other
governmental charges not yet due and payable, or being contested in good faith
by permissible proceedings and set forth in ss.4(e) and ss.4(l) of the
Disclosure Schedule; (ii) customary retention of title provisions contained in
contracts with suppliers for purchase of goods or equipment entered into in the
Ordinary Course of Business pending payment for such goods or equipment in
accordance with customary payment terms; (iii) mechanics', warehousemen's,
landlords' and other similar statutory liens incurred in the Ordinary Course of
Business; provided, however, that such statutory liens have not resulted from
any failure to pay amounts due and owing in the Ordinary Course of Business;
(iv) easements, rights-of-way, covenants, conditions and other restrictions
which do not materially interfere with the present use, occupancy or operation
of any real property; (v) roads and highways, spurs and switch tracts, and
rights-of-way of any railroad serving any real property; (vi) planning, zoning,
business and other similar governmental regulations; (vii) unrecorded easements
or rights-of-way for any utilities providing utility services to any real
property; (viii) encroachments which do not materially interfere with the use,
occupancy or operation of any real property and which are disclosed on the
Survey; and (ix) all matters disclosed on the Survey.
"Person" means an individual, a general or limited partnership, a
limited liability company, a limited liability partnership, a corporation
(including any non-profit corporation), an association, a joint stock company, a
trust, a joint venture, an estate, a trust, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Purchase Price" has the meaning set forth in ss.2(b) below.
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"Registration Rights Agreement" has the meaning set forth in ss.7(a)(viii)
below.
"Required Consents" means the consents and approvals identified in
ss.5(b) of the Disclosure Schedule, the receipt and completion of which shall be
a condition of the consummation of the Buyer's obligations hereunder.
"Requisite Sellers" means Sellers holding a majority in interest of the
Shares as set forth in ss.4(b) of the Disclosure Schedule.
"Retention Bonus Agreements" has the meaning set forth in ss.6(i).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" and "Sellers" have the respective meanings set forth in the
preface above.
"Sellers' Transaction Documents" means this Agreement, the Employment
Agreements, the Retention Bonus Agreements, the Stock Option Agreements, the
General Releases, the Registration Rights Agreement and any and all other
documents required to be executed and delivered by the Sellers at the Closing.
"Seller Receivables" has the meaning set forth in ss.5(j)(i) below.
"Share" means any share of the Common Stock, no par value per share, of the
Company.
"Stock Option Agreements" has the meaning set forth in ss.6(j) below.
"Subcontract" means any subcontracts, agreements, contracts or commitments
with any subcontractors, vendors or suppliers of any labor or material with
respect to any project which is the subject of any of the Customer Contracts,
other than those that (i) can be terminated, without any cost or liability to
the Company, upon thirty (30) days or less notice, or (ii) involve less than
$10,000 when aggregated with all other such subcontracts, agreements, contracts
or commitments.
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"Stock Encumbrances" has the meaning set forth in ss.3(a)(vi) below.
"Subsidiary" means any corporation or other form of business
organization with respect to which a specified Person (or a Subsidiary thereof)
owns a majority of the common stock or other ownership interest or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors or other Person entitled to direct the management and control of such
business organization.
"Sufficient Buyer Common Stock Amount" means as of any date the
aggregate number of shares of Buyer's authorized but unissued voting no par
value common stock ("Buyer Common Stock") that would be required to be issued by
Buyer under all of the Stock Option Agreements, Additional Stock Option
Agreements, Convertible Promissory Notes and Retention Bonus Agreements
(collectively, the "Convertible Securities"), as appropriately adjusted therein,
if on such date all of the holders of the Convertible Securities were entitled
to and in fact did, exercise all of their respective options under the Stock
Option Agreements and Additional Stock Option Agreements and convert the entire
unpaid outstanding balances under the Convertible Promissory Notes and Retention
Bonus Agreements.
"Survey" has the meaning set forth in ss.5(h) below.
"Tax" and "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.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.
"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.
"Third Party Claim" has the meaning set forth in ss.8(e) below.
2. Purchase and Sale of Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of his or its Shares for the
Purchase Price specified and defined below in this ss.2.
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(b) Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing Seven Million, Six Hundred Thousand Dollars ($7,600,000) (the "Purchase
Price") by delivery of (i) its convertible promissory notes (the "Convertible
Promissory Notes") in the form of Exhibit A attached hereto in the aggregate
principal amount of Two Million, Two Hundred Thirty-five Thousand, Three Hundred
Twelve Dollars ($2,235,312) to certain of the Sellers listed in ss.2(b)(ii) of
the Disclosure Schedule, in the aggregate principal amounts set forth therein,
and (ii) cash in the aggregate amount of Five Million, Three Hundred and Sixty
Four Thousand, Six Hundred and Eighty Eight Dollars ($5,364,688) for the balance
of the Purchase Price, payable by wire transfer or delivery of other immediately
available funds to the Sellers in the amounts set forth in ss.2(b)(ii) of the
Disclosure Schedule. At Closing, the cash balance of the Purchase Price to be
paid at the Closing shall be reduced by the sum of (i) the amount of the
Company's loans to its officers as set forth in ss.2(b)(ii)(1) of the Disclosure
Schedule (collectively, the "Officer Loans"), and (ii) the amount of any
outstanding Seller Receivables as referred to in ss.5(j)(i). The reduction of
the cash portion of the Purchase Price referenced to in the immediately
preceding clause (i) for each Officer Loan shall be made by deducting from the
cash portion of the Purchase Price otherwise due (as set forth on ss.2(b)(ii) of
the Disclosure Schedule) the amount of the Officer Loan from the Seller to whom
such Officer Loan was made. The reduction to the cash portion of the Purchase
Price referenced in the immediately preceding clause (ii) for each outstanding
Seller Receivable shall be made by deducting from the cash portion of the
Purchase Price otherwise due certain of the Sellers, as identified by the
Sellers in a written notice to be executed by all the Sellers and delivered to
the Buyer three (3) days prior to the Closing Date, or in the event such notice
has not been delivered, by reducing the cash portion of the Purchase Price
pro-rata among the Sellers based on the amount of cash due to Sellers (before
deduction of the Officer Loans) at Closing.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Jenner & Block at
Xxx XXX Xxxxx, Xxxxxxx, Xxxxxxxx, commencing at 9:00 a.m. local time on November
10, 1997, or such other place, time and date as the Buyer and the Requisite
Sellers may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.7(a) below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in ss.7(b) below,
(iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of his or its Shares, endorsed in blank and accompanied by duly
executed assignment documents, (iv) the Buyer will deliver to (A) each of the
Sellers the Purchase Price in accordance with ss.2(b) above, and (B) the Company
Six Hundred and Thirty Five Thousand, Two Hundred and Ninety-One and 99/100
Dollars ($635,291.99), in immediately available funds, in accordance with
ss.6(i) hereof, and (v) the Company shall pay to the appropriate employee
designated in accordance with ss.6(i), in cash, the amount due each such
employee on the Closing under his or her Retention Bonus Agreement.
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3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
jointly and severally represents and warrants to the Buyer that the statements
contained in this ss.3(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this ss.3(a)) with respect to himself or itself.
(i) Organization of Certain Sellers. If the Seller is a trust,
the Seller is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its organization.
(ii) Authorization of Transaction. The Seller has full power
and authority (including, if the Seller is a trust, the trustee of such trust
has the full power and authority) to execute and deliver this Agreement and each
of the other Sellers' Transaction Documents and to perform his or its
obligations hereunder and thereunder. This Agreement and each of the other
Sellers' Transaction Documents constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement or
by any of the other Sellers' Transaction Documents, except for such notices,
filings, authorizations, consents or approvals where the failure to so give,
make or obtain would not have, either individually or in the aggregate, a
Material Adverse Effect.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement by the Seller, nor the consummation by the Seller of the
transactions contemplated hereby to be consummated by the Seller, will (A)
violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Seller is subject or, if the Seller is a trust, any provision
of its trust agreement or other organizing document or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Seller is a party or by which he or it is bound
or to which any of his or its assets is subject, except in the case of each of
the immediately preceding clauses (A) and (B), for such violations, conflicts,
defaults or breaches that will not, individually or in the aggregate, either (a)
result in any Liability to the Company, (b) result in any Seller failing or
being unable to, or adversely affecting the ability of any Seller to, transfer
or convey his or its Shares to the Buyer in accordance with the terms hereof
free and clear of any Stock Encumbrances (as defined in ss.3(a)(vi) below), or
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(c) otherwise adversely affect the ability of any Seller to perform his or its
other obligations hereunder in accordance with the terms hereof or the terms of
any of the other Sellers' Transaction Documents.
(iv) Brokers' Fees. The Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(v) Investment. The Seller (A) understands that the
Convertible Promissory Note, the Stock Option Agreement, the Additional Stock
Option Agreement, and the Retention Bonus Agreement have not been, and will not
be, except as provided in the Registration Rights Agreement, 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, (B) is acquiring the Convertible Promissory Note,
the Stock Option Agreement, the Additional Stock Option Agreement and the
Retention Bonus Agreement solely for his or its own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning the Buyer and has had
the opportunity to obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding the Convertible Promissory Note,
the Stock Option Agreement, the Additional Stock Option Agreement and the
Retention Bonus Agreement, and (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Convertible Promissory Note, the Stock Option
Agreement, the Additional Stock Option Agreement and the Retention Bonus
Agreement.
(vi) Shares. The Seller holds of record and owns beneficially
the number of Shares set forth next to his or its name in ss.4(b) of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws) and
Encumbrances. Other than this Agreement, and the other agreements, instruments
and arrangements listed next to his or its name in ss.4(b) of the Disclosure
Schedule, which are to be terminated by the Sellers upon the Closing pursuant to
ss.7(a)(xi), the Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell, transfer,
or otherwise dispose of any capital stock of the Company (the "Stock
Encumbrances"). Except as specifically set forth next to his name in ss.4(b) of
the Disclosure Schedule, the Seller is not a party to any voting trust, proxy,
or other agreement or understanding with respect to the voting of any capital
stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this ss.3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.3(b)).
Page 17
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and each of the other Buyer's Transaction Documents to
which it is a party and to perform its obligations hereunder and thereunder.
This Agreement and each of the other Buyer's Transaction Documents to which it
is a party constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. Except for filings
required under the securities laws and regulations of the State of Illinois
(which the Company covenants to make on a timely basis), the Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement or by any of the other Buyer's
Transaction Documents.
(iii) Noncontravention. Neither the execution and the delivery
of this Agreement or any of the other Buyer's Transaction Documents to which it
is a party by the Buyer, nor the consummation of the transactions by the Buyer
contemplated hereby or thereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of its articles of incorporation or bylaws, (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it is
bound or to which any of its assets is subject, or (C) result in the imposition
of any Security Interest upon any of its assets or any of its Subsidiaries other
than any financing obtained by Buyer in connection with this Agreement and the
other Buyer's Transaction Documents including, without limitation, any financing
with Deere Park Equities, Inc. and except in the case of each of the immediately
preceding clauses (A), (B) and (C) for such violations, conflicts, defaults or
breaches that will not, individually or in the aggregate, either (i) result in
the failure of the Buyer to deliver the Purchase Price; or (ii) otherwise
adversely affect the ability of the Buyer to perform its other obligations
hereunder in accordance with the terms hereof or the terms of any of the other
Buyer's Transaction Documents.
(iv) Capitalization. The entire authorized capital stock of
the Buyer consists of 25,000,000 shares of no par value common stock ("Buyer
Common Stock"), of which 24,681,201 shares are issued and outstanding and no
shares are held in treasury. All of the issued and outstanding shares of the
Buyer have been duly authorized, are validly issued, fully paid, and
nonassessable.
