Exhibit 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AMONG
SHAREHOLDERS OF ROYAL HOSPITALITY SERVICES, INC.
AS LISTED ON EXHIBIT A,
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ROYAL HOSPITALITY SERVICES, INC.,
ROYAL INSTITUTIONAL SERVICES, INC.,
SURGI-PACK CORPORATION,
MASSACHUSETTS CAPITAL RESOURCE COMPANY
AND
XXXXXXXX TEXTILE SERVICES, INC.
DATED AS OF MARCH 21, 2005
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this
21st day of March 2005 ("Closing Date"), by and among Xxxxxxxx Textile
Services, Inc., a New York corporation ("Buyer"), the shareholders listed on
Exhibit A hereto ("Shareholders") of Royal Hospitality Services, Inc., a
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Delaware corporation ("Royal Hospitality"), Royal Hospitality, Royal
Institutional Services, Inc, a Massachusetts corporation and wholly owned
subsidiary of Royal Hospitality ("Company"), Surgi-Pack Corporation, a
Massachusetts corporation and wholly owned subsidiary of Royal Hospitality
("Surgi-Pack"), and Massachusetts Capital Resource Company, a Massachusetts
special purpose limited partnership ("Warrantholder").
RECITALS
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WHEREAS, Royal Hospitality is the owner of one hundred percent
(100%) of the issued and outstanding shares of common stock, no par value,
of the Company (the "Company Shares"), such Company Shares being the only
shares of capital stock of the Company that are issued and outstanding on
the date hereof; and
WHEREAS, Royal Hospitality is the owner of one hundred percent
(100%) of the issued and outstanding shares of common stock, no par value,
of Surgi-Pack (the "Surgi-Pack Shares"), such Surgi-Pack Shares being the
only shares of capital stock of Surgi-Pack that are issued and outstanding
on the date hereof; and
WHEREAS, the Warrantholder owns warrants to purchase one thousand
seven hundred (1,700) shares of common stock of the Company (the
"Warrants"); and
WHEREAS, the Company and Surgi-Pack conduct the business of
healthcare linen supply, related linen supply and dust control supply and
related commercial laundry services, from their respective facilities
located on Exhibit B hereto (the "Business"), provided that the definition
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of Business expressly excludes the business of linen supply and related
commercial laundry services for the hospitality industry, which business was
transferred out of the Company and Surgi-Pack to Royal Hospitality by the
Shareholders prior to the Closing Date (the "Hospitality Restructuring");
and
WHEREAS, Royal Hospitality desires to sell, assign, transfer and
convey to Buyer, and Buyer desires to acquire from Royal Hospitality, all of
the Company Shares and Surgi-Pack Shares; and
WHEREAS, the Warrantholder desires to sell, assign, transfer and
convey to Buyer for cancellation, and Buyer desires to acquire for
cancellation from the Warrantholder, the Warrants; and
WHEREAS, each of the parties hereto desires to set forth certain
representations, warranties and covenants, and to establish certain closing
conditions, made to induce the other to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
ARTICLE 1
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PURCHASE AND SALE OF COMPANY SHARES AND SURGI-PACK SHARES
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1.1 Purchase and Sale of Company Shares, the Surgi-Pack Shares
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and the Warrants; Closing. The purchase and sale of the Company Shares, the
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Surgi-Pack Shares and the Warrants shall be effected as follows:
(a) At the Closing (as defined in Section 1.1(b) hereof),
(i) Royal Hospitality shall sell to Buyer, and Buyer shall purchase from Royal
Hospitality, the Company Shares and the Surgi-Pack Shares, free and clear of
any lien, security interest, pledge, restriction on transferability or
voting, or other claim or encumbrance, and (ii) the
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Warrantholder shall sell to Buyer for cancellation, and Buyer shall purchase
from the Warrantholder for cancellation, the Warrants, in consideration of
the Purchase Price (as defined in Section 1.2) as adjusted as set forth in
Section 1.2.
(b) The closing (the "Closing") of the transactions contemplated
hereby shall take place at the offices of Xxxxxxxx Xxxxxx LLP, One XX Xxxx
Xxxxx, Xx. Xxxxx, Xxxxxxxx 00000, commencing at 9:00 a.m. Central Standard
Time on the Closing Date. The Closing shall be effective as of 11:59 p.m.
Central Standard Time on the Closing Date.
1.2 Payments.
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(a) The aggregate consideration to be paid by Buyer to Royal
Hospitality and the Warrantholder in connection with Buyer's purchase of the
Company Shares, the Surgi-Pack Shares and the Warrants (the "Purchase
Price") shall be payable, subject to adjustments as set forth below, as
follows:
(i) At Closing, Buyer will pay to Royal Hospitality
Thirty One Million Forty Nine Thousand Five Hundred Sixty Dollars
and Sixty Nine Cents ($31,049,560.69) in cash or such lesser amount
as adjusted pursuant to the provisions of Section 1.3 (the "Shares
Closing Payment") by means of a wire transfer into an account or
accounts, which account(s) is designated by Royal Hospitality at
least three business days prior to the Closing.
(ii) At Closing, Buyer will deposit an amount equal to
Nine Million Four Hundred and Fifty Thousand Dollars ($9,450,000)
(the "Escrowed Consideration"), by means of a wire transfer into an
interest bearing escrow account (the "Escrow Account") that has
been established by Buyer at least three business days prior to the
Closing Date subject to the terms of an escrow agreement in the
form attached hereto as Exhibit C (the "Escrow Agreement").
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(iii) At Closing, Buyer will pay to Warrantholder Four
Million Five Hundred Thousand Four Hundred Thirty Nine Dollars and
Thirty One Cents ($4,500,439.31) in cash (the "Warrants Closing
Payment, and together with the Shares Closing Payment, the "Closing
Payment") by means of a wire transfer into an account or accounts,
which account(s) is designated by Warrantholder at least three
business days prior to the Closing.
(b) Following the Closing, the following disbursements shall be
made from the Escrowed Consideration in accordance with the provisions set
forth herein:
(i) Subject to Section 7.5 and the terms of the Escrow
Agreement, on the first business day following each of March 21,
2006 (the date that is twelve months after the date of this
Agreement), and March 21, 2007 (the date that is twenty-four months
after the date of this Agreement), Royal Hospitality shall be
entitled to receive from the Escrowed Consideration an amount not
to exceed One Million Dollars ($1,000,000), plus all interest
earned on such amount, or such other amount as shall be determined
in accordance with the terms of Section 7.5 and the Escrow
Agreement.
(ii) Subject to Section 1.5(a) and the terms of the Escrow
Agreement, following the Closing Date, Royal Hospitality or Buyer,
as the case may be, shall be entitled to receive from the Escrowed
Consideration Two Million Dollars ($2,000,000) or such other amount
as shall be determined in accordance with Section 1.5(a) (the
"Contract Escrow Deposit").
(iii) Subject to Section 1.5(b) and the terms of the Escrow
Agreement, on or before the Sixtieth (60th) day following the
Closing Date (the "Equipment Adjustment Date"), Royal Hospitality
or Buyer, as the case may be, shall be entitled to receive from the
Escrowed Consideration Four Hundred Fifty Thousand Dollars
($450,000) or such other amount as shall be determined in
accordance with Section 1.5(b) (the "Equipment Escrow Deposit").
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(iv) In the event that, during the period of time
commencing on the fifth (5th) anniversary of the Closing Date and
ending on the tenth (10th) anniversary of the Closing Date, Xxxx X.
Xxxxxxx ("Xxxxxxx") does not directly or indirectly own an interest
in, operate, join, control, advise, work for, consult to, have a
financial interest which provides any control of, or participate in
any person or entity producing, designing, providing, soliciting
orders for, selling, distributing, consulting to, or marketing or
re-marketing products or services competitive with the Business as
of the date hereof in the entire states of Connecticut,
Massachusetts, Maine, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island and Vermont, Xxxxxxx shall be entitled
to receive an amount of the Escrowed Consideration equal to Five
Hundred Thousand Dollars ($500,000) (the "Xxxxxxx Deposit") in
accordance with the provisions of the Escrow Agreement; provided,
however, that: (i) the mere ownership of less than five (5%)
percent of the outstanding stock of any publicly-traded corporation
by Xxxxxxx; or (ii) the ownership and operation of a linen supply
and commercial laundry business by Xxxxxxx that is not related or
providing services to the healthcare industry, shall not prevent
Xxxxxxx from receiving the payment set forth in this Section
1.2(f). Notwithstanding the foregoing, in the event that at any
time commencing on the fifth (5th) anniversary of the Closing Date
and ending on the tenth (10th) anniversary of the Closing Date,
Xxxxxxx does not fully comply with the provisions of this Section
1.2(b)(iv), Buyer shall be entitled to receive the full amount of
the Xxxxxxx Deposit from the Escrowed Consideration in accordance
with the provisions of the Escrow Agreement.
(v) In the event that, during the period of time
commencing on the fifth (5th) anniversary of the Closing Date and
ending on the tenth (10th) anniversary of the Closing Date, Xxxx X.
Xxxxxxxxx ("Leibovitz") does not directly or indirectly own an
interest in, operate, join, control, advise, work for, consult to,
have a financial interest which provides any control of, or
participate in any person or entity producing, designing,
providing, soliciting orders for, selling, distributing, consulting
to, or marketing or re-marketing products or services competitive
with the Business as of the date hereof in the entire states of
Connecticut, Massachusetts, Maine, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island and Vermont, Leibovitz shall be
entitled to receive an amount of the Escrowed Consideration equal
to Five Hundred Thousand Dollars ($500,000) (the "Leibovitz
Deposit") in accordance with the provisions of the Escrow
Agreement; provided, however, that: (i) the mere ownership of less
than five (5%) percent of the outstanding stock of any
publicly-traded corporation by Leibovitz; or (ii) the ownership and
operation of a linen supply and commercial laundry business by
Leibovitz that is not related or providing services to the
healthcare industry, shall not prevent Leibovitz from receiving the
payment set forth in this Section 1.2(g). Notwithstanding the
foregoing, in the event that at any time commencing on the fifth
(5th) anniversary of the Closing Date and ending on the tenth
(10th) anniversary of the Closing Date, Leibovitz does not fully
comply with the provisions of this Section 1.2(b)(v), Buyer shall
be entitled to receive the full amount of the Leibovitz Deposit
from the Escrowed Consideration in accordance with the provisions
of the Escrow Agreement.
(vi) Subject to Section 1.5(c) and the terms of the
Escrow Agreement, on or before May 25, 2008, Royal Hospitality or
Buyer, as the case may be, shall be entitled to receive from the
Escrowed Consideration Four Million Dollars ($4,000,000) or such
other amount as shall be determined in accordance with Section
1.5(c) (the "Jefferson Escrow Deposit").
1.3 Net Working Capital Adjustment.
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(a) As used in this Section 1.3, the following terms shall have
the following meanings:
(i) "Working Capital" means (A) the aggregate value of
the Current Assets less (B) the aggregate value of the Current
Liabilities.
(ii) "Current Assets" means the current assets of the
Company and Surgi-Pack included in the line items set forth on the
form of Statement of Working Capital.
(iii) "Current Liabilities" means the current liabilities
of the Company and Surgi-Pack included in the line items set forth
on the form of Statement of Working Capital.
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(iv) "Statement of Working Capital" means the statement
of Working Capital in substantially the form of Exhibit D attached
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hereto.
(v) "Target Working Capital" means an amount equal to
Eleven Million Two Hundred Forty Three Thousand Sixty Five Dollars
($11,243,065).
(b) The Shareholders have delivered to Buyer a statement of the
Shareholders' estimate of Working Capital (including related notes and
schedules thereto) in substantially the form of the Statement of Working
Capital, which sets forth a good faith estimate of the amount of Working
Capital as of the Closing Date (the "Estimated Working Capital") and shall
set forth in detail the amounts underlying such calculation. The statement
of Estimated Working Capital was prepared in accordance with generally
accepted accounting principles in the United States, consistently applied
("GAAP"), applied in a manner consistent with the preparation of the
Financial Statements (to the extent that the Financial Statements were
prepared in accordance with GAAP), subject to the modifications and
limitations set forth on the Statement of Working Capital. Buyer has had the
opportunity to comment upon the statement of Estimated Working Capital, such
that the Shareholders and Buyer reasonably agree to the statement of
Estimated Working Capital or the amount of Estimated Working Capital. If the
Estimated Working Capital is less than the Target Working Capital, the
Closing Payment shall be decreased by the amount of such shortfall, and if
the Estimated Working Capital is greater than or equal to the Target Working
Capital, the Closing Payment shall be increased by the amount of such
excess, if any. If the Shareholders and Buyer are unable to reach an
agreement as to the statement of or the amount of the Estimated Working
Capital, then no adjustments shall be made for purposes of the Closing
Payment.
(c) No later than ninety (90) days after the Closing Date,
Buyer shall calculate the amount of Working Capital and shall prepare and
deliver to the Shareholders a statement of Working Capital (including
related notes and schedules thereto) in substantially the form of the
Statement of Working Capital, which shall set forth the amount of Working
Capital as of the Closing Date (the "Closing Working Capital") and shall set
forth in detail the amounts underlying such calculation (the "Initial WC
Statement"). The calculation of the Closing Working Capital set forth on the
Initial WC Statement shall be prepared in accordance with GAAP applied in a
manner consistent with the preparation of the Financial Statements, subject
to the modifications and limitations set forth on the Statement of Working
Capital. Following the delivery of the Initial WC Statement to the
Shareholders, Buyer shall afford the Shareholders' representative the
opportunity to examine the underlying records and workpapers related to the
Initial WC Statement, in each case as are reasonably necessary and
appropriate. Buyer shall cooperate with the Shareholders' representative in
such examination and shall make available to the Shareholders'
representative any records under Buyer's reasonable control requested by the
Shareholders related to the Initial WC Statement. If within thirty (30) days
following delivery of the Initial WC Statement to the Shareholders, the
Shareholders' representative has not given Buyer written notice of its
objection to Buyer's calculation of the Closing Working Capital (which
describes in reasonable detail the basis for such objection, the "Objection
Notice"), then the Closing Working Capital set forth in such Initial WC
Statement shall be deemed to have been accepted by the Shareholders, shall
become final and binding upon the parties and shall be the final working
capital statement (the "Final WC Statement"). The Objection Notices shall
set forth in reasonable detail the basis for Shareholders' objection(s) to
the Closing Working Capital. If the Shareholders' representative provides an
Objection Notice within such thirty (30) day period, then Buyer and the
Shareholders shall endeavor in good faith, for a period not to exceed
twenty-one (21) days from the date of delivery of such Objection Notice, to
resolve the issues in dispute. Any item not specifically disputed by the
Shareholders' representative shall be deemed accepted by the Shareholders
and shall become part of the Final WC Statement. If at the end of such
twenty-one (21) day period there are any remaining issues in dispute, then
the remaining issues in dispute may be submitted to an independent,
nationally-recognized United States public accounting firm having no
material relationship with Buyer or the Shareholders, jointly selected by
Buyer and the Shareholders (the "Accounting Firm"), for determination in
accordance with the terms of this Agreement. Buyer and the Shareholders
shall cause the Accounting Firm to use commercially reasonable efforts to
make a final determination (which will be binding and conclusive on the
parties and shall constitute an arbitral award that is final, binding and
unappealable) of the Closing Working Capital within thirty (30) days after
the remaining issues in dispute are submitted to it, and such final
determination (including any items not specifically disputed by the
Shareholders' representative hereunder) shall be the Final WC Statement. If
any remaining issues in dispute are submitted to the Accounting Firm for
resolution, each party will furnish the Accounting Firm with such workpapers
and other documents and information relating to the disputed issues as the
Accounting Firm may request. The fees and expenses of the Accounting Firm
shall be borne one-half by Buyer and one-half by the Shareholders.
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(d) If the Closing Working Capital (as set forth in the Final WC
Statement) is less than the Estimated Working Capital (if the Estimated
Working Capital has been agreed upon by the Shareholders and Buyer) or less
than the Target Working Capital (if the Estimated Working Capital was not
agreed upon by the Shareholders and Buyer), then, within ten days after such
determination, Royal Hospitality shall deliver to Buyer by wire transfer of
immediately available funds to an account specified in writing by Buyer, an
amount equal to the excess of the Estimated Working Capital or Target
Working Capital, as the case may be according to agreement being reached
between the Shareholders and Buyer on the Estimated Working Capital as set
forth in Section 1.3(b), over the Closing Working Capital. If the Closing
Working Capital (as set forth in the Final WC Statement) is greater than the
Estimated Working Capital (if the Estimated Working Capital has been agreed
upon by the Shareholders and Buyer) or greater than the Target Working
Capital (if the Estimated Working Capital was not agreed upon by the
Shareholders and Buyer), then, within ten days after such determination,
Buyer shall deliver to Royal Hospitality an amount equal to the excess of
the Closing Working Capital (as set forth in the Final WC Statement) over
the Estimated Working Capital or Target Working Capital, as the case may be
according to any agreements reached on between the Shareholders and Buyer on
the Estimated Working Capital as set forth in Section 1.3(b), by wire
transfer of immediately available funds to the same account or accounts to
which it wired the Shares Closing Payment, unless Buyer receives written
notice three business days prior to the date it is to wire such amount to
Royal Hospitality that a different account or accounts are to be used.
