ASSET PURCHASE AGREEMENT
BY
AND
BETWEEN
CORNELL CORRECTIONS OF TEXAS, INC.
AND
INTERVENTIONS, CO.
JANUARY 31, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS..............................................1
Section 1.1 ACCOUNTING TERMS.........................................1
Section 1.2 DEFINED TERMS............................................1
ARTICLE II CLOSING..................................................6
Section 2.1 CLOSING..................................................6
ARTICLE III PURCHASE, SALE AND DELIVERY..............................6
Section 3.1 ACQUISITION ASSETS.......................................6
Section 3.2 EXCLUDED ASSETS..........................................9
Section 3.3 PURCHASE PRICE..........................................10
Section 3.4 ALLOCATION REPORTING....................................10
ARTICLE IV LIABILITIES AND OBLIGATIONS.............................11
Section 4.1 ASSUMED LIABILITIES.....................................11
Section 4.2 LIABILITIES NOT ASSUMED BY PURCHASER....................11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER................12
Section 5.1 ORGANIZATION; QUALIFICATION.............................12
Section 5.2 AUTHORITY; ENFORCEABILITY...............................12
Section 5.3 SUBSIDIARIES............................................13
Section 5.4 CONFLICTING AGREEMENTS AND OTHER MATTERS; CONSENTS......13
Section 5.5 NO DEFAULT; COMPLIANCE WITH LAWS AND REGULATIONS........13
Section 5.6 FINANCIAL STATEMENTS....................................14
Section 5.7 NO UNDISCLOSED LIABILITIES..............................14
Section 5.8 ABSENCE OF CERTAIN CHANGES..............................14
Section 5.9 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS............16
Section 5.10 ACTIONS PENDING.........................................17
Section 5.11 ENVIRONMENTAL...........................................17
Section 5.12 INSURANCE...............................................18
Section 5.13 TITLE...................................................18
Section 5.14 REAL ESTATE.............................................18
Section 5.15 SUPPLIES................................................19
Section 5.16 ACCOUNTS RECEIVABLE.....................................19
Section 5.17 TAXES...................................................19
Section 5.18 EMPLOYEE BENEFIT PLANS..................................20
Section 5.19 EMPLOYEES AND LABOR MATTERS.............................21
Section 5.20 INTELLECTUAL PROPERTY RIGHTS............................21
Section 5.21 RELATIONSHIPS...........................................22
Section 5.22 CERTAIN PAYMENTS........................................22
Section 5.23 BOOKS AND RECORDS.......................................22
Section 5.24 CONDITION AND SUFFICIENCY OF ASSETS.....................22
Section 5.25 CERTAIN EXPENSES........................................23
Section 5.26 INMATE BANK ACCOUNTS....................................23
Section 5.27 INVESTMENTS.............................................23
Section 5.28 STUDIES, ETC............................................23
Section 5.29 DISCLOSURE..............................................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.............23
Section 6.1 CORPORATE EXISTENCE.....................................23
Section 6.2 AUTHORITY; NO CONFLICTS.................................23
Section 6.3 BINDING AGREEMENT.......................................24
Section 6.4 REGULATORY APPROVALS....................................24
ARTICLE VII CERTAIN UNDERSTANDINGS AND AGREEMENTS
OF THE PARTIES..........................................24
Section 7.1 EMPLOYEES...............................................24
Section 7.2 TAXES...................................................25
Section 7.3 CONSENTS................................................26
Section 7.4 TITLE...................................................26
Section 7.5 SURVEY..................................................26
Section 7.6 ENVIRONMENTAL REPORTS...................................27
Section 7.7 FURTHER ASSURANCES......................................27
Section 7.8 MAIL RECEIVED AFTER CLOSING.............................27
Section 7.9 UNCOLLECTIBLE ACCOUNTS RECEIVABLE.......................28
Section 7.10 BILLS AND PAYMENTS RECEIVED AFTER CLOSING...............28
Section 7.11 LOSS DUE TO CONDEMNATION................................28
Section 7.12 LOSS DUE TO CASUALTY....................................28
ARTICLE VIII COVENANTS...............................................29
Section 8.1 SELLER'S COVENANTS......................................29
Section 8.2 PURCHASER'S COVENANTS...................................30
ARTICLE IX CONDITIONS TO CLOSING...................................31
Section 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER..................31
Section 9.2 CONDITIONS TO OBLIGATIONS OF SELLER.....................34
ARTICLE X TERMINATION.............................................35
Section 10.1 GROUNDS FOR TERMINATION.................................35
Section 10.2 EFFECT OF TERMINATION...................................36
ARTICLE XI INDEMNIFICATION.........................................37
Section 11.1 SELLER'S INDEMNITY OBLIGATIONS..........................37
Section 11.2 PURCHASER'S INDEMNITY OBLIGATIONS.......................37
Section 11.3 INDEMNIFICATION PROCEDURES..............................37
Section 11.4 DETERMINATION OF INDEMNIFIED AMOUNTS....................39
Section 11.5 ESCROW..................................................39
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ARTICLE XII COVENANTS NOT TO COMPETE................................40
Section 12.1 SELLER'S COVENANTS NOT TO COMPETE.......................40
ARTICLE XIII MISCELLANEOUS...........................................41
Section 13.1 COMMISSIONS.............................................41
Section 13.2 SURVIVAL................................................41
Section 13.3 EXPENSES................................................41
Section 13.4 NOTICES.................................................41
Section 13.5 ENTIRE AGREEMENT........................................42
Section 13.6 GOVERNING LAW...........................................42
Section 13.7 ARBITRATION.............................................43
Section 13.8 ASSIGNMENTS AND THIRD PARTIES...........................44
Section 13.9 SEVERABILITY............................................44
Section 13.10 AMENDMENTS; NO WAIVERS..................................44
Section 13.11 NO THIRD PARTY BENEFICIARIES............................44
Section 13.12 HEADINGS; USE OF CERTAIN TERMS..........................44
Section 13.13 COUNTERPARTS............................................44
SCHEDULES
Schedule 3.1(f) Machinery, Equipment and Other Tangible Personal Property
Schedule 3.1(g) Motor Vehicles and Other Rolling Stock
Schedule 3.1(i) Contracts
Schedule 3.1(j) Accounts Receivable
Schedule 3.1(k) Purchased Cash and Investments
Schedule 3.1(p) Permits
Schedule 3.4 Allocation of Purchase Price
Schedule 4.1(a) Assumed Current Liabilities
Schedule 5.4 Conflicting Agreements and Other Matters; Consents
Schedule 5.8 Absence of Certain Changes
Schedule 5.9 Contracts, Agreements, Plans and Commitments
Schedule 5.10 Actions Pending
Schedule 5.12 Insurance
Schedule 5.14 Real Estate
Schedule 5.18 Employee Benefit Plans
Schedule 5.19 Employees and Labor Matters
Schedule 5.25 Projected Costs
Schedule 5.26 Inmate Bank Accounts
Schedule 9.1(n) Revenues
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EXHIBITS
Exhibit A Dallas County Land
Exhibit B San Antonio Land
Exhibit C Escrow Agreement (Section 3.3(d))
Exhibit D Title Commitment (Section 7.4(a))
Exhibit E Seller's Officer's Certificate (Section 9.1(b))
Exhibit F Deed for Dallas County Land (Section 9.1(e)(i))
Exhibit G Deed for San Antonio Land (Section 9.1(e)(ii))
Exhibit H Assignment for Dallas County Office Facility Lease
(Section 9.1(e)(iii))
Exhibit I Xxxx of Sale, General Assignment and Conveyance
(Section 9.1(e)(v))
Exhibit J Purchaser's Officer's Certificate (Section 9.2(b))
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT") dated January
31, 1997, by and between INTERVENTIONS, CO., a Texas nonprofit corporation
("SELLER"), and CORNELL CORRECTIONS OF TEXAS, INC., a Delaware corporation
("PURCHASER").
WHEREAS, Seller is in the business of operating an intensive
residential and outpatient chemical dependency treatment center for adult
probationers and other substance abuse related programs for Dallas County and
the State of Texas performed in facilities provided at no charge by Dallas
County, and a juvenile program in San Antonio, Texas operated in a four-story
building owned by Seller; and
WHEREAS, Purchaser wishes to purchase from Seller and Seller
wishes to sell, transfer, assign and deliver to Purchaser substantially all of
the assets of the Business (as hereinafter defined) on the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements stated herein, the parties
hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles and on a basis not inconsistent with those applied in the
preparation of the financial statements referred to in SECTION 5.6 hereof.
SECTION 1.2 DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified in this SECTION 1.2. Other capitalized terms
have the meanings assigned to them elsewhere in this Agreement.
AFFILIATE: with respect to any Person, means any Person directly or
indirectly controlling, controlled by or under common control with such Person,
and any natural Person who is an officer, director or partner of such Person and
any members of their immediate families living within the same household. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
ACQUIRED PROPERTY: means the Dallas County Land, the San Antonio Land
and Seller's interest in the leasehold estate at the Dallas County Office
Facility.
BALANCE SHEET: means the balance sheet of Seller as of September 30,
1996 described in SECTION 5.6.
BEST EFFORTS: means a party's best efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
BEST KNOWLEDGE OF SELLER: means, with respect to any matter in
question, best knowledge of any of the directors or officers of Seller.
BHS MANAGEMENT: means BHS Management Corporation, a Delaware
corporation which formerly provided management services to Seller.
BEXAR COUNTY CONTINGENT LIEN NOTE: means that certain promissory note,
dated March 6, 1996, in favor of the County of Bexar in the original principal
amount of $436,562, secured by that certain Contingent Lien Deed of Trust
encumbering the San Antonio Land.
BUSINESS: means the business engaged in by Seller, consisting primarily
of operating an alcohol and drug treatment center in Wilmer, Dallas County,
Texas, and a Transitional Living Facility in San Antonio, Bexar County, Texas,
and holding certain rights under contracts, including, without limitation, (a) a
contract with Private Industry Council of Dallas, Inc. (Contract No. 9403-IIA);
(b) a contract with County of Bexar, Texas (Supportive Housing Program
Management Agreement Project No. TX 59B95-0456-B); (c) a contract with TCADA
(TCADA Award Number 03-7640-963-TAR); and (d) a contract with Dallas County
Community Supervision and Corrections Department.
BUSINESS PROPERTY: means the Acquired Property and the Dallas County
Operating Facility.
CERCLA: means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
CODE: means the Internal Revenue Code of 1986, as amended, or any
amending or superseding tax laws of the United States of America.
CONTINGENT LIEN DEED OF TRUST: means the deed of trust in favor of the
Bexar County Housing Finance Commission, securing the Bexar County Contingent
Lien Note and encumbering the San Antonio Land.
CPC: means Community Psychiatric Centers Properties of Texas, Inc., a
Nevada corporation now known as Transitional Hospital Corporation.
DALLAS COUNTY LAND: means the 22.23 acres of land located in the Xxxxxx
X. Xxxxxx Survey, A-602, Dallas County, Texas, as more particularly described on
EXHIBIT B.
DALLAS COUNTY OFFICE FACILITY: means the office space located at 0000
Xxxxx Xxxxxx, Xxxxxx, Xxxxx 00000 leased by the Seller from Texas Scottish Rite
Hospital for Children.
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DALLAS COUNTY OFFICE LEASE: means that certain Lease Agreement between
Texas Scottish Rite Hospital for Children, as landlord, and Seller, as tenant,
dated October 1, 1996, covering the Dallas County Office Facility.
DALLAS COUNTY OPERATING FACILITY: means the facility which the Seller
operates on behalf of the Dallas County Community Supervision and Corrections
Department located at 000 Xxxxxx Xxxx, Xxxxxx, Xxxxx.
DALLAS COUNTY OPERATING FACILITY CONTRACT: means the agreement between
the Dallas County Community Supervision and Corrections Department and Seller
effective September 1, 1996 pursuant to which Seller operates the Dallas County
Operating Facility.
EEOC: means United States Equal Employment Opportunity Commission.
ENVIRONMENTAL LAWS: means any and all laws, common law, statutes,
ordinances, rules, regulations, judgments, orders or other official acts or
determinations of any Governmental Authority relating to the protection of human
health or safety or regulating or imposing liability or standards of conduct
concerning any hazardous, toxic or dangerous waste, substance, element,
compound, mixture or material in any and all jurisdictions in which property of
Seller is located or the business of Seller is conducted or in which such
business at any time has been conducted, including, without limitation, (a)
CERCLA, (b) RCRA, (c) the Solid Waste Disposal Act, as amended, (d) the
Hazardous and Solid Waste Amendments Act of 1984, as amended, (e) the Clean Air
Act, as amended, (f) the Toxic Substances Control Act, as amended, (g) the Safe
Drinking Water Act, as amended, (h) the Federal Water Pollution Prevention and
Control Act, as amended, (i) the Occupational Safety and Health Act of 1970, as
amended, (j) the Hazardous Materials Transportation Act, as amended, (k) the
Rivers and Harbors Act of 1899, as amended, and (l) any rules and regulations
promulgated pursuant to any or all of (a) through (k) above. The terms "RELEASE"
or "THREATENED RELEASE" shall have the meanings specified in CERCLA, and the
terms "SOLID WASTE" and "DISPOSAL" (or "DISPOSED") shall have the meanings
specified in RCRA; PROVIDED, HOWEVER, that, to the extent the laws of any
jurisdiction applicable to Seller or any of its properties or assets establish a
meaning for "release," "solid waste" or "disposal" which is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply in such
jurisdiction.
ERISA: means the Employee Retirement Income Security Act of 1974, as
amended.
FIRST LIEN DEED OF TRUST: means the deed of trust in favor of CPC
securing the First Lien Note and encumbering the San Antonio Land.
FIRST LIEN NOTE: means a promissory note given by Seller to CPC in the
original principal amount of $1,250,000 and secured by the First Lien Deed of
Trust in favor of CPC, encumbering the San Antonio Land.
GOVERNMENTAL AUTHORITY: means any nation or government, any state or
political subdivision thereof and any agency or entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government.