Page 18
(v) Xxxx-Xxxxx-Xxxxxx Filing. No notification or other filing
is required pursuant to the Xxxx-Xxxxx-Xxxxxx Act in connection with the
transactions contemplated by this Agreement.
(vi) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(vii) Investment. The Buyer is not acquiring the Shares with a
view to or for sale in connection with any distribution thereof within the
meaning of the Securities Act. The Buyer (A) understands that the Shares are
being sold and offered in reliance upon federal and state exemptions for
transactions not involving any public offering; (B) is acquiring the Shares for
its own account for investment purposes, and not with a view to the distribution
thereof; (C) is a sophisticated investor with knowledge and experience in
business and financial matters; and (D) is able to bear the economic risk and
lack of liquidity inherent in holding the Shares; provided, however, that
nothing contained in this Section shall in any way affect the liability of the
Sellers for the representations and warranties made by each of them in this
Agreement.
(viii) Buyer's Financial Statements. Attached hereto as
Exhibit K (the "Buyer's Financial Statements") are the audited balance sheets
and statements of income, changes in stockholders' equity, and cash flow for the
Buyer as of and for the fiscal year ended September 30, 1996. The Buyer's
Financial Statements, including the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Buyer for such
period as of such date and the results of operations of the Buyer for such
period, and are consistent with the books and records of the Buyer for such
period.
4. Representations and Warranties Concerning the Company. Each of the
Sellers jointly and severally represents and warrants to the Buyer that the
statements contained in this ss.4 are correct and complete in all material
respects as of the date of this Agreement and will be correct and complete in
all material respects as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss.4), except as set forth in a disclosure letter to be delivered by the Sellers
to the Buyer on the date hereof and signed by each of the Sellers (the
"Disclosure Schedule"). A disclosure in the Disclosure Schedule with respect to
a particular lettered or numbered paragraph in this Section 4 shall not be
deemed to be an adequate disclosure or exception with respect to any
representation or warranty of any Seller contained in any other lettered or
Page 19
numbered paragraph in this Section 4 unless (i) such other lettered or numbered
paragraph is specifically referenced in the disclosure, or (ii) based upon the
nature of the disclosure and the facts described therein, it would be clear to a
reasonably prudent business person that such disclosure is also related to and
is an exception or qualification with respect to another representation or
warranty of any Seller contained in this Section 4. The Disclosure Schedule will
be arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.4.
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the failure to so qualify
would not have a Material Adverse Effect. The Company has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and in which it presently proposes to
engage and to own and use the properties owned and used by it, except for such
licenses, permits and authorizations where the failure to possess or to have
obtained will not have a Material Adverse Effect. ss.4(a) of the Disclosure
Schedule lists the directors and officers of the Company. The Sellers have
delivered to the Buyer correct and complete copies of the articles of
incorporation and bylaws of the Company (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors), the stock certificate books, and
the stock record books of the Company are correct and complete in all material
respects. The Company is not in default under or in violation of any provision
of its articles of incorporation or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
consists of Nine Thousand (9,000) Shares of common stock, of which Two Thousand
Six Hundred Forty-three and 38/100 (2,643.38) Shares are issued and outstanding
and Seven Hundred Thirty-nine and 46/100 (739.46) Shares are held in treasury,
and One Thousand (1,000) shares of preferred stock, of which no shares are
issued and outstanding. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers as set forth in ss.4(b) of the Disclosure
Schedule. Except as otherwise expressly set forth in ss.4(b) of the Disclosure
Schedule, all of which shall be terminated by the Sellers pursuant to
ss.7(a)(xi), there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. Except as
otherwise set forth in ss.4(b) of the Disclosure Schedule, all of which shall be
terminated pursuant to ss.7(a)(xi), there are no (i) outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company or (ii) voting trusts, proxies, or other agreements or
understandings with respect to the voting of the Shares.
(c) Noncontravention. Except as otherwise set forth in ss.4(c) of the
Disclosure Schedule, neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
Page 20
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Company is subject or any provision of the
articles of incorporation or bylaws of the Company or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Company does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except for such notices, filings,
authorizations, consents or approvals where the failure to so make, give or
obtain would not result in any of: (i) a material Liability to the Company or
the Buyer; (ii) a Material Adverse Effect; or (iii) a Party (including any of
the Sellers), having the right to rescind or cause the rescission of the sale of
the Shares to the Buyer hereunder.
(d) Brokers' Fees. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(e) Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Encumbrances, except for Permitted
Encumbrances and properties and assets that are either (i) not shown on the Most
Recent Balance Sheet and are not material or necessary for the operation of the
business and operations of the Company or (ii) disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries; Joint Ventures.
(i) The Company does not have any Subsidiaries.
(ii) ss.4(f)(ii) of the Disclosure Schedule sets forth a list
of each entity in which the Company holds or has the right to acquire five
percent (5%) or more of the equity, partnership, or other interest of such
entity (each such entity, except Subsidiaries, being referred to as a "Joint
Venture") and a list of all material agreements relating thereto to which the
Company is a party ("Joint Venture Agreements"). The Company and, to the
Sellers' knowledge, each counterpart, is in compliance in all material respects
with all of the terms, conditions, and obligations binding upon each of them in
respect of each of the Joint Venture Agreements, and as of the date hereof none
of the respective Joint Venture Agreements has been terminated. The Sellers have
delivered true and correct copies of each Joint Venture Agreement, as amended,
modified or supplemented, to the Buyer and all waivers executed thereunder. The
Company's interest in each of the Joint Ventures is directly owned by the
Page 21
Company as indicated on the Disclosure Schedule and, except for any restriction
on transfer contained in the Joint Venture Agreements, is free and clear of any
material Lien or any other limitation or restriction (including any restriction
on the right to vote, if any, sell, or otherwise dispose of such interest).
There are no outstanding obligations of the Company to fund or make a further
investment in any Joint Venture, other than those that are described in
ss.4(f)(ii) of the Disclosure Schedule.
(g) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"):
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended June 30, 1993, June
30, 1994, June 30, 1995, June 30, 1996 and June 30, 1997 (the "Most Recent
Fiscal Year End") for the Company (with such June 30, 1997 financial statements
being referred to herein as the "Most Recent Financial Statements"). The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods, and
are consistent with the books and records of the Company (which books and
records are correct and complete in all material respects).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, and except for the execution by the Company of the
Employment Agreements and Retention Bonus Agreements pursuant hereto and for
such other action expressly required to be taken by the Company hereunder,
thereunder or under any of the other Sellers' Transaction Documents, or
transactions expressly required hereunder, thereunder or under any of the
Sellers' Transaction Documents, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company that has or would have a Material Adverse Effect.
Without limiting the generality of the foregoing, since that date and except
either (A) as expressly required hereunder or expressly required under any of
the other Sellers' Transaction Documents, or (B) as otherwise set forth in
ss.4(h) of the Disclosure Schedule:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair consideration
in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either (x) involving more than $500,000, individually, for the
provision of labor, services or materials for customers entered into in the
Ordinary Course of Business ("Ordinary Course Contracts"); (y) involving more
than $500,000, individually or in the aggregate, excluding all Ordinary Course
Contracts; or (z) outside of the Ordinary Course of Business;
Page 22
(iii) no party (including the Company) has accelerated,
terminated (except with respect to those agreements, contracts, leases or
licenses which have expired by their express terms), modified, or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $500,000, individually or
in the aggregate, to which the Company is a party or by which it is bound;
(iv) the Company has not imposed any Security Interest upon
any of its assets, tangible or intangible, other than in connection with the
acquisition of machinery and equipment in the Ordinary Course of Business;
(v) the Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than $500,000,
individually or in the aggregate, or outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either involving
more than $15,000 or outside the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$15,000, individually or in the aggregate, other than in connection with the
acquisition of machinery and equipment in the Ordinary Course of Business;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either (A)
involving any of the Sellers, any of the Company's directors or officers, any
Associate of any Seller, any Associate of any of the Company's directors or
officers, CUBS Construction or Golf Corporation or any of their officers,
directors, stockholders or employees, or any of the Seller Receivables,, or (B)
outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the
articles of incorporation or bylaws of the Company;
Page 23
(xii) the Company has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xiii) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to any of its
material property in excess of $500,000, individually or in the aggregate;
(xv) the Company has not made any loan to, entered into any
incentive compensation or bonus agreement or program, distributed or agreed to
distribute any funds outside of the Ordinary Course of Business to, or entered
into any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) except as expressly provided in this Agreement or any of
the other Sellers' Transaction Documents, the Company has not made any loan to,
entered into any incentive compensation or bonus agreement or program,
distributed or agreed to distribute any funds outside of the Ordinary Course of
Business to, or entered into any other transaction with, any of the Sellers;
(xvii) except as expressly provided by this Agreement or any
of the other Sellers' Transaction documents, the Company has not entered into
any agreement, contract, lease or license, written or oral, or modified the
terms of any existing agreement, contract, lease or license, with any Seller or
any of the Company's directors or officers or with any Associate of any Seller
or Associate of any of the Company's directors or officers;
(xviii) other than "at will" employments entered into in the
Ordinary Course of Business which do not provide for any agreements with respect
to severance pay, the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xix) the Company has not granted any increase in the base
compensation, incentive compensation or bonus of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xx) the Company has not granted any increase in the base
compensation, incentive compensation or any bonus to the Sellers outside the
Ordinary Course of Business;
Page 24
(xxi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(xxii) the Company has not made any other change in employment
terms for any of its directors or officers, outside the Ordinary Course of
Business and has not paid any severance or made any commitment to pay any
severance to any director or officer ;
(xxiii) the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(xxiv) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving the Company;
(xxv) the Company has not made or committed to make any
acquisition of all or substantially all of the assets or property of any
business or any stock of any business; and
(xxvi) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no Liability (and, to the
Seller's knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) except for: (i) Liabilities set forth
on the face of the Most Recent Balance Sheet (including the notes thereto); (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law); (iii) Liabilities disclosed
in the Disclosure Schedule (including the obligation of the Company to perform
the express terms and provisions of any contract or agreement described in the
Disclosure Schedule other than as a result of a breach or a default under such
contracts or agreements, unless such breach or default would not be required to
be disclosed under the express terms of any of the Sellers' representations and
warranties set forth herein); (iv) Liabilities which do not have and will not
have a Material Adverse Effect, individually, on the Company; (iv) Liabilities
which do not have and will not, on an individual basis (and not an aggregate
basis), have a Material Adverse Effect, on the Company; (v) Permitted
Encumbrances; (vi) Liabilities, the existence of which would not constitute a
breach of the express terms (including the terms that qualify any representation
or warranty with knowledge or materiality) of the following representations and
warranties of the Sellers: clauses (i), (ii) and (iii) of the last sentence of
ss.4(c), ss.4(1)(i)(B), ss.4(1)(i)(C), ss.4(1)(ii)(C), ss.4(1)(ii)(D),
ss.4(m)(iii)(C), ss.4(m)(v), ss.4(o)(i), (ii), (iv) and (xii); clauses (C) and
(D) of the last paragraph of ss.4(o) clauses (C) and (D) of the last paragraph
of ss.4(s), ss.4(t)(ii) and the penultimate sentence of ss.4(t), ss.4(u), and
Page 25
the penultimate sentence of ss.4(x), and the last two sentences of
ss.4(y)(ii)(B); and (vii) any obligations of the Company to perform the express
terms and provisions of any agreement, note, bond or debt security that is not
expressly required to be disclosed in the Disclosure Schedule under ss.4(h)
above, other than as a result of a breach or default under such agreement, note,
bond or debt security unless such breach or default would not be required to be
disclosed under the express terms of any of the Sellers' representations or
warranties set forth herein.