(e) The computation of Closing Working Capital to be reflected
on the Final WC Statement shall not include any Current Liability associated
with the Company that has been paid by the Shareholders after the Closing.
1.4 Purchase Price Allocation. Within 120 days after the Closing
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Date, Buyer shall provide to Royal Hospitality a proposed allocation of the
Purchase Price (as adjusted pursuant to Section 1.3) among the assets of the
Company and Surgi-Pack, which allocation shall be reasonable and in
accordance with the principles of Code Section 1060 and the Treasury
Regulations thereunder (the "Allocation Statement"). Following the delivery
of the Allocation Statement to Royal Hospitality, Buyer shall afford a
representative of Royal Hospitality the opportunity to examine the
underlying records and workpapers related to the Allocation Statement, in
each case as is reasonably necessary and appropriate. Buyer shall cooperate
with the Royal Hospitality representative in such examination and shall make
available to such representative any records under Buyer's reasonable
control requested by Royal Hospitality related to the Allocation Statement.
Within 30 days following Buyer's provision of the Allocation Statement to
Royal Hospitality, Royal Hospitality shall have the right to object to any
portion of the Allocation Statement (by written notice to Buyer), and if
Royal Hospitality objects, it shall notify Buyer (in such written notice) of
such disputed item (or items) and the basis for its objection. If Royal
Hospitality does not object by written notice within such period, the
Allocation Statement shall be deemed to have been accepted and agreed upon,
and final and conclusive, for all purposes of this Agreement. Royal
Hospitality and Buyer shall act in good faith to resolve any such dispute
prior to the date on which Form 8594 is required to be filed with the
appropriate Tax authority. If Royal Hospitality and Buyer cannot resolve any
disputed item, the item in question shall be resolved by the Accounting Firm
as promptly as practicable. The fees and expenses of the Accounting Firm
shall be apportioned and paid equally by Royal Hospitality and Buyer. Except
with respect to any subsequent adjustments to the Purchase Price (which
shall be allocated using the mechanism for allocating the Purchase Price in
this Section 1.4), Royal Hospitality and Buyer and their respective
affiliates (i) shall be bound by the determinations and the Allocation
Statement determined pursuant to this Section 1.4 consistent therewith for
purposes of determining any Taxes, (ii) shall prepare and file all Returns
required to be filed with any Tax authority in a manner consistent with the
Allocation Statement and (iii) shall take no position inconsistent with the
Allocation Statement in any Return, any proceeding before any Tax authority
or otherwise (in each case, unless required to do otherwise pursuant to a
"determination" as defined in Code Section 1313). In the event the
Allocation Statement is disputed by any Tax authority, the person receiving
notice of such dispute shall promptly notify and consult with the other
parties concerning resolution of such dispute. Each of Royal Hospitality,
the Company, Surgi-Pack and Buyer shall cooperate in the preparation and
timely filing of Form 8594 and any comparable state or local forms or
reports and, to the extent permissible by or required by law, any
corrections, amendments or supplements (or additional forms or reports)
thereto (including any supplements, amendments, forms or reports arising as
a result of any adjustments to the Purchase Price).
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1.5 Purchase Price Adjustments.
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(a) If any customer contract set forth on Schedule 1.5(a)
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(collectively the "Short-Term Contracts") is renewed within one hundred
twenty (120) days after such Short-Term Contract's respective renewal date
as set forth on Schedule 1.5(a), then Buyer and Royal Hospitality shall
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cause the Escrow Agent (as defined in the Escrow Agreement) to pay to Royal
Hospitality from the Escrowed Consideration, promptly after the date such
Short-Term Contract is so renewed, in accordance with the provisions of the
Escrow Agreement, into an account or accounts as designated by Royal
Hospitality, an amount equal to the respective Pro-Rata Contract Amount
applicable to such renewed Short-Term Contract, as set forth in Schedule
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1.5(a), with such Pro Rata Contract Amount subject to adjustment as set
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forth on Schedule 1.5(a). Buyer and Royal Hospitality shall cause the
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amount, if any, not paid to Royal Hospitality with respect such renewed
Short-Term Contract due to the adjustment, if any, to the applicable
Pro-Rata Contract Amount provided in Schedule 1.5(a) to be paid to Buyer
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from the Escrowed Consideration. If any Short-Term Contract is not renewed
within one hundred twenty (120) days after such Short-Term Contract's
renewal date as set forth on Schedule 1.5(a) (or is terminated prior to such
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renewal date), Buyer and Royal Hospitality shall cause the Escrow Agent to
pay, in accordance with the provisions of the Escrow Agreement, to Buyer
promptly from the Escrowed Consideration, into an account or accounts as
designated by Buyer, an amount equal to the respective Pro-Rata Contract
Amount applicable to such Short-Term Contract, as set forth on Schedule 1.5(a).
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(b) If, as of the Equipment Adjustment Date, any piece of
equipment identified on Schedule 1.5(b) (the "Equipment Items") located at
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the Company's facility at 00 Xxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx has
not been operating at a normal operating level (as mutually agreed by Buyer
and Royal Hospitality) for at least four (4) consecutive weeks after the
respective Start Date set forth opposite such Equipment Item on Schedule
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1.5(b), Buyer and Royal Hospitality shall cause the Escrow Agent to pay, in
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accordance with the provisions of the Escrow Agreement, to Buyer promptly
into an account or accounts designated by Buyer, that portion of the
Equipment Escrow Deposit that is equal to the value of such non-operational
Equipment Item as set forth on Schedule 1.5(b). If, on or prior to the
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Equipment Adjustment Date, any Equipment Item has been operating at a normal
operating level (as mutually agreed by Buyer and Royal Hospitality) for at
least four (4) consecutive weeks after the respective Start Date set forth
opposite such Equipment Item on Schedule 1.5(b), Buyer and Royal Hospitality
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shall cause the Escrow Agent to pay, in accordance with the provisions of
the Escrow Agreement, to Royal Hospitality promptly into an account or
accounts as designated by Royal Hospitality, that portion of the Equipment
Escrow Deposit that is equal to the value of such operational Equipment
Item, as set forth on Schedule 1.5(b). Buyer and Royal Hospitality shall
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endeavor in good faith under this Section 1.5(b) to make a determination of
the operating level of each Equipment Item. If Buyer and Royal Hospitality
are unable to agree upon whether the operating level with respect to an
Equipment Item is the normal operating level for such Equipment Item, Buyer
and Royal Hospitality agree to engage in the first instance Technical
Consulting of Syracuse, New York to render an evaluation of such Equipment
Item's operating level. The determination of Technical Consulting of
Syracuse, New York as to the operating level of an Equipment Item shall be
final and binding on the parties for all purposes of this Section 1.5(b).
The fees and expenses of such consulting firm shall be borne one-half by
Buyer and one-half by Royal Hospitality.
(c) During each calendar quarter during the 3 year period
following the Closing Date (the "Jefferson Contract Period") that Buyer is
providing service to Jefferson Health System pursuant to the Laundry Service
Agreement dated May 25, 2000 between Company and Jefferson Health System
(the "Laundry Services Agreement"), Buyer and Royal Hospitality shall cause
the Escrow Agent to pay, in accordance with the provisions of the Escrow
Agreement, to Royal Hospitality, on the last day of each such calendar
quarter, into an account or accounts designated by Royal Hospitality, Three
Hundred Thirty Three Thousand Three Hundred Thirty Three Dollars and Thirty
Three Cents ($333,333.33) from the Escrowed Consideration with the first
disbursement to be made on June 30, 2005 and the last disbursement to be
made on May 25, 2008. In the event that, at any time during the Jefferson
Contract Period, the provision of services by Buyer under the Laundry
Services Agreement ceases due to termination by Jefferson Health System,
Buyer and Royal Hospitality shall cause the Escrow Agent to pay, in
accordance with the provisions of the Escrow Agreement, to Buyer promptly
into an account or accounts designated by Buyer the remaining portion of the
Jefferson Escrow Deposit from the Escrowed Consideration, which amount shall
be pro-rated between Buyer and Royal Hospitality for any portion of the
then-current calendar quarter that Buyer provided service under the Laundry
Services Agreement. In the event that, at any time during the Jefferson
Contract Period, the Laundry Services Agreement is finally and
unconditionally assigned to Buyer, or the consent of
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Jefferson Health System under Section VI (F) of the Laundry Services
Agreement is obtained with respect to the transactions contemplated by this
Agreement, Buyer and Royal Hospitality shall cause the Escrow Agent to pay,
in accordance with the provisions of the Escrow Agreement, to Royal
Hospitality promptly into an account or accounts designated by Royal
Hospitality the remaining portion of the Jefferson Escrow Deposit from the
Escrowed Consideration.
ARTICLE 2
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REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
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The Shareholders, jointly and severally, hereby represent and
warrant to Buyer as follows, subject to the exceptions, qualifications and
disclosures set forth on the Schedules attached hereto.
2.1 Status of the Business.
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(a) Corporate Existence, Status and Capitalization.
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(i) Each of the Company and Surgi-Pack is a corporation
duly incorporated, organized, entitled to conduct business and
validly existing in good standing under the laws of the state of
its incorporation.
(ii) The Company's authorized capital stock consists
solely of 200,000 shares of common stock, no par value per share
("Company Common Stock"), 9,000 shares of which are issued and
outstanding and referred to herein as the "Company Shares" and no
shares of the Company Common Stock are held as treasury stock. All
of the Company Shares have been duly authorized, validly issued and
are fully paid and nonassessable, and were not issued in violation
of the terms of any agreement binding upon the Company or any other
person or entity. The Company Shares are the only shares of capital
stock of the Company that are issued and outstanding. Except for
the Warrants, and except as set forth on Schedule 2.1(a)(ii), there
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are no outstanding options, warrants, rights (including preemptive
rights), agreements, puts, calls, commitments or demands of any
character relating to the Company Common Stock or that may require
the Company to issue any shares of Company Common Stock, and there
are no outstanding securities convertible into or exchangeable for
any shares of Company Common Stock.
(iii) Royal Hospitality is the sole record and beneficial
owner of all of the Company Shares. Royal Hospitality owns such
Company Shares free and clear of any lien, security interest,
pledge, restriction on transferability or voting or other claim or
encumbrance. Royal Hospitality has full legal right, power and
authority to transfer the Company Shares to Buyer in accordance
with this Agreement. There are no voting trust agreements or other
agreements restricting the voting, dividend rights or disposition
of any of the Company Shares. Upon delivery to Buyer of the
certificates evidencing the Company Shares and the consummation and
effectiveness of the Closing, Buyer will acquire good, valid and
marketable title to the Company Shares, free and clear of any lien,
security interest, pledge, restriction on transferability or voting
or other claim or encumbrance.
(iv) The Warrantholder is the sole record and beneficial
owner of the Warrants free and clear of any lien, security
interest, pledge, restriction on transferability or voting or other
claim or encumbrance. The Warrantholder has full legal right, power
and authority to transfer the Warrants to Buyer in accordance with
this Agreement.
(v) Surgi-Pack's authorized capital stock consists solely
of 200,000 shares of common stock, no par value per share
("Surgi-Pack Common Stock"), 9,000 shares of which are issued and
outstanding and referred to herein as the "Surgi-Pack Shares" and
no shares of the Surgi-Pack Common Stock are held as treasury
stock. All of the Surgi-Pack Shares have been duly authorized,
validly issued and are fully paid and nonassessable and were not
issued in violation of the terms of any agreement binding upon
Surgi-Pack or any other person or entity. The Surgi-Pack Shares are
the only shares of capital stock of Surgi-Pack that are issued and
outstanding. There are no outstanding options, warrants, rights
(including preemptive rights), agreements, puts, calls, commitments
or demands of any character relating to the Surgi-
8
Pack Common Stock or that may require Surgi-Pack to issue any
shares of Surgi-Pack Common Stock, and there are no outstanding
securities convertible into or exchangeable for any shares of
Surgi-Pack Common Stock.
(vi) Royal Hospitality is the sole record and beneficial
owner of all of the Surgi-Pack Shares. Royal Hospitality owns such
Surgi-Pack Shares free and clear of any lien, security interest,
pledge, restriction on transferability or voting or other claim or
encumbrance. Royal Hospitality has full legal right, power and
authority to transfer the Surgi-Pack Shares to Buyer in accordance
with this Agreement. There are no voting trust agreements or other
agreements restricting the voting, dividend rights or disposition
of any of the Surgi-Pack Shares. Upon delivery to Buyer of the
certificates evidencing the Surgi-Pack Shares and the consummation
and effectiveness of the Closing, Buyer will acquire good, valid
and marketable title to the Surgi-Pack Shares, free and clear of
any lien, security interest, pledge, restriction on transferability
or voting or other claim or encumbrance.
(b) Qualification. Schedule 2.1(b) lists each jurisdiction in
------------- ---------------
which each of the Company and Surgi-Pack is qualified to do business as a
foreign corporation. Such jurisdictions constitute all of the jurisdictions
in which such qualification is necessary to conduct the Business as it is
currently being conducted by either the Company or Surgi-Pack, respectively,
except where the failure to be so qualified would not have a material
adverse effect on the consolidated financial condition, results of
operations, business, assets or liabilities of the Company and Surgi-Pack,
taken as a whole (a "Material Adverse Effect").
(c) Corporate Power. Each of the Company and Surgi-Pack has all
---------------
requisite corporate power to own and lease its properties and otherwise to
conduct the Business, except where the failure to have such power would not
have a Material Adverse Effect.
(d) Ownership Interests. Except as set forth on Schedule 2.1(d),
------------------- ---------------
neither the Company nor Surgi-Pack owns any subsidiary or has any equity
securities of, investment in or loans or advances to any business enterprise
or person or any agreements or commitments for such (other than trade terms
extended to customers in the ordinary course of business and travel advances
to employees), and neither the Company nor Surgi-Pack is subject to any
arrangement that could be treated as a partnership for federal income tax
purposes.
(e) Authorization.
-------------
(i) Each of the Shareholders, Royal Hospitality, the
Company and Surgi-Pack has the right, power and authority to enter
into this Agreement and each other agreement, instrument or other
document required to be executed by such party hereunder,
including, but not limited to, the documents listed in Section 10.1
to be delivered by the Shareholders, the Company and Surgi-Pack to
Buyer (collectively, the "Other Agreements") and subject in each
instance to obtaining all necessary consents and approvals as
contemplated herein to consummate the transactions contemplated by,
and otherwise to comply with and perform its obligations under,
this Agreement and Other Agreements;
(ii) The Warrantholder has the right, power and authority
to enter into this Agreement, subject to obtaining all necessary
consents and approvals as contemplated herein to consummate the
transactions contemplated by, and otherwise to comply with and
perform its obligations under, this Agreement.
(iii) The execution and delivery by Royal Hospitality, the
Company and Surgi-Pack of this Agreement and the Other Agreements
to which it is a party, and the consummation by Royal Hospitality,
the Company and Surgi-Pack of the transactions contemplated by, and
other compliance with and performance of its obligations under,
this Agreement and the Other Agreements to which it is a party have
been duly authorized by all necessary corporate action on the part
of Royal Hospitality, the Company or Surgi-Pack, as the case may
be, in compliance with its governing documents (including its
articles of incorporation and bylaws (as amended)), if applicable,
and applicable law;
9
(iv) The execution and delivery by the Warrantholder of
this Agreement, and the consummation by the Warrantholder of the
transactions contemplated by, and other compliance with and
performance of its obligations under, this Agreement have been duly
authorized by all necessary limited partnership action on the part
of the Warrantholder, in compliance with its governing documents
(including any partnership agreement (as amended)), if applicable,
and applicable law;
(v) This Agreement and the Other Agreements to which a
Shareholder, Royal Hospitality, the Company or Surgi-Pack is a
party constitute the valid and binding agreements of that party
that are enforceable against it in accordance with their respective
terms, except to the extent that such enforceability may be limited
by (A) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, rehabilitation or similar laws relating
to the enforcement of creditors' rights generally, (B) the
availability of the remedies of specific performance or injunctive
relief which may be subject to the discretion of the court before
which any proceeding for such remedies may be brought, or (C) the
exercise by any court of its discretion in invoking general
principles of equity; and
(vi) This Agreement constitutes the valid and binding
agreement of the Warrantholder enforceable against it in accordance
with its terms, except to the extent that such enforceability may
be limited by (A) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, rehabilitation or similar
laws relating to the enforcement of creditors' rights generally,
(B) the availability of the remedies of specific performance or
injunctive relief which may be subject to the discretion of the
court before which any proceeding for such remedies may be brought,
or (C) the exercise by any court of its discretion in invoking
general principles of equity.