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HAZARDOUS SUBSTANCE: means those elements, materials, compounds,
mixtures or substances which are contained in the list of hazardous substances
adopted by the United States Environmental Protection Agency (the "EPA") or the
list of toxic pollutants designated by Congress or the EPA or which are defined
as hazardous, toxic, pollutant, infectious, flammable or radioactive by any of
the Environmental Laws and, whether or not included on such lists, all products
or substances containing asbestos, polychlorinated biphenyls, or chlorinated
hydrocarbons.
HOME AGREEMENT: means that certain Contract For HOME Programs among the
County of Bexar, Bexar County Housing Finance Corporation and Interventions
executed March 6, 1996.
INMATE: means any adult or juvenile parolee, probationer or other
resident, some of whom may be homeless juveniles, utilizing the facilities
operated as part of the Business.
INVESTMENT MANAGEMENT ACCOUNT: means the Investment Management Account
number 30- 03-300-0000000 of Seller held by NationsBank of Texas, N.A., as agent
or custodian, together with all property held in such account.
KNOWLEDGE OF SELLER: means, with respect to any matter in question,
actual knowledge of any of the directors or officers of Seller.
LIEN: means any mortgage, pledge, hypothecation, security interest,
encumbrance, right of first refusal, option, lien, charge, condition,
restriction or burden of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction).
MATERIAL ADVERSE EFFECT: means any material adverse effect on the
business, financial condition, properties, prospects, net worth or results of
operations of Seller.
NATIONSBANK NOTE: means a promissory note given by Seller to
NationsBank, N.A., in the original principal amount of $1,000,000, dated March
7, 1996, and secured by a pledge of the Investment Management Account.
OPERATING EXPENSES: means, for any period, customary gross expenses
related to the operation of the Business in the ordinary course of business
consistent with historical practice, as determined in accordance with generally
accepted accounting principles (on an accrual basis); PROVIDED, HOWEVER, that
the Operating Expenses shall in no event include any of the items referenced in
SECTION 4.2 hereof.
OPERATING REVENUES: means, for any period, gross revenues related to the
operation of the Business (including, but not limited to, all ancillary net
revenues collected from food stamps, rent, vending machines and telephone
operations) for such period, including all cash and other payments received and
trade accounts receivable and other rights to receive payment for services of
the Business performed during such period, as determined in accordance with
generally accepted accounting principles (on an accrual basis).
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OSHA: means the United States Occupational Safety and Health
Administration.
PERMITTED ENCUMBRANCES: means (a) materialmen's, mechanics',
repairmen's, employees', contractors', operators', tax and other similar liens
or charges arising in the ordinary course of business prior to the Closing Date
(i) if they relate to obligations that have not yet become due and payable or
(ii) if their validity is being contested in good faith by appropriate actions;
(b) minor defects and irregularities affecting title to the assets of Seller,
but only if such defects and irregularities do not and will not impair the
operation, value, marketability or use of the asset affected by such defect or
irregularity; (c) rights reserved to or vested in any governmental body to
control or regulate any asset in any manner that does not materially impair the
value or use of such asset; and (d) encumbrances deemed to be Permitted
Encumbrances pursuant to SECTION 7.4(C) hereof.
PERSON: means any individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.
PLAN: means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by Seller or by any trade or business, whether or not
incorporated, which, together with Seller, is under common control, as described
in Section 414(b) or (c) of the Code.
PRE-CLOSING PERMITTED ENCUMBRANCES: means the First Lien Deed of Trust
and the NationsBank Note.
PREPAID CLOSING EXPENSES: means all expenses incurred and paid by
Seller using or out of Acquisition Assets (as defined in SECTION 3.1 hereof)
prior to the Closing Date in connection with the negotiation, preparation and
execution of this Agreement and the transactions contemplated hereby, including
Seller's attorneys' fees.
RCRA: means the Resources Conservation and Recovery Act of 1976, as
amended.
SAN ANTONIO LAND: means the 12.1 acres of land with all buildings and
improvements thereon, located at 000 Xxxx Xxxxx Xxxx Xxxxxxxxx in San Antonio,
Bexar County, Texas, more particularly described on EXHIBIT B.
SUBSIDIARY or SUBSIDIARIES: means, with respect to any specified
Person, a corporation, partnership, joint venture, trust, limited liability
company, unincorporated organization or other Person at least a majority of
whose securities having ordinary voting power for the election of its board of
directors or other similar managing body are, at the time as of which any
determination is being made, owned legally or beneficially by such Person or one
or more Subsidiaries thereof.
TCADA: means Texas Commission on Alcohol and Drug Abuse.
TDCJ: means Texas Department of Criminal Justice.
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TAX RETURN: means any return, report, statement, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Authority in connection with the
determination, assessment or collection of any Taxes or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
TAXES: means all federal, foreign, state, local or other net or gross
income, gross receipts, sales, use, transfer, real property gains or transfer,
school, ad valorem, property, value-added, franchise, production, severance,
windfall profit, withholding, payroll, employment, excise or similar taxes,
assessments, duties, fees, levies or other governmental charges, together with
any interest thereon, any penalties, additions to tax or additional amounts with
respect thereto and any interest in respect of such penalties, additions or
additional amounts.
TRANSITIONAL LIVING FACILITY: means the 44-bed program currently
operated at the San Antonio Facility for homeless juveniles pursuant to the
Supportive Housing Program Management Agreement between Seller and the County of
Bexar, Texas dated effective March 6, 1996.
ARTICLE II
CLOSING
SECTION 2.1 CLOSING. The closing of the purchase and sale provided for
herein (the "CLOSING") shall take place at the offices of Xxxxx & Xxxxx, L.L.P.,
Xxx Xxxxx Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000, on or before
February 28, 1997 (the "OUTSIDE CLOSING DATE"), unless extended as provided in
SECTION 3.3(B), or at such other place, time or date as may be agreed upon by
the parties hereto (the "CLOSING DATE").
ARTICLE III
PURCHASE, SALE AND DELIVERY
SECTION 3.1 ACQUISITION ASSETS. Subject to the terms and conditions of
this Agreement, and on the basis of the representations and warranties
hereinafter set forth, at the Closing, Seller shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall acquire and purchase from
Seller, subject to SECTION 3.2 hereof, all of the assets, properties and rights
of Seller associated with the Business including, without limitation, all of
Seller's right, title and interest in and to the following:
(a) the fee simple interest in and to the Dallas County Land;
(b) the fee simple interest in and to the San Antonio Land;
(c) the lessee's interest in and to the Dallas County Office
Facility;
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(d) all buildings, structures, fixtures and other improvements
located on the Dallas County Land and San Antonio Land and relating to
the Dallas County Office Facility (the "IMPROVEMENTS");
(e) all right, title and interest, if any, of Seller in and to (i)
all easements, tenements, hereditaments, privileges and appurtenances in
any way belonging to the Acquired Property and the Improvements, (ii) any
land lying in the bed of any highway, street, road, avenue or access way,
open or proposed, in front of or abutting or adjoining the Acquired
Property and the Improvements, (iii) the use of all strips and
rights-of-way, if any, abutting, adjacent, contiguous to or adjoining the
Acquired Property and the Improvements, and (iv) all other rights and
appurtenances belonging or in any way pertaining thereto including,
without limitation, all water, wastewater and other utility rights and
capacities (the "APPURTENANCES");
(f) all of the machinery, equipment, trade fixtures, tools,
furniture, appliances, implements, spare parts, supplies, leasehold
improvements, construction in progress and all other tangible personal
property used in the operation of the Business which is owned by Seller,
or of which Seller has the current possession and use, on the Closing
Date, including, without limitation, those listed on SCHEDULE 3.1(F)
hereto (collectively, the "EQUIPMENT");
(g) the motor vehicles and other rolling stock used in the
operation of the Business which are owned by Seller on the Closing Date,
including, without limitation, those listed on SCHEDULE 3.1(G) hereto
(collectively, the "MOTOR VEHICLES");
(h) all office supplies, kitchen supplies, laundry supplies,
medical supplies, spare parts, safety equipment, maintenance supplies,
other supplies used or consumed in the Business and other similar items
which exist on the Closing Date and which are used in the Business
(collectively, the "SUPPLIES");
(i) all right, title and interest in, to and under all contracts
(including, without limitation, all of the operating contracts of
Seller), leases, agreements, equipment or other lease licenses,
government contract awards, management agreements and building service
agreements related to services used in the operation of the Business and
to which Seller is a party on the Closing Date or by which any of the
Acquisition Assets (as hereinafter defined) are then bound including,
without limitation, those listed on SCHEDULE 3.1(I) hereto (collectively,
the "CONTRACTS");
(j) except as identified in Section 3.2(f) hereof, all accounts
receivable of Seller and all other rights of Seller to payment for goods
sold or leased or for services rendered, including, without limitation,
those which are not evidenced by instruments or chattel paper, whether or
not they have been earned by performance or have been written off or
reserved against as a bad debt or doubtful account in any financial
statements, together with all instruments and all documents of title
representing any of the foregoing, all rights in any merchandise or goods
which any of the same represent, and all rights, title, security and
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guaranties in favor of Seller with respect to any of the foregoing (the
"ACCOUNTS RECEIVABLE"), including, without limitation, those listed on
SCHEDULE 3.1(J) hereto;
(k) all cash and investments of Seller (other than investments in
the Investment Management Account) which exist at the Closing Date,
including without limitation, those listed on SCHEDULE 3.1(K) hereto;
(l) all prepaid items, deposits and other similar assets of Seller
which exist at the Closing Date and which are associated with goods or
services used in the Business;
(m) Operating Revenues for the period commencing on January 1,
1997, subject to the assumption and payment of Operating Expenses for
such period by Purchaser pursuant to SECTION 4.1(D) hereof;
(n) cash or cash equivalents representing fund accounts of Inmates
("INMATE BANK ACCOUNTS"), if any;
(o) all goodwill and going concern value of the Business;
(p) all right, title and interest in licenses, permits and
franchises issued by any federal, state, municipal or other governmental
authority (the "PERMITS") relating to the Acquisition Assets or the
Business, including, without limitation, those listed on SCHEDULE 3.1(P)
hereto, to the extent transferable;
(q) all patents, patent applications, processes, shop rights,
formulas, brand names, trade secrets, service marks, copyrights,
drawings, and any similar items and related rights owned by or licensed
to Seller and used in connection with the Business, together with any
goodwill associated therewith and all rights of action on account of
past, present and future unauthorized use or infringement thereof,
excluding any trademarks and trade names owned by or licensed to Seller
and used in connection with the Business;
(r) all rights under express or implied warranties from the
suppliers of Seller with respect to the Acquisition Assets, to the extent
they are assignable;
(s) all warranties and guaranties pertaining to the Permits and
Contracts, to the extent transferable under their terms and applicable
laws;
(t) all books, records, papers and instruments of whatever nature
and wherever located that are in the possession or control of Seller,
that relate to the Business or the Acquisition Assets or which are
required or necessary in order for Purchaser to conduct the Business from
and after the Closing Date in the manner in which it is presently being
conducted, including, without limitation, blueprints of the Improvements,
if any, accounting and financial records relating to the Contracts,
maintenance records, environmental records and reports, correspondence
with the TDCJ or TCADA or other Governmental Authorities related to the
Business, supplier lists and other supplier data relating to the purchase
of
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supplies used in connection with the Business, and confidential
information exclusively relating to or exclusively arising out of the
Business;
(u) all personnel files and other materials relating to employees
of Seller who are to be offered employment by Purchaser as contemplated
by SECTION 7.1 hereof;
(v) all records of compliance and noncompliance with the laws,
regulations ordinances and orders applicable to the Acquisition Assets or
the Business;
(w) all right, title and interest in, to and under all rights,
privileges, claims, causes of action, and options relating or pertaining
to the Acquisition Assets or the Business; and
(x) subject to the exclusions set forth in SECTION 3.2 hereof, all
other or additional privileges, rights, interests, properties and assets
of every kind and description and wherever located that are used or
intended for use in connection with, or that are necessary to the
continued conduct of, the Business as presently conducted.
Subject to SECTION 3.2 hereof, all of the assets referenced
in this SECTION 3.1 are collectively referred to as the "ACQUISITION ASSETS."
SECTION 3.2 EXCLUDED ASSETS. Notwithstanding SECTION 3.1 hereof, Seller
is not selling and Purchaser is not purchasing pursuant to this Agreement any of
the following, all of which shall be retained by Seller (collectively, the
"EXCLUDED ASSETS"):
(a) all of Seller's right, title and interest in the Investment
Management Account;
(b) any minute books, tax returns and similar corporate documents;
(c) the name "Interventions, Co.";
(d) any insurance policies of Seller subject to SECTIONS 7.12,
7.13 and 8.1(B);
(e) any employee benefit plans of Seller; PROVIDED, HOWEVER, that
Purchaser shall make available to the employees of Seller hired by
Purchaser any employee benefit plan which Purchaser offers to its
employees and shall transfer or "roll-over" any account balances
maintained by Seller for the benefit of Seller's employees into such
plan; and
(f) any claims of Seller against BHS Management relating to
periods prior to the Closing Date, together with any claims against
TCADA arising as a result of its withholding of the payment of the sum
of $280,000 in calendar year 1995, together with any associated
insurance coverage for all of such claims.
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SECTION 3.3 PURCHASE PRICE.
(a) The aggregate consideration for the purchase of the Acquisition
Assets and Seller's covenants set forth in ARTICLE XII hereof, shall be (i)
$4,850,000, (ii) less the sum of $1,661,919, being the fair market value of the
Investment Management Account as of September 30, 1996, (iii) less all Prepaid
Closing Expenses (collectively, the price for the Acquisition Assets and
Seller's covenants shall be referred to as the "PURCHASE PRICE").
(b) Prior to the execution of this Agreement, Purchaser delivered to
Seller the sum of $100,000 to serve as an option fee (including any additional
amounts paid pursuant to this SECTION 3.3(B), the "OPTION FEE"), which, upon the
terms and subject to the conditions hereof, including SECTION 10.2 hereof, shall
be applied against the Purchase Price at Closing. Purchaser may extend the
Closing Date to March 31, 1997 by paying to Seller an additional $50,000 on or
before February 28, 1997; if Purchaser has paid to extend the Outside Closing
Date to March 31, 1997, Purchaser may extend the Outside Closing Date to April
30, 1997 by paying to Seller an additional $50,000 on or before March 31, 1997.