(j) Legal Compliance. The Company, and its predecessors and Affiliates,
have been operated from its inception, and the Company and its Affiliates will
continue to operate through the Closing Date, in compliance in all material
respects with all conditions and requirements of all applicable federal, state
and local laws, statutes, ordinances, rules, regulations, permits, policies,
guidelines, orders, franchises, authorizations and consents, except where the
failure to so comply would not have a Material Adverse Effect, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply.
(k) Tax Matters.
(i) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. Except as set forth on ss.4(k) of the Disclosure Schedule, all Taxes
owed by the Company (whether or not shown on any Tax Return) have been paid.
Except as set forth in ss.4(k) of the Disclosure Schedule, the Company currently
is not the beneficiary of any extension of time within which to file any Tax
Return. Except as set forth on ss.4(k) of the Disclosure Schedule, no claim has
ever been made by an authority in a jurisdiction where the Company does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
Except as set forth on ss.4(k) of the Disclosure Schedule, there are no Security
Interests on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of the Company has knowledge of any Basis for any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. Except as set forth in ss.4(k) of the Disclosure Schedule,
there is no dispute or claim concerning any Tax Liability of the Company either
(A) claimed or raised by any authority in writing or (B) as to which any of the
Sellers and the directors and officers (and employees responsible for Tax
matters) of the Company has Knowledge based upon personal contact with any agent
of such authority. Section 4(k) of the Disclosure Schedule lists all federal,
Page 26
state, local, and foreign income Tax Returns filed with respect to the Company
for taxable periods ended on or after June 30, 1993, indicates those Tax Returns
that have been audited for taxable periods ending on or after June 30, 1991, and
indicates those Tax Returns that currently are the subject of audit. The Sellers
have delivered to the Buyer correct and complete copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since June 30, 1993. All deficiencies
proposed as a result of such audits have been paid.
(iv) Except as set forth in ss.4(k) of the Disclosure
Schedule, the Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v) The Company has not filed a consent under Code ss.341(f)
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, or is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code ss.280G. The Company has not been a United States real
property holding corporation within the meaning of Code ss.897(c)(2) during the
applicable period specified in Code ss.897(c)(1)(A)(ii). The Company 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 ss.6662. The Company is not a party to any Tax allocation or
sharing agreement. The Company (A) has not, since June 30, 1991, been a member
of an affiliated group, within the meaning of Code ss.1504(a) or any similar
group defined under a similar provision of state, local or foreign law, filing a
consolidated federal income Tax Return or (B) has any Liability for the Taxes of
any Person under Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) ss.4(k) of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most recent
practicable date: (A) the basis of the Company in its assets; and (B) the amount
of any net operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution allocable to the Company.
(vii) Except as set forth in ss.4(k) of the Disclosure
Schedule, the unpaid Taxes of the Company did not, as of the Most Recent Fiscal
Year End, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto). The charges, accruals and reserves with respect to Taxes on
the books of the Company are adequate (as determined in accordance with GAAP),
and, except as set forth in ss.4(k) of the Disclosure Schedule, do not exceed
the reserves for Tax Liability set forth in such books.
Page 27
(l) Real Property.
(i) ss.4(l)(i) of the Disclosure Schedule lists and describes
briefly all real property that the Company owns. With respect to each such
parcel of owned real property:
(A) the Company has good and marketable title to the parcel of real
property, free and clear of any Encumbrance other than the Permitted
Encumbrances;
(B) there are no pending or, to the Knowledge of the Sellers,
threatened condemnation proceedings, lawsuits, or administrative actions
relating to the property or other matters affecting adversely the current
use, occupancy, or value thereof;
(C) to the Knowledge of the Sellers, the legal description for the
parcel contained in the deed thereof describes such parcel fully and
adequately, except as disclosed on the Survey the buildings and
improvements are located within the boundary lines of the described parcels
of land, are not in violation of applicable setback requirements, zoning
laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and except as
disclosed on the Survey do not encroach on any easement which may burden
the land, and the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the property is not
located within any flood plain or subject to any similar type of
restriction for which any permits or licenses necessary to the use thereof
have not been obtained;
(D) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the ownership or operation thereof (except for such approvals, licenses and
permits where the failure to receive the same would not have a Material
Adverse Effect) and have been operated and maintained in accordance with
applicable laws, rules, and regulations, except for such failure(s), which,
individually or in the aggregate, would not have a Material Adverse Effect;
(E) other than as set forth in ss.4(l)(i) of the Disclosure Schedule,
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of use or
occupancy of any portion of the parcel of real property;
(F) there are no outstanding options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or interest
therein;
Page 28
(G) there are no parties (other than the Company) in possession of the
parcel of real property, other than tenants under any leases disclosed in
ss.4(l)(i) of the Disclosure Schedule who are in possession of space to
which they are entitled;
(H) all facilities located on the parcel of real property are supplied
with utilities and other services necessary for the operation of such
facilities, including gas, electricity, water, telephone, sanitary sewer,
and storm sewer, if applicable, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations and
are provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the parcel of real property; and
(I) each parcel of real property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property.
(ii) ss.4(l)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased to the Company. The Company has not
permitted the occupancy of any third party with respect to the real
property listed on ss.4(1)(ii) of the Disclosure Schedule or subleased or
assigned its rights in such property. The Sellers have delivered to the
Buyer correct and complete copies of the leases listed in ss.4(l)(ii) of
the Disclosure Schedule (as amended to date). With respect to each lease
listed in ss.4(l)(ii) of the Disclosure Schedule:
(A) the lease is legal, valid, binding, enforceable, and in full force
and effect;
(B) subject to the delivery of the Required Consents, the lease will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby;
(C) the Company is not, and to the Sellers' Knowledge, no other party
to the lease is, in breach or default, and no event has occurred with
respect to the Company, or to Sellers' Knowledge, such other party which,
with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) the Company has not, and to the Sellers' Knowledge, no other party
to the lease has, repudiated any provision thereof;
(E) there are no disputes, oral agreements, or forbearance programs in
effect as to the lease;
(F) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold;
Page 29
(G) all facilities leased thereunder have received all approvals of
governmental authorities (including licenses and permits) required in
connection with the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations in all material
respects;
(H) all facilities leased thereunder are supplied with utilities and
other services necessary for the operation of said facilities; and
(I) the owner of the warehouse located at 000 000xx Xxxxxx, Xxxxxxx,
Xxxxxxx and leased to the Company has good and marketable title to the
parcel of real property free and clear of any Security Interest (except for
Security Interests created solely by Alpha Steel), easement, covenant, or
other restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants, and other restrictions, in
each case which do not impair the current use or occupancy of the property
subject thereto.
(m) Intellectual Property.
(i) The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Company as presently
conducted. Each item of Intellectual Property owned or used by the Company
immediately prior to the Closing hereunder will be owned or available for use by
the Company on terms and conditions which are, in all material respects,
identical to the terms and conditions in effect immediately prior to the
Closing. The Company has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). Neither the Sellers, nor to
the Seller's Knowledge, any of the directors and officers (and employees with
responsibility for Intellectual Property matters) for the Company, has any Basis
for believing that any third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company.
(iii) ss.4(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Company with respect to any
of its Intellectual Property, identifies each pending patent application or
application for registration which the Company has made with respect to any of
its Intellectual Property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to any
Page 30
of its Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and have made available to the Buyer correct and complete copies of all
other material written documentation evidencing ownership and prosecution (if
applicable) of each such item. ss.4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by the Company in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in ss.4(m)(iii) of the Disclosure Schedule:
(A) the Company possesses all right, title, and interest in and to the
item, free and clear of any Encumbrance, except for the Permitted
Encumbrances;
(B) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending, or to the Sellers' Knowledge, is
threatened which challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) the Company has not ever agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict
with respect to the item, except as provided in any license or agreement
with respect to any of its Intellectual Property to the extent such
licenses or agreements are set forth in ss.4(m) of the Disclosure Schedule.
(iv) Except for "shrink wrap" licenses relating to
non-customized software purchased by the Company for use in its operations, each
item of Intellectual Property that any third party owns and that the Company
uses pursuant to any license, sublicense, agreement, or other permission is
identified on ss.4(m)(iv) of the Disclosure Schedule. The Sellers have delivered
to the Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in ss.4(m)(iv) of the Disclosure
Schedule:
(A) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission will continue to
be legal, valid, binding, enforceable, and in full force and effect on
terms which are, in all material respects, substantially the same as the
terms in effect immediately prior to the consummation of the transactions
contemplated hereunder following the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to
in ss.2 above);
Page 31
(C) the Company is not, and, to the Seller's Knowledge, no other party
of such license, sublicense, agreement, or permission is in breach or
default thereunder, and to the Seller's Knowledge, no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) to the Seller's Knowledge, no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(E) to the Seller's Knowledge, the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(F) to the Seller's Knowledge, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or enforceability of
the underlying item of Intellectual Property; and
(G) except as set forth in ss.4(m)(iv) of the Disclosure Schedule, the
Company has not granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v) Except as set forth in ss.4(m)(v) of the Disclosure
Schedule, to the Knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company, the Company is not interfering with, infringing upon, misappropriating,
or in conflict with, any Intellectual Property rights of third parties as a
result of the operation of its businesses as presently conducted.
(n) Tangible Assets. ss.4(n) of the Disclosure Schedule lists all of
the Company's machinery, equipment and other tangible assets other than real
property. The Company owns or leases all buildings, machinery, equipment, and
other tangible assets necessary for the conduct of its business as presently
conducted, and each such tangible asset is free from material defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(o) Contracts. ss.4(o) of the Disclosure Schedule lists the following
contracts and other agreements to which the Company is a party:
(i) any agreement (or group of related agreements) as of June
30, 1997 for the lease of personal property which involves annual payments in
excess of $10,000 and which may not be terminated by the Company for any reason
and without payment of any premium or penalty upon thirty (30) days' notice to
or from any Person;
Page 32
(ii) any agreement (or group of related agreements) as of June
30, 1997 for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one
year and involves the payment or receipt of any amount in excess of $10,000;
(iii) any agreement concerning the Company's investments or
equity participation in a partnership or joint venture;
(iv) any agreement (or group of related agreements) as of June
30, 1997 under which it has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation which
involves the payment of any amount in excess of $10,000;
(v) any agreement concerning confidentiality, noncompetition
or other commitment limiting the ability of a party to compete in any line of
business, with any person or in any geographic area, whether for the benefit of
the Company or of a third party;
(vi) any agreement as of June 30, 1997 with any of the Sellers and
their Affiliates (other than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of the Company's current or former directors, officers, and
employees;
(viii) any collective bargaining agreement as of June 30,
1997;
(ix) any agreement as of June 30, 1997 for the employment of any
individual on a full-time, part-time, consulting, or other basis;
(x) any agreement as of June 30, 1997 under which it has advanced or
loaned any amount to any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default
or termination could have a Material Adverse Effect;
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 and may not be
terminated by the Company for any reason and without penalty or premium upon
thirty (30) days' notice;
Page 33
(xiii) a list of all of the Customer Contracts and the status
thereof including specifically the combined job cost analysis in the form of
Exhibit ss.4(o)(c) to ss.4(o) of the Disclosure Schedule (the "Contract
Statement");
(xiv) a list of all of the Subcontracts and the status thereof
including specifically the following information with respect to each such
Subcontract: contract number, name and address of subcontractor, vendor or
supplier, a description of work to be performed thereunder, original Subcontract
price, value and description of all approved change orders, the value and
description of all unapproved change order requests by any such subcontractor,
vendor or supplier, subcontract xxxxxxxx to date by any such subcontractor,
vendor or supplier, and payments made by the Company to such subcontractor,
vendor or supplier to date (the "Subcontract Statement");
(xv) each other agreement, contract, or commitment (other than
Customer Contracts not listed on ss.4(o)(xv) of the Disclosure Schedule) which
contain terms providing for the termination, default, loss of rights or
privileges, acceleration of payment, or any other change in the terms or
conditions of such document upon the sale or exchange of a majority of the
common stock of the Company or upon any change in control of the Company, except
where any such termination, default, loss of rights or privileges, acceleration
of payment or other change in terms or conditions would not have a Material
Adverse Effect.
