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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
GENERAL ROOFING SERVICES, INC.,
XXXXXXXXXX-XXXXXXX ROOFING COMPANY, INC.
AND
ALL OF THE STOCKHOLDERS
OF
XXXXXXXXXX-XXXXXXX ROOFING COMPANY, INC.
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----------------------------
MAY 12, 1998
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TABLE OF CONTENTS
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ARTICLE I - SALE AND PURCHASE OF SHARES...........................................................................1
1.01 Sale and Purchase of Company Common Stock................................................................1
1.02 Purchase Price...........................................................................................2
1.03 Delivery of Purchase Price...............................................................................2
1.04 Excluded Assets and Distribution of Assets...............................................................3
1.05 Stockholders' Representative.............................................................................3
1.06 Earn-Out.................................................................................................4
ARTICLE II - CLOSING..............................................................................................5
2.01 Closing..................................................................................................5
2.02 Deliveries by Stockholders to GRS........................................................................5
2.03 Deliveries by GRS........................................................................................6
2.04 Termination in Absence of Closing........................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS..................................7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER...................................................7
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF GRS.................................................................7
ARTICLE VI - OBLIGATIONS PRIOR TO CLOSING.........................................................................7
6.01 GRS' Access to Information and Assets....................................................................7
6.02 Company's Conduct of Business and Operations.............................................................8
6.03 General Restrictions.....................................................................................8
6.04 Notice Regarding Changes.................................................................................9
6.05 Consents and Best Efforts...............................................................................10
6.06 Casualty Loss...........................................................................................10
6.07 Employee Matters........................................................................................10
6.08 No Solicitation.........................................................................................10
6.09 Employment Agreements...................................................................................11
6.10 Lock-Up Agreement.......................................................................................11
ARTICLE VII - CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS...................................................11
7.01 Conditions to Obligations of All Parties................................................................11
7.02 Conditions to Obligations of Stockholders...............................................................11
7.03 Conditions to Obligations of GRS........................................................................12
ARTICLE VIII - SURVIVAL..........................................................................................14
8.01 Survival of Representations and Warranties of the Company and the Stockholders..........................14
ARTICLE IX - INDEMNIFICATION.....................................................................................15
9.01 Obligation of the Stockholders to Indemnify.............................................................15
9.02 Obligation of GRS to Indemnify..........................................................................15
9.03 Notice and Opportunity to Defend........................................................................15
9.04 Limitations on Indemnification..........................................................................16
9.05 Set-Off Rights..........................................................................................17
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TABLE OF CONTENTS
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ARTICLE X - POST-CLOSING OBLIGATIONS.............................................................................17
10.01 Further Assurances......................................................................................17
10.02 Publicity...............................................................................................18
10.03 Access to Records.......................................................................................18
ARTICLE XI - MISCELLANEOUS.......................................................................................18
11.01 Brokers.................................................................................................18
11.02 Costs and Expenses......................................................................................18
11.03 Notices.................................................................................................18
11.04 Governing Law...........................................................................................19
11.05 Representations and Warranties..........................................................................19
11.06 Entire Agreement, Amendments and Waivers................................................................19
11.07 Binding Effect and Assignment...........................................................................20
11.08 Remedies................................................................................................20
11.09 Exhibits and Schedules..................................................................................20
11.10 Multiple Counterparts...................................................................................20
11.11 References..............................................................................................20
11.12 Survival................................................................................................20
11.13 Attorneys' Fees.........................................................................................20
ARTICLE XII - DEFINITIONS........................................................................................21
12.01 Affiliate...............................................................................................21
12.02 Collateral Agreements...................................................................................21
12.03 Company Assets..........................................................................................21
12.04 Contract Retention......................................................................................21
12.05 Current Assets..........................................................................................21
12.06 Current Liabilities.....................................................................................21
12.07 Damages.................................................................................................21
12.08 Environmental Law.......................................................................................21
12.09 GAAP....................................................................................................22
12.10 Governmental Authorities................................................................................22
12.11 Hazardous Substances....................................................................................22
12.12 Knowledge...............................................................................................22
12.13 Legal Requirements......................................................................................22
12.14 Permits.................................................................................................22
12.15 Properties..............................................................................................22
12.16 Proportionate Share.....................................................................................22
12.17 Regulations.............................................................................................22
12.18 Taxes...................................................................................................22
12.19 Tax Returns.............................................................................................23
12.20 Used....................................................................................................23
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LIST OF EXHIBITS
Exhibit A - Stockholders
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit D - Representations and Warranties of the Company and the Stockholders
Exhibit E - Representations and Warranties of each Stockholder
Exhibit F - Representations and Warranties of GRS
Exhibit G - Employment Agreement for J.R. Xxxxxxxxxx
Exhibit H - Employment Agreement for Xxxxx Xxxxxxx
Exhibit I - Opinion of Xxxxx & XxXxxxxx
Exhibit J - Opinion of Xxxxxxxx, Thomson & Xxxxxx, P.C.
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of May 12, 1998, by and among (i) General Roofing Services,
Inc., a Florida corporation (the "Buyer" or "GRS"),(ii) Xxxxxxxxxx-Xxxxxxx
Roofing Company, Inc., a Kansas corporation (the "Company"), and (iii) all of
the stockholders of the Company (the "Stockholders").
PRELIMINARY STATEMENTS:
A. The Board of Directors of GRS and the Stockholders deem it advisable
for their welfare and best interests that the Stockholders sell and GRS purchase
all of the issued and outstanding capital stock of the Company, consisting of
1,000 shares (the "Shares") of common stock, $1.00 par value ("Company Common
Stock"), upon the terms and subject to the conditions hereinafter set forth.
B. Concurrently with the purchase and sale of the Shares hereby, and as
part of an overall plan, GRS is acquiring the issued and outstanding capital
stock of additional commercial roofing companies (the "Founding Companies")
throughout the United States, and all such transactions are intended to conform
to, and are being made, in connection with a Section 351 Plan of Exchange within
the meaning of the Internal Revenue Code.
C. The Company owns all of the capital stock of Xxxxxxxxxx-Xxxxxx
Roofing Co. and intends to purchase all of the capital stock of Architectural
Sheet Metal, Inc. ("ASM") prior to the Closing (as defined in Section 2.01
hereof) (each a "Subsidiary" and collectively "Subsidiaries").
D. Capitalized terms used herein which have not been defined prior to
such use shall have the respective meanings given such terms in Article XII
hereof.
AGREEMENT
In consideration of the premises, the mutual covenants and agreements
contained herein and the benefits to accrue to the parties hereto, and subject
to the satisfaction or waiver of the conditions contained herein, the parties
hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01. Sale and Purchase of Company Common Stock.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 2.01 hereof, each Stockholder
shall sell, transfer, convey and deliver to GRS, and GRS shall purchase, acquire
and accept from each Stockholder, the number of shares of Company Common Stock
set forth opposite the name of each such Stockholder on Exhibit A hereto under
the heading "Number of Shares of Company Common Stock Purchased", constituting
all of the issued and outstanding shares of Company Common Stock. The sale and
purchase of the Company Common Stock pursuant to this Agreement is sometimes
hereinafter referred to as the "Stock Purchase."
(b) To effect the transfers contemplated by Section 1.01(a),
at the Closing, each Stockholder shall deliver, or cause to be delivered, to the
Stockholders' Representative (as defined and provided for in Section 1.06
hereof), for redelivery to GRS, stock certificates representing the Company
Common Stock being sold by such Stockholder hereunder, together with stock
powers duly executed in
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blank or otherwise in proper form acceptable to GRS for transfer to GRS on the
books of the Company, against payment therefor in accordance with Section 1.03
hereof.
Section 1.02 Purchase Price.
(a) The purchase price for the issued and outstanding shares
of Company Common Stock to be purchased by GRS hereunder (the "Purchase Price")
shall be an aggregate amount equal to (i) $800,000 plus (ii) any additional
amount as shall be payable to the Stockholders in accordance with Section 1.06
hereof. The Purchase Price shall be subject to adjustment as provided in this
Agreement and shall be allocated among the Stockholders in accordance with their
respective ownership interests as set forth on Exhibit A hereof. The Purchase
Price shall be delivered to the Stockholders, in accordance with their
respective Proportionate Share, and to the Escrow Agent (as defined in Section
1.03(b) hereof), subject to and in accordance with Section 1.03 hereof. The
amount of the Purchase Price allocated to each outstanding share of Company
Common Stock is hereinafter referred to as the "Stock Purchase Payment."
(b) The Stockholders shall cause to be prepared and delivered
to GRS within fifteen (15) days prior to the Closing Date (i) an unaudited
consolidated balance sheet of the Company forecasted as of the Closing Date (the
"Closing Date Unaudited Balance Sheet") and (ii) a certificate executed by the
Company's Chief Financial Officer (or another duly authorized officer of the
Company) to the effect that the Closing Date Unaudited Balance Sheet has been
prepared from the books and records of the Company and in a manner consistent
with the preparation of the Company Financial Statements (as defined in Section
3.06 hereof).