The amounts paid pursuant to the preceding sentence shall be part of the Option
Fee, and such amounts shall be subject to the same terms of refundability and
application against the Purchase Price as the original $100,000 Option Fee.
(c) Upon the terms and subject to the conditions hereof, at the Closing,
Purchaser shall pay to Seller an amount equal to the Purchase Price less (i) the
Option Fee and (ii) the Escrowed Purchase Price (as hereinafter defined) by wire
transfer to an account designated in writing by Seller or by a bank cashier's
check made payable to Seller, as determined by Purchaser.
(d) Upon the terms and subject to the conditions hereof, at the Closing,
Purchaser shall pay $500,000 (the "ESCROWED PURCHASE PRICE") of the Purchase
Price to Charter Title Company, as Escrow Agent, or another escrow agent
mutually acceptable to Purchaser and Seller (the "ESCROW AGENT"), to be held by
the Escrow Agent and disbursed by the Escrow Agent in accordance with the terms
and conditions of the Escrow Agreement, substantially in the form of EXHIBIT C
hereto (the "ESCROW AGREEMENT"), to be executed by Purchaser and Seller at the
Closing.
(e) At the Closing, Purchaser shall pay to CPC and NationsBank, N.A.,
respectively, the cash amounts necessary to pay in full the First Lien Note and
the NationsBank Note together with accrued interest thereon.
SECTION 3.4 ALLOCATION REPORTING. Unless otherwise agreed by Purchaser
and Seller, (i) SCHEDULE 3.4 hereto sets forth the allocations established by
Purchaser and Seller of the Purchase Price and the Assumed Liabilities (as
hereinafter defined) (and any other items constituting consideration paid by
Purchaser or received by Seller in connection with the disposition of the
Acquisition Assets) among the Acquisition Assets; (ii) the allocations set forth
on SCHEDULE 3.4 hereto will be used by Purchaser and Seller as the basis for
reporting asset values and other items for purposes of all required Tax Returns
(including any Tax Returns required to be filed under Section 1060(b) of the
Code and the Treasury regulations thereunder); and (iii) Purchaser and Seller
will agree not to assert, in connection with any audit or other proceeding with
respect to Taxes, any asset values or other items inconsistent with the
allocations set forth on SCHEDULE 3.4 hereto.
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ARTICLE IV
LIABILITIES AND OBLIGATIONS
SECTION 4.1 ASSUMED LIABILITIES. As part of the consideration for the
Acquisition Assets, and subject to SECTION 4.2 hereof, at the Closing, Purchaser
shall assume and pay, perform and discharge the following:
(a) the trade accounts payable and recorded accrued liabilities
of Seller incurred in the normal course of operations, as of the Closing
Date, consistent with the account balances on SCHEDULE 4.1(A);
(b) any commitments and liabilities arising after the Closing
Date pursuant to all Contracts (provided that the rights thereunder have
been duly and effectively assigned to Purchaser); and
(c) Operating Expenses in connection with services rendered by
Sellers in connection with the Business for the period commencing on
January 1, 1997.
The above-referenced liabilities (SECTION 4.1(A) through 4.1(D)) are
collectively referred to as the "ASSUMED LIABILITIES."
SECTION 4.2 LIABILITIES NOT ASSUMED BY PURCHASER. Except as provided in
SECTION 4.1 hereof, Purchaser does not assume or agree to pay, perform or
discharge, and shall not be responsible for, any other liabilities or
obligations of Seller, whether accrued, absolute, contingent or otherwise,
including, without limitation, liabilities or obligations based on, arising out
of or in connection with the following (collectively, the "EXCLUDED
LIABILITIES"):
(a) any indebtedness (whether short-term or long-term) for
borrowed money;
(b) any Taxes for which Seller is liable (taking into account
the provisions of SECTION 7.2(A) hereof);
(c) any prepayment penalties or other liabilities related to
retiring or extinguishing any indebtedness of Seller including, without
limitation, the First Lien Note, the NationsBank Note or the Bexar
County Contingent Lien Note;
(d) any liabilities arising out of or in connection with periods
or activity prior to the Closing Date related to BHS Management, TDCJ,
TCADA, OSHA, EEOC and any unrecorded liabilities or contingencies that
are not identified on SCHEDULE 4.1(A);
(e) any liability or obligation (contingent or otherwise) of
Seller arising out of any claim, litigation or proceeding threatened or
pending on or before the Closing Date or any claim, litigation or
proceeding threatened or initiated after the Closing Date, to the extent
based on an act or omission of Seller or any current or former officer,
director, employee,
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agent or representative of Seller occurring before the Closing Date,
whether or not set forth on SCHEDULE 5.10;
(f) any claims or conditions arising under or relating to
Environmental Laws or similar legal requirements attributable or
relating to the assets (including, without limitation, the operation
thereof) or the business of Seller, including any liability or
obligation resulting from Environmental Laws with respect to the
Acquired Property arising after the Closing Date resulting from, caused
by or related to any act or omission of Seller or any current or former
officer, director, employee, agent, representative, tenant or invitee of
Seller which occurred prior to the Closing Date;
(g) any liability arising out of or in connection with Seller's
defective performance of any Contract , the HOME Agreement or any
express or implied warranty with respect to performance of any Contract
or the HOME Agreement prior to the Closing Date;
(h) any expenses of Seller incurred in connection with the
negotiation, preparation and execution of this Agreement and the
transactions contemplated hereby, including Seller's attorneys' fees,
that are not Prepaid Closing Expenses; and
(i) any liability or obligation under or in connection with or
related to the Excluded Assets.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and agrees to and with Purchaser as follows:
SECTION 5.1 ORGANIZATION; QUALIFICATION. Seller is a nonprofit
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. Seller has heretofore delivered to Purchaser true,
correct and complete copies of its articles of incorporation and bylaws, each as
amended or restated through the date of this Agreement. Seller has all requisite
power and authority to own and operate its assets and properties and to carry on
its business and the Business as it is now being conducted. Seller is duly
licensed or qualified as a foreign entity to do business and is in good standing
in all jurisdictions, if any, wherein the character of the properties owned or
held by it or the nature of the business transacted by it requires it to be so
licensed or qualified. Seller is not currently licensed or qualified to transact
business as a foreign entity.
SECTION 5.2 AUTHORITY; ENFORCEABILITY. Seller has all requisite
corporate power and authority to enter into this Agreement. All necessary action
on the part of Seller has been taken to authorize the execution and delivery of
this Agreement, the performance of their respective obligations hereunder and
the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Seller. This Agreement
constitutes,
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as of the date hereof, and this Agreement and all documents and instruments
required hereunder to be executed and delivered by Seller at Closing will
constitute, on the Closing Date, legal, valid and binding obligations of Seller
enforceable against Seller in accordance with their terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 5.3 SUBSIDIARIES. Seller does not have any Subsidiaries, nor
does Seller hold any equity interest in or control (directly or indirectly,
through the ownership of securities, by contract, by proxy, alone or in
combination with others, or otherwise) any corporation, limited liability
company, partnership, business organization or other Person.
SECTION 5.4 CONFLICTING AGREEMENTS AND OTHER MATTERS; CONSENTS. Seller
is not a party to any contract or agreement or subject to any charter or other
corporate restriction which materially and adversely affects its business,
property or financial condition as of the date hereof. Except as set forth on
SCHEDULE 5.4 hereto, the execution and delivery of this Agreement does not, the
fulfillment of or compliance with the terms and provisions hereof will not, and
the consummation of the transactions contemplated hereby will not:
(a) violate or conflict with any provision of, or require any
notice, consent, authorization or approval under, the articles of
incorporation or bylaws of Seller;
(b) violate or conflict with any provision of, or require any
filing, consent, authorization or approval under, any law or
administrative regulation or any judicial, administrative or arbitration
order, award, judgment, writ, injunction or decree applicable to or
binding upon Seller or to which Seller's assets or properties are
subject; or
(c) conflict with, result in a breach of, constitute a default
under (whether with notice or the lapse of time or both), accelerate or
permit the acceleration of the performance required by, or require any
consent, authorization or approval under, (i) any mortgage, indenture,
deed of trust, loan or credit agreement or any other agreement or
instrument evidencing indebtedness for money borrowed to which Seller is
a party or by which Seller is bound or to which Seller's properties are
subject or (ii) any lease, license, contract or other agreement or
instrument to which Seller is a party or by which Seller is bound or to
which Seller's properties are subject.
SECTION 5.5 NO DEFAULT; COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Seller is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, (i) any
mortgage, loan or credit agreement, indenture, evidence of indebtedness or other
instrument evidencing borrowed money to which Seller is a party or by which
Seller or any of its properties is bound, (ii) any judgment, order or injunction
of any court or Governmental Authority or (iii) any other agreement, contract,
lease or license.
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(b) To the best knowledge of Seller, Seller is not in violation of any
law, regulation, order, judgment or decree of any federal or state court or
Governmental Authority applicable to its business or operation.
(c) Seller holds such licenses, certificates, permits, franchises,
consents, waivers, authorizations, approvals and orders of Governmental
Authorities as are necessary to carry on its business and the Business as
currently conducted. Seller is not in violation of any such license,
certificate, permit, franchise, consent, waiver, authorization, approval or
order. All such licenses, certificates, permits, franchises, consents, waivers,
authorizations, approvals and orders are in full force and effect, and no
written or oral notice of suspension, revocation or cancellation thereof has
been threatened, and Seller is fully authorized, subject to the approval of the
licensing agencies, to assign to Purchaser such licenses, certificates, permits,
franchises, consents, waivers, authorizations, approvals and orders.
SECTION 5.6 FINANCIAL STATEMENTS. Seller has heretofore furnished
Purchaser with the following financial statements, identified by the principal
financial officer of Seller, as the case may be: (a) the audited balance sheets
of Seller as of June 30 in each of the years 1995 and 1996, and the related
income and cash flow statements for the fiscal years then ended, and (b) an
unaudited balance sheet of Seller as of September 30, 1996 and the related
income and cash flow statements for such periods. Such financial statements
(including any related schedules and notes) are true, complete and correct, and
fairly present the financial position of Seller as of their respective dates and
the results of operations of Seller for the periods therein indicated, and were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved. Except for ordinary and
customary liabilities that have arisen in the ordinary course of business of
Seller since September 30, 1996, Seller does not have any liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) that are
not reflected in its financial statements.
SECTION 5.7 NO UNDISCLOSED LIABILITIES. There is no existing,
contingent or threatened liability, obligation, Lien or claim of any nature
(absolute, accrued, contingent or otherwise) that relates to the Business or has
been asserted or threatened to be asserted against Seller, other than
liabilities arising after the date of the Balance Sheet in the ordinary course
of business consistent with past practice.
SECTION 5.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE
5.8 hereto, since September 30, 1996 there has not been:
(a) any material adverse change in the business, financial
condition, properties, prospects, net worth or results of operations of
Seller;
(b) any material damage, destruction or loss suffered by Seller,
whether covered by insurance or not;
(c) any change by Seller in tax methods, principles or elections
or in accounting methods or principles that would be required to be
disclosed under generally accepted accounting principles;
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(d) any sale, lease or other disposition of properties and assets
of Seller, other than those in the ordinary course of business consistent
with past practices;
(e) any merger or consolidation of Seller with any other Person or
any acquisition by Seller of the stock or business of another Person;
(f) any borrowing, agreement to borrow funds or guaranty by Seller
or any termination or amendment of any evidence of indebtedness,
contract, agreement, deed, mortgage, lease, license or other instrument
to which Seller is bound or by which Seller or any of its properties is
bound other than in the ordinary course of business and consistent with
past practices;
(g) any cancellation of debt by Seller or waiver of any claim or
right of substantial value to Seller;
(h) any increase in the compensation payable or to become payable
by Seller, other than in the ordinary course of business and consistent
with past practices, to the directors, officers or employees of Seller,
any increase in benefits or benefit plan costs or any increase in any
bonus, insurance, compensation or other benefit plan made for or with or
covering any directors, officers or employees of Seller;
(i) any employment, consulting, severance or indemnification
agreement entered into or made by Seller with any of its employees, or
any collective bargaining agreement or other obligation to any labor
organization incurred or entered into by Seller;
(j) the creation or imposition of any Lien, other than a Permitted
Encumbrance, on any of the Acquisition Assets;
(k) any reduction in accruals or reserves, except to the extent of
related cash payments or other reductions consistent with past practice;
(l) any write-up or write-down of the value of Seller's assets,
except for writeups or write-downs in accordance with generally accepted
accounting principles and in the ordinary course of business and
consistent with past practice;
(m) the making of any capital expenditure or commitments therefor
in excess of $10,000 in the aggregate;
(n) any amendment to the articles of incorporation or bylaws of
Seller;
(o) any contract bid for an amount in excess of $10,000; or
(p) any contract or commitment to do any of the foregoing.
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SECTION 5.9 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. SCHEDULE 5.9
hereto sets forth a complete list of the following contracts, agreements, plans
and commitments to which Seller is a party or by which Seller or any of its
properties is bound as of the date hereof:
(a) any contract, commitment or agreement that involves aggregate
expenditures by Seller of more than $10,000 per year;
(b) any contract or agreement (including any such contracts or
agreements entered into with any Governmental Authority) relating to the
maintenance or operation of the Business;
(c) any indenture, loan agreement or note under which Seller has
outstanding indebtedness, obligations or liabilities for borrowed money;
(d) any lease or sublease for the use or occupancy of real
property;
(e) any agreement that restricts the right of Seller to engage in
any type of business;
(f) any guarantee, direct or indirect, by any Person of any
contract, lease or agreement entered into by Seller;
(g) any partnership, joint venture or construction and operation
agreement;
(h) any agreement of surety, guarantee or indemnification with
respect to which Seller is the obligor, outside of the ordinary course of
business;
(i) any contract that requires Seller to pay for goods or services
substantially in excess of its estimated needs for such items or the fair
market value of such items; and
(j) any other contract material to the Business.
True, correct and complete copies of each of such contracts, agreements, plans
and commitments have been delivered to or made available for inspection by
Purchaser. All such contracts, agreements, plans and commitments (i) were duly
and validly executed and delivered by Seller and, to the knowledge of Seller,
the other parties thereto and (ii) are valid and in full force and effect.