The Sellers have delivered or provided to the Buyer (or its
representatives) a correct and complete copy of each written agreement listed in
ss.4(o) of the Disclosure Schedule (as amended to date) that was in existence as
of June 30, 1997 and a written summary, contained in ss.4(o) of the Disclosure
Schedule, setting forth the terms and conditions of each oral agreement referred
to in ss.4(o) of the Disclosure Schedule and, for such contracts entered into
after June 30, 1997, will make available a copy of each such agreement, or a
written summary thereof in the case of oral agreements. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby (except for breaches or
modifications involving acts or conduct of the Company after the Closing Date);
(C) the Company is not, and to Seller's knowledge, no other party thereto is, in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) the Company has not, and to Seller's
Knowledge, no other party has, repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
the Company are reflected properly on its books and records, and, except for the
Officer Loans, (i) arose out of bona fide, arms' length transactions, (ii) are
in all material respects valid receivables subject to no setoffs or
counterclaims, (iii) are current and collectible, and (iv) will be collected in
Page 34
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and those reserves set forth in ss.4(p) of
the Disclosure Schedule, as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company.
(q) Unbilled Revenues. All of the unbilled revenue and disbursements
reflected in the Most Recent Financial Statements have been properly determined
on a basis consistent with applicable contract terms and such amounts will
become good and collectible accounts receivable in the Ordinary Course of
Business.
(r) Powers of Attorney. Other than as set forth in ss.4(r) of the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company.
(s) Insurance. ss.4(s) of the Disclosure Schedule describes any
self-insurance arrangements affecting the Company, whether underwritten
individually by the Company or jointly with others. ss.4(s) of the Disclosure
Schedule also sets forth the following information with respect to such
self-insurance arrangements and each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past 3
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such self-insurance arrangement and insurance policy: (A)
the arrangement or policy is legal, valid, binding, enforceable, and in full
force and effect in accordance with its express terms; (B) the arrangement or
the policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on terms that following the consummation of the transactions
contemplated hereby are, in all material respects, substantially the same as the
terms in effect immediately prior to the consummation of the transactions
contemplated hereunder; (C) neither the Company nor, to Sellers' knowledge, any
Page 35
other party to the arrangement or the policy, is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default by the Company, or, to Sellers' knowledge, a breach or default
by any other party to the arrangement or the policy, or permit termination,
modification, or acceleration, under the arrangement or the policy; and (D)
neither the Company nor, to the Sellers' knowledge, any other party to the
arrangement or the policy, has repudiated any provision thereof. The Company has
been covered during the past 6 years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the
aforementioned period.
(t) Litigation. ss.4(t) of the Disclosure Schedule sets forth each
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Sellers and the directors and officers (and employees
with responsibility for litigation matters) of the Company, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. None of the
Sellers and the directors and officers (and employees with responsibility for
litigation matters) of the Company has knowledge of any Basis for any such
action, suit, proceeding, hearing, or investigation to be brought or threatened
against the Company other than those listed on ss.4(t) of the Disclosure
Schedule. ss.4(t) of the Disclosure Schedule also sets forth the Company's
reserves for each of the actions, suits, proceedings, hearings, and
investigations that it has recorded on its books and records and reported on the
balance sheet of its Most Recent Financial Statements (not including the notes
thereto).
(u) Warranty. Each product manufactured, sold, leased, or delivered by
the Company and each service rendered by the Company has been in conformity in
all material respects with all applicable contractual commitments and all
express and implied warranties, and the Company has no Liability that would have
a Material Adverse Effect (and to Seller's Knowledge there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company that would give rise to any
Liability that would have a Material Adverse Effect) for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve
for warranty claims set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto). Except as set forth in ss.4(u) of the
Disclosure Schedule, no product manufactured, sold, leased, or delivered by the
Company and no service rendered by the Company is subject to any guaranty,
warranty, or other indemnity beyond the applicable standard terms and
conditions. ss.4(u) of the Disclosure Schedule includes copies of the standard
terms and conditions for the Company (containing applicable guaranty, warranty,
and indemnity provisions).
Page 36
(v) Liability. Except as disclosed in ss.4(v) of the Disclosure
Schedule and except for any Liabilities which, individually or in the aggregate,
would not have a Material Adverse Effect, the Company has no Liability (and, to
Seller's knowledge, there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
the Company that would give rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Company and any service
rendered by the Company.
(w) Employees. ss.4(w) of the Disclosure Schedule lists each employee
of the Company and each employee's respective job title or position and current
salary. To the knowledge of any of the Sellers and the directors and officers
(and employees with responsibility for employment matters) of the Company, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company. Except as set forth in ss.4(w) of the Disclosure
Schedule, consummation of the transactions contemplated by this Agreement will
not (A) entitle any Person to severance pay, unemployment compensation, or any
similar compensation, (B) accelerate any time of payment or vesting or increase
the amount of any compensation due to any Person, or (C) entitle any Person to
any parachute payment within the meaning of Section 280G of the Code. The
Company has not incurred or reasonably expects to incur any liability or
obligation under the Workers Adjustment Retraining Notification Act or any
similar state law ("WARN"); and within the six month period immediately
following the Closing Date, the Company and no Person who together with whom the
Company would be treated as an "employer" for purposes of WARN will incur any
such liability if, during such six month period, only terminations of employment
of not more than 50 employees occur in the normal course of operations.
(x) Collective Bargaining Agreements. Except as set forth on ss.4(x) of
the Disclosure Schedule, the Company is not a party to, bound by or currently
negotiating any collective bargaining agreement or any other agreement with a
labor union. There is not pending or, to the Knowledge of the Sellers,
threatened, any labor dispute, strike, work stoppage, grievance, claim of unfair
labor practices, or other collective bargaining disputes. The Company has not
committed any unfair labor practice.
(y) Employee Benefits.
(i) ss.4(y) of the Disclosure Schedule lists each Employee
Benefit Plan that the Company maintains or to which the Company contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract,
or fund) complies in form and in operation in all respects with the applicable
requirements of ERISA, the Code, and other applicable laws.
Page 37
(B) All required reports and descriptions (including
Form 5500 Annual Reports,
Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
ss.4980B have been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary
reduction contributions) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan and all contributions for
any period ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in accordance with
the past custom and practice of the Company. All premiums or other payments for
all periods ending on or before the Closing Date have been paid with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code ss.401(a) and has received, within the last two years,
a favorable determination letter from the Internal Revenue
Service.
(E) The market value of assets under each such
Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of all vested and nonvested Liabilities thereunder
determined in accordance with PBGC methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for determination.
(F) The Sellers have delivered to the Buyer correct
and complete copies of the
plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent Form 5500
Annual Report, and all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the
Company, and the Controlled Group of Corporations which includes the Company
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been completely or partially
terminated or been the subject of a reportable event, within the meaning
set forth in ERISA ss.4043, as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such
Page38
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
instituted or threatened.
(B) There have been no prohibited transactions, within the meaning set
forth in ERISA ss.406 and Code ss.4975, with respect to any such Employee
Benefit Plan. No fiduciary, within the meaning set forth in ERISA ss.3(21),
has any Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Seller's Knowledge, threatened. None of the
Sellers and the directors and officers (and employees with responsibility
for employee benefits matters) of the Company has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or investigation.
(C) The Company has not incurred, and none of the Sellers and the directors
and officers (and employees with responsibility for employee benefits
matters) of the Company has any reason to expect that the Company will
incur, any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any withdrawal Liability) or
under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) The Company and the other members of the Controlled
Group of Corporations that includes the Company has not contributed to, never
has contributed to, and never has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability) under
any Multiemployer Plan.
(iv) The Company does not maintain and has never maintained,
does not contribute and has never contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code ss.4980B).
(z) Guaranties. Except as set forth in ss.4(z) of the Disclosure
Schedule, the Company is not a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other Person other than
as endorser of checks received by it and deposited in the Ordinary Course of
Business.
(aa) Environment, Health, and Safety.
(i) The Company and its predecessor Persons and Affiliates
have complied in all material respects with all Environmental, Health, and
Page 39
Safety Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply. Without limiting the generality of the
preceding sentence, the Company and its predecessor Persons and Affiliates have
obtained and been in compliance in all material respects with all of the terms
and conditions of all permits, licenses, and other authorizations which are
required under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health, and Safety Laws.
(ii) The Company has no Liability (and none of the Company and
its Affiliates has handled, transported, stored, treated or disposed of any
substance, arranged for the disposal of any substance, exposed any employee or
other individual to any substance or condition, allowed or arranged for any
third person to transport, store, treat, or dispose of waste, (including, but
not limited to asbestos or asbestos-containing materials), to or at (1) any
location other than a site lawfully permitted to receive such waste for such
purposes or (2) any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act, as from
time to time amended, or any similar federal or state statute assigning
responsibility for the cost of investigating or remediating releases of
contaminants into the environment; nor has the Company performed, arranged for,
or allowed by any method or procedure, such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which gives rise to any Liability whatsoever; and the Company has not disposed,
nor has it allowed or arranged for third parties to dispose, of waste upon
property ever owned or leased by it, except as permitted by law and except as
disclosed in the Existing Reports. Without limiting the generality of the
foregoing, except as set forth in ss.4(aa)(ii) of the Disclosure Schedule, the
Company has not received any notification (including requests for information
directed to it) from any governmental agency asserting that it is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment, or disposal facility, pursuant to the provisions of CERCLA, or any
similar federal or state statute assigning responsibility for the costs of
investigating or remediating releases or contaminants into the environment.
There has been no release (for the purpose of any applicable environmental law)
of any hazardous waste or hazardous substance on, into, or beneath any real
property owned or leased by the Company, and the Company does not have any
Liability, whether known or unknown, for any remedial or corrective action on
any real property. The Company has not owned or operated any property or
facility in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Company and its predecessors and Affiliates have been free of asbestos, asbestos
Page 40
containing materials, lead, lead containing materials, PCB's, methylene
chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans,
and extremely hazardous substances, within the meaning set forth in ss.302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
(bb) Certain Business Relationships with the Company. Except as
otherwise set forth in ss.4(bb) of the Disclosure Schedule and except for
employment as an employee of the Company, none of the Sellers or their
Affiliates has been involved in any business arrangement or relationship with
the Company within the past 12 months, and none of the Sellers or their
Affiliates owns any asset, tangible or intangible, which is used in the business
of the Company.
(cc) Conformance with Standard of Care. The performance by the Company
of all services with respect to the Customer Contracts has been conducted in all
material respects in accordance with all applicable industry standards at the
time and within the locality where the services were performed including,
without limitation, compliance in all material respects with all applicable
laws, regulations, and standards governing the provision of such services.