Section 1.03 Delivery of Purchase Price. At the Closing, the Purchase
Price shall be paid upon the surrender pursuant to Section 1.01(b) hereof of a
certificate or certificates representing all of the issued and outstanding
shares of Company Common Stock, as follows:
(a) $360,000, shall be paid directly to the holders thereof by
wire transfer in New York Clearing House Funds in accordance with Exhibit A
hereto.
(b) An aggregate of $440,000 shall be paid by the delivery to
an escrow agent (the "Escrow Agent") selected by GRS and reasonably acceptable
to the Stockholders, on behalf of the Stockholders, of such number of shares of
GRS' common stock, par value $.01 per share ("GRS Common Stock"), as shall have
a value equal to $440,000, (the "Escrow Fund"), based upon the public offering
price of the GRS Common Stock to be sold in its initial public offering (the
"Offering"). The shares of GRS Common Stock to be so held in escrow shall be
held by the Escrow Agent for a period of one year following the Closing in
accordance with the terms of an Escrow Agreement in the form of Exhibit B hereto
(the "Escrow Agreement"), and shall thereafter be restricted from transfer for
an additional one-year period in accordance with the terms, and subject to the
conditions, of a Lock-Up Agreement in the form of Exhibit C hereto (the "Lock-Up
Agreement"). The Stockholders shall receive cash in lieu of fractional shares.
(c) Each certificate evidencing shares of GRS Common Stock
issued in connection with the Stock Purchase shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933
ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT BE
TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
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COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED OR
HYPOTHECATED WITHOUT REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
Section 1.04 Excluded Assets; No Distribution of Assets.
(a) Prior to the Closing, the Company shall be permitted to
distribute to the Stockholders as a dividend those assets (the "Excluded
Assets") which GRS and the Stockholders have agreed in writing are not required
by the Company in the conduct of its operations and which are listed in Schedule
1.04 hereto.
(b) The Stockholders may authorize and the Company may make or
authorize distributions in order to reduce the Company's Closing Net Book Value
to not less than $750,000.
Section 1.05 Stockholders' Representative.
(a) As used in this Agreement, the "Stockholders'
Representative" shall mean J.R. Xxxxxxxxxx or any person appointed as a
successor Stockholders' Representative pursuant to Section 1.05(b) hereof.
(b) During the period ending upon the date when all
obligations under this Agreement have been discharged (including all
indemnification obligations hereunder and all obligations under the Escrow
Agreement), the Stockholders who, immediately prior to the Closing, held Company
Common Stock representing an aggregate number of shares of Company Common Stock
which exceeded 50% of the amount of such Company Common Stock outstanding
immediately prior to such time (a "Majority"), may, from time to time upon
written notice to the Stockholders' Representative and GRS, remove the
Stockholders' Representative or appoint a new Stockholders' Representative to
fill any vacancy created by the death, incapacitation, resignation or removal of
the Stockholders' Representative. Furthermore, if the Stockholders'
Representative dies, becomes incapacitated, resigns or is removed by a Majority,
the Majority shall appoint a successor Stockholders' Representative to fill the
vacancy so created. If the Majority is required to but has not appointed a
successor Stockholders' Representative within 20 business days from a request by
GRS to appoint a successor Stockholders' Representative, GRS shall have the
right to appoint a Stockholders' Representative to fill any vacancy so created,
and shall advise all those who were holders of Company Common Stock immediately
prior to the Closing of such appointment by written notice. A copy of any
appointment by the Majority of any successor Stockholders' Representative shall
be provided to GRS promptly after it shall have been effected.
(c) The Stockholders' Representative shall be authorized to
take any action and to make and deliver any certificate, notice, consent or
instrument required or permitted to be made or delivered under this Agreement or
under the documents referred to in this Agreement (an "Instrument") which the
Stockholders' Representative determines to be necessary, appropriate or
desirable, and, in connection therewith, to hire or retain, at the sole expense
of the Stockholders, such counsel, investment bankers, accountants,
representatives and other professional advisors as he determines in his sole and
absolute discretion to be necessary, advisable or appropriate in order to carry
out and perform his rights and obligations hereunder. The Stockholders hereby
grant the Stockholders' Representative the right and power to execute the Escrow
Agreement on their behalf with such changes or amendments thereto as the
Stockholders' Representative shall determine to be necessary or desirable in his
sole and absolute discretion. Any party receiving an Instrument from the
Stockholders' Representative shall have the right to rely in good faith upon
such Instrument, and to act in accordance with the Instrument without
independent investigation.
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(d) GRS shall have no liability to any Stockholder or
otherwise arising out of the acts or omissions of the Stockholders'
Representative or any disputes among the Stockholders or with the Stockholders'
Representative. GRS may rely entirely on its dealings with, and notices to and
from, the Stockholders' Representative to satisfy any disputed obligations it
might have to the Stockholders under this Agreement, any agreement referred to
herein or otherwise.
(e) The Stockholders shall indemnify, defend and hold harmless
the Stockholders' Representative from and against any and all claims, demands,
actions, suits, causes of action, damages, costs and expenses (including,
without limitation, attorneys' fees) (collectively, "Claims") which are
hereafter made, sustained or brought against the Stockholders' Representative by
any person arising out of the acts or omissions of the Stockholders'
Representative or any disputes among the Stockholders, unless such Claims
allegedly occurred as a result of the willful misconduct or negligence by the
Stockholders' Representative.
Section 1.06 Earn-Out. (a) As additional consideration for the sale of
the Company Common Stock, subject to the provisions of Section 1.06(c), GRS
shall deliver to the Stockholders within 60 days of the last day of each
Earn-Out Period (as defined below), for allocation among the Stockholders in
accordance with their respective Proportionate Share, an aggregate amount (the
"Earn-Out Amount") equal to (i) EBIT, (as defined and determined pursuant to
Section 1.06(b) hereof) for each of two consecutive 12 month periods following
the Closing Date (as defined in Section 2.01 hereof), beginning with the first
full month following the Closing Date (the "Earn-Out Period"), as determined by
reference to the financial statements of the Company prepared in accordance with
GAAP multiplied by (ii) two (2) (subject to the limitation set forth in Section
1.06(e)). The sum of the Earn-Out Amount minus $180,000 shall be paid to the
stockholders for each Earn-Out Period (i) in cash by wire transfer of
immediately available funds, (ii) by the delivery of such number of shares of
GRS Common Stock as shall have a value equal to the Earn-Out Amount as computed
in accordance with Section 1.06(f) hereof, or (iii) a combination of cash and
GRS Common Stock, the form of such consideration to be determined by the
Stockholders' Representative.
(b) For purposes of this Section 1.06, "EBIT" shall mean the
consolidated net income of the Company before interest, federal and state income
taxes and general corporate overhead allocations during the Earn-Out Period,
modified as follows:
(i) to the extent included in the consolidated net
income of the Company, excluding the effect of the following items:
(A) the gain or loss from any sale, exchange
or other disposition of assets other than in the ordinary course of business
consistent with past practice;
(B) any extraordinary gain or loss;
(C) any reserves or adjustments to reserves
which are not consistent with past practices of the Company; and
(D) any other adjustments agreed to in
writing by GRS and the Stockholders.
(c) Within 30 days after the last day of each Earn-Out Period,
GRS shall prepare and deliver to the Stockholders' Representative a statement
setting forth in reasonable detail the computation of EBIT, including
identification of all excluded items and adjustments and all necessary
calculations in accordance with Section 1.06(b) hereof. The calculation of EBIT
shall be used in determining the amounts to be paid under Section 1.06 unless
the holders of at least 50% of the Company Common Stock on the date hereof give
GRS notice (the "EBIT Dispute Notice") that such Stockholders dispute GRS
calculation of EBIT within ten (10) days after the initial determination of EBIT
has been given to the Stockholders,
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which notice shall set forth in reasonable detail the exclusions or calculations
being disputed in good faith (the "Disputed Matters"). In the event an EBIT
Dispute Notice is timely given to GRS, GRS and the Stockholders shall have
fifteen (15) days to resolve the dispute and, if not resolved, the dispute shall
be submitted to an internationally recognized "Big Six" accounting firm or its
successor (the "EBIT Arbitrator"), selected by GRS and the Stockholders which
shall be instructed to arbitrate such disputed item(s) and determine EBIT within
thirty (30) days. If within five days following the expiration of such fifteen
(15) day period, GRS and the Stockholders have failed to agree in writing upon
the selection of the EBIT Arbitrator or any EBIT Arbitrator selected by them has
not agreed to perform the services called for hereunder, the EBIT Arbitrator
shall thereupon be selected by the American Arbitration Association (the "AAA"),
with preference being given by the AAA in making such selection to any one of
the "Big Six" accounting firms (other than GRS' Accountants and the
Stockholders' Accountants) willing to perform such services. The EBIT Arbitrator
shall consider only the Disputed Matters. The resolution of disputes by the EBIT
Arbitrator shall be set forth in writing and shall be conclusive and binding
upon and non-appealable by the parties, and the determination of EBIT shall
become final upon the date of such resolution, and may be entered as a final
judgment in any court of proper jurisdiction. The fees and expenses of the EBIT
Arbitrator with respect to settlement of each Disputed Matter shall, to the
extent such fees and expenses are allocable, be borne in each such instance by
the party against whom the award of the EBIT Arbitrator is made, and if
allocation is not feasible in any such instance, then such fees and expenses
shall be borne by the parties in reverse proportion to the number of Disputed
Matters settled in their respective favor by the EBIT Arbitrator.