Seller has fulfilled all material obligations required of Seller under each such
contract, agreement, plan or commitment to have been performed by it prior to
the date hereof, including timely paying all interest on its debt, including the
First Lien Note and the NationsBank Note, as such interest has become due and
payable. Except as set forth on SCHEDULE 5.9, to the best knowledge of Seller,
there are no counterclaims or offsets under any of such contracts, agreements,
plans and commitments. The assignment of the Dallas County Operating Facility
Contract will vest in Purchaser the right to operate the Dallas County Operating
Facility under the terms of the Dallas County Operating Facility Contract and to
use the Dallas County Operating Facility for such purposes at no cost to
Purchaser.
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SECTION 5.10 ACTIONS PENDING. Except as set forth on SCHEDULE 5.10
hereto, there is no action, claim, suit, investigation or proceeding pending or,
to the knowledge of Seller, threatened against Seller or involving any
properties or rights of Seller by or before any court, arbitrator or
Governmental Authority. There is no action, claim, suit, investigation or
proceeding pending or, to the knowledge of Seller, threatened against Seller
which purports to affect the validity or enforceability of this Agreement or
that seeks to prohibit, restrict or delay the consummation of the transactions
contemplated hereby or that might have a Material Adverse Effect on Seller or
its assets or property. SCHEDULE 5.10 sets forth a summary description
(including the cost to Seller of each such lawsuit (including any settlements or
judgments paid by Seller and attorneys' fees incurred by Seller) and the amount,
if any, covered by insurance) of all current and prior lawsuits by or against
Seller. The HOME Agreement is no longer of any force and effect, and Purchaser
shall have no obligations under such agreement.
SECTION 5.11 ENVIRONMENTAL. To the best knowledge of Seller, Seller has
conducted and is conducting its businesses in compliance with all Environmental
Laws and none of the operations of Seller is the subject of federal, state or
local investigation evaluating whether any remedial action is needed to respond
to a release of any Hazardous Substance into the environment. Seller has not
(and no other Person has) filed any notice under any federal, state or local law
indicating that Seller is responsible for the release into the environment or
the improper storage of any amount of any Hazardous Substance, or that any such
Hazardous Substance has been released or is improperly stored upon any owned,
operated or leased property of Seller. Other than as set forth in the Dallas
County Office Lease, to the best knowledge of Seller, Seller has no liability or
contingent liability in connection with any violation of Environmental Laws or
in connection with the release or threatened release into the environment or the
improper storage of any Hazardous Substance. All notices, permits, licenses or
similar authorizations, if any, required to be obtained or filed in connection
with the operations of Seller, including, without limitation, present or past
treatment, storage, disposal or release of a Hazardous Substance into the
environment, have been duly obtained or filed, and Seller is in compliance with
the terms and conditions of all such notices, permits, licenses and similar
authorizations. There has been no release or threatened release of any Hazardous
Substances on or to any of the owned, operated or leased properties or assets of
Seller that either (a) is not in compliance with Environmental Laws or (b) could
create an obligation or liability of Seller under Environmental Laws, and there
are no storage tanks or other containers on or under any of the owned, operated
or leased properties or assets of Seller from which any Hazardous Substances may
be released into the surrounding environment. No claims are pending or
threatened by third parties against Seller alleging liability for exposure to a
Hazardous Substance and there have been no environmental investigations,
studies, audits, reviews or other analyses conducted by or which are in the
possession of Seller regarding any facility or property owned, operated or
leased by Seller which have not been delivered to Purchaser.
Notwithstanding the foregoing, to the knowledge of Seller, except
as otherwise disclosed to Purchaser in writing, there are no Hazardous
Substances now on or previously existing on the Acquired Property, nor are there
now or have there every been any above or below ground storage tanks. Purchaser
understands that Seller has undertaken no investigation or testing nor made any
other effort with regard to determining the existence of Hazardous Substances on
the Acquired Property.
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Notwithstanding the foregoing, to the knowledge of Seller, no
aspect or condition of the Acquired Property violates any applicable laws,
rules, regulations, codes, or covenants, conditions or restrictions, nor does
the Acquired Property have any structural or latent defects, nor have any
improvements or alterations been made to the Acquired Property without a permit
where one was required, nor is there any unfulfilled order directive of any
applicable governmental agency or casualty insurance company that any work of
investigation remediation, repair, maintenance or improvement required to be
performed on the Acquired Property.
SECTION 5.12 INSURANCE. SCHEDULE 5.12 hereto sets forth a list of all
insurance policies owned by Seller by which Seller or any of its properties or
assets is covered against present losses, all of which are now in full force and
effect. No insurance has been refused with respect to any operations, properties
or assets of Seller nor has coverage of any insurance been limited by any
insurance carrier that has carried, or received any application for, any such
insurance during the last three (3) years. No insurance carrier has denied any
claims made against any of the policies listed on SCHEDULE 5.12 hereto.
SECTION 5.13 TITLE. Seller has good and marketable title to its
personal, tangible and intangible properties and assets, including such
properties and assets reflected in the Balance Sheet and, except as noted in the
financial statements and the notes thereto delivered pursuant to SECTION 5.6
hereof, said properties and assets are not subject to any Lien, other than
Permitted Encumbrances. Seller has not received any written notice of any
material adverse claim that has not been satisfied with respect to its title to
any material Permit, right-of-way, easement or lease on or under which any of
its facilities are located. Seller enjoys peaceful and undisturbed possession
under all material Permits or leases under which it is operating, and all such
Permits and leases are valid, subsisting and in full force and effect.
SECTION 5.14 REAL ESTATE.
(a) SCHEDULE 5.14 hereto contains an accurate and complete list of all
real property owned in whole or in part by Seller as part of or related to the
Business, and includes the name of the record title holder thereof and a list of
all indebtedness secured by any Lien thereon. Seller has good and marketable
title in fee simple to all the real property owned by it, free and clear of any
Lien, except for Permitted Encumbrances and Pre-Closing Permitted Encumbrances.
To the knowledge of Seller, none of the buildings, structures or appurtenances
(or any equipment therein) located on such real property, nor the operation or
maintenance thereof, violates in any respect any restrictive covenant, or
encroaches on any property owned by others. No condemnation proceeding is
pending or, to the knowledge of Seller, threatened which would preclude or
impair in any material respect the use of such property by Seller for the
purpose for which it is currently used.
(b) SCHEDULE 5.14 hereto sets forth a list and summary description
(including property location, parties and annual rental payments) of all leases,
subleases and other agreements as part of or related to the Business under which
Seller is lessor or lessee of, or uses or occupies or allows the use or
occupancy of, any real property. All such leases, subleases and other agreements
are valid and subsisting and in full force and effect.
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(c) The real and leased property listed on SCHEDULE 5.14 (i) has full
and free access to and from highways, streets and roads and there is no
proceeding pending or, to the knowledge of Seller, threatened that could result
in the termination of or material limitations on such access and (ii) is
connected to and serviced by utilities and public services all of which are
adequate for the use of the real property listed thereon as the Business is
currently conducted. Seller has not experienced during the three (3) years
preceding the date hereof any material interruption in the delivery of adequate
quantities of any utilities (including, without limitation, electricity, natural
gas, potable water, water for cooling or similar purposes and fuel oil) or other
public services (including, without limitation, sanitary and industrial sewer
service) required in the operation of the Business during such period and no
such material interruption is, to the knowledge of Seller, threatened.
SECTION 5.15 SUPPLIES. The Supplies of Seller are of a quantity and
quality that has been normal for Seller in the ordinary course of business of
Seller and are owned by Seller free and clear of any Liens. The value of the
Supplies have been recorded on the books of Seller in accordance with generally
accepted accounting principles.
SECTION 5.16 ACCOUNTS RECEIVABLE. All accounts receivable reflected on
the Balance Sheet represent sales actually made in the ordinary course of
business and are fully collectible except as reflected in the reserve for
doubtful accounts in the Balance Sheet. The reserve for doubtful accounts
reflected in the Balance Sheet has been determined based on Seller's prior
accounting and collection practices.
SECTION 5.17 TAXES.
(a) Seller has provided Purchaser with true and correct copies of all
Tax Returns, if any, of Seller for the past five (5) years.
(b) Seller has caused to be duly filed in a timely manner with the
appropriate Governmental Authorities all Tax Returns required to be filed by or
with respect to the Business or the Acquisition Assets and has caused to be paid
or deposited all Taxes (including estimated Taxes) required with respect to the
periods covered by such Tax Returns or by any taxing authority. All Taxes
required to be collected or withheld with respect to the Business or the
Acquisition Assets have been duly collected or withheld, and all Taxes with
respect to the Business or the Acquisition Assets required under generally
accepted accounting principles to be accrued on the financial statements of
Seller have been so accrued.
(c) No liens with respect to Taxes exist, and Seller has no reason to
expect that any lien with respect to Taxes will arise, on or with respect to the
Business or the Acquisition Assets, except for liens imposed by law and incurred
in the ordinary course of business for obligations not yet due. No extension of
time is in effect with respect to the date on which any Tax Return is to be
filed by or with respect to the Business or the Acquisition Assets. There are no
outstanding agreements or waivers extending the period for assessment or
collection of any Taxes relating to the ownership or operation of the Business
or the Acquisition Assets.
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(d) There is no pending action, proceeding or investigation, and, to the
knowledge of Seller, no action, proceeding or investigation has been threatened
by any Governmental Authority, for assessment or collection of Taxes with
respect to the Business or the Acquisition Assets. No claim for assessment or
collection of Taxes has been asserted during the past five (5) years and no
actual or proposed assessment has been made with respect to Taxes relating to
the ownership or operation of the Business or the Acquisition Assets.
SECTION 5.18 EMPLOYEE BENEFIT PLANS.
(a) Each Plan is listed on SCHEDULE 5.18 hereto. No Plan is or has been
(i) covered by Title IV of ERISA, (ii) subject to the minimum funding
requirements of Section 412 of the Code or (iii) a "multi-employer plan" as
defined in Section 3(37) of ERISA. Each Plan intended to be qualified under
Section 401(a) of the Code is designated as a tax-qualified plan on SCHEDULE
5.18 and is so qualified.
(b) Seller has heretofore delivered to Purchaser true and correct copies
of the following, if any:
(i) each Plan listed on SCHEDULE 5.18, all amendments thereto as
of the date hereof and all current summary plan descriptions provided to
employees regarding the Plans;
(ii) each trust agreement and annuity contract (or any other
funding instruments) pertaining to any of the Plans, including all
amendments to such documents to the date hereof;
(iii) each management or employment contract or contract for
personal services and a complete description of any understanding or
commitment between Seller and any officer, consultant, director,
employee or independent contractor of Seller that is not by its terms
terminable at will; and
(iv) a complete description of each other plan, policy, contract
or arrangement providing for bonuses, deferred compensation, retirement
payments, profit sharing, incentive pay, commissions, hospitalization or
medical expenses or insurance for any officer, consultant, director,
annuitant, employee or independent contractor of Seller as such or
members of their families (other than directors' and officers' liability
policies), whether or not insured (a "BENEFIT PROGRAM").
(c) To the knowledge of Seller, each Plan and Benefit Program has been
maintained and administered in compliance with the terms and requirements of all
applicable laws. Seller has no commitment or obligation to establish or adopt
any new or additional Plans or to increase the benefits under any existing Plan.
Other than for costs of administration, there is no annual cost to Seller
related to all Plans.
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SECTION 5.19 EMPLOYEES AND LABOR MATTERS.
(a) SCHEDULE 5.19 hereto is a complete list of all employees of Seller
listing the title or position held, base salary or wage rate and any bonuses,
commissions, profit sharing, Seller's vehicles, club memberships or other
compensation or perquisites payable, all employee benefits received by such
employees and any other material terms of any written agreement with Seller. As
of the date of this Agreement and as of the Closing Date, the combined projected
annual payroll for fiscal year ending June 30, 1997 of Seller required to
operate the Business is not materially different from that as listed on SCHEDULE
5.19, and Seller has not entered into any agreement or agreements pursuant to
which the combined annual payroll of Seller, including projected pay increases,
overtime and fringe benefit costs, required to operate the Business (including
all administrative and support personnel) would be greater than as listed on
SCHEDULE 5.19. SCHEDULE 5.19 also includes a detailed description of all health,
dental, life and disability insurance plans of Seller and a description of the
cost per employee under each such plan for individual coverage as well as for
coverage of such employee's dependents.
(b) Except as set forth on SCHEDULE 5.19, Seller is not a party to or
bound by any written employment agreements or commitments, other than on an at
will basis. Seller is in compliance with all applicable laws respecting the
employment and employment practices, terms and conditions of employment and
wages and hours of its employees and is not engaged in any unfair labor
practice. To the knowledge of Seller, all employees of Seller who work in the
United States are lawfully authorized to work in the United States according to
federal immigration laws. There is no labor strike or labor disturbance pending
or, to the knowledge of Seller, threatened against Seller with respect to the
Business and, during the past five (5) years, Seller has not experienced a work
stoppage with respect to the Business.
(c) Seller is not a party to or bound by the terms of any collective
bargaining agreement or other union contract applicable to any employee of
Seller and no such agreement or contract has been requested by any employee or
group of employees of Seller, nor has there been any discussion with respect
thereto by management of Seller with any employees of Seller. Seller is not
aware of any union organizing activities or proceedings involving, or any
pending petitions for recognition of, a labor union or association as the
exclusive bargaining agent for, or where the purpose is to organize, any group
or groups of employees of Seller. There is not currently pending, with regard to
any of its facilities, any proceeding before the National Labor Relations Board,
wherein any labor organization is seeking representation of any employees of
Seller.
SECTION 5.20 INTELLECTUAL PROPERTY RIGHTS. Except as set forth on
SCHEDULE 5.10, all patents, trademarks (whether registered or not), trade names,
corporate names, computer software, copyrights and patent or know-how licenses
(wherein Seller is either licensee or licensor) and any other intellectual
property of Seller (the "INTELLECTUAL PROPERTY RIGHTS") are lawfully owned,
possessed or used by Seller, as the case may be. No past due royalties or other
payments subsequent to the Closing Date are or will be required to be paid to
any Person who is the licensor under such license agreements as they currently
exist, and Seller is not now nor upon consummation of the transactions
contemplated hereby will be in default in any obligation with respect to any
agreement with others concerning the Intellectual Property Rights. There is no
existing or threatened
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infringement, misuse or misappropriation by others of the Intellectual Property
Rights; there is no pending or threatened claim by Seller against others for any
such infringement, misuse or misappropriation; and there is no pending judicial
proceeding involving any claim, and Seller has not received any notice or claim
of any infringement, misuse or misappropriation by Seller of any patent,
trademark, trade name, copyright, Intellectual Property Rights license or
similar right owned by any third party during the past five (5) years.