(dd) Relationships with Customers. Except as set forth in ss.4(dd) of
the Disclosure Schedule, no customer of the Company, which for the twelve (12)
month period ending June 30, 1997, accounted for more than two percent (2%) of
the total revenue for the Company, has (1) refused to honor any of its
commitments, (2) presented the Company with written information indicating
dissatisfaction with the quality or price of the Company's services, or (3)
indicated that it would not renew any existing vendor agreement, maintenance
agreement or blanket purchase order or that it would generally not continue
doing business with the Company on a basis similar to that previously conducted.
(ee) Disclosure. The representations and warranties (as supplemented by
the Disclosure Schedule) contained in this ss.4 do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained in this ss.4 not
misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss.7 below).
(b) Notices and Consents. The Sellers will obtain the Required Consents
as set forth in ss.5(b) of the Disclosure Schedule. The Sellers will cause the
Company to give any notices to third parties, and will cause the Company to use
Page 41
its reasonable best efforts to obtain any third party consents, that the Buyer
may reasonably request in connection with the matters referred to in ss.4(c)
above. Each of the Parties will (and the Sellers will cause the Company to) give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in ss.3(a)(ii),
ss.3(b)(ii), and ss.4(c) above.
(c) Operation of Business. Except as expressly provided for in this
Agreement, the Sellers will not cause or permit the Company to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, except as
expressly provided for in this Agreement, the Sellers will not cause or permit
the Company to (i) declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or otherwise
acquire any of its capital stock, (ii) declare, set aside, agree to pay or pay
any bonus or other compensation outside the Ordinary Course of Business, (iii)
loan, guaranty or agree to loan or guaranty any amount to any of the Sellers or
third party; or (iv) otherwise engage in any practice, take any action, or enter
into any transaction which would be required to be disclosed under ss.4(h)
above.
(d) Preservation of Business. The Sellers will cause the Company to use
its reasonable best efforts to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers, and
employees, consistent with past custom and practice.
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause the Company to permit, representatives of the Buyer to have full access at
all reasonable times, to all premises, properties, personnel, books, records
(including Tax records), contracts, and documents of or pertaining to the
Company.
(f) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development of which any of them become
aware that causes a breach of any of the representations and warranties in ss.4
above. Each Party will give prompt written notice to the others of any material
adverse development of which any of them become aware that causes a breach of
any of his or its own representations and warranties in ss.3 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. Until such time as this Agreement shall have been
terminated, none of the Sellers will (and the Sellers will not cause or permit
the Company to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets of,
the Company (including any acquisition structured as a merger, consolidation, or
Page 42
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Until such time as this Agreement shall have been
terminated none of the Sellers will vote their Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange. During the
term hereof, the Sellers will notify the Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) Title Insurance. The Sellers will cause the Company to obtain the
following title insurance commitments, policies, and riders in preparation for
the Closing: with respect to each parcel of real estate that the Company owns,
an ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent policy
reasonably acceptable to the Buyer if the real property is located in a state in
which an ALTA Owner's Policy of Title Insurance Form B-1987 is not available)
issued by a title insurer reasonably satisfactory to the Buyer (and, if
requested by the Buyer, reinsured in whole or in part by one or more insurance
companies and pursuant to a direct access agreement reasonably acceptable to the
Buyer), in such amount as the Buyer may reasonably determine to be the fair
market value of such real property (including all improvements located thereon),
insuring title to such real property to be in the Company as of the Closing
(subject only to the Permitted Encumbrances).
Each title insurance policy delivered under this ss.5(h) shall (A)
insure title to the real property and all recorded easements benefiting such
real property, (B) contain an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such policies, (C) contain an ALTA
Zoning Endorsement 3.1 (or equivalent), if available, (D) contain an endorsement
insuring that the real property described in the title insurance policy is the
same real estate as shown on the survey delivered with respect to such property
(the "Survey"), (E) contain an endorsement insuring that each street adjacent to
the real property is a public street and that there is direct and unencumbered
pedestrian and vehicular access to such street from the real property, (F) if
the real property consists of more than one record parcel, contain a
"contiguity" endorsement insuring that all of the record parcels are contiguous
to one another, and (G) contain a "non-imputation" endorsement to the effect
that title defects known to the officers, directors, and stockholders of the
owner prior to the Closing shall not be deemed "facts known to the insured" for
purposes of the policy, if available.
(i) Termination of Agreements. The Sellers will cause the Company to
terminate all of its agreements regarding, and obtain a release from liability
related to (i) the Company's guaranty of indemnity agreements for bonding
purposes of Persons other than the Company including, but not limited to, CUBS
Construction and Golf Corporation; (ii) employment agreements with Xxxxxxx X.
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxx and Xxxxxx Xxxxxxx;
(iii) deferred compensation agreements with Xxxx X. Manta, Xxx X. Manta, Xxxxxx
X. Manta and Xxxxxx Xxxxxxx; and (iv) security interests securing obligations of
Page 43
the Company to Xxxx X. Manta, collateralized in part by a pledge of the Shares
owned by Xxx X. Manta and Xxxxxx X. Manta. In addition, the Sellers will
terminate any existing agreements by, among or between the Sellers relating to
securities of the Company.
(j) Related Party Agreements.
(i) The Sellers will cause the Company to deliver to the Buyer
an acknowledgment signed by duly authorized officers of each of Golf Corporation
and CUBS Construction that the Company's arrangement and agreement with such
parties for the Company to provide accounting, safety and other services is an
"at will" arrangement and is terminable at any time, with or without cause, by
either the Company or such party. The Sellers will cause (i) all outstanding
amounts owed to the Company from Golf Corporation, CUBS Construction, or any
other corporation, partnership, trust or other entity in which any of the
Sellers, any officers, directors or employees of the Company, or the Associates
of any of the foregoing have an interest, as listed on ss.5(j) of the Disclosure
Schedule and (ii) all outstanding amounts owed to the Company from the
individuals or entities, and in the amounts, listed on ss.5(j) of the Disclosure
Schedule (collectively, the "Seller Receivables"), to be paid in full at or
prior to the Closing. In the event that such Seller Receivables are not paid in
full at or prior to Closing, the amount of any outstanding Seller Receivables
shall be offset from the cash portion of the Purchase Price pursuant to ss.2(b).
(ii) The Sellers will cause the Company to deliver to the
Buyer evidence of the termination of insurance and bonding coverage for Golf
Corporation, CUBS Construction, and any other entities which are not an
Affiliate of the Company and the Sellers shall deliver to the Buyer an indemnity
agreement, reasonably satisfactory in form and substance to Buyer, in which each
of CUBS Construction, Inc. ("CUBS") and Golf Corporation ("Golf") shall
indemnify the Buyer for any Adverse Consequences resulting from, arising out of
relating to or caused by (i) any uninsured claims arising out of or relating to
the business or operations of CUBS or Golf; (ii) any amounts which the Company
is required to pay pursuant to the insurance program with United Trades
Insurance Company as the result of any claims arising out of or relating to the
business or operations of CUBS or Golf; and (iii) any guarantees by the Company
of any bonds issued for Golf Corporation and CUBS Construction as principals.
(iii) The Sellers shall cause the Company to deliver an
Assignment and Assumption Agreement, in a form reasonably acceptable to Buyer
(the "Assignment Agreement"), duly executed by the Company and the officers of
Riff-Raff, Inc., as agent for Lake County Trust Company (the "Landlord"), which
shall assign to the Company all of the rights of JMLI of Indiana, Inc. under its
lease with the Landlord for the aforementioned property and in which the Company
shall assume all of the obligations under such lease. The Assignment Agreement
shall further provide (i) an acknowledgment by the Landlord that such lease is
in full force and effect; (ii) a representation that the tenant thereunder is
Page 44
not in default under the lease, (iii) an acknowledgment that the landlord is and
shall be responsible for any remediation required pursuant to any remediation of
conditions identified in the Existing Reports and (iv) an agreement in which the
Landlord agrees to indemnify, defend and hold the Company and the Buyer harmless
from and against any Liability for such remediation. Notwithstanding the
foregoing, any liability of Landlord for a violation of Environmental, Health
and Safety Laws with respect to the warehouse located at 000 000xx Xxxxxx,
Xxxxxxx, Xxxxxxx, shall cease upon the sale of such property to Buyer.
(iv) The Sellers will cause the Company to deliver to the
Buyer a written instrument executed by Xxxx X. Manta (the "Xxxx X. Manta
Waiver") (A) waiving his rights to mandatory pre-payment of certain amounts
required to be paid to him pursuant to his Redemption Agreement and Consulting
Agreement with the Company (B) consenting to this Agreement and the transactions
contemplated hereby and (C) acknowledging that the annual periodic payments due
to him pursuant to such agreements may be continued to be made after the Closing
in full satisfaction of the Company's obligations to him thereunder.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is reasonably necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under ss.8 below). The
Sellers acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
Notwithstanding the foregoing, after the Closing, the Buyer shall provide to
Sellers, on a timely basis upon written request, the information reasonably
required by Sellers in connection with the preparation of Sellers' tax returns
for periods prior to the Closing Date.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any claim brought under or pursuant to this Agreement or any of Sellers'
Transaction Documents or Buyer's Transaction Documents or otherwise in
connection with any of the transactions contemplated under this Agreement or any
of the Sellers' Transaction Documents or Buyer's Transaction Documents or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
Page 45
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or any Seller, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under ss.8 below).
(c) Transition. Prior to the Closing and during the Non-Compete Period,
none of the Sellers will take any action that is intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Company from maintaining the same business relationships with
the Company after the Closing as it maintained with the Company prior to the
Closing. During the Non-compete Period, each of the Sellers will refer all
customer inquiries received by them relating to the businesses of the Company to
the Buyer from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as
confidential all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
ss.6(d). If, in the absence of a protective order or the receipt of a waiver
hereunder, any of the Sellers is, on the advice of counsel, compelled or
required by applicable law to disclose any Confidential Information to any
tribunal , that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or its
reasonable best efforts to obtain, at the request and sole expense of the Buyer,
an order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as the Buyer
shall designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to the
time of disclosure.
(e) Amendment Approval. Promptly following the Closing the Buyer shall
take, at its sole expense, all appropriate and necessary action to seek all
approvals required under its bylaws, corporate charter and/or under all
applicable laws, rules and regulations (including applicable federal and state
securities laws and exchange or NASDAQ rules and regulations) for it to amend
its corporate charter to provide for an amount of Buyer's authorized but
unissued shares of Buyer Common Stock equal to or greater than the Sufficient
Buyer Common Stock Amount (the "Amendment"), as adjusted pursuant to the terms
of the Convertible Securities. Such Sufficient Buyer Stock Amount may be
obtained by an increase in the number of the Buyer's authorized but unissued
shares, by stock split or reverse stock split, or by any other method deemed
appropriate by Buyer. Without limiting the generality of the foregoing, the
Buyer shall take all necessary and appropriate action required for such
Amendment, including, without limitation, establishing a meeting date for a
Page 46
meeting of its shareholders to vote on and approve such Amendment, establishing
a record date for such meeting and preparing and mailing proxy materials for
such meeting and soliciting proxies from its shareholders to vote in favor of
such Amendment. Buyer agrees that the approval of the Amendment will be included
on the agenda of the Buyer's first stockholders' meeting following the Closing,
which meeting shall be held no later than June 30, 1998 (the "Approval
Deadline"). Although the parties acknowledge that Buyer cannot insure that the
Amendment will be approved, Buyer does hereby agree to use its reasonable best
efforts to obtain approval of the Amendment. The Board of Directors of the
Company will recommend to its stockholders that such Amendment be approved.