(d) Notwithstanding anything in this Agreement to the
contrary, if an EBIT Dispute Notice has been delivered with respect to any
payment to be made under this Section 1.07, and the dispute has not been
resolved by the payment due date, (i) the amount not in dispute shall be paid as
required hereunder, and (ii) GRS shall have no obligation to pay any disputed
amount until ten (10) days after the date on which the dispute is resolved.
(e) Notwithstanding anything to the contrary in this Section
1.06, the combined aggregate Earn-Out Amount for the 24 month Earn-Out Period
shall not exceed $6,000,000.
(f) In the event that the Stockholders' Representative elects
to receive GRS Common Stock for the Earn-Out Amount, the number of shares of GRS
Common Stock to be so delivered shall be based upon the average closing price of
GRS Common Stock as quoted on the Nasdaq Stock Market's National Market for the
last five (5) business days of each Earn-Out Period.
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the satisfaction or waiver of the
conditions stated in Article VII hereof, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Miami time, on
the closing date of the Offering, estimated to be July 15, 1998 or, if the
conditions set forth in Sections 7.01 through 7.03 have not been satisfied or
waived on such date, no later than seven (7) days after all such conditions
shall have been satisfied or waived, at the offices of Xxxxx & XxXxxxxx, 000
Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx 00000, unless another date or place
is agreed to in writing by the parties hereto. The date upon which the Closing
occurs is hereinafter referred to as the "Closing Date." The Closing shall be
deemed completed as of 11:59 p.m. Miami time on the Closing Date.
Section 2.02 Deliveries by Stockholders to GRS. At or prior to the
Closing, the Stockholders shall deliver to GRS:
(i) certificates representing all of the issued
and outstanding shares of Company Common
Stock in proper form for transfer to GRS;
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(ii) the resignations of all members of the board
directors of the Company and each Subsidiary
as set forth in Section 7.03(l);
(iii) the stock books, stock ledgers, minute books
and corporate seals of the Company;
(iv) a certificate executed by the Company to the
effect that the conditions set forth in
Sections 7.03(b) through 7.03(i), have been
satisfied;
(v) the opinion of counsel set forth in Section
7.03(f);
(vi) the executed Collateral Agreements; and
(vii) evidence of the consents required pursuant
to Section 7.03(n).
Section 2.03 Deliveries by GRS. At or prior to the Closing, GRS shall
deliver to the Stockholders:
(i) by wire transfer in immediately available
funds to the Stockholders the payment
described in Section 1.03(a) as being
required to be paid by GRS at Closing;
(ii) by delivery to the Escrow Agent the shares
of GRS Common Stock described in Section
1.03(b) as being required to be delivered by
GRS to the Escrow Agent at Closing;
(iii) a certified copy of all necessary corporate
action on behalf of GRS approving its
execution, delivery and performance of this
Agreement and the Collateral Agreements to
which it is a party pursuant to Section
7.02(a);
(iv) a certificate executed by an authorized
officer of GRS to the effect that the
conditions set forth in Sections 7.02(b) and
7.02(c) have been satisfied;
(v) the opinion of counsel set forth in Section
7.02(d);
(vi) the executed Collateral Agreements to which
it is a party; and
(vii) evidence that: (a) the Stockholders have
been released from all personal guarantees
relating to any obligations of the Company,
including but not limited to, any bank
loans, lines of credit, and/or performance
bonds (the "Personal Guarantees and
Obligations") and (b) GRS shall indemnify
and hold harmless the Stockholders from and
against any personal liability or
obligations relating to or arising out of
any Personal Guarantees or Obligations.
Section 2.04 Termination in Absence of Closing. If by the close of
business on December 31, 1998 (the "Termination Date"), the Closing has not
occurred, then any party hereto may thereafter terminate this Agreement by
written notice to such effect, to the other parties hereto, without liability of
or to any party to this Agreement or any shareholder, director, officer,
employee or representatives of such party unless the reason for Closing having
not occurred is (i) such party's willful breach of the provisions of this
Agreement, or (ii) if all of the conditions to such party's obligations set
forth in Article VII have been
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satisfied or waived in writing by the date scheduled for the Closing pursuant to
Section 2.01, the failure of such party to perform its obligations under this
Article II on such date; provided, however, that any termination pursuant to
this Section 2.04 shall not relieve any party hereto who was responsible for
Closing having not occurred as described in clauses (i) or (ii) above of any
liability for (x) such party's willful breach of the provisions of this
Agreement, or (y) if all of the conditions to such party's obligations set forth
in Article VII have been satisfied or waived in writing by the date scheduled
for the Closing pursuant to Section 2.01, the failure of such party to perform
its obligations under this Article II on such date. Notwithstanding the
foregoing, the Stockholders expressly acknowledge and agree that market and
economic conditions are impossible to predict, and although GRS intends to
proceed with the Offering in an expeditious manner at this time, GRS shall not
be liable to the Stockholders or the Company if the Closing has not occurred
because the Offering has not been consummated prior to the Termination Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS as to the matters set forth on Exhibit D hereto, the full text of
which is incorporated herein by reference as if set forth fully herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as to the matters set
forth on Exhibit E hereto, the full text of which is incorporated herein by
reference as if set forth fully herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Stockholders as to the matters set
forth on Exhibit F hereto, the full text of which is incorporated herein by
reference as if set forth fully herein.
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
Section 6.01 GRS' Access to Information and Assets. The Stockholders
shall permit GRS and its authorized employees, agents, accountants, legal
counsel and other representatives, at GRS' own expense, to have access to the
books, records, employees, counsel, accountants, and other representatives of
the Company at all times reasonably requested by GRS for the purpose of
conducting an investigation ("GRS' Due Diligence Investigation") of the
Company's and each Subsidiary's financial condition, corporate status,
operations, business and Properties. The Stockholders shall make available to
GRS for examination and reproduction, at GRS' own expense, all documents and
data of every kind and character relating to the Company and each Subsidiary in
possession or control of, or subject to reasonable access by, the Stockholders
or the Company, including, without limitation, all files, records, data and
information relating to the Company Assets (whether stored in paper, magnetic or
other storage
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media) and all agreements, instruments, contracts, assignments, certificates,
orders, and amendments thereto. Also, the Company shall allow GRS, at GRS' own
expense, access to, and the right to inspect, the Company Assets.
Section 6.02 Company's Conduct of Business and Operations. The
Stockholders shall keep GRS advised as to all material operations and proposed
material operations relating to the Company, each Subsidiary or the Company
Assets. Except for distributions permitted pursuant to Sections 1.04 and 3.02,
the Company and each Subsidiary shall (a) conduct its business in the ordinary
course, (b) use its best efforts to keep available to the Company and each
Subsidiary the services of present employees, (c) maintain and operate Company
Assets in a good and workmanlike manner, (d) pay or cause to be paid all costs
and expenses (including but not limited to insurance premiums) incurred in
connection therewith in a timely manner in accordance with prior practices, (e)
use reasonable efforts to keep all Company Contracts listed or required to be
listed on Schedule 3.12 in full force and effect, (f) comply with all of the
material covenants contained in all such Company Contracts, (g) maintain in
force until the Closing Date insurance policies (subject to the provisions of
Section 6.06) equivalent to those in effect on the date hereof, and (h) comply
in all material respects with all applicable Legal Requirements. Except as
otherwise contemplated in this Agreement, the Stockholders shall use their best
efforts to preserve the present relationships of the Company with persons having
significant business relations therewith. GRS acknowledges and agrees that prior
to the Closing, the Company intends to acquire, through a stock purchase, merger
or other business combination, all of the issued and outstanding capital stock
of ASM.