SECTION 5.21 RELATIONSHIPS. Other than BHS Management, the Seller has
not received notice from any supplier or from any party to any Contract
involving more than $10,000 annually with Seller (each a "CONTRACT PARTY"),
during the past two (2) years that such supplier or Contract Party intends to
discontinue doing business with Seller, and no supplier or Contract Party during
the past two (2) years has indicated any intention (a) to terminate its existing
business relationship with Seller or (b) not to continue its business
relationship with Seller, whether as a result of the transactions contemplated
hereby or otherwise. Seller has not entered into any related party transaction
during the past year.
SECTION 5.22 CERTAIN PAYMENTS. Neither Seller nor any officer, director
or employee of Seller has paid or received or caused to be paid or received,
directly or indirectly, in connection with the business of Seller (a) any bribe,
kickback or other similar payment to or from any domestic or foreign government
or agency thereof or any other Person or (b) any contribution to any domestic or
foreign political party or candidate (other than from personal funds of such
officer, director or employee not reimbursed by Seller or as permitted by
applicable law).
SECTION 5.23 BOOKS AND RECORDS. To the best knowledge of Seller, and for
the period subsequent to July 1, 1995, the corporate minute books, and other
corporate records of Seller are correct and complete in all material respects
and the signatures appearing on all documents contained therein are the true
signatures of the person purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the State of Texas and no meeting of the board of directors of
Seller or any committee thereof has been held for which minutes have not been
prepared and are not contained in the minute books. To the extent that they
exist, all personnel files, reports, strategic planning documents, financial
forecasts, accounting and tax records and all other records of every type and
description that relate to the business of Seller have been prepared and
maintained in accordance with good business practices and, where applicable, in
conformity with generally accepted accounting principles and applicable laws and
regulations. All such books and records are located in the offices of Seller.
SECTION 5.24 CONDITION AND SUFFICIENCY OF ASSETS. The Improvements and
Equipment are structurally sound, are in good operating condition and repair
(subject to normal wear and tear) and are adequate for the uses to which they
are being put, and Seller is not aware that any of such Improvements or
Equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The
Improvements, Equipment and Motor Vehicles reflected in the Balance Sheet
(except any such tangible property disposed of since September 30, 1996 in the
ordinary course of business) or acquired since September 30, 1996 by Seller
constitute all of the operating assets held for use or used in connection with
Seller's business other than those disposed of in the ordinary course of
business, and are sufficient for the continued
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conduct of the Business at the Closing in substantially the same manner as
conducted prior to the Closing.
SECTION 5.25 CERTAIN EXPENSES. The projected costs as determined under
generally accepted accounting principles to Seller to operate the Business
during the fiscal year 1997 as listed on SCHEDULE 5.25 are reasonable based on
historical financial data.
SECTION 5.26 INMATE BANK ACCOUNTS. SCHEDULE 5.26 lists each of the
Inmate Bank Accounts.
SECTION 5.27 INVESTMENTS. The fair market value of the Investment
Management Account as of September 30, 1996 was $1,661,989. The Seller has not
transferred any cash on hand into, or used any cash on hand to purchase or make
any investments that have been included in, the Investment Management Account
since September 30, 1996.
SECTION 5.28 STUDIES, ETC. Seller has provided all studies, reports,
plans, analyses or similar documents (whether prepared by Seller's employees or
others) in their possession or control relating to Hazardous Substances and
Environmental Laws or relating to the Business, the Dallas County Land, the San
Antonio Land and the Dallas County Office Facility and the Improvements.
SECTION 5.29 DISCLOSURE. To the best knowledge of Seller, there is no
fact known to Seller that has specific application to Seller (other than general
economic or industry conditions) that would have a Material Adverse Effect that
has not been set forth in this Agreement or in the Schedules attached hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants that:
SECTION 6.1 CORPORATE EXISTENCE. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to transact business in all jurisdictions wherein
the nature of its business or ownership of its assets require such
qualification.
SECTION 6.2 AUTHORITY; NO CONFLICTS. Purchaser has all requisite
corporate power and authority to carry on its business as presently conducted,
to enter into this Agreement and to perform its other obligations under this
Agreement. The consummation of the transactions contemplated by this Agreement
will not violate, or be in conflict with, any provision of Purchaser's charter,
bylaws, any agreement or instrument to which Purchaser is a party or by which
Purchaser is bound or any law applicable to Purchaser. The execution, delivery
and performance of this Agreement and the transactions contemplated hereby have
been duly and validly authorized by all requisite corporate action on the part
of Purchaser. There is no action, claim, suit, arbitration, investigation or
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proceeding pending or threatened against Purchaser which purports to affect the
validity or enforceability of this Agreement or that seeks to prohibit, restrict
or delay the consummation of the transactions contemplated hereby.
SECTION 6.3 BINDING AGREEMENT. This Agreement constitutes, as of the
date hereof, and this Agreement and all documents and instruments required
hereunder to be executed and delivered by Purchaser at Closing will constitute,
on the Closing Date, legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 6.4 REGULATORY APPROVALS. Except with respect to Purchaser's
application for required licenses or permits, no filings or other regulatory
approvals are required to be filed or obtained by Purchaser in connection with
the execution, delivery and performance by Purchaser of this Agreement prior to
the consummation of the transactions contemplated herein.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1 EMPLOYEES.
(a) Purchaser may, but shall not be obligated to, offer employment to
any of the employees of the Business. Seller will not solicit, or endeavor to
solicit, after the Closing Date any employee or discourage any such person from
accepting such employment with Purchaser. Seller has not made any
representations or promises, oral or written, to employees of Seller concerning
employment by Purchaser.
(b) Purchaser shall not be responsible for any costs, obligations or
liabilities which may result from the termination of employment by Seller of any
employee of the Business not retained by Purchaser as of the first payroll day
after the Closing; PROVIDED, HOWEVER, that Purchaser shall be responsible for
and shall assume all costs, losses or damages in connection with the termination
by Purchaser of any employee of the Business who is hired by Purchaser on or
after the Closing Date. Purchaser makes no representation with respect to the
comparability of Purchaser's employee benefits to those offered by Seller.
Purchaser specifically disclaims any obligation to remunerate employees of
Seller who, following the Closing Date, will be employed by Purchaser, at levels
comparable to the aggregate remuneration provided to such employees while
employed by Seller. Prior to the Closing Date, Seller shall have taken all
necessary actions to comply with the Worker Adjustment and Retraining
Notification Act (the "WARN ACT") to the extent it is subject to the WARN Act,
and Purchaser shall not have any disclosure or announcement obligations or any
other responsibilities under the WARN Act as a result of the transactions
contemplated by this Agreement.
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(c) Seller shall take such actions as it deems appropriate to terminate,
modify, alter or amend the existing Benefit Programs with respect to employees
of the Business due to the transactions contemplated by this Agreement.
Purchaser shall have no obligation to assume, establish or continue any of such
Benefit Programs, including, without limitation, any severance plans of Seller.
Seller shall provide all employees of the Business terminated by Seller with
health insurance continuation in accordance with the provisions of Part 6 of
Title 1 of ERISA, if applicable.
(d) Purchaser shall take all reasonable actions necessary and
appropriate to assure that the accrued vacation time and accrued "paid time-off"
of the employees of Seller shall be honored or provisions made for the payment
thereof to such employees.
SECTION 7.2 TAXES.
(a) LIABILITY FOR TAXES. Subject to SECTION 7.2(D) hereof, Seller shall
be liable for, and shall indemnify and hold Purchaser and its Affiliates
harmless from, (i) all Taxes that are imposed on or incurred by Seller, (ii) all
Taxes that are imposed on or incurred with respect to the Acquisition Assets or
the Business for any taxable period ending on or before the Closing Date, except
to the extent that accruals were made therefor at September 30,1996 and except
for the personal property tax on motor vehicles, (iii) a portion, determined as
described below, of any Taxes that are imposed on or incurred with respect to
the Acquisition Assets or the Business for any taxable period beginning prior to
and ending after the Closing Date ("STRADDLE PERIOD") which is allocable to the
period ending on or before the Closing Date, but not otherwise, (iv) any Taxes
payable as a result of a breach by Seller of any of the representations set
forth in SECTION 5.17 hereof, and (v) any attorneys' fees or other costs
incurred by Purchaser or its Affiliates in connection with any payment from
Seller under this SECTION 7.2(A). The determination of the portion of any Taxes
imposed on or incurred with respect to the Acquisition Assets or the Business
for a Straddle Period which is allocable to the period ending on or before the
Closing Date shall be made, in the case of ad valorem, property or similar
Taxes, if any, which are not measured by, or based upon, production, or
franchise or capital Taxes which are not measured by, or based upon, net income,
by allocating such Taxes on a per diem basis, and, in the case of all other
Taxes, by assuming that the period ending on or before the Closing Date
constitutes a separate taxable period and by taking into account the actual
taxable events occurring during such period.
(b) TAX RETURNS. Seller shall be responsible for the preparation and
filing of any Tax Return relating to the Acquisition Assets or the Business that
is originally due on or before the Closing Date. Purchaser shall be liable for
the preparation and filing of all other Tax Returns that relate to the
Acquisition Assets or the Business.
(c) RIGHT TO REFUNDS. If Seller, on the one hand, or Purchaser, on the
other hand, receives a refund of any Taxes for which the other is liable, then
the party receiving such refund shall, within thirty (30) days after its
receipt, remit it to the other party.
(d) TRANSFER TAXES. Seller shall be liable for and pay, and shall
indemnify and hold Purchaser harmless from all transfer, sales, use, gross
receipts, stamp, value added, excise, or similar Taxes imposed on or relating to
the sale or transfer of the Acquisition Assets or the Business.
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SECTION 7.3 CONSENTS. Seller shall procure all consents, novations,
approvals or waivers in a form reasonably satisfactory to Purchaser which must
be obtained by Seller pursuant to this Agreement or which are necessary to
assign the Contracts and transfer any other Acquisition Assets to Purchaser. At
the Closing, Purchaser may elect to close the transactions contemplated hereby,
notwithstanding the fact that Seller may have failed to obtain consents to the
transfer.
SECTION 7.4 TITLE.
(a) Unless waived by Purchaser, Purchaser has caused Charter Title
Company, as agent for Lawyers Title Insurance Corporation (the "TITLE COMPANY"),
to furnish Purchaser a Commitment for Title Insurance (the "COMMITMENT") from
the Title Company addressed to Purchaser covering the Dallas County Land and the
San Antonio Land and the Improvements, pursuant to which the Title Company shall
commit to issue to Purchaser a Texas Owner's Policy of Title Insurance (the
"TITLE POLICY") in the form of the Commitment set forth as EXHIBIT D, together
with legible copies of all instruments described in the Commitment evidencing
defects in, exceptions or objections to or encumbrances upon title to the Dallas
County Land, the San Antonio Land or the Improvements.
(b) Unless waived by Purchaser, Purchaser, at its sole cost and expense,
shall have obtained a report of searches made of the Uniform Commercial Code
Records of Dallas and Bexar Counties, Texas and the Secretary of State of Texas
in the name of Seller (the "UCC SEARCHES"), evidencing any Liens relating
thereto granted by Seller.
(c) Purchaser shall have fifteen business days following receipt of the
Commitment and UCC Searches provided for in this SECTION 7.4 and the Survey
provided for in SECTION 7.5 hereof to deliver to Seller its written objections
to any matters reflected in Schedule B of the Commitment. Any such matters which
are not objected to by Purchaser within said fifteen business days shall all be
considered Permitted Encumbrances. Seller shall in good faith diligently work to
have the title and survey exceptions raised by Purchaser, other than the
Permitted Encumbrances, cured or removed to the reasonable satisfaction of
Purchaser by the Closing Date after Purchaser notifies Seller in writing of such
exceptions or objections. If Seller fails to cure or satisfy such objections for
any reason within such time period, Purchaser may either (i) accept conveyance
of title to the Acquired Property and the Improvements subject to such uncured
matters and proceed with the Closing contemplated herein (in which event all
such matters shall be deemed Permitted Encumbrances), or (ii) give written
notice to Seller electing to terminate this Agreement pursuant to ARTICLE X
hereof.
SECTION 7.5 SURVEY. Seller, at its sole cost and expense, has caused a
survey (the "SURVEY") of the San Antonio Land to be made by a licensed surveyor.
The Survey shall be acceptable to Purchaser and the Title Company and shall
contain a certification in favor of Purchaser and the Title Company that the
Survey is correct and accurate and that the San Antonio Land is free of
encroachments, except as shown, the form and content of which certification
shall be approved by the Purchaser and the Title Company. For purposes of the
description of the land to be included in the deeds to be delivered pursuant to
SECTION 9.1(E) hereof, the description prepared by the surveyor shall control
any conflicts or inconsistencies with the descriptions of the San Antonio Land
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on EXHIBIT B hereto, and such description shall be deemed to be incorporated
into this Agreement upon its completion and approval by Purchaser.