In the event that the Amendment is not approved or is not effective by
the Approval Deadline, Buyer covenants and agrees to implement another form of
incentive compensation or stock appreciation rights (collectively, the
"Alternative Compensation Agreements"), reasonably acceptable to the Requisite
Sellers and the Buyer, which would give the Sellers substantially the same
financial benefits as the financial benefits of the Convertible Securities. In
the case of the Additional Stock Option Agreements, the financial benefits of
such Alternative Compensation Agreements shall vest over the same period of time
as the Additional Stock Option Agreements, shall have an effective term of not
less than ten (10) years, shall be based on the value of the options granted
pursuant to the Additional Stock Option Agreement and shall be subject to the
all limitations set forth therein, including restrictions on the time and manner
of exercise.
(f) Maintaining Sufficient Buyer Common Stock Amount. From and after
the date of approval of the Amendment and for so long as any amounts remain
outstanding under any of the Convertible Promissory Notes or Retention Bonus
Agreements and/or any options remain outstanding under any of the Stock Option
Agreements or Additional Stock Option Agreements, Buyer shall have available for
issuance an amount of shares of Buyer Common Stock equal to the Sufficient Buyer
Common Stock Amount.
(g) Covenant Not to Compete. Each Seller agrees that during its
Non-Compete Period, it shall not engage directly or indirectly in any business
that the Company conducts as of the Closing Date; provided, however, that no
owner of less than 3% of the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses, and provided further that the ownership of the securities of the
Buyer shall not constitute a breach of this Section. If the final judgment of a
court of competent jurisdiction declares that any term or provision of this
ss.6(g) is invalid or unenforceable, then the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
Page 47
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed. Provided,
however, the ownership of the entities set forth in ss.6(g) to the Disclosure
Schedule shall not be deemed to violate the foregoing covenant.
(h) Convertible Promissory Notes. The conversion rights set forth in
the Convertible Promissory Notes shall be exercisable only in the event that the
Buyer then shall have sufficient authorized capital stock to issue to the
Sellers in conversion of payments due to them thereunder. Each Convertible
Promissory Note will be imprinted with a legend substantially in the following
form:
The payment of principal and interest on this Note is subject to
certain recoupment provisions set forth in a Stock Purchase Agreement dated as
of September 30, 1997 (the "Purchase Agreement") among the issuer of this Note,
the person to whom this Note originally was issued, and certain other persons.
This Note was originally issued on November 10, 1997, and has not been
registered under the Securities Act of 1933, as amended. The transfer of this
Note is subject to certain restrictions set forth in the Purchase Agreement. The
issuer of this Note will furnish a copy of these provisions to the holder hereof
without charge upon written request.
Each holder desiring to transfer a Convertible Promissory Note first must
furnish the Buyer with (i) a written opinion satisfactory to the Buyer in form
and substance from counsel satisfactory to the Buyer by reason of experience to
the effect that the holder may transfer the Convertible Promissory Note as
desired without registration under the Securities Act.
(i) Retention Bonus Agreements. On the Closing Date the Company shall
enter into Retention Bonus Agreements in the form of Exhibit B attached hereto
with certain key employees of the Company (the "Retention Bonus Agreements").
The Requisite Sellers shall determine the employees of the Company to enter into
such Retention Bonus Agreements and to be paid such bonuses and the amount of
each such employee's bonus. The aggregate amount of all bonuses pursuant to the
Retention Bonus Agreements shall be Nine Hundred Thousand Dollars ($900,000),
and the Buyer agrees to make available the aggregate amount of Nine Hundred
Thousand Dollars ($900,000) for the payment of bonuses pursuant to such
Retention Bonus Agreements. On the Closing Date the Buyer shall pay to the
Company in immediately available funds the aggregate amount of Six Hundred
Thirty-five Thousand, Two Hundred Ninety-One and 99/100 Dollars ($635,291.99)
for the purpose of the Company paying bonuses on the Closing Date pursuant to
the Retention Bonus Agreements. The payment of such bonuses on the Closing Date,
the withholding of appropriate federal, state and local taxes, and all other
employer obligations related to such bonuses shall be the obligation of the
Company. The Retention Bonus Agreements shall provide that the remaining bonus
amount of Two Hundred Sixty-four Thousand, Seven Hundred Eight and 01/100
Dollars ($264,708.01) shall be paid quarterly in equal quarterly installments
Pag 48
over a three (3) year period subsequent to the Closing Date, and payments shall
be convertible at the election of the holder thereof into voting no par value
common stock of the Buyer; provided, however, that such conversion rights shall
be exercisable only in the event that the Buyer then shall have sufficient
authorized capital stock to issue to such holders in conversion of payments due
to them thereunder.
(j) Stock Option Agreements. On the Closing Date the Buyer agrees to
issue to the Sellers, in the aggregate, options to purchase Three Hundred
Thousand (300,000) shares of the voting no par value common stock of the Buyer
(the "Stock Option Agreements"). In addition, the Buyer agrees to issue to the
Sellers, in the aggregate, options to purchase Two Hundred Thousand (200,000)
shares of the voting no par value common stock of the Buyer (the "Additional
Stock Option Agreements") when the Buyer has obtained the sufficient Buyer
Common Stock Amount (subject to the qualifications set forth in ss.6(e));
provided, however, that the Buyer shall not have any obligation to issue
securities pursuant to the Additional Stock Option Agreements in the event it
has implemented Alternative Compensation Agreements in lieu thereof pursuant to,
and in accordance with, the terms and conditions of ss.6(e) hereof. Buyer shall,
on or before the date on which any options under the Stock Option Agreements or
Additional Stock Option Agreements, as applicable, become exercisable, file and
have effective with the SEC a registration statement on Form S-8 covering the
stock and the options relating to each of the Stock Option Agreements and any
Additional Stock Option Agreements granted pursuant to ss.6(j). The Stock Option
Agreements and the Additional Stock Option Agreements shall be in the form of
Exhibit C attached hereto, shall have an exercise price equal to $0.34 per
share, and shall vest over a three (3) year period subsequent to the Closing
Date, at a rate a one-third (1/3) of the total number of options per year. The
employees of the Company to be issued the Stock Option Agreements and the
Additional Stock Option Agreements and the number of options to be issued to
each such employee is listed on ss.6(j) of the Disclosure Schedule. The
Requisite Sellers shall provide to the Buyer in writing, not less than three (3)
business days prior to the Closing Date, a list of the employees of the Company
to be issued the Stock Option Agreements and the Additional Stock Option
Agreements, together with the number of options to be issued to each such
employee.
(k) Employment and Consulting Agreements. Each of Xxx X. Manta, Xxxx X.
Manta, Xxxxxxx X. Xxxxxx, Xxx X. Xxxxxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxxxxx and
Xxxxx XxXxxxx shall enter into an Employment Agreement with the Company in form
and substance as set forth in Exhibit E-1 through E-7 attached hereto,
respectively, for a term of three (3) years each in the case of the Employment
Agreements of Xxx X. Manta, Xxxx X. Manta, Xxxxxxx X. Xxxxxx, Xxx X. Xxxxxxxx
and Xxxxx XxXxxxx, and for a term of one (1) year each in the case of the
Employment Agreements of Xxxx Xxxxxxxxx and Xxx Xxxxxxxxx (the "Employment
Agreements") with the title and salary set forth opposite his name on ss.6(k) of
Page 49
the Disclosure Schedule, and Xxxxxx X. Manta shall enter into a Consulting
Agreement with the Company in form and substance as set forth in Exhibit L for a
term of one (1) year (the "Consulting Agreement").
(l) Actions to Allow the Nomination of Xxxxxxx X. Xxxxxx to the Board
of Directors of Buyer. Buyer shall use its reasonable best efforts to assure the
addition of one (1) seat on Buyer's Board of Directors and to assure that
Xxxxxxx X. Xxxxxx be included as part of Buyer's slate of directors to be
recommended for election by the stockholders of Buyer at each annual meeting of
stockholders of Buyer which includes the election of directors for any term of
office included in the next three (3) years after the Closing Date; provided
that such increase in the size of Buyer's Board of Directors and the nomination
and election of Xxxxxxx X. Xxxxxx shall be subject to the approvals of the
Buyer's Board of Directors and Stockholders. The foregoing obligation shall
cease and expire on the third anniversary of the Closing Date.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(a)
and ss.4 above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) the Sellers shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the Required
Consents, all of the title insurance commitments, policies, and riders specified
in ss.5(h) above, and all of the surveys specified in ss.5(h) above;
(iv) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Buyer to own the
Shares and to control the Company, or (D) have a Material Adverse Effect upon
the right of the Company to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
Page 50
(v) the Sellers shall have delivered to the Buyer a
certificate, duly executed by each Seller, to the effect that each of the
conditions specified above in ss.7(a)(i)-(iv) is satisfied in all respects;
(vi) Xxxx X. Manta shall have entered into an Employment
Agreement in the form of Exhibit E-1 attached hereto, Xxxxxxx X. Xxxxxx shall
have entered into an Employment Agreement in the form of Exhibit E-2 attached
hereto, Xxx X. Manta shall have entered into an Employment Agreement in the form
of Exhibit E-3 attached hereto, Xxxxx XxXxxxx shall have entered into an
Employment Agreement in the form of Exhibit E-4 attached hereto, Xxx X. Xxxxxxxx
shall have entered into an Employment Agreement in the form of Exhibit E-5
attached hereto, Xxx Xxxxxxxxx shall have entered into an Employment Agreement
in the form of Exhibit E-6 attached hereto, Xxxx Xxxxxxxxx shall have entered
into an Employment Agreement in the form of Exhibit E-7 attached hereto, and
Xxxxxx X. Manta shall have entered into a Consulting Agreement in the form of
Exhibit L attached hereto.
(vii) each of the Sellers shall have executed and delivered to
the Buyer a General Release in favor of the Company in form and substance as set
forth in Exhibit F attached hereto (the "General Release"), and the same shall
be in full force and effect;
(viii) each of the Sellers shall have entered into a
Registration Rights Agreement with the Buyer in form and substance as set forth
in Exhibit G attached hereto (the "Registration Rights Agreement"), and the same
shall be in full force and effect;
(ix) the Buyer shall have received from counsel to the Sellers
an opinion in form and substance as set forth in Exhibit H attached hereto,
addressed to the Buyer, and dated as of the Closing Date, subject to such
changes as may be reasonably made by the legal opinion committee of counsel to
Sellers, which changes shall be reasonably acceptable to counsel to Buyer;
(x) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company other than those
whom the Buyer shall have specified in writing at least five (5) business days
prior to the Closing;
(xi) The Company shall have terminated and obtained
appropriate releases in form and substance acceptable to the Buyer in its sole
and absolute discretion of the following: (1) guaranties of indemnity agreements
for bonding purposes of Persons other than the Company, including, but not
limited to, any and all guaranties of obligations of CUBS Construction, Inc. and
Golf Corporation including, but not limited to, bond guaranties, and any and all
other guaranties, (2) existing employment agreements with Xxxxxxx X. Xxxxxx,
Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxx and Xxx Xxxxxxxxx, (3)
deferred compensation agreements with Xxxx X. Manta, Xxxxxx X. Manta, Xxx X.