Section 6.03 General Restrictions. Except as otherwise expressly
permitted in this Agreement, without the prior written consent of GRS, neither
the Company nor any Subsidiary shall:
(i) (A) except as permitted by Sections 1.04 and
3.02 hereof, declare, set aside or pay any dividends on, or make any
other distribution (whether in cash, stock or property) in respect of,
any of its capital stock, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in view of or in substitution for shares of
its capital stock, or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities;
(iii) amend its Articles of Incorporation or By-laws
(or similar organizational documents);
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation,
partnership, joint venture, association or other business organization
or division thereof or (B) any assets that are material, individually
or in the aggregate, to the Company, except purchases of assets in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of, or agree to sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Properties except (A)
in the ordinary course of business consistent with past practice, or
(B) pursuant to any Company Contract or except as permitted by Sections
1.04 and 3.02 hereof;
(vi) (A) incur any indebtedness for borrowed money
or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other
agreements to maintain any financial statement
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condition of another person or enter into any arrangement having the
economic effect of the foregoing, except for borrowings incurred in the
ordinary course of business consistent with past practice, or (B) make
any loans, advances or capital contributions to, or investments in, any
other person;
(vii) make or agree to make any new capital
expenditure or expenditures which, individually is in excess of $25,000
or, in the aggregate, are in excess of $50,000 (other than those
required pursuant to currently outstanding Company Contracts or in the
ordinary course of business consistent with past practice);
(viii) make any material tax election or settle or
compromise any material tax liability;
(ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Company
Financial Statements (or the notes thereto) or incurred in the ordinary
course of business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company
or any Subsidiary is a party;
(x) except in the ordinary course of business
consistent with past practice, modify, amend or terminate any Company
Contract;
(xi) except in the ordinary course of business
consistent with past practice, enter into any contracts, agreements,
arrangements or understandings relating to performance by third parties
of the Company's or any Subsidiary's services;
(xii) except as required to comply with applicable
law and as may be required with respect to union members (A) adopt,
enter into, terminate or amend any benefit plan or other arrangement
for the benefit or welfare of any director, officer or current or
former employee, (B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee
(except in a manner consistent with past practice), (C) pay any benefit
not provided for under any benefit plan, (D) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement
or benefit plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance
units or restricted stock, or the removal of existing restrictions in
any benefit plans or agreement or awards made thereunder) or (E) take
any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract
or arrangement or benefit plan;
(xiii) make any change in any method of accounting or
accounting practice or policy other than those required by GAAP; or
(xiv) authorize any of, or commit or agree to take
any of, the foregoing actions.
Section 6.04 Notice Regarding Changes. The Stockholders shall promptly
inform GRS in writing of any change in facts and circumstances that could render
any of the representations, warranties or covenants made herein by the Company,
any Subsidiary or the Stockholders inaccurate or misleading if such
representations and warranties had been made upon the occurrence of the fact or
circumstance in question. GRS shall promptly inform the Stockholders in writing
of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading if
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such representations and warranties had been made upon the occurrence of the
fact or circumstance in question.
Section 6.05 Consents and Best Efforts. Each of the parties hereto
shall use all commercially reasonable good faith efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations, and consult and fully
cooperate with and provide reasonable assistance to each other party and their
respective representatives in order to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
hereafter, including without limitation, (i) using all commercially reasonable
good faith efforts to make all filings, applications, notifications, reports,
submissions and registrations with, and to obtain all consents, approvals,
authorizations or permits of, governmental entities or other persons or entities
as are necessary for the consummation of the transactions contemplated by this
Agreement, and (ii) taking such actions and doing such things as any other party
hereto may reasonably request in order to cause any of the conditions to such
other party's obligation to consummate the transactions contemplated hereby, as
specified in Article VII of this Agreement, to be fully satisfied.
Section 6.06 Casualty Loss. If, between the date of this Agreement and
the Closing, any of the Properties of the Company or any Subsidiary shall be
destroyed or damaged, in whole or in part, by fire, earthquake, flood, other
casualty or any other cause (a "Casualty Loss"), then the Stockholders shall, at
GRS' election, (i) cause the Company or any Subsidiary to cause such Properties
to be repaired or replaced prior to the Closing with Property of substantially
the same condition and function to the extent of available insurance proceeds,
(ii) cause the Company or any Subsidiary to deposit in a separate account an
amount sufficient to cause such Property to be so repaired or replaced to the
extent of available insurance proceeds, or (iii) enter into contractual
arrangements with the Company or any Subsidiary satisfactory to GRS so that the
Company or any Subsidiary will have at the Closing the same economic value as if
such casualty had not occurred.
Section 6.07 Employee Matters. The Stockholders shall take (or cause
the Company or any Subsidiary to take) all actions necessary or appropriate to
cause each plan or benefit program or agreement in effect on the date of this
Agreement to remain in full force and effect until the Closing Date; provided,
however, that, to the extent requested in writing by GRS at least ten (10) days
prior to the Closing Date, the Stockholders shall cause the Company or any
Subsidiary to cease to sponsor, maintain or contribute to any plan or benefit
program or agreement specified by GRS in such written request.
Section 6.08 No Solicitation. The Stockholders, the Company, its
Subsidiaries and their officers, directors, employees, representatives and
agents shall immediately cease any discussions or negotiations with any parties
that may be ongoing with respect to a Third Party Acquisition Proposal (as
defined below). Neither the Company or any Subsidiary nor any of the
Stockholders shall, nor shall they permit any of their Affiliates to, nor shall
they authorize or permit any of their officers, directors or employees or any
investment banker, attorney or other advisor or representatives retained by them
or any of their Affiliates to (i) solicit, initiate or knowingly encourage the
submission of, any Third Party Acquisition Proposal, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any non-public
information with respect to, or take any other action knowingly to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Third Party Acquisition Proposal. For purposes of
this Agreement, "Third Party Acquisition Proposal" means any inquiry, proposal
or offer from any person relating to any direct or indirect acquisition or
purchase of all or a portion or more of the assets of the Company or any
Subsidiary or all or a portion of any class of equity securities of the Company
or any Subsidiary (other than Excluded Assets) or any offer to acquire or
purchase that if consummated would result in any person beneficially owning all
or a portion of any class of equity securities of the Company or any Subsidiary,
or any merger, consolidation, business combination, sale of assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Subsidiary, other than the transactions contemplated by this
Agreement, or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or delay, or dilute materially
the benefits to GRS of the transactions contemplated hereby.
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Section 6.09 Employment Agreement. On or before the Closing, J. R.
Xxxxxxxxxx and Xxxxx Xxxxxxx shall have entered into employment agreements in
the form of Exhibits G and H (the "Employment Agreement"), which shall include
non-competition provisions, to take effect on and after the Closing Date.
Section 6.10 Lock-Up Agreement. On or before Closing, the Stockholders
shall have entered into the Lock-Up Agreement.
ARTICLE VII
CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS
Section 7.01 Conditions to Obligations of All Parties. The respective
obligations of each party to carry out the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) All filings with all Governmental Authorities required to
be made in connection with the transactions contemplated hereby shall have been
made, and all orders, permits, waivers, authorizations, exemptions, and
approvals of such entities required to be in effect on the date of the Closing
in connection with the transactions contemplated hereby shall have been issued,
and all such orders, permits, waivers, authorizations, exemptions or approvals
shall be in full force and effect on the date of the Closing; provided, however,
that no provision of this Agreement shall be construed as requiring any party to
accept, in connection with obtaining any other requisite approval, clearance or
assurance of non-opposition, avoiding any challenge, or negotiating settlement,
any condition that would materially change or restrict the manner in which the
Company, its Subsidiaries or GRS conducts or proposes to conduct its business,
and no transfers of licenses shall occur prior to the Closing.
(b) None of the parties hereto shall be subject to any
statute, rule, regulation, decree, ruling, injunction or other order issued by
any Governmental Authorities of competent jurisdiction (collectively, an
"Injunction") which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
Section 7.02 Conditions to Obligations of Stockholders. The obligations
of the Stockholders to carry out the transactions contemplated by this Agreement
are subject, at the option of the Stockholders, to the satisfaction, or waiver
by Stockholders, of the following conditions:
(a) GRS shall have furnished the Stockholders with a certified
copy of all necessary corporate action on its behalf approving its execution,
delivery and performance of this Agreement and each of the Collateral
Agreements.
(b) All representations and warranties of GRS contained in
this Agreement qualified by materiality shall be true and correct in all
respects at Closing and all other representations and warranties of GRS
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, as if such representations and warranties were made at
and as of the Closing, except for changes contemplated by the terms of this
Agreement except as and to the extent that the facts and conditions upon which
such representations and warranties are based are expressly required or
permitted to be changed by the terms thereof, and GRS shall have performed and
satisfied in all material respects all covenants and agreements required by this
Agreement to be performed and satisfied by GRS at or prior to the Closing;
provided, however, that no Stockholder shall be entitled to refuse to consummate
the transaction in reliance upon its own breach or failure to perform.
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(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the
Stockholders or the Company) shall be pending or threatened before any
Governmental Authority seeking to restrain the Stockholders from effectuating
the Stock Purchase or prohibit the Closing or seeking Damages against the
Stockholders or the Company as a result of the consummation of the transactions
contemplated by this Agreement.
(d) The Company shall have received the opinion of Xxxxx &
XxXxxxxx, counsel to GRS, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Company, as to the matters set forth on Exhibit
H. In rendering such opinion, Xxxxx & XxXxxxxx may rely as to factual matters on
certificates of officers and directors of GRS and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to the Company.
(e) GRS shall have executed the Escrow Agreement.
(f) GRS shall have executed and delivered to Stockholders and
the Company the documents referred to in Section 2.03 hereof.
(g) The Offering shall have been consummated on or before the
Termination Date.
(h) GRS shall have furnished the Stockholders and the Company
with an Opinion Letter from Deloitte & Touche to GRS which provides that the
consummation of the transactions described in this Agreement will qualify as a
Section 351 Plan of Exchange within the meaning of the Internal Revenue Code.
(i) GRS shall have provided the Stockholders with evidence of
the release and indemnification of the Personal Guarantees and Obligations as
contemplated by Section 2.03 (vii) hereof.