SECTION 7.6 ENVIRONMENTAL REPORTS. Prior to Closing, Purchaser, at its
sole cost and expense, may obtain a Phase I environmental assessment ("PHASE I")
of the Acquired Property by a certified environmental professional chosen by
Purchaser. The certified environmental professional shall be permitted to
inspect the Acquired Property and to perform such tests as he or she deems
necessary thereon. If the Phase I indicates that remediation of the Acquired
Property might be required, Seller, at its sole cost and expense, shall promptly
obtain any additional environmental assessments necessary to estimate the scope,
cost and time requirements of remediation, and, in the meantime, if necessary,
the Closing shall be postponed. If the estimated cost of the remediation exceeds
$75,000, or if the estimated time required to perform the remediation exceeds
ninety (90) days from the date such remediation is commenced, either Seller or
Purchaser may elect to terminate this Agreement pursuant to ARTICLE X hereof. If
the estimated cost of remediation is less than $75,000 and the estimated time
for remediation is less than ninety (90) days, or if the estimated cost of
remediation and the time for completion is greater than $75,000 and ninety (90)
days, respectively, but neither Seller nor Purchaser elects to terminate this
Agreement, Seller shall promptly commence the remediation and, in the meantime,
if necessary, the Closing shall be further postponed. If, during the process of
the remediation, it reasonably appears that the cost of remediation will exceed
the greater of $75,000 or the original estimate, either Seller or Purchaser may
elect to terminate this Agreement pursuant to ARTICLE X hereof. If, during the
process of remediation, it appears that the time required to complete the
remediation will exceed ninety (90) days or, if greater, the number of days
originally estimated, either Seller or Purchaser may elect to terminate this
Agreement pursuant to ARTICLE X hereof. Notwithstanding the foregoing, Seller
shall have no right to terminate this Agreement pursuant to ARTICLE X hereof if
Seller has not used its Best Efforts to keep the costs of remediation below
$75,000 and the time for completion of the remediation to less than ninety (90)
days.
SECTION 7.7 FURTHER ASSURANCES. Seller and Purchaser shall execute and
deliver to the other, at the Closing or thereafter, any other instrument which
may be requested by the other and which is reasonably appropriate to perfect or
evidence any of the sales, assignments, transfers or conveyances contemplated by
this Agreement or to transfer any Acquisition Assets identified after the
Closing or to obtain any consents or licenses necessary for Purchaser to operate
the Business.
SECTION 7.8 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Purchaser may receive and open all mail addressed to Seller at the Business
Property and, to the extent that such mail and the contents thereof relate to
the Business or the Acquisition Assets, deal with the contents thereof in its
discretion. Purchaser shall notify Seller of (and provide Seller copies of the
relevant portions of) any mail that obliges Seller to take any action or
indicates that action may be taken against Seller. To the extent that such mail
and the contents thereof do not relate to the Business or the Acquisition
Assets, such mail and the contents thereof shall be promptly forwarded to Seller
at the Law Office of Xxxxxxx X. Xxxxxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxx,
Xxxxx 00000, or at such other address as may be designated by Seller.
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SECTION 7.9 UNCOLLECTIBLE ACCOUNTS RECEIVABLE. Seller will indemnify
Purchaser for the full amount of any accounts receivable included in the
Acquisition Assets that Purchaser, using its Best Efforts, is unable to collect
within 180 days after the end of the month during which such accounts receivable
were accrued ("UNCOLLECTIBLE ACCOUNTS RECEIVABLE"). Seller shall pay Purchaser
pursuant to Seller's obligations under this SECTION 7.9 within ten (10) business
days after written notice from Purchaser of the amount Seller owes Purchaser
pursuant to this SECTION 7.9. After receipt of payment from Seller for the full
amount for any Uncollectible Accounts Receivable, Purchaser shall assign the
rights and interests to such Uncollectible Accounts Receivable to Seller.
SECTION 7.10 BILLS AND PAYMENTS RECEIVED AFTER CLOSING. Purchaser shall
promptly send Seller any bills or other notices that payment is due that
Purchaser receives after Closing related to obligations of Seller not assumed by
Purchaser under this Agreement, and Seller shall timely pay such bills or other
debts on or before the date that such bills are due. Seller shall promptly send
Purchaser any bills or other notices that payment is due that Seller receives
after Closing related to obligations of Seller expressly assumed by Purchaser
under this Agreement, and Purchaser shall timely pay such bills or other debts
on or before the date that such bills are due. Seller and Purchaser shall each
promptly send to the other any payments received by them after Closing that is
an asset of the other.
SECTION 7.11 LOSS DUE TO CONDEMNATION. In the event of a condemnation
proceeding commenced on or before the Closing Date with respect to all or any
material portion of the Business Property or the Improvements, Purchaser may,
upon written notice to Seller given within ten (10) days of receipt of notice of
such event, terminate this Agreement pursuant to ARTICLE X of this Agreement. In
the event that Purchaser does not elect to terminate, then this Agreement shall
remain in full force and effect, and the transaction hereby contemplated shall
close in accordance with the terms and conditions of this Agreement except that
Seller shall assign to Purchaser at Closing all of Seller's rights and interests
in and to any condemnation awards which have been paid or are or become payable
to Seller.
SECTION 7.12 LOSS DUE TO CASUALTY. In the event of a Substantial Loss or
Damage (defined below) to any of Business Properties or the Improvements by fire
or other casualty prior to the Closing Date, Purchaser may, upon written notice
to Seller within ten (10) days of receipt of notice of such event, terminate
this Agreement pursuant to ARTICLE X of this Agreement. In the event that
Purchaser does not elect to terminate, then this Agreement shall remain in full
force and effect, and the transaction hereby contemplated shall close in
accordance with the terms and conditions of this Agreement except that Seller
shall assign to Purchaser at Closing all of Seller's rights and interests in and
to any insurance proceeds which have been or are or become payable to Seller as
a result of such damage or loss, less reasonable costs and attorneys fees of
Seller in connection therewith. "SUBSTANTIAL LOSS OR DAMAGE" shall mean a loss
or damage of 20% or more of the square footage of the Improvements or material
damage to any of Business Properties. In the event of a loss or damage arising
prior to the Closing Date that constitutes less than a Substantial Loss or
Damage by fire or other casualty, Purchaser shall not have the right to
terminate this Agreement pursuant to this SECTION 7.12; HOWEVER, Seller shall
assign to Purchaser at Closing all of Seller's rights and interests in and to
any insurance proceeds which have been or are or become payable to Seller as a
result of such damage or loss.
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ARTICLE VIII
COVENANTS
SECTION 8.1 SELLER'S COVENANTS. Seller covenants and agrees with
Purchaser as follows:
(a) CONDUCT OF BUSINESS. Except as permitted hereunder or
contemplated hereby or as consented to in writing by Purchaser, through
the Closing Date Seller will (i) conduct the Business in the usual and
ordinary course thereof, including, without limitation, the making of
proposals, quotations, bids and solicitations, and the entering into of
contracts for the purchase of products and purchase and sale of
services; (ii) communicate regularly with Purchaser and keep Purchaser
closely advised of any material developments relating to the Business;
(iii) permit Purchaser to have reasonable access to the Business
Property and to review and copy the books and records of the Business;
(iv) maintain and preserve the assets of Seller in customary repair,
order and condition, reasonable wear and tear and loss by fire and
casualty (which loss shall be governed by SECTION 7.12 hereof) excepted,
and proceed with any improvements in progress at the Improvements
associated with the Business; (v) use its Best Efforts to preserve
Seller's business organization intact, to retain the services of
Seller's officers and employees and to preserve Seller's relationships
with its suppliers and all Governmental Authorities with which Seller
has engaged in business related to the Business; (vi) use its Best
Efforts to cause all of the representations and warranties in ARTICLE V
hereof to continue to be true and correct; (vii) continue to purchase
inventories, supplies and similar items in the ordinary course through
the Closing Date; and (viii) not make new commitments for an annual
value greater than $10,000, without the prior written consent of
Purchaser.
(b) MAINTENANCE OF INSURANCE. Seller will (i) maintain or cause
to be maintained the insurance policies or risk retention programs (or
policies or programs of substantially the same nature) of Seller in full
force and effect at all times until the Closing Date and (ii) assign to
Purchaser rights accruing under such policies, programs or coverage
(including self-insurance or any insurance reserves) from and after the
Closing with respect to incidents occurring prior to the Closing.
(c) INFORMATION AND ACCESS. Seller will afford representatives of
Purchaser reasonable access during normal business hours to its offices,
personnel, Improvements, equipment and records, for the purpose of
conducting an investigation thereof. Seller will furnish to Purchaser
such additional financial and operating data and other information as
Purchaser may reasonably request; PROVIDED, HOWEVER, that the
confidentiality of any data or information so acquired shall be
maintained by Purchaser and its representatives in accordance with
SECTION 8.2(A) hereof. Purchaser will be responsible for all
reproduction or copying costs as well as any overtime incurred in
connection with any such investigation
(d) BEST EFFORTS. Seller will use its Best Efforts to obtain
the satisfaction of the conditions to Closing set forth in SECTION 9.1
hereof.
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(e) PUBLIC ANNOUNCEMENTS AND DISCLOSURE OF COMPANY INFORMATION.
Subject to applicable law, at all times until the Closing, Seller will
promptly advise, and obtain the approval of, Purchaser before (i)
issuing, or permitting any of Seller's directors, officers to issue, any
press release with respect to this Agreement or the transactions
contemplated hereby or (ii) disclosing, or permitting any of Seller's
directors, officers, employees, representatives or agents to disclose,
to any Person (other than Seller or Purchaser or their respective
directors, officers, employees, representatives or agents) nonpublic
information regarding Purchaser.
(f) OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, Seller
shall not, and shall not knowingly permit any of its officers,
directors, employees, Affiliates, representatives or agents to, directly
or indirectly, (i) solicit, initiate or knowingly encourage any offer or
proposal for, or any indication of interest in, a merger or business
combination involving Seller or the acquisition of an equity interest
in, or a substantial portion of the assets of, Seller or (ii) engage in
negotiations with or disclose any nonpublic information relating to
Seller, or afford access to the properties, books or records of Seller,
to any Person.
(g) NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt
notice to Purchaser of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of such party contained in this Agreement to
be untrue or inaccurate in any material respect at or prior to the
Closing Date and (ii) any material failure by Seller to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; PROVIDED, that the delivery of any notice
pursuant to this SECTION 8.1(G) shall not limit or otherwise affect the
remedies available hereunder to Purchaser.
SECTION 8.2 PURCHASER'S COVENANTS. Purchaser covenants and agrees with
Seller as follows:
(a) PUBLIC ANNOUNCEMENTS AND DISCLOSURE OF COMPANY INFORMATION.
Subject to applicable law, at all times until the Closing, Purchaser
will promptly advise, and obtain the approval of, Seller before (i)
issuing, or permitting any of Purchaser's directors, officers,
employees, representatives or agents to issue, any press release with
respect to this Agreement or the transactions contemplated hereby or
(ii) disclosing, or permitting any of Purchaser's directors, officers,
employees, representatives or agents to disclose, to any Person (other
than Purchaser or Seller or their respective directors, officers,
employees, representatives or agents) nonpublic information regarding
Seller.
(b) BEST EFFORTS. Purchaser will use its Best Efforts to cause
the representations and warranties contained in ARTICLE VI hereof to
continue to be true and correct through the Closing Date and to obtain
the satisfaction of the conditions to Closing set forth in SECTION 9.2
hereof.
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ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated herein are subject, at the
option of Purchaser, to satisfaction or waiver of the following conditions:
(a) COMPLIANCE. Seller shall have complied with their covenants
and agreements contained herein, and the representations and warranties
contained in ARTICLE V hereof shall be true and correct on the date
hereof and as of the Closing Date.
(b) OFFICER'S CERTIFICATE. Purchaser shall have received a
certificate, substantially in the form of EXHIBIT E hereof, dated the
Closing Date, of an executive officer of Seller certifying as to the
matters specified in SECTION 9.1(A) hereof.
(c) SELLER'S RESOLUTIONS. Seller shall deliver to Purchaser
certified copies of resolutions duly adopted by the board of directors
of Seller, authorizing and approving the execution and delivery of this
Agreement, including the exhibits and schedules hereto, and the
consummation of the transactions contemplated herein.
(d) NONCANCELLATION OF OPERATING CONTRACTS. No operating
contracts of Seller listed on SCHEDULE 3.1(I) hereto shall have been
canceled or adversely affected, in any material respect, as the case may
be, prior to Closing.
(e) TRANSFER DOCUMENTS. Seller shall execute and deliver to
Purchaser such bills of sale and other instruments of sale, transfer,
conveyance, assignment and delivery covering the Acquisition Assets or
any part thereof, executed by Seller or other appropriate parties, as
Purchaser may reasonably require to assure the full and effective sale,
transfer, conveyance, assignment and delivery to Purchaser of the
Acquisition Assets free and clear of any rights and claims of third
parties (other than Permitted Encumbrances) no later than the open of
business on the Closing Date, including, but not limited to, the
following:
(i) a general warranty deed (the "DALLAS COUNTY LAND
DEED"), substantially in the form of EXHIBIT F hereto and
acceptable to Purchaser, duly executed by Seller, or its duly
authorized agent, duly acknowledged and in form for recording,
conveying to Purchaser good and marketable fee simple title to
the Dallas County Land and Improvements thereon and all of
Seller's right, title and interest in and to the Appurtenances
related thereto free and clear of all liens, encumbrances,
covenants, conditions, restrictions, rights-of-way, easements and
other matters affecting the title to the Dallas County Land and
Improvements thereon except for the Permitted Encumbrances.
(ii) a general warranty deed (the "SAN ANTONIO LAND
DEED"), substantially in the form of EXHIBIT G hereto and
acceptable to Purchaser, duly executed by Seller,
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or its duly authorized agent, duly acknowledged and in form for
recording, conveying to Purchaser good and marketable fee simple
title to the San Antonio Land and Improvements thereon and all of
Seller's right, title and interest in and to the Appurtenances
related thereto, free and clear of all liens, encumbrances,
covenants, conditions, restrictions, rights-of-way, easements and
other matters affecting the title to the San Antonio Land and
Improvements thereon except for the Permitted Encumbrances.
(iii) a general assignment (the "DALLAS COUNTY OFFICE
FACILITY LEASE ASSIGNMENT"), substantially in the form of EXHIBIT
H hereto and acceptable to Purchaser, duly executed by Seller, or
its duly authorized agent, duly acknowledged and in form for
recording, conveying to Purchaser all of Seller's right, title
and interest in and to the Dallas County Office Facility lease,
free and clear of all liens, encumbrances, covenants, conditions,
restrictions, rights-of-way, easements and other matters
affecting the title to the Dallas County Office Facility Lease
except for the Permitted Encumbrances and vesting in Purchaser
exclusive possession of Dallas County Office Facility for a term
of not less than two (2) years effective as of October 1, 1996.
(iv) the standard form of Texas Owner's Policy of Title
Insurance as set forth on EXHIBIT D issued by the Title Company,
at the sole cost and expense of Purchaser, insuring good and
marketable fee simple title to the Dallas County Land and the San
Antonio Land and the Improvements, subject only to the Permitted
Encumbrances with such endorsements and/or deletions thereto as
are set forth on EXHIBIT D hereto, or as otherwise acceptable to
Purchaser.