Manta and Xxxxxx Xxxxxxx, (4) all security interests in and pledges of the
Page 51
Shares including, but not limited to, pledges of certain of the Shares to Xxxx
X. Manta and (5) any existing agreements by, among, or between the Sellers
relating to securities of the Company, other than the Company's By-laws and
Articles of Incorporation (provided that any and all transfer restrictions set
forth in such By-laws and Articles of Incorporation shall have been waived by
all of the Sellers and the Company prior to the Closing Date);
(xii) all actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to be provided by the
Company and/or the Sellers in order to effect the transactions contemplated
hereby will be reasonably satisfactory in form and substance to the Buyer;
(xiii) The Sellers shall have delivered the acknowledgments of
Golf Corporation and CUBS Construction required pursuant to ss.5(j)(i) hereof
and the condition regarding the payment of the Seller Receivables at Closing, as
referenced in ss.5(j)(i) shall have been satisfied;
(xiv) The Sellers shall have delivered the Assignment
Agreement regarding the lease of the warehouse located at 000 000xx Xxxxxx,
Xxxxxxx, Xxxxxxx required pursuant to ss.5(j)(iii) hereof and the same shall be
in full force and effect;
(xv) The Sellers shall have delivered the Xxxx X. Manta Waiver;
(xvi) The Sellers shall have delivered evidence of the
termination of insurance and bonding coverage of GOLF Corporation and CUBS
Construction and the indemnity agreement referenced in ss.5(j)(ii);
(xvii) The Sellers shall have delivered to the Buyer a
certificate, duly executed by Xxx X. Xxxxxxxx, to the effect that no offers of
securities have been made to Xx. Xxxxxxxx in the State of California; and
(xviii) The Sellers shall have executed and delivered to Buyer
any and all documents necessary to assign to the Company (or any beneficiary
designated by the Company) and to terminate all of Sellers' right, title and
interest in: (i) all insurance policies included in the Company's Most Recent
Financial Statements; and (ii) any additional insurance policies identified in
Exhibit 4(y)(A) to the Disclosure Schedule as owned by the Company. The Buyer
may waive any condition specified in this ss.7(a) if it executes a writing so
stating at or prior to the Closing.
Page 52
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the cash portion of the Purchase Price shall be delivered
and paid by the Buyer to Sellers in accordance with ss.2(b) hereof;
(ii) immediately available funds in the aggregate amount of
Six Hundred and Thirty Five Thousand, Two Hundred and Ninety One and 99/100
Dollars ($635,291.99) (and in addition to the cash portion of the Purchase
Price) shall have been delivered by Buyer to the Company and the Company shall
have, in turn, delivered such aggregate amount to those employees of the Company
entitled to receipt thereof under the Retention Bonus Agreements as the first
installment of their respective retention bonus, allocable among them in
accordance with the Retention Bonus Agreements;
(iii) each of the Convertible Promissory Notes shall have been
duly executed and delivered by the Buyer to the Sellers and shall be in full
force and effect;
(iv) each of the Retention Bonus Agreements shall have been
duly executed by each of the Company and the Buyer and delivered by the Company
and the Buyer to the appropriate employees thereunder, and each of the same
shall be in full force and effect;
(v) the representations and warranties set forth in ss.3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(vi) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(vii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(viii) the Buyer shall have delivered to the Sellers a
certificate, duly executed by Buyer's President, to the effect that each of the
conditions specified above in ss.7(b)(v)-(vii) is satisfied in all respects;
Page 53
(ix) the Company shall have entered into: an Employment
Agreement with Xxxx X. Manta in the form of Exhibit E-1 attached hereto; an
Employment Agreement with Xxxxxxx X. Xxxxxx in the form of Exhibit E-2 attached
hereto; and Employment Agreement with Xxx X. Manta in the form of Exhibit E-3
attached hereto; an Employment Agreement with Xxxxx XxXxxxx in the form of
Exhibit E-4 attached hereto; an Employment Agreement with Xxx Xxxxxxxxx in the
form of Exhibit E-6 attached hereto, an Employment Agreement with Xxxx Xxxxxxxxx
in the form of Exhibit E-7 attached hereto and a Consulting Agreement with
Xxxxxx X. Manta in the form of Exhibit L attached hereto, together with a
severance Letter Agreement from the Company to Xxxxxx X. Manta in which the
Company agrees (A) for a period of twelve (12) months from the Closing Date: (i)
to continue, at the Company's expense, the medical and disability benefits
provided to him by the Company as of the date hereof and (ii) to provide him, at
the Company's expense, with an automobile or similar benefit substantially
equivalent to the automobile provided to him by the Company as of the date
hereof and (B) to allow Xxxxxx X. Manta, to the extent permissible under any of
the then applicable medical and disability plans maintained by the Company, to
continue to participate in such plans, provided that if Xxxxxx X. Manta is no
longer engaged by the Company as a consultant, he shall reimburse the Company on
a monthly basis for all premiums for such benefits.
(x) the Buyer shall have duly executed and issued each of the
Stock Option Agreements in form and substance as set forth in Exhibit C attached
hereto, to the employees of the Company as specified in ss.6(k) hereof, and the
same shall be in full force and effect;
(xi) the Buyer shall have entered into a Registration Rights
Agreement with each of the Sellers in form and substance as set forth in Exhibit
G attached hereto, and the same shall be in full force and effect;
(xii) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Sellers, and dated as of the Closing Date, subject to
such changes as may be reasonably made by the legal opinion committee of counsel
to Buyer, which changes shall be reasonably acceptable to counsel to Sellers;
and
(xiii) the Sellers shall have received a Guaranty of American
Eco Corporation of the payment obligations of Buyer under the Retention Bonus
Agreements and the Convertible Promissory Notes, in the form of Exhibit J
attached hereto (the "Guaranty") and the same shall be in full force and effect;
and
(xiv) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to be provided by the Buyer
in order to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Requisite Sellers.
Page 54
The Requisite Sellers may waive any condition specified in this ss.7(b) if they
execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations, Warranties and Covenants. All of the
representations, warranties and covenants of the Parties contained in this
Agreement shall survive the Closing hereunder.
(b) Indemnification by Sellers -- Joint and Several Liability.
(i) Joint and Several Liability -- General. Each of the
Sellers jointly and severally agree to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any of the following
matters (excluding those matters set forth in ss.8(c)):
(A) a breach by any of the Sellers of any of their representations,
warranties, and covenants contained herein or in any of the other Sellers'
Transaction Documents; or
(B) in the event the Company has any Liability for any amount pursuant to
the agreements required to be terminated in accordance with ss.5(i) hereof.
(ii) Limitations on Joint and Several Liability.
Notwithstanding the foregoing, the right of Buyer to joint and several
indemnification under ss.8(b)(i) shall be subject to the following provisions:
(A) the maximum amount of indemnification payments required to be paid by
Sellers under ss.8(b)(i) or any other right or remedy provided in ss.8(i)
(except for claims pursuant to ss.8(c)), in the aggregate, shall be Four
Hundred and Twenty Five Thousand Dollars ($425,000); provided, however, any
amounts paid by the Sellers pursuant to ss.8(c) shall not be credited to
the maximum indemnification amount set forth above; and
(B) no indemnification shall be payable pursuant to
ss.8(b)(i) with respect to
claims asserted after November 10, 2000; and
(C) all indemnification payments shall be subject to the limitations on
indemnification set forth in ss.8(h) hereof; and
Page 55
(D) no indemnification payment shall be due hereunder in respect of any of
the matters disclosed in the Existing Reports and the amount of any Adverse
Consequences resulting therefrom shall not be counted pursuant to
ss.8(h)(i) hereof; provided, however, that nothing contained in this ss.8
shall have any affect on any Liability of any of the Sellers pursuant to
the Assignment Agreement regarding the lease of the warehouse located at
000 000xx Xxxxxx, Xxxxxxx, Xxxxxxx.
(c) Indemnification by Sellers -- Several Liability.
(i) Several Liability -- General. Each of the Sellers,
severally, but not jointly, agrees to indemnify the Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any of the following
matters (excluding those matters set forth in ss.8(b)):
(A) any breach of any of the Sellers' representations, warranties or
covenants contained herein with respect to Taxes, including the
representations and warranties contained in ss.4(k) hereof; or
(B) in the event the Company has any Liability as a result of the
commission, at any time prior to Closing, of a criminal offense. For
purposes of this ss.8, a "criminal offense" shall mean a violation by the
Sellers, the Company, or any of its employees, servants, agents, officers
or directors of any statute, regulation, rule, judgment, order, decree,
ruling or charge of any government, governmental authority or court which
could or does impose criminal penalties, liabilities or sanctions.
(ii) Several Liability -- Limitations. Notwithstanding the
foregoing, the right of Buyer to several indemnification under ss.8(c)(i) shall
be subject to the following provisions:
(A) no Seller shall have any liability for indemnification pursuant to
ss.8(c)(i) in excess of the sum of: (1) that portion of the Purchase Price
that is received by the Seller (in cash or by delivery of a Convertible
Promissory Note); and (2) the amount payable under the Seller's Retention
Bonus Agreement;
(B) no indemnification shall be payable pursuant to ss.8(c)(i) with respect
to claims asserted after the expiration of the statute of limitations
applicable in civil tax matters to the assessment of Taxes against the
Company for all periods ending on or before the Closing Date;
(C) no indemnification shall be due or payable
pursuant to ss.8(c)(i)(B) with
respect to claims asserted more than 120 days after the Buyer receives actual
notice of the conviction or the entering of any plea; provided, however, that
Page 56
for purposes hereof, a claim shall be deemed "asserted" upon the Buyer giving
written notice to the Sellers (or their representatives) that the Buyer seeks
indemnification as a result of such claim.
(D) all payments shall be subject to the limitations
on indemnification set forth
in ss.8(h) hereof.
(d) Indemnification by Buyers. In the event the Buyer breaches (or in
the event any third party alleges facts that, if true, would mean the Buyer has
breached) any of its representations, warranties, and covenants contained
herein, or in any other of Buyer's Transaction Documents to which it is a party,
and provided that any of the Sellers makes a written claim for indemnification
against the Buyer pursuant to ss.11(h) below, then the Buyer agrees to indemnify
each of the Sellers from and against the entirety of any Adverse Consequences
the Seller may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach).
(e) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss.8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) either (A) the Indemnifying Party thereby is
prejudiced, or (B) the notice is otherwise given after the dates or time periods
specified in ss.8(b)(ii)(B), ss.8(c)(ii)(B), or ss.8(c)(ii)(C) above, as
applicable.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will in accordance with and subject to the terms of this
ss.8, indemnify the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (B)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, and (D)
the Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
Page 57
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.8(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party, and (C) the Indemnifying Party may consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party provided the
Indemnifying Party pays any and all monetary obligations relating to such
judgment or settlement, unless: (i) such judgment or settlement imposes any
non-monetary obligation upon the Indemnified Party, or (ii) such judgment or
settlement is, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party.
(iv) In the event any of the conditions in ss.8(e)(ii) above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent from,
any Indemnifying Party in connection therewith), (B) the Indemnifying Parties
will reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (C) the Indemnifying Parties will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this ss.8.
(f) Determination of Adverse Consequences. The Parties shall take into
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this ss.8. All
indemnification payments under this ss.8 shall be deemed adjustments to the
Purchase Price.
(g) Recoupment. Before seeking any cash indemnification payments
otherwise due from Sellers to Buyer hereunder, Buyer shall recoup or setoff all
or any part of any Adverse Consequences for which it is entitled to receive
indemnification from Sellers under this ss.8 by notifying each Seller from which
it is entitled to receive indemnification that the Buyer is either reducing the
principal amount outstanding under his or its Convertible Promissory Note or the
amount owed pursuant to his or its Retention Bonus Agreement. In the event
Page 58
reduction is made to the Convertible Promissory Note, such reduction shall be
made among all Sellers from which Buyer is entitled to indemnification for the
subject Adverse Consequences on a pro-rata basis in accordance with the relative
principal amounts outstanding under each of the Sellers' Convertible Promissory
Notes and shall affect the timing and amount of payments required under each of
the Convertible Promissory Notes in the same manner as if the Buyer had made a
permitted prepayment (without premium or penalty) thereunder. In the event
reduction is made to the Retention Bonus Agreements, such reduction shall be
made among all Sellers from which Buyer is entitled to indemnification for the
subject Adverse Consequences on a pro-rata basis in accordance with the relative
principal amounts outstanding under all of the Sellers' Retention Bonus
Agreements.