(j) All proceedings to be taken by GRS in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to the Stockholders and their counsel, and
the Stockholders and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
(k) The Stockholders shall have received written evidence, in
form and substance satisfactory to the Stockholders, of the consent to the
transactions contemplated by this Agreement of all governmental,
quasi-governmental and private third parties (including, without limitation,
persons or other entities leasing real or personal property to GRS), except
where the failure to have obtained any such consent would not have an adverse
effect on the Company or GRS following the Closing.
Section 7.03 Conditions to Obligations of GRS. The obligations of GRS
to carry out the transactions contemplated by this Agreement are subject, at the
option of GRS, to the satisfaction, or waiver by GRS, of the following
conditions:
(a) All of the Company Common Stock shall have been tendered
to GRS.
(b) All representations and warranties of Stockholders, the
Company and any Subsidiary contained in this Agreement qualified by materiality
shall be true and correct in all respects at Closing and all other
representations and warranties of the Stockholders, the Company and any
Subsidiary contained in this Agreement shall be true and correct in all material
respects at and as of the Closing as if such representations and warranties were
made at and as of the Closing, except for changes contemplated by the terms of
this Agreement except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms thereof, and the Stockholders, the Company
and any Subsidiary shall have performed and satisfied in all material respects
all agreements and covenants required by this Agreement
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to be performed and satisfied by Stockholders, the Company and any Subsidiary at
or prior to the Closing; provided, however, that GRS shall not be entitled to
refuse to consummate the transaction in reliance upon its own breach or failure
to perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of GRS) shall be
pending or threatened before any court or governmental agency seeking to
restrain GRS or prohibit the Closing or seeking Damages against GRS, the
Stockholders, the Company, any Subsidiary or their Properties as a result of the
consummation of the transactions contemplated by this Agreement.
(d) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
that have not expired or been waived.
(e) Except for matters disclosed in the Schedules hereto, from
the date hereof up to and including the Closing there shall not have been:
(i) any change in the business, operations,
prospects or financial condition of the Company that had or would reasonably be
likely to have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company or any Subsidiary;
and
(ii) any damage, destruction or loss to the Company
or any Subsidiary (whether or not covered by insurance) that had or would
reasonably be likely to have a material adverse effect on the business,
operations, prospects, Properties, securities or financial condition of the
Company or any Subsidiary.
(f) GRS shall have received the opinion of Xxxxxxxx, Thomson &
Xxxxxx, P.C. ("Sellers' Counsel"), counsel to the Company, the Subsidiaries and
the Stockholders, dated as of the Closing Date, in form and substance reasonably
satisfactory to GRS, as to the matters set forth on Exhibit J. In rendering such
opinion, Sellers' Counsel may rely as to factual matters on certificates of
officers, directors and shareholders of the Company and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to GRS.
(g) GRS shall have received the Company Financial Statements.
(h) The Net Book Value of the Company as determined by
reference to the Closing Date Unaudited Balance Sheet shall be equal to or
greater than $575,000. For purposes of this Agreement, Net Book Value shall mean
the excess of the Company's total assets over the Company's total liabilities,
determined in accordance with GAAP.
(i) The Working Capital of the Company as determined by
reference to the Closing Date Unaudited Balance Sheet shall not be less than
$389,000. For purposes of this Agreement, Working Capital shall mean the
Company's
(i) Current Assets less
(ii) its Current Liabilities determined in accordance
with GAAP.
(j) The Stockholders shall have executed and delivered to GRS
the Escrow Agreement.
(k) GRS shall have received the executed Employment Agreement
for J.R. Xxxxxxxxxx and Xxxxx Xxxxxxx.
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(l) GRS shall have received the resignation of all of the
members of the board of directors of the Company or any Subsidiary effective as
of the Closing Date.
(m) All proceedings to be taken by Stockholders and the
Company or any Subsidiary in connection with the transactions contemplated
hereby and all documents incident thereto shall be satisfactory in form and
substance to GRS and its counsel, and GRS and said counsel shall have received
all such counterpart originals or certified or other copies of such documents as
it or they may reasonably request.
(n) GRS shall have received written evidence, in form and
substance satisfactory to GRS, of the consent to the transactions contemplated
by this Agreement of all governmental, quasi-governmental and private third
parties (including, without limitation, persons or other entities leasing real
or personal property to the Company or any Subsidiary), except where the failure
to have obtained any such consent would not have an adverse effect on the
Company or GRS following the Closing.
(o) GRS shall be satisfied in its sole and absolute discretion
with GRS' Due Diligence Investigation of the Company and shall have notified the
Company in writing on or before July 1, 1998 that it has waived this condition
precedent.
(p) GRS shall have determined, in its reasonable discretion,
that all agreements between the Company and the Stockholders shall be on terms
as favorable to the Company as the Company could have obtained pursuant to
agreements with unaffiliated third parties.
(q) The Offering shall have been consummated on or before the
Termination Date.
(r) All assets or the capital stock of H&S Investments, LLC
shall have been transferred to the Company, an affiliate of the Company or to
GRS, as directed by GRS in its reasonable discretion.
(s) GRS shall have received written evidence, in form and
substance satisfactory to GRS, of the assignment and transfer of all the capital
stock of ASM to the Company.
ARTICLE VIII
SURVIVAL
Section 8.01. Survival of Representations and Warranties of the Company
and the Stockholders. Notwithstanding any right of any party hereto fully to
investigate the affairs of any other party hereto and notwithstanding any
knowledge of facts determined or determinable by any party hereto pursuant to
such investigation or right of investigation, each of GRS, on the one hand, and
the Company and the Stockholders, on the other hand, has the right to rely fully
upon the representations, warranties, covenants and agreements of GRS or the
Company its Subsidiaries and the Stockholders, as the case may be, contained in
this Agreement, or in any certificate delivered pursuant to any of the
foregoing; provided, that no party hereto shall be entitled to rely on any
representation or warranty made by any other party hereto herein to the extent
that such party has actual knowledge, and the other party or parties (or any of
them) are not aware, that such representation or warranty is untrue or incorrect
in any material respect. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing hereunder, and, except as otherwise specifically provided in this
Agreement and, except for all representations and warranties of the Stockholders
contained in Article IV and except with respect to the obligation to pay the
Earn-Out Amount, if any, and the Basket Exclusions (as defined in Section 9.04),
shall thereafter terminate and expire on the first anniversary of the Closing
Date.
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ARTICLE IX
INDEMNIFICATION
Section 9.01 Obligation of the Stockholders to Indemnify Subject to the
limitations contained in Article VIII and Article IX hereof, the Stockholders,
jointly and severally, agree to indemnify, defend and hold harmless GRS (and its
Affiliates, successors and assigns and their respective officers and directors)
from and against all losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements, but offset by any proceeds from insurance and taking into account
the present value of any tax savings to GRS or the Company resulting from such
losses, liabilities, damages, deficiencies, costs or expenses) ("Losses") based
upon, arising out of or otherwise in respect of (i) any inaccuracy in or any
breach of any representation, warranty, covenant or agreement of the Company or
the Stockholders contained in this Agreement, (ii) liabilities for Taxes and
(iii) any liability arising out of any subsequent adjustment by any tax
authorities with respect to items attributable to periods prior to the Closing
Date.
Section 9.02 Obligation of GRS to Indemnify. GRS agrees to indemnify,
defend and hold harmless the Company and the Stockholders from and against any
Losses based upon, arising out of or otherwise in respect of any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of GRS
contained in this Agreement.
Section 9.03 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by
any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would or might give rise to a claim
or the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 9.01 or
9.02 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the objection of the other, provided, however, that consent to
settlement or compromise shall not be unreasonably withheld. In any event, the
Indemnitee and the Indemnifying Party may participate, at their own expense, in
the defense of such Asserted Liability. If the Indemnifying Party chooses to
defend the claim, the Indemnitee shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense.
(c) Disputes with Customers or Suppliers. Anything in Section
9.03(b) to the contrary notwithstanding, in the case of any Asserted Liability
by any supplier, distributor, sales agent or customer of the Company with
respect to the business conducted by the Company or any Subsidiary prior to the
Closing in connection with which GRS may make a claim against the Stockholders
for indemnification pursuant to Section 9.01, GRS shall give a Claims Notice
with respect thereto but, unless GRS and the
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Indemnifying Party otherwise agree, the Stockholders shall have the exclusive
right at its option to defend, at their own expense, any such matter, subject to
the duty of the Stockholders to consult with GRS and its attorneys in connection
with such defense and provided that no such matter shall be compromised or
settled by the Stockholders without the prior consent of GRS, which consent
shall not be unreasonably withheld. GRS shall have the right to recommend in
good faith to the Stockholders proposals to compromise or settle claims brought
by a supplier, distributor or customer, and the Stockholders agree to present
such proposed compromises or settlements to such supplier, distributor or
customer. All amounts required to be paid in connection with any such Asserted
Liability pursuant to the determination of any court, governmental or regulatory
body or arbitrator, and all amounts required to be paid in connection with any
such compromise or settlement consented to by GRS , shall be borne and paid by
the Stockholders. The parties agree to cooperate fully with one another in the
defense, compromise or settlement of any Asserted Liability.