(v) a xxxx of sale, general assignment and conveyance by
Seller transferring to Purchaser good and marketable title to all
of the Acquisition Assets, substantially in the form of EXHIBIT I
hereto.
(vi) all documents reasonably required for the assignment
of Seller's rights under all registrations, permits and licenses
(to the extent permitted by law), equipment or motor vehicle
leasing agreements, motor vehicle and rolling stock titles,
rights under sales and/or purchase orders and of Seller's rights
under all other Contracts (including the operating contracts of
Seller listed on SCHEDULE 3.1(I) hereto) constituting a part of
the Acquisition Assets.
(vii) originals of all of the contracts, agreements,
commitments, books, records, files and other data that (x) are
included in the Acquisition Assets or (y) relate to or affect the
Acquisition Assets and are reasonably necessary for the continued
conduct of the Business.
(viii) such other instruments of transfer and assignment
in respect of the Acquisition Assets as Purchaser shall
reasonably require and as shall be consistent with the terms and
provisions of this Agreement.
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Prior to the Closing Date, Seller will take such reasonable steps
as may be requisite or appropriate so that no later than the close of
Business on the Closing Date, Purchaser will be in actual ownership and
control of all of the Acquisition Assets.
(f) ABSENCE OF MATERIAL ADVERSE EFFECT. No Material Adverse
Effect shall have occurred since the date hereof.
(g) CORRECTIONAL FACILITY PERMITS. Purchaser shall have obtained
or received a transfer of all required permits or licenses allowing
Purchaser to operate the Business at the Transitional Living Facility,
the Dallas County Operating Facility and the Dallas County Office
Facility under the requirements of any applicable Governmental
Authority, or a letter from the appropriate Governmental Authority
satisfactory to Purchaser regarding the issuance of such required
permits to Purchaser subsequent to Closing.
(h) ENVIRONMENTAL REVIEW AND REMEDIATION. Purchaser shall have
received a current Phase I environmental review, either provided by
Seller from any previous reviews, or a new review prepared at
Purchaser's expense, with respect to the Dallas County Land, the San
Antonio Land and the Dallas County Office Facility and such survey shall
not have raised any questions as to the accuracy of Seller's
representations and warranties in SECTION 5.11 hereof; and any
remediation suggested by the environmental studies performed pursuant to
SECTION 7.6 hereof with respect to the Acquired Property and the
Improvements has been completed to the reasonable satisfaction of
Purchaser.
(i) ORDERS, ETC. No action, suit or proceeding shall have been
commenced or shall be pending or, to the knowledge of Seller,
threatened, and no statute, rule, regulation or order shall have been
enacted, promulgated, issued or deemed applicable to the transactions
contemplated by this Agreement, by any Governmental Authority or court
that reasonably may be expected to (i) prohibit Purchaser's ownership or
operation of all or a material portion of the Business or the
Acquisition Assets, or compel Purchaser to dispose of or hold separate
all or a material portion of Purchaser's or Seller's business or assets,
as a result of the transactions contemplated by this Agreement or (ii)
prohibit consummation of the transactions contemplated by this
Agreement.
(j) REMOVAL OF LIENS. Seller shall have caused any and all Liens
on the Acquisition Assets, other than Permitted Encumbrances, to be
released and shall have provided Purchaser with documentary evidence to
such effect.
(k) ADDITIONAL REAL PROPERTY MATTERS.
(i) Purchaser shall have timely received the Title
Commitment, the Survey, and each of those items described in
SECTION 7.4 hereof and any objections of Purchaser thereto shall
have been waived pursuant to such Section;
(ii) There shall be no unpaid ad valorem taxes or
assessments levied or assessed against the Acquired Property for
five (5) years prior to the year in which
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Closing occurs. If the Acquired Property, or any part thereof,
shall be or shall have been affected by any such assessments for
five (5) years prior to the year of Closing, which are or may
become payable in installments, then for the purposes of this
Agreement all the installments of any such assessment whether due
or payable prior to or after the date of Closing shall be paid
and discharged by Seller at the Closing and Purchaser shall take
title free of the lien of all the unpaid installments of any such
assessment.
(l) CONSENTS. All consents and approvals required in connection
with (i) the execution, delivery and performance of this Agreement and
(ii) the assignment of all agreements necessary for Purchaser to conduct
the Business as it is currently being conducted by Seller, including,
without limitation, those consents listed on SCHEDULE 5.4 hereto, shall
have been obtained.
(m) OTHER DOCUMENTS; VERIFICATION BY INDEPENDENT AUDITOR. Seller
shall have delivered to Purchaser such other documents, instruments and
certificates as may be reasonably requested by Purchaser. Purchaser, at
its sole cost and expense, shall have the right to have an independent
public auditing firm verify the accuracy of Seller's representations and
warranties which relate the financial condition of the Business.
(n) REVENUES. Purchaser shall have received satisfaction
reasonable to Purchaser that Seller's projected revenues (including
other income) listed on SCHEDULE 9.1(N) are supported by appropriate
contracted funding from the relevant governmental agencies.
(o) RECEIVABLES CURRENT. All receivables relating to the
operation of the Transitional Living Facility shall have been brought
current (i.e., all receivables over one hundred eighty (180) days old
shall have been paid to Seller.)
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate the transactions contemplated herein are subject, at the
option of Seller, to satisfaction of the following conditions:
(a) COMPLIANCE. Purchaser shall have complied with its covenants
and agreements contained herein, and the representations and warranties
contained in ARTICLE VI hereof shall be true and correct in all respects
on the date hereof and as of the Closing Date.
(b) OFFICER'S CERTIFICATE. Seller shall have received a
certificate, substantially in the form of EXHIBIT J hereof, dated the
Closing Date, of an executive officer of Purchaser certifying as to the
matters specified in SECTION 9.2(A) hereof.
(c) PURCHASER'S RESOLUTIONS. Purchaser shall deliver to Seller
certified copies of resolutions duly adopted by the board of directors
of Purchaser authorizing and approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated
herein.
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(d) ORDERS, ETC. No action, suit or proceeding shall have been
commenced or shall be pending or, to the actual knowledge of the
officers and directors of Purchaser, threatened, and no statute, rule,
regulation or order shall have been enacted, promulgated, issued or
deemed applicable to the transactions contemplated by this Agreement, by
any Governmental Authority or court that reasonably may be expected to
(i) prohibit Purchaser's ownership or operation of all or a material
portion of the Business or the Acquisition Assets, or compel Purchaser
to dispose of or hold separate all or a material portion of Seller's
business or assets, as a result of the transactions contemplated by this
Agreement or (ii) prohibit consummation of the transactions contemplated
by this Agreement.
ARTICLE X
TERMINATION
SECTION 10.1 GROUNDS FOR TERMINATION. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by the mutual written agreement of Seller and Purchaser;
(b) by Purchaser by written notice thereof to Seller if any of
the conditions set forth in SECTION 9.1 hereof shall have become
incapable of fulfillment by or before the Closing Date, and shall not
have been waived by Purchaser;
(c) by Seller by written notice thereof to Purchaser if any of
the conditions set forth in SECTION 9.2 hereof shall have become
incapable of fulfillment by or before the Closing Date, and shall not
have been waived by Seller;
(d) by Purchaser, as set forth in SECTIONS 7.4, 7.11 and 7.12
hereof;
(e) by Purchaser or Seller, as set forth in SECTION 7.6 hereof;
(f) by Seller or Purchaser by written notice thereof to the other
if the transactions contemplated hereby shall not have been consummated
by February 28, 1997 (or such later date as shall apply pursuant to
SECTION 3.3(B) hereof), or such other date, if any, as Seller and
Purchaser shall agree upon in writing; or
(g) by Seller or Purchaser by written notice thereof to the other
if the consummation of the transactions contemplated hereby would
violate any nonappealable final order, decree or judgment of any court
or Governmental Authority having competent jurisdiction enjoining,
restraining or otherwise preventing, or awarding substantial damages in
connection with, or imposing a material adverse condition upon, the
consummation of this Agreement or the transactions contemplated hereby;
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PROVIDED, HOWEVER, that a party shall not be allowed to exercise any right of
termination pursuant to this SECTION 10.1 if the event giving rise to such
termination right shall be due to the negligent or willful failure of the party
seeking to terminate this Agreement to perform or observe in any material
respect any of the covenants or agreements set forth herein to be performed or
observed by such party.
SECTION 10.2 EFFECT OF TERMINATION. The following provisions shall
apply in the event of a termination of this Agreement:
(a) Subject to subsections (b) and (c) of this SECTION 10.2, if
this Agreement is terminated by Seller or by Purchaser as permitted
under SECTION 10.1 hereof, such termination shall be without liability
to any party to this Agreement or any stockholder, director, officer,
employee, agent or representative of such party; PROVIDED, that if this
Agreement is terminated by Seller or Purchaser as permitted by SECTION
10.1, unless the event giving rise to such termination right shall be
due to the negligent or willful failure of Purchaser, Seller shall
refund the Option Fee to Purchaser promptly after such termination of
this Agreement;
(b) If this Agreement is terminated as a result of the negligent
or willful failure of Purchaser to perform its obligations hereunder,
Purchaser shall forfeit the Option Fee to Seller as full payment for
damages for such negligent or willful failure. The parties hereto
acknowledge and agree that the actual damages that Seller might sustain
by reason of such negligent or willful failure of Purchaser to perform
its obligations hereunder are uncertain and would be difficult, if not
impossible, to ascertain, and that the Option Fee would be reasonable
compensation for any such negligent or willful failure;
(c) If this Agreement is terminated as a result of the negligent
or willful failure of Seller to perform its obligations hereunder,
Seller shall promptly refund to Purchaser the Option Fee. The parties
hereto acknowledge and agree that Purchaser, as a result of the actual
damages Purchaser would sustain by reason of such negligent or willful
failure of Seller to perform its obligations hereunder, could not be
made whole by monetary damages, and it is accordingly agreed that
Purchaser shall have the right to elect to enforce specific performance
under this Agreement as Purchaser's sole and exclusive remedy and Seller
waives the defense in any such action for specific performance that a
remedy at law would be adequate; and
(d) The parties hereto hereby agree that the provisions of
SECTIONS 10.2, 13.1, 13.3, 13.5 and 13.7 hereof and ARTICLE XI hereof
shall survive any termination of this Agreement.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.1 SELLER'S INDEMNITY OBLIGATIONS. Seller shall indemnify and
hold harmless Purchaser and Purchaser's officers, directors, stockholders,
employees, agents, representatives and Affiliates (each a "PURCHASER INDEMNIFIED
PARTY") from and against any and all claims, actions, causes of action,
arbitrations, proceedings, losses, actual damages, liabilities, judgments and
expenses (including, without limitation, reasonable attorneys' fees)
("INDEMNIFIED AMOUNTS") incurred by a Purchaser Indemnified Party as a result of
(a) any breach or misrepresentation in any of the representations and warranties
made by or on behalf of Seller in this Agreement or any certificate or
instrument delivered in connection with this Agreement, (b) any violation or
breach by Seller of or default by Seller under the terms of this Agreement or
any certificate or instrument delivered in connection with this Agreement, (c)
except for liabilities and obligations expressly assumed by Purchaser pursuant
to this Agreement arising prior to the Closing Date, any act or omission by
Seller or any officer, director, employee, agent or representative of Seller,
occurring on or prior to the Closing Date with respect to the Business or the
Acquisition Assets (including any claim by a third party, including employees
and Inmates, arising out of or related to any act or omission by Seller or any
officer, director, employee, agent or representative of Seller occurring on or
prior to the Closing Date with respect to the Business or Acquisition Assets),
or (d) any liabilities or obligations of Seller or any officer, director,
employee, agent or representative of Seller not expressly assumed by Purchaser
pursuant to this Agreement.
SECTION 11.2 PURCHASER'S INDEMNITY OBLIGATIONS. Purchaser shall
indemnify and hold harmless Seller and Seller's officers, directors, employees,
agents, representatives and Affiliates (each a "SELLER INDEMNIFIED PARTY") from
and against any and all Indemnified Amounts incurred by a Seller Indemnified
Party as a result of (a) any breach or misrepresentation in any of the
representations and warranties made by or on behalf of Purchaser in this
Agreement or any certificate or instrument delivered in connection with this
Agreement, (b) any violation or breach by Purchaser of or default by Purchaser
under the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement, (c) except for liabilities and obligations
retained by Seller pursuant to this Agreement, any act or omission by Purchaser
or any officer, director, employee, agent or representative of Purchaser
occurring after Closing Date with respect to the Business or the Acquisition
Assets (including any claim by a third party, including employees and Inmates,
arising out of any act or omission by Purchaser or any officer, director,
employee, agent or representative of Purchaser occurring after Closing Date with
respect to the Business or the Acquisition Assets), or (d) any liabilities or
obligations of Seller expressly assumed by Purchaser pursuant to this Agreement.
SECTION 11.3 INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"INDEMNIFIED PARTY") shall with reasonable promptness (i) notify the party from
whom indemnification is sought (the "INDEMNIFYING PARTY") of any third-party
claim or claims asserted against the Indemnified Party
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("THIRD PARTY CLAIM") for which indemnification is sought and (ii) transmit to
the Indemnifying Party a copy of all papers served with respect to such claim
(if any) and a written notice ("CLAIM NOTICE") containing a description in
reasonable detail of the nature of the Third Party Claim, an estimate of the
amount of damages attributable to the Third Party Claim to the extent feasible
(which estimate shall not be conclusive of the final amount of such claim) and
the basis of the Indemnified Party's request for indemnification under this
Agreement.