(f) Absence of Violations or Conflicts. Except as disclosed
----------------------------------
in Schedule 2.1(f) and except as would not have or reasonably be expected to
---------------
have a Material Adverse Effect, the execution and delivery of this Agreement
and the Other Agreements by each of the Shareholders, Royal Hospitality, the
Company and Surgi-Pack and the consummation by each of the Shareholders,
Royal Hospitality, the Company and Surgi-Pack of the transactions
contemplated by, or other compliance with or performance under, this
Agreement and the Other Agreements by such party, do not and will not with
the passage of time or giving of notice or both constitute a violation of,
be in conflict with, constitute a default or require any payment under,
permit a termination of, require any consent under, or result in the
creation or imposition of any lien, encumbrance or other material adverse
claim or interest other than Permitted Encumbrances (as such term is defined
in Section 2.4(a) of this Agreement) under (i) any Contract (as such term is
defined in Section 2.6(b) of this Agreement) agreement, commitment,
undertaking or other material contract or understanding to which a
Shareholder, Royal Hospitality, the Company or Surgi-Pack is a party or to
which the Shareholders, Royal Hospitality, the Company or Surgi-Pack or any
of such party's assets or properties are subject or bound, (ii) to the best
knowledge of the Shareholders, Royal Hospitality, the Company, and
Surgi-Pack, any judgment, decree or order of any governmental or regulatory
authority to which a Shareholder, Royal Hospitality, the Company or
Surgi-Pack or any of such party's assets or properties are subject or bound,
(iii) to the best knowledge of the Shareholders, Royal Hospitality, the
Company and Surgi-Pack, any applicable law or regulation, or (iv) any
governing documents of Royal Hospitality, the Company or Surgi-Pack
(including its articles of incorporation and by-laws (as amended), if
applicable).
(g) No Consents Required. Except as set forth in
--------------------
Schedule 2.1(g), to the best knowledge of the Shareholders, Royal
---------------
Hospitality, the Company and Surgi-Pack, no consent, approval, order or
authorization of, or registration, declaration or filing with, any third
party or any governmental authority on the part of the Shareholders, Royal
Hospitality, the Company or Surgi-Pack is required in connection with its
execution or delivery of this Agreement or the Other Agreements or the
consummation of the transactions contemplated by, or other compliance with
or performance under, this Agreement or such Other Agreements by the
Shareholders, Royal Hospitality, the Company or Surgi-Pack, excluding,
however, any consents, approvals, orders or authorizations, registration,
declaration or filing, if any, the failure to obtain or make would not
reasonably be expected to have a Material Adverse Effect.
2.2 Financial Matters.
-----------------
(a) Financial Statements. The Shareholders have previously
--------------------
delivered, or caused to be delivered, to Buyer true and complete copies of
(i) (A) the audited consolidated balance sheets of the Company as of
December
10
31, 2004 and December 31, 2003 and the related audited consolidated
statements of income and cash flows for the years then ended (the "Audited
Company Financials"), and (B) the audited balance sheets of Surgi-Pack as of
December 31, 2004 and the related audited consolidated statements of income
and cash flows for the year then ended (the "Audited Surgi-Pack Financials"
and collectively with the Audited Company Financials, the "Audited Financial
Statements"), and (ii) for any fiscal quarter of the Company and Surgi-Pack
ended after December 31, 2004 but prior to the Closing Date, (A) the
Company's related unaudited consolidated balance sheets as of such fiscal
quarter and as of the corresponding period for the Company's fiscal year
2004 of the Company and the unaudited consolidated statements of income and
cash flows for the year-to-date period of fiscal year 2005 then ended (the
"Interim Company Financials"), and (B) Surgi-Pack's unaudited consolidated
balance sheet as of such fiscal quarter and the unaudited consolidated
statements of income and cash flows for the year-to-date period of fiscal
year 2005 then ended ("Interim Surgi-Pack Financials, and collectively with
the Interim Company Financials, the "Interim Financial Statements"). The
Interim Financial Statements and the Audited Financial Statements are
collectively referred to herein as the "Financial Statements." The Company
Interim Financials have been prepared in accordance with GAAP, applied on a
basis consistent with the preparation of the Audited Financial Statements
and with the prior practice of the Company. The Surgi-Pack Interim
Financials have been prepared in accordance with GAAP, applied on a basis
consistent with the prior practice of Surgi-Pack. The Financial Statements
fairly present in all material respects the consolidated assets and
liabilities and consolidated results of operations of the Company and
Surgi-Pack, respectively, as of and for the periods presented.
(b) Absence of Material Adverse Effect. Since December 31, 2004,
----------------------------------
there has not occurred any event resulting in a Material Adverse Effect.
(c) Absence of Undisclosed Liabilities. Except (i) as referenced
----------------------------------
in the Financial Statements, (ii) for liabilities and obligations arising
since December 31, 2004 in the ordinary course of business, (iii) for
liabilities and obligations which would not be required to be disclosed in
the Financial Statements, or (iv) as set forth on Schedule 2.2(c), neither
---------------
the Company nor Surgi-Pack have any material debt, obligations or
liabilities (contingent or otherwise).
(d) Accounts Receivable. The trade accounts receivable (billed
-------------------
or unbilled), notes receivable, bid or performance deposits, employee
advances and other miscellaneous receivables of each of the Company and
Surgi-Pack (collectively, the "Accounts Receivable") are bona fide accounts
receivable created in the ordinary course of business. Subject to reserves
therefor in the Interim Financial Statements, except as set forth in
Schedule 2.2(d), (i) no customer of the Business is delinquent in payment by
---------------
more than ninety (90) days, (ii) to the best knowledge of the Shareholders,
Royal Hospitality, the Company and Surgi-Pack, no customer of the Business
has refused or threatened to refuse to pay all or any part of its
obligations with respect to the Accounts Receivable for any reason and (iii)
to the best knowledge of the Shareholders, Royal Hospitality, the Company
and Surgi-Pack, no such customer of the Business is insolvent or bankrupt.
(e) Accounts Payable. Except for costs and expenses incurred
----------------
by the Company and Surgi-Pack in connection with this Agreement and the
transactions contemplated hereby, including the fees and expenses of
financial advisors, accountants and attorneys, all accounts payable by the
Company or Surgi-Pack as of December 31, 2004 or arising since then have
been incurred in the ordinary course of business.
2.3 Taxes.
-----
(a) Definitions. For purposes of this Agreement:
-----------
(i) The term "Code" shall mean the Internal Revenue Code
of 1986, as amended. All citations to the Code or to the
regulations promulgated thereunder shall include any amendments or
any substitute or successor provisions thereto.
(ii) The term "Returns" shall mean, collectively, all
reports, forms, declarations, estimates, returns, information
statements, and similar documents relating to, or required to be
filed in respect of, any Taxes and the term "Return" means any one
of the foregoing Returns.
11
(iii) The term "Taxes" shall mean (A) all net income,
alternative or add-on minimum tax, gross income, gross receipts,
gains, sales, use, ad valorem, value added, franchise, profits,
license, unitary, intangible, corporate loan tax, capital stock
tax, lease, service, service use, withholding on amounts paid to or
by the Shareholders, the Company or Surgi-Pack, employment,
payroll, excise, severance, transfer, documentary, mortgage,
registration, stamp, occupation, environmental, premium, property,
windfall, profits, customs, duties, and other taxes, fees,
assessments or charges of like kind, together with any interest,
penalties and other additions with respect thereto, imposed by any
federal, territorial, state, provincial, local or foreign
government; and (B) any penalties, interest, or other additions for
the failure to collect, withhold, or pay over any of the foregoing,
or to accurately file any Return; and the term "Tax" shall mean any
one of the foregoing Taxes.
(b) Returns Filed and Taxes Paid. Except as otherwise set forth
----------------------------
in Schedule 2.3, (i) each of the Company and Surgi-Pack has duly filed or
------------
caused to be filed (or joined in the filing of), on or before the due date
thereof (including any valid extensions), with the appropriate taxing
authorities, all Returns that it is required to file; (ii) each such Return
(including any amendment thereto) is true, correct, and complete in all
material respects; and (iii) all Taxes of the Company and Surgi-Pack due
with respect to, or shown to be due on, each such Return (or amendment) or
subsequent assessment with regard thereto, have been timely paid; and (iv)
there is no valid basis for the assessment of any deficiency with regard to
any such Return. Except as set forth in Schedule 2.3, no Taxes are due and
------------
not paid as of the Closing Date with respect to any taxable periods or
portions of periods ending on or before the Closing Date. Except as set
forth in Schedule 2.3, there are no liens, attachments or similar
------------
encumbrances on the Company Shares or the Surgi-Pack Shares or on any of the
assets of the Company or Surgi-Pack with respect to any Taxes, other than
liens for Taxes that are not yet due and payable. Except as set forth in
Schedule 2.3, there are no pending or threatened audits, investigations,
------------
claims, proposals or assessments for or relating to any Taxes. No waiver of
any statute of limitations in respect of Taxes or agreement of time with
respect to a Tax assessment or deficiency is in effect with respect to the
Company or Surgi-Pack.
(c) QSUB. The Company and Surgi-Pack have each been a "qualified
----
subchapter S subsidiary" (a "QSUB") within the meaning of Code Section
1361(b)(3)(B) and the Treasury Regulations thereunder since December 31,
2004 and will remain so for all periods up to and including the Closing
Date. Any transaction and related election whereby the Company and
Surgi-Pack each became a QSUB has not resulted, and will not result, in any
Taxes payable by the Buyer, the Company or Surgi-Pack. The Warrants do not
constitute stock for purposes of Code Section 1361(b)(1)(D) and the Treasury
Regulations thereunder.
(d) Other. None of Royal Hospitality, the Company or Surgi-Pack
-----
have ever been a member of an affiliated group (within the meaning of Code
Section 1504) filing a consolidated federal or state income tax return and
neither the Company or Surgi-Pack has any actual or contingent liability for
the Taxes of Royal Hospitality or any other third party under Treasury
Regulation Section 1.1502 (or any similar income Tax provision of state,
local or foreign law), as transferee or successor, by contract or otherwise.
Neither the Company nor Surgi-Pack is a party to any Tax allocation or
sharing agreement.
(e) Reportable Transactions. Neither the Company nor Surgi-Pack
-----------------------
has participated in any "reportable transaction" as such term is defined in
Treasury Regulation Section 1-6011-4(b)(2).
2.4 Real and Personal Property.
--------------------------
(a) Property. For purposes of this Agreement, "Property" or
--------
"Properties" means those real and personal properties owned or used by the
Company or Surgi-Pack. Schedule 2.4(a) lists all of the real properties
---------------
owned by the Company or Surgi-Pack. Except as set forth on Schedule 2.4(a),
---------------
(i) each of the Company and Surgi-Pack has good and marketable title to all
Properties owned by it and (ii) none of the Properties are subject to any
lien, claim or other encumbrance whatsoever, except for (A) liens for Taxes
not yet due and payable or being contested in good faith by appropriate
proceedings, (B) liens shown and described in the Financial Statements, and
(C) (1) liens imposed by law and incurred in the ordinary course of business
for obligations not yet due and payable to landlords, carriers,
warehousemen, laborers, materialmen and the like, (2) easements, building
restrictions, rights of way, reservations and such similar encumbrances or
charges against real property as are of a nature generally
12
existing with respect to properties of a similar character and which do not
in any material way affect the use thereof in the Business, (3) liens,
claims, encumbrances or other exceptions which are identified on the title
insurance policies issued to the Company or Surgi-Pack with respect to such
Properties or otherwise set forth in Schedule 2.4(a), and (4) liens, claims,
---------------
encumbrances or other exceptions which would not reasonably be expected to
have a Material Adverse Effect on such Properties (collectively, the
"Permitted Encumbrances").
(b) Leases; Subleases. For purposes of this Agreement, "Lease"
-----------------
means any written or oral lease, sublease or rental agreement (and any
related contract, agreement, commitment, arrangement, undertaking or
understanding) and all amendments, modifications and supplements thereof and
waivers and consents thereunder pursuant to which the Company or Surgi-Pack
leases, subleases or rents any real or personal property, either as lessor,
lessee, landlord or tenant. Schedule 2.4(b) lists all Leases. No
---------------
Shareholders have executed as individuals, as opposed to on behalf of the
Company or Surgi-Pack, any Leases or are otherwise party to any lease,
sublease or rental agreement that is used by or for the benefit of the
Company or Surgi-Pack. Schedule 2.4(b) describes all oral Leases required to
---------------
be disclosed in Schedule 2.4(b), and true and complete copies of all written
---------------
Leases required to be disclosed shall be made available prior to the Closing
to Buyer. With respect to each of the Leases: (i) each of the Company and
Surgi-Pack is not and, to the best knowledge of the Shareholders, Royal
Hospitality, the Company and Surgi-Pack, no other party to such Lease is in
material default in connection with each Lease; (ii) to the best knowledge
of each of the Shareholders, Royal Hospitality, the Company and Surgi-Pack,
no act or event has occurred which, with notice or lapse of time or both,
would constitute a material default under such Lease with respect to the
Company or Surgi-Pack or any other party; (iii) none of the Shareholders,
the Company or Surgi-Pack have been given or received any notice of
cancellation or termination in connection with such Lease; (iv) such Lease
is the valid and binding agreement of the applicable party (Company or
Surgi-Pack), is in full force and effect and is enforceable in accordance
with its terms, except as enforceability may be limited by (A) the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium,
rehabilitation or similar laws relating to the enforcement of creditors'
rights generally, (B) the availability of the remedies of specific
performance or injunctive relief which may be subject to the discretion of
the court before which any proceeding for such remedies may be brought, and
(C) the exercise by any court of its discretion in invoking general
principles of equity; and (v) except as disclosed in Schedule 2.1(g), such
---------------
Lease will not require consents of any parties thereto in order to be
assigned to Buyer hereunder.
(c) Adequacy; Condition. Except as set forth in Schedule 2.4(c)
------------------- ---------------
or except as otherwise disclosed to Buyer in writing prior to the Closing:
(i) to the best knowledge of the Shareholders, Royal Hospitality, the
Company and Surgi-Pack, the Properties are in good repair and condition
subject to reasonable wear and tear and structurally and mechanically sound,
as applicable; and (ii) none of the Shareholders, the Company or Surgi-Pack
have received notice of any violation (which has not been cured) of, and to
the best knowledge of the Shareholders, Royal Hospitality, the Company and
Surgi-Pack, each of the Company and Surgi-Pack is in material compliance
with all applicable material building, zoning, land use or other similar
statutes, laws, ordinances, regulations, permits, health and safety codes or
other requirements in respect of any properties subject to a Lease.
(d) All Necessary Properties. Except as described on
------------------------
Schedule 2.4(d), the Properties and the Leases constitute all of the
---------------
properties (tangible and intangible) which the Company and Surgi-Pack use in
connection with the operation of the Business as presently conducted.
2.5 Intellectual Property; Patents; Trademarks, Trade Names. All
-------------------------------------------------------
patents, trademarks, service marks, trade names or copyrights owned by or
used or proposed to be used by the Shareholders, the Company and Surgi-Pack
in connection with the Business and all applications or registrations
therefor ("Intellectual Property") and all material contracts, agreements,
commitments and understandings relating to the use or license of technology,
know-how or processes by the Shareholders, the Company and Surgi-Pack that
are known to the Shareholders, the Company or Surgi-Pack and related to or
used in the Business (the "Intellectual Property Licenses") are listed in
Schedule 2.5. Except as disclosed in Schedule 2.5: (a) the Company or
------------ ------------
Surgi-Pack owns (free and clear of all liens, claims and encumbrances, other
than Permitted Encumbrances), or has the right to use, all Intellectual
Property, whether under Intellectual Property Licenses or otherwise, used in
the ordinary conduct of the Business; (b) the consummation of the
transactions contemplated by this Agreement will not materially alter or
impair any such rights or require any consent or approval, except where the
failure to obtain such consent or approval would have or would not
reasonably be expected to have a Material Adverse Effect; and (c) no
Intellectual Property owned, licensed or used by the Company or Surgi-Pack,
or Intellectual Property License of such party is the subject of a lawsuit
or any
13
other proceeding, nor, within the three most recently completed fiscal years
of the Company or Surgi-Pack, has any party challenged or, to the best
knowledge of the Shareholders, Royal Hospitality, the Company and
Surgi-Pack, threatened to challenge the right of the Company or Surgi-Pack
to use such Intellectual Property or Intellectual Property License or
application for any of the foregoing. Except as disclosed in Schedule
--------
2.1(g), the Intellectual Property does not require the approval or consent
------
of any third-parties in order to be assigned to and assumed by Buyer
hereunder.