Section 9.04 Limitations on Indemnification. The indemnification
provided for in Sections 9.01 and 9.02 shall be subject to the following
limitations:
(i) The Stockholders shall not be obligated to pay
any amounts for indemnification under this Article IX arising out of any Losses
based upon, arising out of or otherwise in respect of any inaccuracy or breach
disclosed in writing to GRS and specifically waived in writing by GRS prior to
the Closing.
(ii) Neither GRS, the Company nor the Stockholders
shall be obligated to pay any amounts for indemnification under this Article IX,
except those based upon, arising out of or otherwise in respect of Sections
3.02, 3.13, 3.21, 3.28, 5.22, 9.01 (ii) and (iii), 11.01 and 11.02 and Article
IV hereof (the "Basket Exclusions"), until the aggregate indemnification
payments, exclusive of the Basket Exclusions, equals one percent (1%) of the
Purchase Price (including the Earn-Out Amount, if any) (the "Basket Amount"),
whereupon GRS, or the Company and Stockholders, as the case may be, shall be
obligated to pay any indemnification payments, including the Basket Amount, in
full. It is expressly understood that the Basket Amount shall serve as a
"trigger" for indemnification and not as a "deductible" (for example, if the
indemnity claims for which GRS or the Stockholders would, but for the provisions
of this subparagraph (ii), be liable is in the aggregate amount of $100,000, and
1% of the Purchase Price is $70,000, the Stockholders would then be liable for
the entire $100,000 and not just $30,000). This Section 9.04(ii) will not apply
to any breach of any representations and warranties of which any party had
actual Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional breach by any party of any covenant or
obligation, and GRS or the Stockholders, as the case may be, will be jointly and
severally liable for all damages with respect to such breaches.
(iii) GRS, the Company and Stockholders shall be
obligated to pay the Basket Exclusions without regard to the individual or
aggregate amounts thereof and without regard to whether the aggregate amount of
all other indemnification payments shall have exceeded, in the aggregate, the
Basket Amount.
(iv) Notwithstanding anything to the contrary in
this Agreement, except with respect to any breach of the representations and
warranties set forth in Article IV hereof, neither GRS nor the Stockholders and
the Company shall have any obligation to indemnify the other parties for any
breach of any representation, warranty or covenant under this Agreement for any
amount of Losses in excess of $1,288,000.
(v) After the Closing, the indemnification rights
set forth in this Article IX shall be each party's sole and exclusive remedy
against the other party for any breach of any representation, warranty or
covenant contained in this Agreement. Notwithstanding the foregoing, nothing
herein shall prevent any party from bringing an action based upon allegations of
fraud in connection with this Agreement. In the event an action based on
allegations of fraud is brought, the prevailing party's attorneys' fees and
costs shall be paid by the nonprevailing party.
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(vi) GRS shall be deemed to have suffered Losses with
respect to accounts receivable reflected on the Closing Date Unaudited Balance
Sheet only if and to the extent that such accounts receivable, except for
Contract Retention, remain uncollected 180 days from the Closing Date. Contract
Retention will be considered uncollectible, and be deemed a Loss, if it remains
uncollected 350 days from the Closing Date. Because the Purchase Price is
predicated upon the Company's adjusted earnings before interest and taxes
("EBIT"), GRS shall be deemed to have suffered Losses in an amount equal to the
amount of such accounts receivable and Contract Retention which have not been
collected within the time periods specified above. Any Losses claimed on such
accounts receivable or Contract Retention will be credited back to the Escrow
Fund based on the foregoing formula to the extent such accounts receivable or
Contract Retention are recovered within the period of the Escrow Agreement. To
the extent that GRS suffers Losses from the failure to collect accounts
receivable of the Company or Contract Retention and such Losses result in a
set-off from the Escrow Fund, the related accounts receivable or Contract
Retention shall be assigned to the Stockholders following, and to the extent of,
such set-off.
Section 9.05 Set-Off Rights.
(a) Each Stockholder specifically agrees that, subject to
initial compliance with the procedures of Section 9.03 and to Section 9.04 and
paragraphs (b) and (c) of this Section 9.05, any claims for indemnification by
GRS against the Stockholders (or any of them) hereunder shall be satisfied first
against the Escrow Fund pursuant to the Escrow Agreement and second against the
aggregate Earn-Out Amounts.
(b) GRS shall give Stockholders not less than fifteen (15)
days' notice (the "GRS Notice") of its intention to deduct or set-off any
amounts pursuant to this Section 9.05, including in such notice a description of
GRS' indemnification claim. If none of the Stockholders object in writing to
such deduction or set-off at least two business days prior to the date of the
proposed set-off set forth in the GRS Notice (the "Set-Off Date"), then such
proposed deduction or set-off shall become effective on such date and shall not
be subject to further review, challenge or adjustment, absent fraud.
(c) If any of the Stockholders timely object in writing to the
set-off proposed in the GRS Notice, and if GRS and the objecting Stockholder(s)
are unable to resolve such dispute on or prior to the Set-Off Date, then (i) the
proposed deduction or set-off shall be effective only as to undisputed amounts,
and (ii) any undisputed amounts shall be retained in escrow to be held and
disbursed by the Escrow Agent in accordance with the terms of the Escrow
Agreement. In the event that a dispute among the parties arises pursuant to this
Section 9.05(c), the party who is later determined to have been in error in
attempting to enforce or dispute the payment or set-off shall (i) pay the
reasonable legal and accounting fees, costs and expenses incurred by the
prevailing party in presenting, arguing and resolving such dispute and (ii) pay
to the party to which such payment or set-off is determined to be payable an
amount sufficient to equal a return at the rate of ten percent (10%) per annum
on the disputed amount from the date payment of such amount was originally due
through the date payment is actually made.
ARTICLE X
POST-CLOSING OBLIGATIONS
Section 10.01 Further Assurances. Following the Closing, each of the
Company, any Subsidiary, the Stockholders and GRS shall execute and deliver such
documents, and take such other action, as shall be reasonably requested by any
other party hereto to carry out the transactions contemplated by this Agreement.
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Section 10.02 Publicity. None of the parties hereto shall issue or
make, or cause to have issued or made, any public release or announcement
concerning this Agreement or the transactions contemplated hereby, without the
advance approval in writing of the form and substance thereof by each of the
other parties, and the parties shall endeavor jointly to agree on the text of
any announcement or circular so approved or required.
Section 10.03 Access to Records. From and after the Closing, (i) each
of the Stockholders shall (A) permit GRS and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, files, agreements and other information in the possession of the
Stockholders or their respective Affiliates, and (B) use his or her best efforts
to permit GRS and its authorized employees, agents, accountants, legal counsel
and other representatives to have access to the employees, counsel, accountants
and other representatives of the Stockholders and their respective Affiliates,
in each case, to the extent and at all times reasonably requested by GRS for the
purpose of investigating or defending any claim made against the Stockholders or
the Company in connection with periods ending on or before the Closing Date and
(ii) GRS shall use its best efforts to permit the Stockholders and their
respective authorized employees, agents, accountants, legal counsel and other
representatives to have access to the employees, counsel, accountants and other
representatives of GRS, the Company, the Subsidiaries and their Affiliates, in
each case, to the extent and at all times reasonably requested by the
Stockholders, or any of them, for the purpose of investigating or defending any
claim made against the Stockholders in connection with Article IX.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Brokers. Regardless of whether the Closing shall occur,
(i) each Stockholder shall jointly and severally indemnify and hold harmless GRS
and the Company and each Subsidiary from and against any and all liability for
any brokers or finders' fees arising with respect to brokers or finders retained
or engaged by the Company, any Subsidiary or any of the Stockholders in respect
of the transactions contemplated by this Agreement, and (ii) GRS shall indemnify
and hold harmless the Stockholders from and against any and all liability for
any brokers' or finders' fees arising with respect to brokers or finders
retained or engaged by GRS in respect of the transactions contemplated by this
Agreement.
Section 11.02 Costs and Expenses. Each of the parties to this Agreement
shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby; provided, that GRS shall pay the costs and expenses of
preparing the Company Financial Statements.
Section 11.03 Notices. Any notice, request, instruction, correspondence
or other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, as follows:
GRS: General Roofing Services, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxx & XxXxxxxx
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Telecopy No.: (000) 000-0000
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THE STOCKHOLDERS: J.R. Xxxxxxxxxx
Xxxxxxxxxx Roofing Company, Inc.
X.X. Xxx 0000
0000 Xxx Xxxx
Xxxxxx Xxxx, Xxxxxx 00000
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxxxx, Thomson & Xxxxxx, P.C.
Twelve Wyandotte Plaza
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, Notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
Section 11.04 Governing Law. The provisions of this Agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Florida (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of the Circuit Court
located in Broward County, Florida, in any action or proceeding arising out of
or relating to this Agreement or any of the Collateral Agreements, and each
party hereby irrevocably agrees that all claims in respect of any such action or
proceeding must be brought and/or defended in such court; provided, however,
that matters which are under the exclusive jurisdiction of the Federal courts
shall be brought in the Federal District Court for the Southern District of
Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
Section 11.05 Representations and Warranties. Each of the
representations and warranties of each of the parties to this Agreement shall be
deemed to have been made at the date hereof and at and as of the Closing Date.