Within 30 days after receipt of any Claim Notice (the "ELECTION
PERIOD"), the Indemnifying Party shall notify the Indemnified Party (i) whether
the Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
If the Indemnifying Party notifies the Indemnified Party within
the Election Period that the Indemnifying Party elects to assume the defense of
the Third Party Claim, then the Indemnifying Party shall have the right to
defend, at its sole cost and expense (if the Indemnified Party is entitled to
indemnification hereunder), such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this SECTION 11.3(A). The Indemnifying
Party shall have full control of such defense and proceedings. The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party (but only if the Indemnified Party is entitled to indemnification
hereunder), to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall reasonably deem necessary or
appropriate to protect its interests or those of the Indemnifying Party and not
prejudicial to the Indemnifying Party (it being understood and agreed that if an
Indemnified Party takes any such action that is materially prejudicial and
causes a final adjudication that is adverse to the Indemnifying Party, the
Indemnifying Part shall be relieved of its obligations hereunder with respect to
such Third Party Claim). If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party elects to contest,
including, without limitation, the making of any related counterclaim against
the person asserting the Third Party Claim or any cross-complaint against any
person. Except as otherwise provided herein, the Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this SECTION 11.3 and
shall bear its own costs and expenses with respect to such participation.
If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to the preceding paragraph, or if the Indemnifying
Party elects to defend the Indemnified Party but fails to prosecute or settle
the Third Party Claim as herein provided, then the Indemnified Party shall have
the right to defend, at the sole cost and expense of the Indemnifying Party (if
the Indemnified Party is entitled to indemnification hereunder), the Third Party
Claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or settled.
The Indemnified Party shall have full control of such defense and proceedings.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by
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the Indemnified Party pursuant to this SECTION 11.3, and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, if the Indemnifying Party has
delivered a written notice to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this ARTICLE XI and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this SECTION
11.3 or of the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of such litigation.
The Indemnifying Party shall not settle or compromise any Third
Party Claim unless (i) the terms of such compromise or settlement require no
more than the payment of money (I.E., such compromise or settlement does not
require the Indemnified Party to admit any wrongdoing or take or refrain from
taking any action), (ii) the full amount of such monetary compromise or
settlement will be paid by the Indemnifying Party, and (iii) the Indemnified
Party receives as part of such settlement a legal, binding and enforceable
unconditional satisfaction and/or release, in form and substance reasonably
satisfactory to it, providing that such Third Party Claim and any claimed
lability of the Indemnified Party with respect thereto is being fully satisfied
by reason of such compromise or settlement and that the Indemnified Party is
being released from any and all obligations or liabilities it may have with
respect thereto. The Indemnified Party shall not settle or admit liability to
any Third Party Claim without the prior written consent of the Indemnifying
Party unless (x) the Indemnifying Party has disputed its potential liability to
the Indemnified Party, and such dispute either has not been resolved or has been
resolved in favor of the Indemnifying Party or (y) the Indemnifying Party has
failed to respond to the Indemnified Party's Claim Notice.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"INDEMNITY NOTICE") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement.
SECTION 11.4 DETERMINATION OF INDEMNIFIED AMOUNTS. The Indemnified
Amounts payable by an Indemnifying Party hereunder shall be determined (i) by
the written agreement of the parties, (ii) by binding arbitration pursuant to
SECTION 13.7 hereof, (iii) by a final judgment or decree of any court of
competent jurisdiction, or (iv) by any other means agreed to in writing by the
parties. A judgment or decree of a court shall be deemed final when the time for
appeal, if any, shall have expired and no appeal shall have been taken or when
all appeals taken have been fully determined. The Indemnified Party shall have
the burden of proving the Indemnified Amounts suffered by the Indemnified Party.
SECTION 11.5 ESCROW. Seller and Purchaser expressly acknowledge that the
indemnification obligations of Seller and Purchaser and the payment of
Indemnified Amounts pursuant to this ARTICLE XI shall not be limited to or by
the Escrowed Purchase Price or the terms of the Escrow Agreement.
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ARTICLE XII
COVENANTS NOT TO COMPETE
SECTION 12.1 SELLER'S COVENANTS NOT TO COMPETE. Except as otherwise
consented to or approved in writing by Purchaser, neither Seller nor any officer
or director of Seller will (i) at any time for a period of five (5) years
following the Closing Date, directly or indirectly, acting alone or as a member
of a partnership, as a shareholder of any security, as an agent, owner in full
or in part, advisor, consultant to or representative of, any Person:
(a) engage in any business in competition with the Business or
any other business operation of Purchaser in the adult or juvenile
prison, substance abuse/chemical dependency or halfway-house
construction or management field in the State of Texas; or
(b) request any present or future customer or supplier of the
Business to curtail or cancel its business with Purchaser in respect to
the Business; or
(c) unless otherwise required by law, disclose to any person,
firm or corporation any details of organization or business affairs of
the Business, any names of past or present customers of Seller or any
other nonpublic information concerning the Business; or
(d) induce or attempt to influence any employee of Purchaser
engaged in the conduct of the Business to terminate his or her
employment; or
(ii) at any time following the date hereof, disclose to any person, firm or
corporation any trade, technical or technological secrets used by the Business
or any other knowledge or information of a confidential nature (which knowledge
and information is not otherwise in the public domain) with respect to the
Business.
Seller acknowledges that this covenant not to compete is being provided
as an inducement to Purchaser to acquire the Acquisition Assets and that this
ARTICLE XII contains reasonable limitations as to time, geographical area and
scope of activity to be restrained and no broader than necessary to protect
legitimate business interests of Purchaser directly or indirectly associated
with the transactions pursuant to this Agreement. Seller acknowledges that, in
the event the scope of the covenants set forth in this ARTICLE XII is deemed to
be too broad in any court proceeding, the court may reduce such scope to that
which it deems reasonable under the circumstances. The parties hereto agree and
acknowledge that Purchaser does not have any adequate remedy at law for the
breach or threatened breach by Seller or any of its officers or directors of the
covenants and agreements set forth in this ARTICLE XII and, accordingly, Seller
and its officers and directors further agree that Purchaser may, in addition to
the other remedies which may be available to it hereunder, file a suit in equity
to enjoin Seller or any of its officers or directors from such breach or
threatened breach and consent to the issuance of injunctive relief hereunder. If
Seller or any of its officers or directors is found to have violated this
ARTICLE XII, then the party having been found to have violated this ARTICLE XII
shall pay all costs and reasonable attorneys' fees incurred by Purchaser to
enforce its rights under this ARTICLE XII. In the event that any officer or
director is not found to have violated
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this ARTICLE XII, then the Purchaser shall pay all costs and reasonable
attorney's fees incurred by the officer or director in connection with the
defense of such claims by Purchaser.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 COMMISSIONS. Seller represents and warrants that it has
done nothing to create any liability for the payment of any commission or
compensation in the nature of a finder's fee or similar fee to any broker or any
other Person in connection with this Agreement and the transactions contemplated
hereby. Seller shall indemnify and hold Purchaser harmless from and against any
and all claims for finders' fees, brokers' commissions or similar fees made by
any party as a result of this Agreement and the transactions contemplated
hereunder to the extent that any such commission or fee was incurred, or alleged
to have been incurred, by, through or under Seller. Purchaser shall indemnify
and hold Seller harmless from and against any and all claims for finders' fees,
brokers' commissions or similar fees made by any party as a result of this
Agreement and transactions contemplated hereunder to the extent that any such
commission was incurred, or alleged to have been incurred, by, through or under
Purchaser.
SECTION 13.2 SURVIVAL. The representations and warranties set forth in
this Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing for a period of
eighteen (18) months following the Closing Date, but shall thereafter terminate
and be of no further force or effect; PROVIDED, HOWEVER, that in the case of all
representations and warranties, there shall be no such termination with respect
to any such representation or warranty as to which a bona fide claim has been
asserted by written notice of such claim delivered to the party or parties
making such representation or warranty prior to the expiration of the survival
period; PROVIDED, FURTHER, that the representations and warranties set forth in
SECTIONS 5.2, and 5.13 hereof shall survive the Closing indefinitely and SECTION
5.17 shall survive the Closing for the statutory survival period; and, PROVIDED,
FURTHER, that the representations and warranties set forth in SECTIONS 5.19(A)
and 5.25 shall expire on the Closing Date.
SECTION 13.3 EXPENSES. Except as otherwise expressly provided herein,
each party shall bear its own respective expenses incurred in connection with
the negotiation, preparation and execution of this Agreement and the
transactions contemplated hereby, including its own consultant's fees,
attorneys' fees, investment banking and loan fees and other similar costs and
expenses. All Prepaid Closing Expenses of Seller will be deducted from the
purchase price paid by Seller pursuant to SECTION 3.3(A) hereof and all closing
expenses of Seller that have not been paid by Seller prior to the Closing Date
will be paid separately by Seller subsequent to the Closing Date.
SECTION 13.4 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been received only if and when
(i) personally delivered or (ii) on receipt after mailing, by United States
mail, first class, postage prepaid, by certified mail return receipt requested,
or by facsimile transmission to the respective parties, addressed in each case
as follows (or to such other address as may be specified by like notice):
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(1) If to Seller, to: Interventions, Co.
0000 X. Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy (which shall
not constitute notice) to: Xxxxxxx X. Xxxxxxxx
Attorney at Law
P. O. Box 550
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
(2) If to Purchaser, to: Cornell Corrections of Texas, Inc.
0000 Xxxxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telephone: 000-000-0000
Facsimile: 713-623-2853
With a copy (which shall
not constitute notice) to: Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx
Xxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
SECTION 13.5 ENTIRE AGREEMENT. This Agreement, including all schedules
and exhibits hereto, which schedules or exhibits are incorporated herein by
reference and deemed to be a part of this Agreement, constitutes the entire
agreement of the parties with respect to the subject matter hereof, and may not
be modified, amended or terminated except by a written instrument specifically
referring to this Agreement signed by all the parties hereto.
SECTION 13.6 GOVERNING LAW. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of laws thereof.
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SECTION 13.7 ARBITRATION.
(a) Any issue, controversy or claim arising out of or relating to this
Agreement or its alleged breach that cannot be resolved by mutual agreement
within sixty (60) days' notice thereof shall be resolved exclusively by final
and binding arbitration in Houston, Texas in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA"), and judgment
on the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof; PROVIDED, HOWEVER, that the parties shall have the right
to agree among themselves as to the amount of the claim.
(b) The arbitrators shall be selected by mutual agreement of the
parties, if possible. If the parties fail to reach agreement upon appointment of
arbitrators within thirty (30) days following receipt by one party of the other
party's notice of arbitration, each party shall select one arbitrator and the
two resulting arbitrators shall mutually agree on a third arbitrator from a list
or lists of proposed arbitrators submitted by AAA. The selection process shall
be that which is set forth in the AAA commercial arbitration rules then
prevailing, except that (i) the number of preemptory strikes shall not be
limited and (ii) if the parties' arbitrators fail to select an arbitrator from
one or more lists, AAA shall not have the power to make an appointment but,
subject to SECTION 13.7(C) hereof, shall continue to submit additional lists
until an arbitrator has been selected. Initially, however, promptly following
its receipt of a request to submit a list of proposed arbitrators, AAA shall
convene the parties' arbitrators in person or by telephone and attempt to
facilitate their selection of the third arbitrator by agreement. If an
arbitrator should die, withdraw or otherwise become incapable of serving, a
replacement shall be selected and appointed in the same manner as the initial
third arbitrator.
(c) If the third (or successor) arbitrator has not been selected
following submission of three or more lists by AAA, either party may declare the
existence of an impasse by giving written notice to the other. In that event,
the third (or successor) arbitrator shall be selected in the following manner:
Each party shall designate three proposed arbitrators whose names appear on any
of the lists previously submitted by AAA. The parties shall then eliminate five
of the designated names by alternately striking one, and the person whose name
remains shall serve as arbitrator. If necessary, the party to make the first
strike shall be designated by lot.
(d) All aspects of the arbitration shall be confidential, and the
parties and arbitrators shall not disclose to others, or permit disclosure of,
any information related to the proceedings, including but not limited to
discovery, testimony and other evidence, briefs and the award.
(e) Upon the motion of either party, and for good cause shown, the
arbitrators, by majority vote, may make any order which justice requires to
protect a party from the disclosure of proprietary, privileged or confidential
business information, including orders (i) that depositions or hearings be
conducted with no one present except the lead attorney for the respective
parties and persons designated by a majority of the arbitrators, and (ii) that
depositions, exhibits, other documents filed with the arbitrators or transcripts
of the hearing be sealed and not disclosed except as specified by the
arbitrators.
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SECTION 13.8 ASSIGNMENTS AND THIRD PARTIES. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. No party hereto
shall assign this Agreement or any part hereof without the prior written consent
of the other party; PROVIDED, HOWEVER, that it is understood and agreed that
Purchaser may assign all or any portion of its rights and delegate all or any
portion of its duties hereunder to an Affiliate of Purchaser, in which event the
assignee of Purchaser shall execute and deliver all documents, certificates and
other instruments to be executed and delivered by Purchaser at the Closing in
lieu of Purchaser, which documents, certificates and other instruments shall be
appropriately modified to conform to such assignee's organizational status. No
assignment shall release a party of any of its obligations under this Agreement;
PROVIDED, HOWEVER, Purchaser shall be released from its obligations under this
Agreement upon Purchaser's assignment of its rights and obligations under this
Agreement to an Affiliate of Purchaser.
SECTION 13.9 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any of the parties hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
SECTION 13.10 AMENDMENTS; NO WAIVERS. Any provision of this Agreement
may be amended or waived prior to the Closing Date if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
all parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 13.11 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement
shall entitle any Person other than the parties hereto or their respective
successors and assigns permitted hereby to any claim, cause of action, remedy or
right of any kind.
SECTION 13.12 HEADINGS; USE OF CERTAIN TERMS. The headings and table of
contents herein are for convenience only and shall have no significance in the
interpretation hereof. Unless the context shall otherwise require, the singular
shall include the plural and vice versa, and each pronoun in any gender shall
include all other genders.
SECTION 13.13 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed for all purposes to be an
original, but all of which together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
INTERVENTIONS, CO.
By: /S/ XXX XXXXXXXXX
Xxx Xxxxxxxxx
PRESIDENT AND MEMBER OF THE
BOARD OF DIRECTORS
By: /S/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
VICE PRESIDENT AND MEMBER OF THE
BOARD OF DIRECTORS
By:/S/ XXXXXX X. XXXXXXXXX
Xxxxxx X. Xxxxxxxxx
MEMBER OF THE BOARD OF DIRECTORS
CORNELL CORRECTIONS OF TEXAS, INC.
By: /S/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
CHIEF FINANCIAL OFFICER, TREASURER
AND SECRETARY
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