2.6 Loans and Contracts.
-------------------
(a) Indebtedness. Schedule 2.6(a) sets forth, as of
------------ ---------------
immediately following the Closing, a complete and accurate list or
description of all instruments or other documents ("Debt Instruments")
relating to any direct or indirect indebtedness for borrowed money of each
of the Company and Surgi-Pack, as well as indebtedness by way of industrial
development bonds, capital leases, lease-purchase arrangements, guarantees,
undertakings on which others rely in extending credit and all conditional
sales contracts, chattel mortgages and other security arrangements with
respect to personal property used or owned by the Company and Surgi-Pack.
(b) Contracts. Schedule 2.6(b) lists each material contract,
--------- ---------------
agreement, commitment, arrangement, undertaking or understanding (except
where the same does not call for the payment or receipt by the Company and
Surgi-Pack of cash or other property or services to which either party is a
party or bound or to which it or its property is subject, whether written or
oral ("Contract," but such list and the term "Contract" shall not include
Leases, Intellectual Property Licenses, Debt Instruments, Insurance Policies
and employee-related matters of the Shareholders, the Company or Surgi-Pack
disclosed elsewhere in this Agreement). Schedule 2.6(b) also separately
---------------
identifies each Contract pertaining to the customers of the Business that
shall be referred to throughout this Agreement as "Customer Contracts."
Except as disclosed in Schedule 2.1(f), the Contracts do not require the
---------------
approval or consent of any third-party in connection with the transactions
contemplated by this Agreement.
(c) Insurance. The material terms of all insurance coverage
---------
of each of the Company and Surgi-Pack now in force with respect to the
Business (including comprehensive general liability, personal and
professional liability, comprehensive general casualty and extended
coverage, automobile, boiler and machinery, fire and lightning, marine,
endowment, life, and worker's compensation) ("Insurance Policies"), have
been disclosed to Buyer, and true and complete copies of such policies will
be provided or made available to Buyer prior to Closing. All such policies
are in full force and effect and provide insurance, including, without
limitation, liability insurance, in such amounts and against such risks as
is customary for companies engaged in business comparable to the Business.
(d) Status. Except as disclosed on Schedule 2.6(d): (i) none
------ ---------------
of the Shareholders, the Company or Surgi-Pack is, nor, to the best
knowledge of the Shareholders, Royal Hospitality, the Company or Surgi-Pack,
is any other party in material default in connection with any Lease,
Intellectual Property License, Debt Instrument or Contract; (ii) none of the
Shareholders, the Company or Surgi-Pack have received any notice of
cancellation or termination in connection with any Lease, Intellectual
Property License, Debt Instrument or Contract; (iii) each Lease,
Intellectual Property License, Debt Instrument and Contract is the valid and
binding agreement of the parties thereto which is in full force and effect
and is enforceable in accordance with its terms, except as enforceability
may be limited by (A) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium, rehabilitation or similar laws relating to the
enforcement of creditors' rights generally, (B) the availability of the
remedies of specific performance or injunctive relief which may be subject
to the discretion of the court before which any proceeding for such remedies
may be brought, and (C) the exercise by any court of its discretion in
invoking general principles of equity; and (iv) no Lease, Intellectual
Property License, Debt Instrument or Contract will require the consent of or
payment to any other party to avoid an event of default or event of
termination with respect to such Lease, Intellectual Property License, Debt
Instrument or Contract (assuming that any required notice of default or
termination has been given and any periods for cure have expired) by reason
of the transactions contemplated by this Agreement.
2.7 Employee Plans.
--------------
(a) Except as set forth in Schedule 2.7, neither the Company
------------
nor Surgi-Pack maintains, or is required to maintain or contribute to or
otherwise participates in, with respect to employees employed by such party
14
who provide services to the Business (the "Business Employees"), either (i)
any employee pension benefit plan, including any employee stock ownership
plan ("Pension/Profit Sharing Plan"), or any employee welfare benefit plan
("Welfare Plan") (as such terms are defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), including any pension,
profit sharing, retirement or thrift plan, or (ii) any other compensation,
welfare, fringe benefit or retirement plan, program, stock purchase or stock
option plan, policy, understanding or arrangement of any kind whatsoever,
whether formal or informal, providing for benefits for or the welfare of any
or all of the current or former Business Employees or their beneficiaries or
dependents (all of the foregoing in items (i) and (ii) being referred to
herein collectively as the "Employee Plans" and individually as an "Employee
Plan").
(b) Neither the Company nor Surgi-Pack has maintained,
contributed to or been required to contribute to, nor do any of the Business
Employees participate in, a "multiemployer plan" (as defined in Section
3(37) of ERISA). Except as set forth in Schedule 2.7, no amount is due or
------------
owing from the Shareholders, the Company or Surgi-Pack on account of a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or on account of
any withdrawal therefrom.
(c) No Employee Plan, other than an Employee Plan which is an
employee pension benefit plan (within the meaning of Section 3(2)(A) of
ERISA), provides benefits, including without limitation death, health or
medical benefits (whether or not insured), with respect to current or former
Business Employees beyond their retirement or other termination of service
in the Business (other than (i) coverage mandated by applicable law, (ii)
deferred compensation benefits accrued as liabilities on the books of
Company or Surgi-Pack, or (iii) benefits the full cost of which is borne by
the current or former Business Employee (or his or her beneficiary)).
2.8 Labor Relations. Except as described in Schedule 2.8 or except
--------------- ------------
as would not have a Material Adverse Effect: (a) there is no unfair labor
practice, complaint, charge or other matter against or involving the Company
or Surgi-Pack pending or, to the best knowledge of the Shareholders, the
Company and Surgi-Pack, threatened before any governmental authority; (b)
there is no labor strike, organizing effort, slow down, stoppage or other
material labor difficulty pending against or involving the Company or
Surgi-Pack or, to the best knowledge of the Shareholders, the Company and
Surgi-Pack, threatened against or affecting the Company or Surgi-Pack; (c)
no grievance nor any arbitration proceeding arising out of or under
collective bargaining agreements to which the Company or Surgi-Pack is a
party is pending, and, to the best knowledge of the Shareholders, the
Company and Surgi-Pack, no claim therefor exists; and (d) there is no
collective bargaining agreement which is binding on the Company or
Surgi-Pack.
2.9 Litigation and Other Proceedings. Except as disclosed in
--------------------------------
Schedule 2.9, neither the Company or Surgi-Pack is engaged in, a party to,
------------
subject to or, to the best knowledge of the Shareholders, the Company and
Surgi-Pack, threatened with any claim, legal or equitable action, or other
proceeding (whether as plaintiff, defendant or otherwise and regardless of
the forum or the nature of the opposing party) which, if decided adversely,
would reasonably be expected to have a Material Adverse Effect.
2.10 Compliance with Laws.
--------------------
(a) Generally. Except as set forth in Schedule 2.10(a), to
--------- ----------------
the best knowledge of the Shareholders, the Company and Surgi-Pack, the
Company and Surgi-Pack are conducting the Business in compliance with all
applicable laws excluding, however, any non-compliance which would not
reasonably be expected to have a Material Adverse Effect and excluding
Environmental Laws (as defined in Section 2.10(c)), as to which the
Shareholders' sole representations and warranties are set forth in
Section 2.10(c).
(b) Permits. Except as set forth in Schedule 2.10(b), to the
------- ----------------
best knowledge of the Shareholders, the Company and Surgi-Pack, each of the
Company and Surgi-Pack holds all permits and franchises necessary to operate
the Business as currently operated that are applicable to it, except where
the failure to obtain a permit would not reasonably be expected to have a
Material Adverse Effect and excluding permits under Environmental Laws, as
to which the Shareholders' sole representations and warranties are as set
forth in Section 2.10(c).
15
(c) Environmental.
-------------
(i) Except as set forth on Schedule 2.10(c), no person
----------------
or party (including, but not limited to, any governmental or
regulatory authority) has asserted any pending claim against the
Shareholders, the Company or Surgi-Pack relating to any
Environmental Law with respect to the Business. Except as set forth
on Schedule 2.10(c), none of the Shareholders, Company or
----------------
Surgi-Pack have received oral or written notice of any existing or
pending violation, citation, claim, order, direction, instruction
or complaint relating to the Business, or any facility now or
previously owned or operated by the Company or Surgi-Pack in
connection therewith, arising under the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response Compensation
and Liability Act, the Superfund Amendments and Reauthorization
Act, the Toxic Substances Control Act, the Safe Drinking Water Act,
the Federal Water Pollution Control Act (Clean Water Act), the
Clean Air Act, the National Environmental Policy Act (Environmental
Impact Statement), and antipollution, waste control and disposal
and environmental "cleanup" provisions of similar statutes of any
governmental authority, and all regulations and standards enacted
pursuant thereto and all permits and authorizations issued in
connection therewith (collectively, "Environmental Laws").
(ii) To the best knowledge of the Shareholders, the
Company and Surgi-Pack, except as disclosed on Schedule 2.10(c),
----------------
the operation of the Business is in compliance with all applicable
Environmental Laws, except for any noncompliance which would not
have a Material Adverse Effect.
(iii) To the best knowledge of the Shareholders, the
Company and Surgi-Pack, except as disclosed on Schedule 2.10(c),
----------------
each of the Company and Surgi-Pack currently holds all required
permits, approvals or other authorizations required under or issued
pursuant to any Environmental Law with respect to the Business,
except for such environmental permits, the absence of which would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(iv) Buyer acknowledges that (A) the representations and
warranties contained in this Section 2.10(c) are the only
representations and warranties being made with respect to
compliance with or liability under Environmental Laws or with
respect to environmental, health or safety matter, including
natural resources, related in any way to this Agreement or its
subject matter, and (B) no other representation or warranty
contained in this Agreement shall apply to any such matters and no
other representation or warranty, express or implied, is being made
with respect thereto.
2.11 Bank Accounts. Schedule 2.11 lists all bank, money market,
------------- -------------
savings and similar accounts and safe deposit boxes of the Company and
Surgi-Pack, specifying the account numbers and the authorized signatories or
persons having access to them.
2.12 Brokers and Commissions. Except as disclosed in Schedule 2.12,
----------------------- -------------
no person, firm or corporation has asserted or is entitled to any commission
or broker's or finder's fee in connection with the other transactions
contemplated by this Agreement.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to the Shareholders,
Royal Hospitality, the Company and Surgi-Pack as follows:
3.1 Status of Buyer.
---------------
(a) Organization. Buyer is a duly organized New York
------------
corporation, entitled to conduct business and validly existing in good
standing under the laws of the state of New York.
16
(b) Authorization.
-------------
(i) Buyer has the right, power and authority to enter
into this Agreement and each Other Agreement and to consummate the
transactions contemplated by, and otherwise to comply with and
perform its obligations under, this Agreement and the Other
Agreements;
(ii) The execution and delivery by Buyer of this Agreement
and the Other Agreements, and the consummation by Buyer of the
transactions contemplated by, and other compliance with and
performance of its obligations under, this Agreement and the Other
Agreements have been duly authorized by all necessary corporate
action on the part of Buyer in compliance with its governing
documents (including its Articles of Incorporation and Bylaws (as
amended)) and applicable law; and
(iii) This Agreement and the Other Agreements to which
it is a party constitute the valid and binding agreements of Buyer
that are enforceable against Buyer in accordance with their
respective terms, except to the extent that such enforceability may
be limited by (A) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, rehabilitation or similar
laws relating to the enforceability of creditors' rights generally,
(B) the availability of the remedies of specific performance or
injunctive relief, which may be subject to the discretion of the
court before which any proceeding for such remedies may be brought,
and (C) the exercise by the court of its discretion in invoking
general principles of equity.
(c) Absence of Violations or Conflicts. Except as disclosed in
----------------------------------
Schedule 3.1(c), the execution and delivery by Buyer of this Agreement and
---------------
the Other Agreements and the consummation by Buyer of the transactions
contemplated by, or other compliance with or performance under, this
Agreement and the Other Agreements, do not and will not with the passage of
time or giving of notice or both, constitute a violation of, be in conflict
with, constitute a default or require any payment under, permit a
termination of, require any consent under, or result in the creation or
imposition of any lien, encumbrance or other adverse claim or interest upon
any properties of Buyer under (i) any contract, agreement, commitment,
undertaking or understanding to which Buyer is a party or to which it or any
of its assets or properties are subject or bound, (ii) any judgment, decree
or order of any governmental or regulatory authority to which Buyer or any
of its properties are subject or bound, (iii) to the knowledge of Buyer, any
applicable law, or (iv) any governing documents (including its Articles of
Incorporation and Bylaws (as amended)).
(d) No Governmental Consents Required. Except as set forth in
---------------------------------
Schedule 3.1(d), no consent, approval, order or authorization of, or
---------------
registration, declaration or filing with, any governmental or regulatory
authority on the part of Buyer is required in connection with its execution
or delivery of this Agreement or the Other Agreements or the consummation of
the transactions contemplated by, or other compliance with or performance
under, this Agreement or such Other Agreements by Buyer.
3.2 Brokers and Commissions. Except as set forth in Schedule 3.2,
----------------------- ------------
no person, firm or corporation has asserted or is entitled to any commission
or broker's or finder's fee in connection with the transactions contemplated
by this Agreement by reason of any act or omission of Buyer.
3.3 Available Funds. As of the date of this Agreement, and as of the
---------------
Closing, Buyer will have sufficient funds available to satisfy the
obligation of Buyer to pay the Purchase Price as contemplated by Section 1.2
and to pay all fees and expenses of Buyer related to the transactions
contemplated by this Agreement.
ARTICLE 4
---------
COVENANTS OF THE SHAREHOLDERS, THE COMPANY AND SURGI-PACK
---------------------------------------------------------
4.1 Conduct of Business. From the date hereof to the Closing Date,
-------------------
except for transactions which are expressly approved in writing by Buyer,
the Shareholders, the Company and Surgi-Pack shall refrain from:
17
(a) subjecting any of the Business's assets, tangible or
intangible, to any lien, encumbrance, security interest or other claim of
any kind, exclusive of liens arising as a matter of law in the ordinary
course of business as to which there is no known default and except for
Permitted Encumbrances;
(b) except for sales in the ordinary course of business or
consistent with past practices, selling, assigning, transferring or
otherwise disposing of any of the Business's assets or properties;
(c) making any capital expenditure or acquiring any property
or assets (other than inventory and supplies in the ordinary course of
business) for a cost to the Company or Surgi-Pack in excess of Ten Thousand
Dollars ($10,000) in any one case or Twenty-Five Thousand Dollars ($25,000)
in the aggregate;
(d) modifying, amending, altering or terminating (whether by
written or oral agreement, or any manner of action or inaction) any of the
Debt Instruments, Leases, Intellectual Property Licenses, Employee Plans,
Contracts or Insurance Policies, or entering into any such arrangement which
is outside of the ordinary course of business;
(e) declaring, setting aside or paying any dividends or other
distributions, directly or indirectly, to the Shareholders with respect to
the Company Shares and the Surgi-Pack Shares;
(f) entering into any agreement that restricts in any respect
the Company and Surgi-Pack from carrying on the Business;
(g) cancelling any material debts of others or waiving any
material claims or rights of the Business;
(h) increasing in any manner the compensation of any director
or officer or increasing in any manner the compensation of any class of
employees of the Company or Surgi-Pack;
(i) increasing in any amount the benefits or compensation of
the Shareholders or paying or agreeing to pay any bonus or commission to the
Shareholders; and
(j) taking or permitting any other action that, if taken or
permitted immediately prior to the execution of this Agreement, would
constitute a breach of or an exception to the representations and warranties
in Section 2.1(d) hereof.