Section 11.06 Entire Agreement, Amendments and Waivers. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of
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whether similar), nor shall any such waiver constitute a continuing waiver
unless otherwise expressly provided.
Section 11.07 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party. Nothing in this Agreement, express or implied, is intended to confer upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
Section 11.08 Remedies. The rights and remedies provided by this
Agreement are cumulative, and the use of any one right or remedy by any party
hereto shall not preclude or constitute a waiver of its right to use any or all
other remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute, or otherwise.
Section 11.09 Exhibits and Schedules. The exhibits and schedules
referred to herein are attached hereto and incorporated herein by this
reference. Disclosure of a specific item in any one schedule shall be deemed
restricted only to the Section to which such disclosure specifically relates
except where (i) there is an explicit cross-reference to another Schedule, and
(ii) GRS could reasonably be expected to ascertain the scope of the modification
to a representation intended by such cross-reference.
Section 11.10 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.11 References. Whenever required by the context, and as used
in this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
References to monetary amounts and specific named statutes are intended to be
and shall be construed as references to United States dollars and statutes of
the United States of the stated name, respectively, unless the context otherwise
requires.
Section 11.12 Survival. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing for
the time period set forth in Section 8.01 hereof and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
Section 11.13 Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
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ARTICLE XII
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to such terms in this Article XII, unless otherwise defined in
this Agreement.
Section 12.01 Affiliate. The term "Affiliate" shall mean, with respect
to any person, any other person controlling, controlled by or under common
control with such person. The term "Control" as used in the preceding sentence
means, with respect to a corporation, the right to exercise, directly or
indirectly, more than fifty percent (50%) of the voting rights attributable to
the shares of the controlled corporation and, with respect to any person other
than a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person.
Section 12.02 Collateral Agreements. The term "Collateral Agreements"
shall mean any or all of the following agreements, the forms of which are
attached hereto as exhibits to this Agreement:
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit G - Employment Agreement for J.R. Xxxxxxxxxx
Exhibit H - Employment Agreement for Xxxxx Xxxxxxx
and any and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
Section 12.03 Company Assets. The term "Company Assets" shall mean,
with respect to the Company, all of the Properties, Company Contracts, and
Permits, that were Used by the Company as of the Balance Sheet Date and those
Used by the Company at any time after that date until the Closing Date.
Section 12.04 Contract Retention. The term "Contract Retention" shall
mean any amounts withheld by customers from contract progress billing until
final and satisfactory contract completion as determined by such customers.
Section 12.05 Current Assets. The term "Current Assets" shall mean,
with respect to the Company, cash and other assets that are expected to be
converted into cash, sold or exchanged within one year from the Closing Date,
including marketable securities, receivables, inventory and current prepayments
.
Section 12.06 Current Liabilities. The term "Current Liabilities" shall
mean, with respect to the Company, all obligations of the Company that are
required by their terms to be repaid within one year from the Closing Date.
Section 12.07 Damages. The term "Damages" shall mean any and all
damages, liabilities, obligations, penalties, fines, judgments, claims,
deficiencies, losses, costs, expenses and assessments (including without
limitation income and other Taxes, interest, penalties and attorneys' and
accountants' fees and disbursements).
Section 12.08 Environmental Law. "Environmental Law" shall mean any
governmental statute, law, ordinance, code, rule, regulation, order or decree
relating to or imposing liability or standards of
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conduct as may now be in effect regarding any air emission, water discharge or
use, storage, handling, generation or disposal of any Hazardous Substances,
including, without limitation, the following, and all regulations promulgated
thereunder or in connection therewith: the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Resource Conservation and Recovery Act, the
Used Oil Recycling Act, the Occupational Safety and Health Act, the Federal Safe
Drinking Water Act, the Federal Water Pollution Control Act, the Oil Pollution
Act, the Emergency Planning and Community Right-to-Know Act, and all other
federal, state, tribal and local laws, rules and regulations relating to
protection of human health and the environment, reclamation of land, wetlands
and waterways or relating to the use, storage, emissions, discharge, clean-up or
release of Hazardous Substances on or into the work-place or the environment
(including, without limitation, ambient air, oceans, waterways, wetlands,
surface water, ground water (tributary and nontributary), land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
contaminants, as all of the foregoing may be amended, supplemented and
reauthorized from time to time.
Section 12.09 GAAP. The term "GAAP" shall mean generally accepted
accounting principles applied on a basis consistent with past practices (except
for the omission of footnotes in any interim financial statements).
Section 12.10 Governmental Authorities. The term "Governmental
Authorities" shall mean any nation or country (including but not limited to the
United States) and any commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
Section 12.11 Hazardous Substances. "Hazardous Substances" shall mean
industrial, toxic or hazardous substances or wastes or other pollutants,
contaminants, petroleum products, asbestos, polychlorinated biphenyls ("PCBs")
or chemicals, all as defined and regulated under Environmental Law.
Section 12.12 Knowledge. The term "Knowledge" shall mean the actual
knowledge of a party or, in the case of the Company or GRS, any of their
respective directors or executive officers with respect to the representation
being made, and such knowledge of any such persons as reasonably should have
obtained upon due investigation and inquiry into the representation being made.
Section 12.13 Legal Requirements. The term "Legal Requirements", when
described as being applicable to any person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or Properties.
Section 12.14 Permits. The term "Permits" shall mean any and all
permits or orders under any Legal Requirement or otherwise granted by any
Governmental Authority.
Section 12.15 Properties. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible).
Section 12.16 Proportionate Share. The term "Proportionate Share" shall
mean each Stockholder's respective percentage ownership interest in the Company
as set forth on Exhibit A.
Section 12.17 Regulations. The term "Regulations" shall mean any and
all regulations promulgated by the Department of the Treasury pursuant to the
Code.
Section 12.18 Taxes. The term "Taxes" means any federal, states, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss.59A), customs duties, capital stock, franchise,
profits,
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withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
Section 12.19 Tax Returns. The term "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 12.20 Used. The term "Used" shall mean, with respect to the
Properties, Company Contracts or Permits of the Company, those owned, leased,
licensed or otherwise held by the Company which were acquired for use or held
for use by the Company in connection with the Company's business and operations,
whether or not reflected on the Company's books of account.
EXECUTED as of the date first written above.
GENERAL ROOFING SERVICES, INC.
By: /s/ Xxxxx Xxxxxxx
------------------------------
Xxxxx Xxxxxxx, President
COMPANY:
XXXXXXXXXX-XXXXXXX
ROOFING COMPANY, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
STOCKHOLDERS:
/s/ J.R. Xxxxxxxxxx
----------------------------------
J.R. Xxxxxxxxxx
/s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
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EXHIBIT A
Purchase Price
Name Number of Shares Allocation
---- ---------------- --------------
J. R. Xxxxxxxxxx 510 51%
Xxxxx Xxxxxxx 490 49%
Total........................ 1,000 100%
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EXHIBIT D
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS that:
Section 3.01 Corporate Existence and Qualification: Corporate Documents
(a) The Company and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of Kansas, and
is not required to be qualified to do business as a foreign corporation in any
other jurisdiction where the failure to so qualify would have a material adverse
effect on the Company. The Company and each Subsidiary has all required
corporate power and authority to own its Properties and to carry on its business
as presently conducted. The Articles of Incorporation and By-laws of the Company
and each Subsidiary, copies of which are attached as Schedule 3.01(a), are
complete and reflect all amendments thereto through the date hereof.
(b) The stock and minute books of the Company and each
Subsidiary that have been made available to GRS for review contain a complete
and accurate record of all stockholders of the Company and each Subsidiary and
all material actions of the stockholders and directors (and any committees
thereof) taken at meetings of stockholders or directors of the Company and each
Subsidiary.
(c) The Company does not have any subsidiaries, participate in
any partnership or joint venture, or own any outstanding capital stock of any
other corporation other than Xxxxxxxxxx-Xxxxxx Roofing Co., Architectural Sheet
Metal, Inc. and HS Investments LLC.
Section 3.02 Capitalization and Ownership. As of the date of this
Agreement, the entire authorized capital stock of the Company consists of 50,000
shares of Company Common Stock, par value $1.00 per share. The issued and
outstanding shares of Company Common Stock are owned of record and beneficially
by the Stockholders shown on Exhibit A hereof. All of the issued and outstanding
capital stock of the Subsidiaries is owned by the Company. All of the presently
outstanding shares of capital stock of the Company have been validly authorized
and issued and are fully paid and nonassessable. Neither the Company nor any
Subsidiary has issued any other shares of its capital stock and there are no
outstanding options, warrants, subscriptions or other rights or obligations to
purchase or acquire any of such shares, nor any outstanding securities
convertible into or exchangeable for such shares, except as set forth on
Schedule 3.02. Except as contemplated under this Agreement, there are no
agreements to which the Company or any Subsidiary is a party regarding the
issuance, registration, voting or transfer of its outstanding shares of its
capital stock. Except for possible dividends to be issued in connection with the
Excluded Assets as described in Section 1.04 and dividends related to the
payment of the Stockholders' tax liabilities with respect to earnings of the
Company up to the Closing Date, each and all of which shall be subject to the
prior written approval of GRS, no dividends are accrued but unpaid on any
capital stock of the Company.