Notwithstanding the foregoing, any recoupment by Buyer of any
Adverse Consequences shall be subject to the following provisions:
(i) Consent of the Parties. In the event of any dispute between the
parties with respect to Buyer's right of recoupment, the parties shall first use
their best efforts to resolve any such claim on terms and conditions acceptable
to the parties. If the parties are unable to resolve the dispute within ten (10)
calendar days after the commencement of efforts to resolve the dispute, the
dispute will be submitted to arbitration in accordance with ss.8(g)(ii) hereof.
(ii) Arbitration.
(a) Any party may submit any matter referred to in ss.8(g)(i)
hereof to arbitration by notifying the other parties hereto, in writing, of such
dispute. Within ten (10) days after receipt of such notice, the Buyer, on the
one hand, and the Requisite Sellers, on the other hand, shall designate in
writing one arbitrator to resolve the dispute; provided, that if the parties
hereto cannot agree on an arbitrator within such ten-day (10) period, the
arbitrator shall be selected pursuant to the rules of the American Arbitration
Association (the "AAA"). The arbitrator so designated shall be a neutral and
impartial party and shall be selected in accordance with the AAA's Commercial
Arbitration Rules then in effect, except that each party shall be entitled to
strike on a preemptory basis, for any reason or no reason, any and all of the
names of potential arbitrators on the list submitted to the parties by the AAA
as being qualified. In the event the parties cannot agree on a mutually
acceptable arbitrator from the one or more lists submitted by the AAA, the
President of the AAA shall designate the arbitrator, which designee may include
persons named on any list submitted by the AAA.
(b) Within fifteen (15) days after the designation of the
arbitrator, the arbitrator and the parties shall meet, at which time the Buyer
and the Requisite Sellers shall be required to set forth in writing all disputed
issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing, which shall
be no later than thirty (30) days after the submission of written proposals
pursuant to paragraph (b) above, to discuss each of the issues identified by the
parties. The arbitration shall be governed by the rules of the AAA; provided,
that the arbitrator shall have sole discretion with regard to the admissibility
of evidence.
(d) The arbitrator shall use his best efforts to rule on each
disputed issue within thirty (30) days after the completion of the hearings
Page 59
described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto.
(e) The prevailing party or parties in any arbitration shall
be entitled to an award of reasonable attorneys' fees incurred in connection
with the arbitration. The non-prevailing party or parties shall pay such fees,
together with the fees of the arbitrator and the costs and expenses of the
arbitration.
(f) Any arbitration pursuant to this ss.8(g) shall be
conducted in Chicago, Illinois. Any arbitration award may be entered in and
enforced by any court having jurisdiction therefor and the parties hereby
consent and commit themselves to the jurisdiction of the courts of the State of
Illinois and the United States District Court for the Northern District of
Illinois for purposes of the enforcement of any arbitration award.
(g) All questions as to the meaning of the above clauses shall
be resolved by the arbitrator, and his decision thereon shall be absolutely
binding, and not subject to judicial review.
(iii) any recoupment of Convertible Promissory Notes pursuant to this
Section shall be made to the Sellers on a pro-rata basis, based upon the
outstanding balance on all Convertible Promissory Notes.
(iv) during the pendency of any arbitration hereunder, Buyer may deduct
from any payments that otherwise become due and payable to a Seller under
his or its Convertible Promissory Note or Retention Bonus Agreement the
amount that the Buyer seeks to recoup from such Seller under the pending
arbitration, and the failure to pay such amounts (but only such amounts)
shall not constitute a default thereunder. In the event that the arbitrator
determines that Buyer either was not entitled to recoupment at all or for
the full amount claimed, Buyer shall pay to Sellers any amounts deducted
from any payments otherwise due under the Convertible Promissory Notes or
the Retention Bonus Agreement within ten (10) days after such determination
and shall pay to Sellers the interest on such deducted amount at the
Applicable Rate.
(h) Limitations on Indemnification. An Indemnifying Party's indemnification
obligations hereunder shall be subject to the following further
limitations.
(i) Deductible on Claims. Notwithstanding anything herein to the contrary,
no Party shall be entitled to receive any indemnification payments in
accordance with this ss.8 unless and until such Party is entitled to
$25,000 with respect to a single claim or $50,000 with respect to the
aggregate amount of all claims of such Party, whereupon such Party shall
only receive indemnification payments in excess of such amount.
Page 60
(ii) Amounts Received from Third Parties. Any indemnification payment
otherwise due hereunder from the Sellers shall be reduced by the amount of
any payments received by the Buyer from any third party (including, without
limitation, amounts received under any insurance policies) in respect of
the Adverse Consequences for which such indemnification payment is due;
provided, however, that the Buyer shall not be required to seek
indemnification from such third party prior to enforcing its rights to
indemnification pursuant to this ss.8. Buyer acknowledges and agrees that
in the event that Buyer recovers any amount from any third party
(including, without limitation, amounts received under any insurance
policies) in respect of any Adverse Consequences for which Buyer has
previously recovered any indemnification payment from Sellers, Buyer shall
promptly remit to each Seller an amount equal to such Seller's pro-rata
portion of such third party recovery in accordance with each Seller's
respective percentage of ownership of the Shares. In no event shall such
remittance be deemed a prepayment of any amounts due and owing to any of
the Sellers under the Convertible Promissory Notes or the Retention Bonus
Agreements; provided, however, that such remittance may be applied to
credit the Buyer for the principal payments or amounts that Buyer owed to
Sellers pursuant to the Convertible Promissory Notes or the Retention Bonus
Agreement which have not been paid by Buyer pursuant to Buyer's exercise of
its right of recoupment set forth in ss.8(g). Sellers shall have a right of
subrogation with respect to any insurance coverages afforded the Company
with respect to any Adverse Consequences for which the Buyer receives
indemnification or other reimbursement from Sellers under this ss.8 or
otherwise.
(i) Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant; provided, however, that the limitations on
indemnification set forth in this ss.8, including, without limitation, the
deductible on claims referenced in ss.8(h), the maximum amount of
indemnification referenced herein, and the time limitations referenced in
ss.8(b)(ii)(B), ss.8(c)(ii)(B) and ss.8(c)(ii)(C), shall apply to all such
statutory, equitable and common law remedies. Each of the Sellers hereby agrees
that he or it will not make any claim for indemnification against the Company by
reason of the fact that he or it was a director, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether such claim is pursuant to
any statute, articles of incorporation, bylaw, agreement, or otherwise) with
respect to any action, suit, proceeding, complaint, claim, or demand brought by
the Buyer against such Seller (whether such action, suit, proceeding, complaint,
claim, or demand is pursuant to this Agreement, applicable law, or otherwise).
Page 61
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date for which
the filing date is after the Closing Date. Buyer shall permit the Requisite
Sellers to review and comment on each such Tax Return described in the preceding
sentence prior to filing.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for Tax periods which begin before the Closing Date
and end after the Closing Date
(c) Cooperation on Tax Matters.
(i) Buyer, the Company and Sellers 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 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 and making the employees, if any, of such Party available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. The Company and Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
the Company or Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax in respect of any period or portion thereof ending
on or before the Closing Date that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to
provide the other party with all information that either party may be required
to report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
Page 62
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with the sale of the Shares pursuant to the
terms of this Agreement shall be paid by Sellers when due, and Sellers 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, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax Returns and other
documentation.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Requisite Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Sellers' Notice Recipient at any time prior to the Closing (A) in
the event any of the Sellers has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the Buyer has
notified the Sellers' Notice Recipient of the breach in writing, and the breach
has continued without cure for a period of ten (10) calendar days after the
notice of breach or (B) if the Closing shall not have occurred on or before
November 10, 1997, by reason of the failure of any condition precedent under
ss.7(a) hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iii) the Requisite Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach in writing, and the breach has continued
without cure for a period of ten (10) days after the notice of breach or (B) if
the Closing shall not have occurred on or before November 10, 1997, by reason of
the failure of any condition precedent under ss.7(b) hereof (unless the failure
results primarily from any of the Sellers themselves breaching any
representation, warranty, or covenant contained in this Agreement).
Page 63
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
(c) Failure to Deliver Xxxx X. Manta Waiver. The failure of the Sellers
to deliver the Xxxx X. Manta Waiver shall not constitute a breach of the
Agreement, provided the Sellers have used their reasonable best efforts to
secure and deliver the Xxxx X. Manta Waiver.
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in ss.2(a) above
concerning the sale of his or its Shares to the Buyer are several obligations.
This means that the particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in ss.8 above for any
Adverse Consequences the Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This means that
each Seller will be responsible to the extent provided in ss.8 above for the
entirety of any Adverse Consequences the Buyer may suffer as a result of any
breach thereof.
(b) Press Releases and Public Announcements. The Sellers shall not
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer.
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Requisite Sellers.
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(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the Notice Recipient, with copies
to such Party's counsel, as set forth below:
If to the Sellers: Xxxxxxx X. Xxxxxx Copy to: Xxxxxxx X. Xxxxxxx, Esq.
X.X. Manta, Inc. Jenner & Block
0000 Xxxxxx Xxxxxx One IBM Plaza
Hammond, IN 46320 Xxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
If to the Buyer: Xxxxx X. Xxxxxxxx Copy to: Xxxxx X. Xxxxxx, Esq.
President & CEO Xxxxxx, Xxxxxxxx & Branch,
EIF Holdings, Inc. Professional Association
000 XX 0000 West 00 Xxxxx Xxxxxx
Xxxxx 000 P.O. Box 39
Houston, TX 77090 Xxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address and/or the Notice Recipient to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
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(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Sellers agree that the Company has not borne or will bear any of the Sellers'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
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Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Illinois in any action or
proceeding arising out of or relating to this Agreement and agrees that all
claims in respect of the action or proceeding may be heard and determined in any
such court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process (i) to the Party to be served at the address and in the
manner provided for the giving of notices in ss.11(h) above. Nothing in this
ss.11(p), however, shall affect the right of any Party to bring any action or
proceeding arising out of or relating to this Agreement in any other court or to
serve legal process in any other manner permitted by law or at equity. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER: EIF HOLDINGS, INC.
By:/s/ Xxxxx X. Xxxxxxxx
----------------------------
Xxxxx X. Xxxxxxxx, President
SELLERS:
/s/ Xxx X. Manta /s/ Xxxxxx X. Manta
------------------------------- -------------------------------
Xxx X. Manta Xxxxxx X. Manta
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxx X. Manta
------------------------------- -------------------------------
Xxxxxxx X. Xxxxxx Xxxx X. Manta
/s/ Xxxxx XxXxxxx /s/ Xxxx X. Manta
------------------------------- -------------------------------
Xxxxx XxXxxxx Xxxx X. Manta, as Trustee of
Xxxxxxx Manta Trust
/s/ Xxx X. Manta /s/Xxxx X. Manta
------------------------------- -------------------------------
Xxx X. Manta Xxxx X. Manta, as Trustee of
Alexander Manta Trust
/s/ Xxx X. Xxxxxxxx /s/ Xxxx X. Manta
------------------------------- -------------------------------
Xxx X. Xxxxxxxx Xxxx X. Manta, as Trustee of
Xxxxx Manta Trust
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