4.2 Affirmative Covenants. From the date hereof to the Closing Date,
---------------------
the Shareholders, the Company and Surgi-Pack shall use their reasonable best
efforts to:
(a) maintain the property and liability insurance of the
Company and Surgi-Pack in amounts and with coverage at least as great as the
amounts and coverage in effect on the date of this Agreement;
(b) maintain, consistent with past practice, the properties
of the Company and Surgi-Pack in good repair, order and condition,
reasonable wear and tear excepted, and use their best efforts to preserve
its possession and control of all of its assets and properties;
(c) keep in faithful service the key officers and
professional staff of the Company and Surgi-Pack to preserve the goodwill of
those having business relations with the Company and Surgi-Pack;
(d) maintain the books, accounts and records of the Company
and Surgi-Pack in a manner consistent with past practice;
(e) comply with all applicable law relating to the conduct of
the Business, and conduct the Business obligations in such a manner so that
on the Closing Date the representations and warranties contained in this
Agreement shall be true as though such representations and warranties were
made on and as of such date, except for changes permitted or contemplated by
the terms of this Agreement;
18
(f) maintain each of the permits and franchises of the
Business by and from all third parties, including but not limited to
governmental or regulatory authorities, necessary to operate the Business as
currently operated that are applicable to it, except where the failure to
obtain or maintain a permit would not reasonably be expected to have a
Material Adverse Effect;
(g) provide Buyer with prompt written notice of any event,
occurrence or circumstance which could reasonably be expected to have a
Material Adverse Effect;
(h) maintain in inventory quantities of goods, supplies and
materials sufficient to allow the Company and Surgi-Pack to continue to
operate after the Closing Date free of any shortage of such items; and
(i) operate the Business only in the ordinary course so as to
preserve its business organization intact, including the goodwill of its
suppliers, customers and others having business relations with the Company
or Surgi-Pack.
4.3 Access Before Closing. From the date of this Agreement
---------------------
until the Closing Date, the Shareholders, the Company and Surgi-Pack will
permit Buyer and its representatives reasonable access on reasonable notice
during normal business hours to the properties, personal property,
personnel, books and records, contracts, and commitments of the Business,
including the right to make copies of such books and records, contracts, and
commitments. In the event that any record or other information requested by
Buyer is subject to a confidentiality agreement with a third party,
attorney-client privilege, or other legal restriction or privilege, the
Company, Surgi-Pack and Buyer will endeavor to find means of disclosing as
much information as practicable that is needed by Buyer to prepare for the
transfer of the Business, but the Company will not be obligated to breach
such restriction or privilege. Buyer shall return all copies of such books
and records, contracts, and commitments promptly upon the request of the
Company or Surgi-Pack if for any reason the Closing does not occur. All
requests for access to information, properties, personnel or documents
pursuant to this Section 4.3 shall be directed to an executive officer or
officers of the Company or Surgi-Pack designated by the Company or
Surgi-Pack.
4.4 Consents and Closing Conditions. The Shareholders, the
-------------------------------
Company and Surgi-Pack shall use commercially reasonable best efforts, and
will cooperate with Buyer: (a) to obtain such consents, approvals,
authorizations and waivers from third parties and to take other actions as
may be required in order to fulfill the closing conditions which are within
its control; provided, however, that it is understood that such efforts do
not require the Shareholders, the Company or Surgi-Pack to offer or grant
financial accommodations to any third party; and (b) to cause the
representations and warranties of the Shareholders in Article 2 to be true
and correct on and as of the Closing Date. The Shareholders, the Company and
Surgi-Pack will use their commercial best efforts to obtain all consents
listed on Schedule 2.1(f) and Schedule 2.1(g) (collectively, the
--------------- ---------------
"Transaction Consents"). If the Shareholders, the Company and Surgi-Pack do
not obtain any Transaction Consent, then, until such Transaction Consent is
obtained, the Shareholders, the Company and Surgi-Pack shall make the full
economic benefit of the affected asset of the Business available to Buyer
from and after the Closing, and this Agreement shall operate, to the maximum
extent permitted by law and any applicable contract, as a subcontract,
sublease, sublicense or other contractual arrangement with Buyer to perform
the obligations thereunder at a fee equal to the consideration receivable or
payable by the Shareholders, the Company or Surgi-Pack thereunder.
4.5 Inquiries and Negotiations. The Shareholders, the Company
--------------------------
and Surgi-Pack and their respective directors, officers, employees,
representatives, advisors or agents (including, without limitation, any
investment banker, attorney or accountant retained by any of the
Shareholders, the Company and Surgi-Pack) shall immediately cease all
existing discussions or negotiations, if any, with any parties conducted
heretofore with respect to the acquisition or exchange of all or any
material portion of the assets or securities of the Company and Surgi-Pack
if such acquisition or exchange would adversely affect Buyer's rights to
purchase the Business (by direct purchase from Shareholders, the Company,
Surgi-Pack or otherwise) or any business combination, merger, consolidation
or similar transaction with or involving either the Shareholders, the
Company or Surgi-Pack if such business combination, merger, consolidation or
other transaction would adversely affect Buyer's rights to purchase the
Business (an "Acquisition Transaction"). Neither the Shareholders, the
Company, Surgi-Pack nor any of their respective directors, officers,
employees, representatives, advisors or agents (including, without
limitation, any investment banker, attorney or accountant retained by any of
the Shareholders, the Company or Surgi-Pack) shall directly or indirectly
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide
19
information to, any corporation, partnership, limited liability company,
person or other entity or group (other than Buyer or any of its affiliates)
with respect to any inquiries or the making of any offer or proposal
concerning an Acquisition Transaction (an "Acquisition Proposal"). The
Company or Surgi-Pack will take all necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations under this Section 4.5. The Company or Surgi-Pack will notify
Buyer immediately if any such inquiries or proposals are received, any such
information is requested, or any such negotiations or discussions are sought
to be initiated or continued, the name of the person or entity making such
inquiry, proposal or request, the material terms and conditions of such
proposals and, thereafter, shall keep Buyer informed, on a current basis, of
the status and terms of such inquiry, proposal, negotiations or discussions.
The Company and Surgi-Pack agree not to release any third party from, or
waive any provisions of, any confidentiality or standstill agreement to
which the Company or Surgi-Pack is a party.
4.6 Cooperation. The Shareholders, the Company and
-----------
Surgi-Pack shall provide Buyer all information or assistance reasonably
requested by Buyer to bring about the consummation of the transactions
contemplated by this Agreement. The Shareholders, Company and Surgi-Pack
shall cooperate with Buyer and shall use commercially reasonable efforts to
assist Buyer in obtaining all consents or approvals required for
consummation of the transactions contemplated by this Agreement. The
Shareholders, the Company and Surgi-Pack will cooperate with Buyer and take
whatever steps are reasonably necessary and appropriate prior to the Closing
to allow the Company and Surgi-Pack under Buyer's ownership to provide to
service under the Customer Contracts on the Closing Date.
4.7 Retention of Customer Contracts. The Shareholders, the
-------------------------------
Company and Surgi-Pack will use reasonable commercial efforts and will take
all reasonable steps to retain the patronage of all customers under Customer
Contracts (whether existing business or business obtained after the date
hereof). The Shareholders, the Company and Surgi-Pack will promptly notify
Buyer of any Customer Contract which terminates or gives notice of
termination of service to the Shareholders, the Company or Surgi-Pack on or
before the Closing Date and any customer account that has commenced or
signed a Customer Contract for new service.
4.8 Inventory in Service. The Shareholders, the Company and
--------------------
Surgi-Pack will maintain sufficient stocks of circulating inventory of
merchandise in service to the customer under Customer Contracts, will
continue to repair and maintain such circulating inventory in accordance
with the normal operating procedures of the Company and Surgi-Pack, and will
continue to put new merchandise in service in accordance with the normal
operating procedures of the Company and Surgi-Pack, but in any event a
commercially reasonable manner.
4.9 Indebtedness for Borrowed Money. The Shareholders, Royal
-------------------------------
Hospitality, the Company and Surgi-Pack shall cause the Company and
Surgi-Pack to have no direct or indirect liability or other indebtedness for
borrowed money as of the Closing Date.
4.10 Employees. Except for the persons separately identified
---------
on Schedule 4.10 as "Hospitality Employees" (the "Hospitality Employees")
-------------
which as of Closing Date are not employees of the Company or Surgi-Pack due
to the Hospitality Restructuring, the Shareholders, the Company and
Surgi-Pack shall cause all employees of the Company and Surgi-Pack listed on
Schedule 4.10 with his or her position, base salary and employer, to remain
-------------
employed in the provision of services to the Business through the Closing
Date by the Company or Surgi-Pack, as the case may be. The covenant
contained in this Section 4.10 does not prohibit the termination of an
employee's employment by the Company or Surgi-Pack, as the case may be, for
cause or the employee's voluntary termination of his or her employment. The
Shareholders, the Company and Surgi-Pack shall use reasonable commercial
efforts and will take all reasonable steps to retain all such employees. The
Shareholders, the Company and Surgi-Pack will promptly notify Buyer of any
employee listed on Schedule 4.10 (other than the Hospitality Employees)
-------------
which terminates or gives notice of termination of employment to the
Shareholders, the Company or Surgi-Pack on or before the Closing Date and
any new employee that has been hired prior to the Closing Date.
4.11 Restrictive Covenants.
---------------------
(a) During the Customer Non-Solicitation Period (as defined
in this Section 4.11(a) below), each of the Shareholders covenants and
agrees that he shall not solicit, directly or indirectly, on his own behalf
or on behalf of any other person or entity, any customer which has a
continuing business or contractual relationship with the Company or
Surgi-Pack with respect to providing any product or service which is a part
of the Business as of the Closing Date. The Customer Non-Solicitation Period
is a period beginning as of the Closing Date and ending as
20
of the fifth (5th) anniversary of the Closing Date except that for those
customers subject to Customer Contracts which by their respective terms
terminate or are subject to renewal for the first time after the Closing
Date at any time after the fourth (4th) anniversary of the Closing Date, the
Customer Non-Solicitation Period will be the period beginning as of the
Closing Date and ending as of the first (1st) anniversary date after the
first termination or renewal date after the Closing Date, as specified in
the particular Customer Contract. This covenant does not prohibit the
Shareholders from soliciting any customer which has a continuing business or
contractual relationship with the Company in connection with the
Shareholders' operation of a linen supply and commercial laundry business
that is not related or providing services to the healthcare industry.
(b) Except for such actions necessary to ensure the
compliance by the Shareholders of their obligations under this Agreement,
each Shareholder covenants and agrees that it shall not, for a period
commencing at Closing and ending on the fifth (5th) anniversary of the
Closing Date, directly or indirectly, on its own behalf or on behalf of any
other person or entity, induce or attempt to induce any supplier or business
relation of the Company or Surgi-Pack to terminate or breach any contract
with the Company or Surgi-Pack, to reduce its volume of business with the
Company or Surgi-Pack, to cease doing business with the Company or
Surgi-Pack, to divert the business or trade that such person is conducting
with the Company or Surgi-Pack or in any way interfere with the relationship
between the Company or Surgi-Pack and any supplier or business relation of
the Company or Surgi-Pack. This covenant applies to those suppliers and
other business relations of the Company or Surgi-Pack and their respective
affiliates to which the Shareholders, the Company, Surgi-Pack or any of
their respective affiliates has purchased products or services with respect
to the Business prior to the Closing Date, and those prospective suppliers
or business relations of the Company with which the Shareholders, the
Company, Surgi-Pack or any of its affiliates has actively pursued sales or
supply opportunities prior to the date hereof with respect to the Business.
This covenant does not prohibit the Shareholders from seeking or
establishing a business relationship with any supplier or business relation
of the Company in connection with the Shareholders' operation of a linen
supply and commercial laundry business that is not related or providing
services to the healthcare industry.
(c) Except for such actions necessary to ensure the
compliance by the Shareholders of their obligations under this Agreement,
each Shareholder covenants and agrees that it shall not, for a period
commencing at Closing and ending on the fifth (5th) anniversary of the
Closing Date, directly or indirectly own an interest in, operate, join,
control, advise, work for, consult to, have a financial interest which
provides any control of, or participate in any person or entity producing,
designing, providing, soliciting orders for, selling, distributing,
consulting to, or marketing or re-marketing products or services competitive
with the Business as of the date hereof. This prohibition applies to the
entire states of Connecticut, Massachusetts, Maine, New Hampshire, New
Jersey, New York, Pennsylvania, Rhode Island and Vermont. This covenant does
not prohibit: (i) the mere ownership of less than five (5%) percent of the
outstanding stock of any publicly-traded corporation by a Shareholder as
long as it is not otherwise in violation of this Agreement; or (ii) the
ownership and operation of a linen supply and commercial laundry business by
the Shareholders that is not related or providing services to the healthcare
industry.
(d) Except for such actions necessary to ensure the
compliance by the Shareholders of their obligations under this Agreement,
each Shareholder covenants and agrees that it shall not divert or attempt to
divert or take advantage of or attempt to take advantage of any actual or
potential business or opportunities of the Business, the Company, Surgi-Pack
or Buyer or any of their respective affiliates engaged in a business similar
to that of the Business, of which (a) such Shareholder became aware as the
result of the Company's or Surgi-Pack's conduct of the Business or its
relationship with Buyer or any of its affiliates and (b) relate specifically
to the Business, or any part thereof, as of the date hereof. This covenant
does not prohibit the ownership and operation of a linen supply and
commercial laundry business by the Shareholders that is not related or
providing services to the healthcare industry.
(e) The Shareholders agree that for a period commencing at
Closing and ending on the fifth (5th) anniversary of the Closing Date, the
Shareholders shall not, without Buyer's prior consent: (i) hire away, or
cause any other person or entity to hire away any employee of Buyer,
including, but not limited to, any Business Employee and any employees
listed on Schedule 4.10 that are then employed by Buyer, or (ii) directly or
-------------
indirectly entice or solicit or seek to induce or influence any of such
employees to leave their employment with Buyer; provided, however, that this
-------- -------
prohibition shall not apply to the Hospitality Employees.
21
(f) The Shareholders acknowledge that they have had access to
certain confidential trade secrets, information, observations, records,
customer lists, data, drawings, writings or other materials owned by the
Company and Surgi-Pack. The Shareholders agree that the Shareholders will
not directly or indirectly disclose to others or use for his or her own
benefit or for the benefit of others any of the foregoing information. All
records, files, writings, drawings, lists, data and similar materials and
information that the Shareholders prepared, used or otherwise came into
contact with during the course of their control of the Company or Surgi-Pack
will, as between the Company, Surgi-Pack and the Shareholders, at all times
remain the sole property of the Company or Surgi-Pack. The provisions of
this Section 4.11(f) will not: (i) apply to the operation of the Company,
Surgi-Pack or their respective Businesses to the extent that the
Shareholders acquire information from parties other than the Company,
Surgi-Pack, Buyer or their subsidiaries or affiliates; or (ii) apply to any
information, matter or thing that is available in the public domain or that
has been disclosed to others by the Company, Surgi-Pack, Buyer or their
respective subsidiaries, affiliates, employees or agents; (iii) apply to
information solely relating to the Hospitality Business; or (iv) apply to
any information, matter or thing that the Shareholders are requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigation demand or
similar process) to disclose; provided, however, that the Shareholders will
notify Buyer promptly of the request or requirement so that Buyer may seek
an appropriate protective order or waive compliance with the provisions of
this paragraph.
(g) Each of the parties hereto acknowledges and agrees that
the covenants set forth in this Section 4.11 are reasonable and valid in
duration, geographic area, scope and in all other respects. The parties
acknowledge that the laws and public policies of the various states of the
United States and other jurisdictions might differ as to the validity and
enforceability of the covenants contained in this Section 4.11. It is the
intention of the parties that the provisions of this Section 4.11 shall, to
the fullest extent permissible under the law and public policy, be enforced
by the courts of each state and jurisdiction in which enforcement is sought,
and that the unenforceability (or the modification necessary to conform the
covenants contained in this Section 4.11 with such law and public policy) of
any part of this Section 4.11 shall not be deemed to render unenforceable
any other part of this Agreement. Accordingly, if any provision of this
Section 4.11 is deemed too restrictive by any court of competent
jurisdiction in any proceeding involving the validity of such provision, the
arbitrator or court making the determination of invalidity or
unenforceability may reduce, and it is the parties' intention that such
arbitrator or court should reduce, the offending provision to the maximum
restriction the arbitrator or court deems reasonable under the
circumstances.
(h) Each of the parties hereto acknowledges that the remedy
at law of the non-breaching party for breach of the covenants contained
herein will be inadequate and will give rise to irreparable injury to the
non-breaching party and that, in addition to any other remedy the
non-breaching party may have, it will be entitled to an injunction
restraining any breach or threatened breach, without bond or other security
being required. Each of the parties further acknowledges and agrees that the
covenants contained in this Section 4.11 are necessary for the protection of
the legitimate business interests of the non-breaching party and its
affiliates and are reasonable in scope and content.
4.12 Hospitality Business of the Company and Surgi-Pack.
--------------------------------------------------
Prior to the Closing Date, the Shareholders, the Company and Surgi-Pack
shall have completed the Hospitality Restructuring and there shall be no
hospitality related business, assets, liabilities, obligations, employees or
properties owned by, included in, associated with or related to the
Business, Company or Surgi-Pack as of the Closing Date.
4.13 Audit of the Company and Surgi-Pack. Prior to the
-----------------------------------
Closing Date and after the Hospitality Restructuring has been completed, the
Shareholders, at their sole expense, shall direct Xxxxxx & Company PC to
conduct and complete an audit of the financial statements of Company and
Surgi-Pack as of and for the year ended December 31, 2004 (the "Audit") and
to deliver such Audit to Buyer.
4.14 Termination of Covenants. The covenants set forth in
------------------------
this Article 4 shall terminate effective as of the Closing, except for the
covenants set forth in Section 4.11, which shall terminate in accordance
with the respective time periods set forth therein.
22
ARTICLE 5
---------
COVENANTS OF BUYER
------------------
5.1 Consents and Closing Conditions. Buyer shall use commercially
-------------------------------
reasonable efforts (i) to obtain such consents, approvals, authorizations
and waivers from third parties and to take other actions as may be required
in order to fulfill the closing conditions which are within its control;
provided, however, that it is understood that such efforts shall not require
Buyer to offer or grant financial accommodations to any third party, and
(ii) to cause the representations and warranties of Buyer in Article 3 to be
true and correct on and as of the Closing Date.
5.2 Cooperation. Buyer shall provide the Shareholders, the Company
-----------
and Surgi-Pack all information or assistance reasonably requested by the
Shareholders, the Company and Surgi-Pack to bring about the consummation of
the transactions contemplated by this Agreement. Buyer shall cooperate with
the Shareholders, the Company and Surgi-Pack and shall use commercially
reasonable efforts to assist the Shareholders, the Company and Surgi-Pack in
obtaining all consents or approvals required for consummation the
transactions contemplated by this Agreement.
ARTICLE 6
---------
TAX MATTERS
-----------
6.1 Payment of Taxes. The Company and Surgi-Pack shall timely pay,
----------------
before the same shall become delinquent and before interest and penalties
accrue thereon, all Taxes (but only to the extent not included as a
liability for purposes of calculating Estimated Working Capital or Closing
Working Capital) (a) shown (or required to be shown) on any Return (or
amendment thereto) filed (or required to be filed) by the Company,
Surgi-Pack or Royal Hospitality in respect of the Company or Surgi-Pack
prior to the Closing Date, or (b) that become due from or payable by the
Company or Surgi-Pack before the Closing Date.
6.2 Cooperation and Records Retention. From time to time, the
---------------------------------
Shareholders, the Company, Surgi-Pack and Buyer shall provide, and shall
cause their respective accountants and other representatives to provide, to
each other on a timely basis, the information that they or their accountants
or other representatives have within their control and that may be
reasonably necessary in connection with the preparation of any Return or the
examination by any taxing authority or other administrative or judicial
proceeding relating to any Return. The Shareholders, the Company, Surgi-Pack
and Buyer shall retain or cause to be retained, until the applicable
statutes of limitations (including any extensions and carryovers) have
expired, copies of all Returns for all tax periods beginning before the
Closing Date, together with supporting work schedules and other records or
information that may be relevant to such Returns.
6.3 Tax Elections. No new elections with respect to Taxes, or any
-------------
changes in current elections with respect to Taxes, affecting the Business
shall be made by the Company or Surgi-Pack after the date of this Agreement
without the prior written consent of Buyer.
6.4 Tax Treatment. The parties hereto intend for U.S. federal
-------------
income tax purposes that (i) the transactions contemplated by this Agreement
will be treated as an acquisition by the Buyer of assets of the Company and
Surgi-Pack pursuant to Treasury Regulation Section 1.1361-5(b)(3) Example 9,
(ii) the Escrowed Consideration, the Non-Renewal Holdback Amount and the
Equipment Holdback Amount will be treated with respect to Royal Hospitality
as an obligation subject to tax under the "installment method" pursuant to
Code Section 453. None of the Company, Surgi-Pack, the Warrantholder or the
Buyer shall take a position in any Return or examination or other
administrative or judicial proceeding (including any ruling request)
relating to any Tax that is inconsistent with such treatment.
6.5 Tax Convention. Whenever it is necessary for purposes of the
--------------
Closing, any payment or indemnification required under Article 7 or any
other provision of this Agreement to determine any liability for Taxes
attributable to a period or any portion thereof ending on the Closing Date
or any period straddling the Closing Date, and the Return in respect of such
Tax liability relates to a taxable year or period beginning on or before and
23
ending after the Closing Date, the determination shall be made by
apportioning the total Taxes involved by treating the Closing Date as the
end of a short taxable year of the Company and Surgi-Pack. In making this
computation, exemptions, allowances, or deductions calculated on an annual
basis, such as the deduction for depreciation, shall be apportioned as
provided in the Code. All real property and personal property Taxes which
are past due or have been due upon any real property or personal property of
the Company and Surgi-Pack prior to the Closing Date shall be paid by Royal
Hospitality (or if Royal Hospitality has objected to such Taxes, Royal
Hospitality shall assume responsibility for such Taxes), together with any
penalty or interest thereon. Current real property and personal property
Taxes and special assessments shall be prorated and adjusted as of the
Closing Date on a per diem basis. If current Tax bills are unavailable at
the Closing Date, the prior year's Tax bills shall be used for proration
purposes and when the current year's tax bills are received, the proration
shall be recalculated and the appropriate payment shall be made forthwith.
6.6 Continuing QSUB Status. Other than the transactions
----------------------
contemplated herein, Shareholders, Royal Hospitality, the Company,
Surgi-Pack or the Warrantholder shall not take any action, fail to take any
action, or permit any person, including without limitation the
Warrantholder, to take any action, that could result in the Company or
Surgi-Pack ceasing to be a QSUB within the meaning of Code Section
1361(b)(3)(B) for all periods through the Closing Date.
6.7 Tax Clearance Certificate. Royal Hospitality shall use its best
-------------------------
efforts to obtain and provide to Buyer any state or local tax clearance
certificates with respect to the Company and Surgi-Pack as soon as
practicable after the Closing Date.
6.8 Employment Tax Matters. Buyer, the Company and Surgi-Pack agree
----------------------
to utilize or cause their respective affiliates to utilize the alternate
procedure set forth in Revenue Procedure 2004-53 with respect to wage
reporting.
ARTICLE 7
---------
INDEMNIFICATION
---------------
7.1 Indemnification of the Buyer. Subject to the provisions of this
----------------------------
Article 7, by execution of this Agreement, Royal Hospitality and the
Shareholders hereby acknowledge that the Buyer shall be entitled to full
indemnification of the following by Royal Hospitality and the Shareholders
jointly and by Royal Hospitality and each Shareholder severally:
(a) any and all loss, liability or damage (including
judgments and settlement payments) (a "Loss") incurred by the Company,
Surgi-Pack or Buyer incident to, arising in connection with or resulting
from any misrepresentation, breach, nonperformance or inaccuracy of any
representation, warranty or covenant by the Shareholders made or contained
in this Agreement or in any Exhibit, Schedule, certificate, Other Agreement
or other document executed and delivered to Buyer by the Shareholders or by
or on behalf of the Company or Surgi-Pack under or pursuant to this
Agreement or the transactions contemplated herein;
(b) any and all Losses incurred by the Company, Surgi-Pack or
Buyer relating to Taxes (other than any Taxes of the Company or Surgi-Pack
for which Buyer is liable pursuant to the other provisions of this
Agreement) of Royal Hospitality, the Company or Surgi-Pack which arise from
or relate to (i) Royal Hospitality's, the Company's, Surgi-Pack's or the
Shareholders' activities through the Closing Date, or (ii) Tax periods
ending on or prior to the Closing Date;
(c) any and all Losses incurred by the Company, Surgi-Pack or
Buyer relating to any breach by the Shareholders, the Company or Surgi-Pack
of their or its obligations or any violation of law with respect to current
or former employees of the Company or Surgi-Pack (including without
limitation any applicable laws with respect to employment discrimination or
sexual harassment), or the Company's, Surgi-Pack's or the Shareholders'
obligations with respect to any of the employees of the Company or
Surgi-Pack under any pension, profit sharing or retirement plan, collective
bargaining agreement, consulting agreement, life insurance, Employee Plan or
other
24
employee welfare benefit plan or vacation policy relating to any time prior
to the Closing Date, and in particular, obligations for medical or life
insurance benefits of any former or retired employees of the Company or
Surgi-Pack;
(d) any obligations, liabilities, injuries or damages
arising, accruing or existing prior to the Closing Date with respect to the
Business Employees (as defined in Section 2.7) including, without
limitation, any matters arising under laws governing wages and hours,
employment discrimination, occupational safety and health, workers'
compensation, the payment and withholding of employment taxes and any
alleged violations of the law;
(e) any liabilities to the extent that the Shareholders, the
Company or Surgi-Pack is insured or otherwise indemnified therefor;
(f) liabilities and obligations arising prior to, on or
before the Closing Date under the Contracts, Leases, Intellectual Property
Licenses, Debt Instruments or Insurance Policies other than the principal
amount of accounts payable with respect thereto included in the Closing Net
Working Capital of the Company or Surgi-Pack, as applicable;
(g) all liabilities and obligations arising with respect to
Contracts, Leases, Intellectual Property Licenses, Debt Instruments or
Insurance Policies, in each instance as to which the Shareholders, the
Company or Surgi-Pack is in breach or default as of the Closing Date, other
than the principal amount of accounts payable with respect thereto included
in the Closing Net Working Capital of the Company or Surgi-Pack, as
applicable, without regard to whether such liability or obligation arises or
is attributable to the time period before, at or after the Closing Date
including, without limitation, default-related penalties, fees and interest
imposed by third parties under the terms of such Contract, Lease,
Intellectual Property License, Debt Instrument or Insurance Policy, and
out-of-pocket costs and expenses incurred by Buyer in handling and resolving
same including attorneys fees and costs;
(h) all liabilities of the Shareholders, the Company and/or
Surgi-Pack for commissions or fees owed to any finder or broker in
connection with the transactions contemplated hereunder;
(i) all liability arising prior to the Closing Date under
Environmental Laws by reason of statute, tort or contract, and such
liability whether known or unknown, asserted or unasserted, present or
future, relating to the Property arising prior to the Closing Date,
including, without limitation, any such liability which arises directly or
indirectly from the condition of the Property or the activity of the
Shareholders, the Company or Surgi-Pack or their respective officers,
employees, contractors, agents, servants or assigns, or of any third party,
prior to Closing;
(j) all liabilities and obligations of the Shareholders and
all liabilities and obligations that are existing on or prior to Closing of
the Company or Surgi-Pack under or related to any long-term indebtedness;
(k) any suits, actions, claims or litigation existing or yet
to be commenced with respect to alleged infringements by the Shareholders,
the Business, the Company or Surgi-Pack on or prior to the Closing Date of
patents, trademarks, trade names or other intellectual property rights of
others;
(l) any suits, actions, claims or litigation existing or yet
to be commenced arising out of or in connection with the Shareholders', the
Company's or Surgi-Pack's conduct of the Business on or prior to the Closing
Date; and
(m) any and all Losses incurred by the Buyer, the Company or
Surgi-Pack incident to, arising in connection with, resulting from or
otherwise related to the Shareholders', the Company's or Surgi-Pack's
communications and/or relationship with Allouette Capital, Inc.;
(n) any and all Losses incurred by the Buyer, the Company or
Surgi-Pack incident to, arising in connection with or resulting from any
matter disclosed, or required to be disclosed, on Schedules 2.3, 2.9,
2.10(a), 2.10(b) or 2.10(c);
(o) any and all amounts of the Accounts Receivable that Buyer
has used its commercially reasonable efforts to collect, but that have not
been so collected by Buyer within the one hundred twenty (120) day
25
period after the Closing Date and that are in excess of the amounts reserved
for such Account Receivables on the Financial Statements, provided that if
the Shareholders indemnify Buyer under this Section 7.1(o), Buyer shall
reassign to the Shareholders, by written instrument reasonably acceptable to
both Buyer and the Shareholder, such Accounts Receivable accounts that have
gone uncollected and for which the Shareholders have made indemnifying
payments hereunder;
(p) any and all Losses relating to Taxes arising out of or in
connection with any inability of Buyer, the Company or Surgi-Pack, or any of
their successors or assigns, after audit or examination by any relevant
taxing authority, to include in the purchase price of the assets of the
Company and Surgi-Pack for Tax purposes the amount of the Purchase Price, as
adjusted, paid to the Warrantholder; and
(q) any and all reasonable costs and expenses and all other
Losses incurred in claiming, contesting or remedying any breach,
misrepresentation, nonperformance or inaccuracy described in this Section
7.1, or in enforcing its right to indemnification hereunder, including, by
way of illustration and not limitation, all reasonable legal and accounting
fees, other reasonable professional expenses and all filing fees and
reasonable collection costs incident thereto and all such reasonable fees,
costs and expenses incurred in defending claims which, if successfully
prosecuted, would have resulted in a Loss.
7.2 Indemnification of the Shareholders. By execution of this
-----------------------------------
Agreement, Buyer hereby acknowledges that Royal Hospitality and the
Shareholders shall be entitled to full indemnification by the Buyer of the
following:
(a) any and all Losses incurred by Royal Hospitality and the
Shareholders incident to, arising in connection with or resulting from any
misrepresentation, breach or nonperformance of any representation, warranty
or covenant by Buyer made or contained in this Agreement or in any Exhibit,
Schedule or certificate executed and delivered to Royal Hospitality and the
Shareholders by Buyer; and
(b) any and all Losses incurred in claiming, contesting or
remedying any breach, misrepresentation, nonperformance or inaccuracy
described above, or in enforcing its rights to indemnification hereunder,
including, by way of illustration and not limitation, all reasonable legal
and accounting fees, other reasonable professional expenses and all filing
fees and reasonable collection costs incident thereto and all such
reasonable fees, costs and expenses incurred in defending claims which, if
successfully prosecuted, would have resulted in a Loss.
7.3 Notice of and Procedures for Collecting Indemnification.
-------------------------------------------------------
(a) When Buyer, on the one hand, or Royal Hospitality or the
Shareholders, on the other hand, become aware of a situation which may
result in Losses for which it or they would be entitled to be indemnified
hereunder, Buyer, on the one hand, or Royal Hospitality or the Shareholders,
on the other (the "Indemnitee" or "Indemnitees") shall submit promptly a
written notice (the "Initial Claim Notice") to the other party or parties
from which indemnification may be forthcoming pursuant to Section 7.1 or 7.2
(the "Indemnitor" or "Indemnitors") to such effect after it first becomes
aware of such matter and shall furnish the Indemnitor(s) with such
information as it has available demonstrating its right or possible right to
receive indemnity. If the potential claim is predicated on, or later results
in, the filing by a third party of any action at law or in equity (a "Third
Party Claim"), the Indemnitee(s) shall provide promptly to the Indemnitor(s)
a supplemental Initial Claim Notice not later than twenty (20) calendar days
prior to the date on which a responsive pleading must be filed, and shall
also furnish a copy of such claim (if made in writing) and of all documents
received from the third party in support of such claim. In addition, each
Initial Claim Notice shall name, when known, the person or persons making
the assertions which are the basis for such claim. Failure by the
Indemnitee(s) to deliver an Initial Claim Notice or an update thereof in a
timely manner shall not relieve the Indemnitor(s) of any of its or their
obligations under this Agreement except to the extent that such failure
results in actual and material prejudice to the Indemnitor(s).
(b) If, prior to the expiration of thirty (30) calendar days
from the receipt by the Indemnitor(s) of an Initial Claim Notice (the "Claim
Answer Period"), the Indemnitor(s) shall request in writing that such claim
not be paid, the same shall not be paid, and the Indemnitor(s) shall settle,
compromise or litigate in good faith such claim, and employ attorneys of its
choice to do so; provided, however, that the Indemnitee(s) shall not be
required to
26
refrain from paying any claim which has matured by court judgment or decree,
unless appeal is taken therefrom and proper appeal bond posted by the
Indemnitor(s), nor shall the Indemnitee(s) be required to refrain from
paying any claim where such action would result in the foreclosure of a lien
upon any of its assets or a default in a lease or other contract except a
lease or other contract which is the subject of the dispute. The
Indemnitee(s) shall cooperate fully to make available to the Indemnitor(s)
and its or their attorneys, representatives and agents, all pertinent
information under its control. The Indemnitee(s) shall not settle or
compromise any contested claims without the prior consent of the
Indemnitor(s), which shall not be unreasonably withheld or delayed.
(c) At such time as Losses for which the Indemnitor(s) is or
are liable hereunder are incurred by Indemnitee by actual payment thereof or
by entry of a final judgment, the Indemnitee(s) shall forward a Final Claims
Statement to the Indemnitor(s) setting forth the amount of such damages in
reasonable detail on an itemized basis. The Indemnitee(s) shall supplement
the Final Claims Statement with such supporting proof of loss (e.g.
vouchers, canceled checks, accounting summaries, judgments, settlement
agreement, etc.) as the Indemnitor(s) may reasonably request in writing
within thirty (30) calendar days after receipt by Indemnitor(s) of a Final
Claims Statement. All amounts reflected on Final Claims Statements shall be
paid promptly by the Indemnitor(s) to the Indemnitee(s) and the
Indemnitee(s) shall have the right to immediate payment of proceeds from
insurance policies paid to Indemnitor(s) in connection with the claim for
which the indemnification right arose.
7.4 Limitations on Indemnification. Notwithstanding any other
------------------------------
provision of this Article 7, (i) no Indemnitee shall be entitled to
indemnification hereunder for Losses arising out of or based upon any
inaccuracy in or breach of any representation or warranty made in or
pursuant to this Agreement or any Other Agreement until the aggregate of all
Losses to such Indemnitee exceeds Two Hundred Fifty Thousand Dollars
($250,000) (the "Threshold Amount") and then such Indemnitee shall be
entitled to indemnification for all of such Losses, and (ii) no Indemnitor
shall be liable for aggregate Losses under this Agreement in excess of Ten
Million Dollars ($10,000,000) in the aggregate. For the avoidance of doubt,
Royal Hospitality's and the Shareholders' collective total liability for all
Losses under this Agreement shall not exceed $10,000,000 in the aggregate.
The limitations set forth in this Section 7.4, however, shall not apply to
(i) amounts paid in satisfaction of the judgment (including interest and
attorneys fees) of claims arising out of the suit captioned Lily
----
Transportation Corp v. Royal Institutional Service, Inc., Gem Laundry LLC
-------------------------------------------------------------------------
d/b/a Harbor Healthcare Laundry Services; Xxxx Xxxxxxxxx, Xxxx Xxxxxxx and
--------------------------------------------------------------------------
Xxxxx Xxxx, initially filed in the Superior Court of the County of Norfolk,
----------
Massachusetts, or (ii) the covenants to be performed by the Shareholders set
forth in Section 4.11. In addition, the calculation of the Threshold Amount
shall include any Losses incurred by an Indemnitee for which the Indemnitee
would have been entitled to claim indemnification under this Article 7 with
respect to a breach of representation or warranty but for such
representation or warranty being qualified by materiality or by reference to
a Material Adverse Effect. Notwithstanding any provision of this Section 7.4
to the contrary, the limitations set forth in this Section 7.4 shall not
apply to any claim for indemnification for Losses by Buyer relating to or
arising from any breach of the representations and warranties set forth in
Section 2.1(a).
7.5 Payment of Claims for Indemnification. Any amounts
-------------------------------------
payable to Buyer pursuant to the provisions of Section 7.1 shall be the
responsibility of Royal Hospitality and the Shareholders jointly and
severally. Any such amounts shall be paid promptly upon notice of the Buyer
to Royal Hospitality or the Shareholders of incurrence of such Loss and an
explanation of the Losses for Buyer's demand for indemnification under this
Article 7; provided, however, that such payment obligation shall be
-------- -------
satisfied, subject to the limitations set forth in Section 7.4, (i) first,
by payment to Buyer from the Escrowed Consideration, to the extent
available, pursuant to the terms of the Escrow Agreement, and (ii) second,
directly by Royal Hospitality and/or the Shareholders, with the Buyer
initially making demand for indemnification against Royal Hospitality and/or
all Shareholders simultaneously, then making such demand against Royal
Hospitality and/or any Shareholder individually if upon Buyer's discretion
Royal Hospitality or any Shareholder has refused or is unable to meet its
indemnification payment obligations under this Agreement. Notwithstanding
anything set forth in this Section 7.5, Royal Hospitality and/or the
Shareholders agree that they will directly and promptly pay (or cause to be
paid) any amounts (including interest and attorneys fees) due and owing in
satisfaction of the judgment or in settlement of claims arising out of the
judgment captioned Lily Transportation Corp v. Royal Institutional Services,
---------------------------------------------------------
Inc., Gem Laundry LLC d/b/a Harbor Healthcare Laundry Services, Xxxx
--------------------------------------------------------------------
Leibovitz, Xxxx Xxxxxxx and Xxxxx Xxxx, initially filed in the Superior
--------------------------------------
Court of the County of Norfolk, Massachusetts, and such amounts will not be
satisfied from the Escrowed Consideration. Any amounts payable to Royal
Hospitality or the Shareholders pursuant to the provisions of Section 7.2 of
this Agreement shall be the responsibility of Buyer and shall be paid
promptly upon notice of Royal Hospitality or the Shareholders to the Buyer
27
of incurrence of such Loss and an explanation of the Losses for Royal
Hospitality's or the Shareholders' demand for indemnification under Section
7.2 of this Agreement. Any amounts payable pursuant to this Article 7 shall
be reduced by (i) any Tax benefit realized by the Indemnitee(s) arising
(directly or indirectly) from the Losses giving rise to such payment, and
shall be treated as an adjustment to the Purchase Price for Tax purposes and
(ii) the amount, if any, of insurance proceeds actually paid to the
Indemnitee(s) with respect to the event giving rise to such Losses.
7.6 Survival of Representations and Warranties; Survival of
-------------------------------------------------------
Indemnification.
---------------
(a) Any other provision hereof to the contrary
notwithstanding, the parties agree that the representations and warranties
of the parties contained in this Agreement and any certificates delivered
pursuant to this Agreement shall survive the Closing and any investigation
made by either party prior to the Closing Date until 5:00 p.m. (Eastern
time) on the 60th-month anniversary of the Closing Date, except that (i)
solely in the case of the representations and warranties contained in
Section 2.3, which shall survive until 5:00 p.m. (Eastern time) on the 30th
day following the expiration of the applicable statute of limitations, if
later (giving effect to any waiver, mitigation or extension thereof); and
(ii) solely in the case of the representations and warranties contained in
Section 2.1(a), which survive without limitation.
(b) The Buyer, on the one hand, and Royal Hospitality and the
Shareholders, on the other hand, shall only be entitled to indemnification
under this Article 7 if a written notice describing the claim for which
indemnification is sought is signed by an executive officer of the Buyer or
Royal Hospitality or by the Shareholders, as the case may be, and is
submitted to the Buyer, Royal Hospitality or the Shareholders, not later
than 5:00 p.m. (Eastern time) on the 60th-month anniversary of the Closing
Date, except solely with respect to indemnification claims pursuant to
Section 7.1(a) as related to representations and warranties contained in
Section 2.3 and covenants contained in Article 6, and with respect to
indemnification claims made pursuant to Section 7.1(b) or Section 7.1(p),
such indemnification obligations survive until 5:00 p.m. (Eastern time) on
the 30th day following the expiration of the applicable statute of
limitations, if later (giving effect to any waiver, mitigation or extension
thereof), in accordance with Section 7.3 hereof.
Any claim for indemnification pursuant to this Article 7 not made prior to
the expiration of the applicable period described in this Section above
shall be extinguished, and all representations and warranties with respect
to which no claim is made prior to the expiration of the applicable period
described above shall expire and be of no further force and effect.
Notwithstanding any provision of this Section 7.6 to the contrary, the time
limitations set forth in this Section 7.6 shall not apply to the survival of
(i) any claim by either party for actual fraud or intentional
misrepresentation, and (ii) any claim by Buyer for indemnification for
Losses relating to: (A) or arising from any breach of the representations
and warranties set forth in Section 2.1(a); (B) matters described in
Sections 7.1(h) or (m); or (C) the obligations of Royal Hospitality and/or
the Shareholders to pay amounts arising out of the suit captioned Lily
----
Transportation Corp., v. Royal Institutional Services, Inc., Gem Laundry LLC
----------------------------------------------------------------------------
d/b/a Harbor Healthcare Laundry Service, Xxxx Xxxxxxxxx, Xxxx Xxxxxxx and
-------------------------------------------------------------------------
Xxxxx Xxxx, initially filed in the Court of the County of Norfolk,
----------
Massachusetts as set forth in Section 7.5.
7.7 Exclusive Remedy. From and after the Closing, this
----------------
Article 7 shall provide the sole and exclusive remedy for the parties hereto
with respect to any claim relating to the subject matter of this Agreement
and the transactions contemplated herein. The parties hereto agree to treat
any payment pursuant to this Article 7 as an adjustment to the Purchase
Price for all Tax purposes.
ARTICLE 8
---------
BUYER'S CONDITIONS TO CLOSING
-----------------------------
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment to
Buyer's reasonable satisfaction of each of the following conditions:
8.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of the Shareholders and the Company herein contained shall be
true and correct in all material respects as of the Closing Date.
28
8.2 Performance of Covenants. Each of the Shareholders and the
------------------------
Company shall have performed in all material respects all covenants and
obligations and complied with all conditions required by this Agreement to
be performed or complied with by it on or prior to the Closing Date,
including, but not limited to, both the Hospitality Restructuring and the
Company Audit having been completed prior to the Closing Date.
8.3 No Event Causing a Material Adverse Effect. There shall have
------------------------------------------
been no event, occurrence or circumstance from the date of this Agreement
through the Closing Date that has caused Material Adverse Effect in the
Business.
8.4 Permits and Consents. The Shareholders and the Company shall
--------------------
have secured all Transaction Consents and all other appropriate orders,
consents, approvals and clearances to be obtained by the Shareholders and
the Company, in form and substance reasonably satisfactory to Buyer, by and
from all third parties, including but not limited to governmental or
regulatory authorities, whose order, consent and approval or clearance is
required by contract or applicable law for the consummation of the
transactions herein contemplated.
8.5 No Litigation. There shall not be any litigation or proceeding
-------------
pending or threatened (including, without limitation, any litigation or
proceeding arising under the antitrust, competition, trade or securities
laws) to restrain or invalidate the transactions contemplated by this
Agreement.
8.6 Authorization. All corporate action necessary to authorize the
-------------
execution, delivery and performance by the Shareholders and Company of this
Agreement, and the consummation of the transactions contemplated hereby,
shall have been duly and validly taken by each of the Shareholders and the
Company and the Shareholders and the Company shall have furnished Buyer with
copies of all applicable resolutions adopted by the Boards of Directors and
shareholder(s) of each of the Shareholders and the Company certified by the
Secretary or Assistant Secretary of each of the Shareholders and the
Company.
8.7 Closing Documents. The Shareholders, the Company and Surgi-Pack
-----------------
shall have delivered all documents required to be delivered by Shareholders
and the Company at Closing, as more specifically set forth in this
Agreement, in each case in form and substance reasonably satisfactory to
Buyer.
8.8 Audit. The Audit shall have been completed and an unqualified
-----
opinion of Xxxxxx & Company PC as to the Audited Financial Statements shall
have been delivered by Shareholders to Buyer prior to the Closing Date.
ARTICLE 9
---------
CONDITIONS TO CLOSING OF THE SHAREHOLDERS, THE COMPANY AND SURGI-PACK
---------------------------------------------------------------------
The respective obligations of the Shareholders, the Company and
Surgi-Pack to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment to their reasonable satisfaction of the
following conditions:
9.1 Continued Truth of Warranties. The representations and
-----------------------------
warranties of Buyer herein contained shall be true and correct in all
material respects on and as of the Closing Date.
9.2 Performance of Covenants. Buyer shall have performed in all
------------------------
material respects all covenants and obligations and complied with all
conditions required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.
9.3 Permits and Consents. Buyer shall have secured all appropriate
--------------------
orders, consents, approvals and clearances to be obtained by it, in form and
substance reasonably satisfactory to the Shareholders, the Company and
Surgi-Pack, by and from all third parties, including but not limited to
governmental and regulatory authorities, whose order, consent, approval or
clearance is required by contract or applicable law for the consummation of
the transactions herein contemplated.
29
9.4 No Litigation. There shall not be any litigation or proceeding
-------------
pending or threatened (including, without limitation, any litigation or
proceeding arising under the antitrust, competition, trade or securities
laws) to restrain or invalidate the transactions contemplated by this
Agreement.
9.5 Closing Documents. Buyer shall have delivered all documents
-----------------
required to be delivered by it at Closing, as more specifically set forth in
this Agreement, in each case in form and substance satisfactory to the
Shareholders, the Company and Surgi-Pack.
ARTICLE 10
----------
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
10.1 Documents to be Delivered by the Shareholders, the Company and
--------------------------------------------------------------
Surgi-Pack. At the Closing, the Shareholders, Royal Hospitality, the Company
----------
and Surgi-Pack shall:
(a) Deliver to Buyer a certificate of incumbency and copies
of the resolutions adopted by the Boards of Directors of Royal Hospitality,
the Company and Surgi-Pack, authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, duly
certified as of the Closing Date by the Secretary or an Assistant Secretary
of Royal Hospitality, the Company or Surgi-Pack, as applicable;
(b) Deliver to Buyer certificates of good standing or their
equivalent, dated not more than thirty (30) days prior to the Closing Date,
attesting to the good standing of each of Royal Hospitality, the Company and
Surgi-Pack as a corporation under the laws of the state of its incorporation
or organization and each other jurisdiction listed on Schedule 2.1(b);
---------------
(c) To the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, including, but not
limited to the Transaction Consents, deliver to Buyer copies of all such
consents or approvals;
(d) Deliver to Buyer (i) the Articles of Incorporation, as
amended, of each of Royal Hospitality, the Company and Surgi-Pack, certified
by the Secretary of State of the state of such party's state of
incorporation as of a date not more than fifteen (15) days prior to the
Closing Date, and (ii) the By-laws, as amended, of each of Royal
Hospitality, the Company and Surgi-Pack, certified as of the Closing Date by
the Secretary or an Assistant Secretary of the respective party;
(e) Deliver to Buyer the original corporate minute books,
stock transfer books and corporate seal of the Company and Surgi-Pack;
(f) Deliver to Buyer certificate(s) representing the Company
Shares and Surgi-Pack Shares with duly executed and valid stock powers
attached in form for transfer to Buyer and otherwise acceptable in form and
substance to Buyer;
(g) Deliver to Buyer the Right of First Refusal Option
Agreement in substantially the form attached hereto as Exhibit E, duly
---------
executed by Gold Street Realty, LLC;
(h) Deliver to Buyer the Option to Purchase in substantially
the form attached hereto as Exhibit F, duly executed by Gold Street Realty,
---------
LLC; and
(i) Execute and deliver to Buyer the Other Agreements, as
applicable, and any and all instruments of sale, assignment and transfer and
other documents reasonably requested by Buyer in order to facilitate the
transactions contemplated hereby.
10.2 Documents to be Delivered by Buyer. At the Closing, Buyer
----------------------------------
shall:
30
(a) Deliver to the Shareholders, Warrantholder, Royal
Hospitality, the Company and Surgi-Pack a certificate of incumbency and a
copy of the resolutions adopted by the Board of Directors of Buyer,
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, duly certified as of
the Closing Date by the Secretary or an Assistant Secretary of Buyer;
(b) Deliver to the Shareholders, Warrantholder, Royal
Hospitality, the Company and Surgi-Pack a certificate of good standing or
its equivalent dated note more than thirty (30) days prior to the Closing
Date, attesting to the good standing of Buyer as a corporation under the
laws of the state of its incorporation or organization;
(c) To the extent any consents or approvals shall be
necessary to any of the transactions herein contemplated, Buyer shall
deliver to the Shareholders, Warrantholder, Royal Hospitality, the Company
and Surgi-Pack upon request copies of all such consents or approvals as
obtained by Buyer;
(d) Deliver the Escrowed Consideration to the Escrow Account
according to the terms of the Escrow Agreement and deliver to Royal
Hospitality and Warrantholder the Closing Payment; and
(e) Execute and deliver to the Shareholders, Warrantholder,
Royal Hospitality, the Company and Surgi-Pack the Other Agreements, as
applicable, and any and all instruments of sale, assignment and transfer and
other documents reasonably requested by the Shareholders, Warrantholder,
Royal Hospitality, the Company and Surgi-Pack in order to facilitate the
transactions contemplated hereby.
10.3 Documents to be Delivered by Warrantholder. At the
------------------------------------------
Closing, Warrantholder shall deliver the Warrants, with duly executed
instruments of assignment attached for transfer to Buyer in form reasonably
acceptable to Buyer.
ARTICLE 11
----------
TERMINATION
-----------
11.1 Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated and the transactions contemplated herein may be abandoned at any
time prior to the Closing, by the mutual consent of the Shareholders, the
Company and Surgi-Pack, on the one hand, and Buyer, on the other, by
appropriate action of the individuals or their respective Boards of
Directors.
11.2 Termination by Either Buyer or the Shareholders, the Company
------------------------------------------------------------
and Surgi-Pack. This Agreement may be terminated and the transactions
--------------
contemplated herein may be abandoned at any time prior to the Closing by
either Buyer, on the one hand, or the Shareholders, the Company and
Surgi-Pack, on the other, if (a) the transactions contemplated in this
Agreement shall not have been consummated by March 22, 2005, or (b) any
court of competent jurisdiction or other governmental entity having
jurisdiction over the Company, Surgi-Pack, Buyer or the Business has issued
a final order, decree or ruling or taken any other final action restraining,
enjoining, or otherwise prohibiting or materially restricting the
consummation of the transactions contemplated in this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable.
11.3 Termination by Buyer. This Agreement may be terminated and the
--------------------
transactions contemplated herein may be abandoned at any time prior to the
Closing by Buyer, if a Shareholder, the Company or Surgi-Pack shall have
breached any of its representations or warranties or failed to perform in
any material respect any of its covenants or agreements contained in this
Agreement which breach or failure (a) individually or in the aggregate, (i)
could be reasonably be expected to have a Material Adverse Effect, or (ii)
could prevent or materially delay the consummation of the transactions
contemplated in this Agreement, or (iii) could materially impair the ability
of Buyer following consummation of the transactions contemplated in this
Agreement to conduct the Business in any jurisdiction where the Business is
now being conducted and (b) shall not have been cured within five business
days
31
after the receipt of written notice by the Shareholders, the Company or
Surgi-Pack from Buyer of such breach or failure.
11.4 Termination by Shareholders, the Company or Surgi-Pack. This
------------------------------------------------------
Agreement may be terminated and the transactions contemplated herein may be
abandoned at any time prior to the Closing by the Shareholders, the Company
or Surgi-Pack, if Buyer shall have breached any of its representations or
warranties or failed to perform in any material respect any of its covenants
or agreements contained in this Agreement which breach or failure (a)
individually or in the aggregate, (i) could be reasonably be expected to
have a Material Adverse Effect, or (ii) could prevent or materially delay
the consummation of the transactions contemplated in this Agreement, and (b)
shall not have been cured within five business days after the receipt of
written notice by the Company or Surgi-Pack from Buyer of such breach or
failure.
11.5 Effect of Termination and Abandonment. In the event of the
-------------------------------------
termination of this Agreement pursuant to any of the provisions of this
Article 11, neither the Shareholders, the Company, Surgi-Pack nor Buyer (nor
any of their respective directors and officers) shall have any liability or
further obligation to the other party to this Agreement, except that nothing
herein will relieve any party from liability for breach of any
representation or warranty or any failure to perform any covenant and
agreement. The terminating party's rights to pursue all legal remedies due
to such breach or failure to perform shall survive the termination of this
Agreement unimpaired.
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 Nondisclosure Agreement. The terms of the Nondisclosure
-----------------------
Agreement dated as of March 7, 2003 between the Company and Buyer
("Nondisclosure Agreement") are incorporated by reference herein and shall
continue in full force and effect until the Closing, at which time the
Nondisclosure Agreement and the obligations of Buyer shall terminate;
provided, however, that the Nondisclosure Agreement shall not terminate with
respect to that portion of the Evaluation Material (as defined in the
Nondisclosure Agreement) that is not exclusively related to the transactions
contemplated by this Agreement. If this Agreement is, for any reason,
terminated prior the Closing Date, the Nondisclosure Agreement shall
continue in full force and effect thereafter in accordance with its terms.
12.2 Contract Renewals. With respect to each Short-Term Contract,
-----------------
for a period beginning on the Closing Date and continuing for a period of
time equal to one hundred twenty (120) days after such Short-Term Contract's
renewal date as set forth on Schedule 1.5(b), and with respect to all other
---------------
matters, for a period beginning on the Closing Date and continuing for a
period of time equal to ninety (90) days following the Closing Date, or, in
either case, such shorter period as Buyer may designate (the "Cooperation
Period"), the Shareholders will reasonably cooperate with Buyer to assist it
in retaining the Customer Contracts as part of Buyer's business and will
reasonably cooperate with Buyer in the transfer of the Business in order to
minimize disruption in the servicing of the customers under Customer
Contracts and to effect the orderly transfer of the Business. Buyer, Royal
Hospitality and Shareholders shall use their commercial best efforts to
renew the Short-Term Contracts on terms and conditions, including but not
limited to terms and conditions related to duration and pricing, that are
not materially different from the terms and conditions existing on the
Closing Date with respect to such Short-Term Contracts.
12.3 Trade Name License Agreement. For a period beginning on the
----------------------------
Closing Date and continuing for so long as (i) the Shareholders own a
majority of the shares of capital stock of Royal Hospitality and operate the
same, and (ii) Royal Hospitality is engaged solely in the hospitality linen
service business, Buyer hereby grants to Royal Hospitality and the
Shareholders a non-exclusive, non-transferrable (including no sublicenses),
worldwide, fully paid-up royalty-free license (the "Trade Name License") to
use the trade name "Royal" solely in connection with, and as a part of, the
trade names "Royal Hospitality Services, Inc.," "Royal Hospitality Services"
and/or "Royal Hospitality." In the event that (i) except with the prior
written consent of Buyer which may be granted in Buyer's sole discretion,
the Shareholders cease to own a majority of the shares of capital stock of
Royal Hospitality and operate the same, whether by a sale of all or
substantially all of the assets of Royal Hospitality, change of control,
cessation of business or otherwise, or (ii) Royal Hospitality engages in any
business other than the hospitality linen service business, the Trade Name
License granted hereby shall immediately terminate and Royal Hospitality and
the Shareholders shall immediately cease to use the trade name "Royal",
including all translations, adaptations, derivations and combinations
thereof, in connection with their or its business.
32
12.4 Notices. Any notices or other communications required or
-------
permitted hereunder (including, by way of illustration and not limitation,
any notice permitted or required under Article 7 hereof) to any party hereto
shall be sufficiently given when delivered in person, or when sent by
certified or registered mail, postage prepaid, or one business day after
dispatch of such notice with an overnight delivery service, or when
transmitted by facsimile or other form of electronic communication if an
answer back is received by the sender, in each case addressed as follows:
In the case of the Company or Surgi-Pack (pre-closing):
Royal Institutional Services, Inc.
Attention: Xxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax no.: 000-000-0000
With a mandatory copy to:
Xxxxxxx Procter LLP
Attention: Xxxxx X. Xxxxxx, Esq.
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax no.: 000-000-0000
In the case of Royal Hospitality:
Royal Hospitality Services, Inc.
Attention: Xxxx X. Xxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
With a mandatory copy to:
Xxxxxxx Procter LLP
Attention: Xxxxx X. Xxxxxx, Esq.
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax no.: 000-000-0000
33
In the case of Warrantholder:
Massachusetts Capital Resource Company
Attention: Xxxxxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax no.: 000-000-0000
With a mandatory copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
x/x Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
(a limited liability partnership in dissolution)
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Fax no.: 000-000-0000
In the case of the Shareholders, to their respective addresses set
forth on the signature pages hereto.
With a mandatory copy to:
Xxxxxxx Procter LLP
Attention: Xxxxx X. Xxxxxx, Esq.
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax no.: 000-000-0000
In the case of Company (post-closing) and Buyer:
Xxxxxxxx Textile Services, Inc.
Attention: President
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax no.: 000-000-0000
With a mandatory copy to:
Xxxxxxxx Corporation
Attention: Xxxxxx X. Xxxx, Esq.
Vice President and General Counsel
000 X. Xxxxx Xxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Fax no.: 000-000-0000
And with a mandatory copy to:
Xxxxxxxx Xxxxxx LLP
Attention: Xxxxxx X. XxXxxx, Esq.
One XX Xxxx Xxxxx
Xx. Xxxxx, XX 00000
Fax no.: 000-000-0000
or such substituted address or attention as any party shall have given
notice to the others in writing in the manner set forth in this Section 12.4.
34
12.5 Amendment. This Agreement may be amended or modified in whole
---------
or in part only by an agreement in writing executed by all parties hereto
and making specific reference to this Agreement.
12.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together shall constitute one instrument.
12.7 Binding on Successors and Assigns. This Agreement shall be
---------------------------------
binding upon, inure to the benefit of and be enforceable by and against the
parties hereto and their respective successors and assigns in accordance
with the terms hereof. Neither the Shareholders, the Company nor Surgi-Pack
may assign their interest under this Agreement without the prior written
consent of Buyer. Buyer may not assign its interest under this Agreement
without the prior written consent of the Shareholders, the Company and
Surgi-Pack.
12.8 Severability. In the event that any one or more of the
------------
provisions contained in this Agreement or any application thereof shall be
invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Agreement and any other
application thereof shall not in any way be affected or impaired thereby;
provided, however, that to the extent permitted by applicable law, any
invalid, illegal, or unenforceable provision may be considered for the
purpose of determining the intent of the parties in connection with the
other provisions of this Agreement.
12.9 Waivers. The parties may, by written agreement, (a) extend the
-------
time for the performance of any of the obligations or other acts of the
parties hereto, (b) waive any inaccuracies in the representations contained
in this Agreement or in any document delivered pursuant to this Agreement,
(c) waive compliance with, or modify, any of the covenants or conditions
contained in this Agreement, and (d) waive or modify performance of any of
the obligations of any of the parties hereto; provided, that no such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall operate as a waiver of, or an estoppel with
respect to, any subsequent insistence upon such strict compliance other than
with respect to the matter so waived or modified.
12.10 Publicity. None of the Shareholders, the Company, Surgi-Pack
---------
or Buyer shall: (a) disclose to any third party, except for those respective
advisors and representatives of the Shareholders, the Company, Surgi-Pack
and Buyer that have been retained to assist such party with the transaction,
or (b) make, deliver or release a public announcement, press release or
similar publicity, with respect to this Agreement or the transactions
contemplated herein, that discloses (y) the contents or existence of any
terms for the purchase of the Company Shares and the Surgi-Pack Shares by
Buyer that have been discussed, proposed, offered, negotiate or agreed upon,
or (z) the fact that there are discussions or negotiations with respect to a
purchase transaction or any other transaction or business relationship among
parties hereto. Notwithstanding the preceding sentence, such disclosures
regarding this Agreement and the transactions contemplated herein may be
made, at such time and in such manner as Buyer, the Shareholders, the
Company and Surgi-Pack shall mutually agree and determine, or such
disclosures may be made by Buyer at any time after the date hereof to the
extent that Buyer deems it desirable or necessary to do so as a public
company, including reference to the transition services to be provided by
the Shareholders during the Cooperation Period as set forth in Section 12.2.
12.11 Headings. The headings in the sections and subsections of
--------
this Agreement and in the Schedules and Exhibits are inserted for
convenience only and in no way alter, amend, modify, limit or restrict the
contractual obligations of the parties.
35
12.12 List of Schedules and Exhibits. As mentioned in this
------------------------------
Agreement, there are attached hereto or delivered herewith, the following
Schedules and Exhibits:
SCHEDULES
---------
Schedule No. Schedule Caption
------------ ----------------
1.5(a) Short-Term Contracts
1.5(b) Equipment Valuation
2.1(a)(ii) Outstanding Securities or Rights on Company
Common Stock
2.1(b) Foreign Qualifications
2.1(d) Ownership Interests
2.1(f) Absence of Violations, List of Customer Contracts
and Customer Contract Consents
2.1(g) Governmental Consents
2.2(c) Undisclosed Liabilities
2.2(d) Accounts Receivable
2.3 Tax Matters
2.4(a) Real and Personal Property
2.4(b) Leases
2.4(c) Condition of Assets
2.4(d) Necessary Payments
2.5 Intellectual Property Licenses
2.6(a) Indebtedness
2.6(b) Contracts
2.6(d) Status
2.7 Employee Plans
2.8 Labor Relations
2.9 Litigation
2.10(a) Compliance with Laws
2.10(b) Permits
2.10(c) Environmental Matters
2.11 Bank Accounts
2.12 Brokers and Commissions
3.1(c) Absence of Violations
3.1(d) Consents
3.2 Brokers and Commissions
4.10 Employees
EXHIBITS
--------
Exhibit No. Exhibit Caption
----------- ---------------
A Shareholders
B Facilities of Business
C Escrow Agreement
D Statement of Working Capital
E Right of First Refusal Option Agreement
F Option to Purchase
Each of the foregoing Schedules and Exhibits is incorporated herein by this
reference and expressly made a part hereof.
12.13 Entire Agreement; Law Governing. All prior negotiations and
-------------------------------
agreements between the parties hereto are superseded by this Agreement and
there are no representations, warranties, understandings or agreements other
than those expressly set forth herein or in an Exhibit or Schedule delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto. This Agreement shall be governed by and construed and
interpreted according to the internal laws of the State of New York,
determined without reference to conflicts of law principles.
12.14 No Third Party Rights. This Agreement is not intended and
---------------------
shall not be construed to create any rights in any persons other than Buyer,
the Shareholders, Royal Hospitality, the Company, Surgi-Pack and MCRC, and
no person shall assert any rights as third party beneficiary hereunder.
36
12.15 Sales and Transfer Taxes. Except as expressly provided
------------------------
otherwise herein, the Shareholders, on the one hand, and Buyer, on the
other, shall each pay one-half of all applicable sales, transfer,
documentary, use, filing and other taxes and fees that may become due or
payable as a result of the sale, conveyance, assignment, transfer or
delivery of the Company Shares, the Surgi-Pack Shares or the Business to
Buyer, whether levied on Buyer, the Company, Surgi-Pack or the Shareholders.
At the Closing, the Shareholders, the Company and Surgi-Pack shall execute
and deliver to Buyer any certificates or other documents as Buyer may
reasonably request to claim available exemptions from the payment of sales,
transfer, use or other similar taxes under applicable law.
12.16 Expenses. Except as expressly provided otherwise herein, the
--------
Shareholders, on the one hand, and Buyer, on the other, shall pay all costs
and expenses incurred by it or on its behalf in connection with this
Agreement and the transactions contemplated hereby, including, without
limiting the generality of the foregoing, fees and expenses of its own
financial consultants, accountants and counsel.
12.17 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in
accordance with the terms hereof and that, prior to the Closing, the parties
shall be entitled to seek specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
12.18 Survivability of Provisions After Termination. If this
---------------------------------------------
Agreement is terminated pursuant to Article 11 hereof, it shall become null
and void and have no further force and effect, except as provided in
Sections 11.5, 12.1, 12.16, 12.17 and this 12.18 which shall survive
termination and except that nothing herein shall relieve any party hereto
for a breach by such party of the terms of this Agreement. Upon any
termination of this Agreement, each party hereto will return all documents
work papers and all other material of the other party relating to the
transactions contemplated hereby and all covers at such materials, where so
obtained before or after the execution hereof, to the party furnishing the
same.
[the remainder of the page is intentionally left blank]
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives on the day and year
first above written.
SHAREHOLDERS: ROYAL HOSPITALITY:
/s/ Xxxx X. Xxxxxxx Royal Hospitality Services, Inc.
------------------------------------
Xxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxxxx -------------------------------
------------------------------------ Title: President
Xxxx X. Xxxxxxxxx ------------------------------
COMPANY:
/s/ Xxxxx X. Xxxx
------------------------------------ Royal Institutional Services, Inc.
Xxxxx X. Xxxx
By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
-------------------------------
Title: President
-----------------------------
SURGI-PACK:
Surgi-Pack Corporation
By: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
-------------------------------
Title: President
------------------------------
BUYER:
Xxxxxxxx Textile Services, Inc.
By: /s/ Xxxxxx X. Xxxx
---------------------------------
Name: Xxxxxx X. Xxxx
------------------------------
Title: Vice President
------------------------------
WARRANTHOLDER:
Massachusetts Capital Resource
Company
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
-------------------------------
Title: Senior Vice President
------------------------------
38