Section 3.03 No Preemptive Rights; Registration Rights. There are no
preemptive rights affecting the issuance or sale of the Company Common Stock.
Section 3.04 No Company Defaults or Consents. Except as otherwise set
forth in Schedule 3.04 attached hereto, neither the execution and delivery of
this Agreement nor the carrying out of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or bylaws of the
Company or any Subsidiary;
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(ii) violate any Legal Requirements applicable to
the Company or any Subsidiary;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Company Contract or
Permit applicable to the Company or any Subsidiary;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of the Company
or any Subsidiary; or
(v) require any of the Stockholders or the Company
or any Subsidiary to obtain or make any waiver, consent, action, approval or
authorization of, or registration, declaration, notice or filing with, any
private non-governmental third party or any Governmental Authority. Any and all
consents required to be obtained by the Company or any Subsidiary as set forth
in Schedule 3.04 shall be obtained and copies thereof delivered to GRS upon
execution of this Agreement.
Section 3.05 No Proceedings. Except as set forth on Schedule 3.05, no
suit, action or other proceeding is pending or, to the Knowledge of the Company
or the Stockholders, threatened before any Governmental Authority seeking to
restrain any of the Stockholders or prohibit their entry into this Agreement or
prohibit the Closing, or seeking damages against the Company or any Subsidiary
or its Properties, as a result of the consummation of the transactions
contemplated by this Agreement.
Section 3.06 Financial Statements. Attached as Schedule 3.06 are true
and correct copies of the Company's (i) Closing Date Unaudited Balance Sheet,
(ii) unaudited consolidated balance sheets as of March 31, 1998 (the "Interim
Company Balance Sheet") and the related statements of income and stockholders'
equity for the three months ended March 31, 1998 (the "Interim Company Financial
Statements"), as well as (iii) the Company's consolidated balance sheet and
statements of income, stockholders' equity and cash flow as of and for each of
the three fiscal years ended December 31, 1997 (the "Company Financial
Statements"). The Company Financial Statements (i) have been prepared from the
books and records of the Company and the Subsidiary, (ii) present fairly the
consolidated financial condition of the Company and its results of operations as
at and for the respective periods then ended, and (iii) have been prepared in
accordance with GAAP.
Section 3.07 Liabilities and Obligations. Except as set forth in
Schedule 3.07, the Company Financial Statements reflect all consolidated
liabilities of the Company as determined in accordance with generally accepted
accounting principles arising out of transactions effected or events occurring
on or prior to the date of the Interim Company Balance Sheet, except for
liabilities not exceeding $10,000 in the aggregate. All reserves shown in the
Company Financial Statements are appropriate and reasonable to provide for
losses thereby contemplated. Except as set forth in the Company Financial
Statements (including the Notes thereto), neither the Company nor any Subsidiary
is liable upon or with respect to, or obligated in any other way to provide
funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity.
Section 3.08 Accounts Receivable. Except as otherwise set forth in
Schedule 3.08, the accounts receivable reflected on the Interim Company Balance
Sheet and all accounts receivable arising between the date of the Interim
Company Balance Sheet (the "Interim Company Balance Sheet Date") and the date
hereof, arose from bona fide transactions in the ordinary course of business,
and the goods and services involved have been sold, delivered and performed to
the account of the obligors, and no further filings (with Governmental
Authorities, insurers or others) are required to be made, no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company or any Subsidiary to collect the
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accounts receivable in full. No such account has been assigned or pledged to any
other person, firm or corporation, and, except only to the extent fully reserved
against as set forth in the Interim Company Balance Sheet, no defense or setoff
to any such account has been asserted by the account obligor.
Section 3.09 Employee Matters.
(a) Schedule 3.09(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of the Company and
each Subsidiary, regardless of compensation levels, and other employees who are
currently compensated at a rate in excess of $50,000 per year (including any
reasonably anticipated bonus) or who earned in excess of $50,000 during the
Company's fiscal year ended December 31, 1997 (collectively, the "Company Key
Employees"). In addition, Schedule 3.09(a) contains a complete and accurate
description of (i) all increases in compensation of the Company Key Employees
during the fiscal years of the Company ending December 31, 1997 and December 31,
1996, respectively, and (ii) any promised increases in compensation of the
Company Key Employees that have not yet been effected.
(b) Schedule 3.09(b) contains a complete and accurate list of
all Compensation Plans sponsored by the Company and each Subsidiary or to which
the Company and each Subsidiary contributes on behalf of its employees, other
than Employee Benefit Plans listed in Schedule 3.10. As used herein,
"Compensation Plans" shall mean and include, without limitation, plans,
arrangements or practices that provide for severance pay, deferred compensation,
incentive, bonus or performance awards, and stock ownership or stock options.
(c) Schedule 3.09(c) contains a complete and accurate list of
all Employment Agreements. As used in this Section 3.09(c) and in Section
3.09(e) hereof, "Employment Agreements" shall mean and include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements to which the Company or any Subsidiary is a party.
(d) The Company has provided GRS with a complete and accurate
list of all significant written employee policies and procedures of the Company
and each Subsidiary.
(e) To the Knowledge of the Company, no unwritten material
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans, Employment Agreements or
employee policies and procedures.
(f) To the Knowledge of the Company, except as set forth in
Schedule 3.09(f), the Company and each Subsidiary (i) has been and is in
material compliance with all laws, rules, regulations and ordinances respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and (ii) is not liable in any material amount for any arrears
of wages or penalties for failure to comply with any of the foregoing. Neither
the Company nor any Subsidiary has engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age
or handicap in its employment conditions or practices. To the Knowledge of the
Company, there are no (i) material unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, race or handicap
discrimination charges or complaints pending or threatened against the Company
or any Subsidiary before the National Labor Relations Board or any similar state
or foreign commission or agency or (ii) existing or threatened material labor
strikes, disputes, grievances, controversies or other labor troubles affecting
the Company or any Subsidiary.
(g) Except as set forth on Schedule 3.09(g), neither the
Company nor any Subsidiary has ever been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of the
Company or any Subsidiary are represented by any union, labor organization or
collective bargaining unit. No employees of the Company or any Subsidiary have
threatened to organize or join a union, labor organization or collective
bargaining unit.
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(h) Except as disclosed on Schedule 3.09(h), no Company Key
Employee has indicated his or her desire or intent to terminate employment with
the Company, and the Company has no present intent of terminating the employment
of any Company Key Employee.
Section 3.10 Employee Benefit Matters.
(a) Schedule 3.10 contains a complete and accurate list of all
Employee Benefit Plans sponsored by the Company or any Subsidiary or to which
the Company or any Subsidiary contributes on behalf of its employees and all
Employee Benefit Plans previously sponsored or contributed to on behalf of its
employees within the three years preceding the date hereof. No unwritten
amendment exists with respect to any Employee Benefit Plan. For purposes of this
Agreement an "Employee Benefit Plan" means each employee benefit plan, as such
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
(b) Each Employee Benefit Plan has been administered and
maintained in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on the Company or
any Subsidiary. To the Knowledge of the Company no Employee Benefit Plan is
currently the subject of an audit, investigation, enforcement action or other
similar proceeding conducted by any state or federal agency. To the Knowledge of
the Company, no prohibited transactions (within the meaning of Section 4975 of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code")) have occurred with respect to any Employee Benefit
Plan. No pending or, to the Knowledge of the Company, threatened, claims, suits
or other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
(c) The Company and each Subsidiary has received a favorable
determination letter or ruling from the Internal Revenue Service for each
Employee Benefit Plan intended to be qualified within the meaning of Section 401
(a) of the Code and/or tax exempt within the meaning of Section 501(a) of the
Code, which letter or ruling is current and covers all required amendments to
each such Employee Benefit Plan through the Closing Date. No proceedings exist
or, to the Knowledge of the Company, have been threatened that could result in
the revocation of any such favorable determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither the Company, any Subsidiary nor
any member of a Controlled Group has any liability to pay excise taxes with
respect to any Employee Benefit Plan under applicable provisions of the Code or
ERISA. Neither the Company, any Subsidiary nor any member of a Controlled Group
is or ever has been obligated to contribute to a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) Neither the Company nor any Subsidiary has any obligation
or commitment to provide medical, dental or life insurance benefits to or on
behalf of any of its employees who may retire or any of its former employees who
have retired from employment with the Company or any Subsidiary.
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Section 3.11 Absence of Certain Changes. Except as set forth in
Schedule 3.11, from the Interim Company Balance Sheet Date to the date of this
Agreement, neither the Company nor any Subsidiary has:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of the Company, or any Stockholder, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
(b) contracted for the purchase of any capital assets having a
cost in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or
sold any debt securities, except in the ordinary course of business consistent
with past practice;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its Properties or Company
Assets, except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any
Company Assets (whether or not covered by insurance) that has materially
adversely affected, or could materially adversely affect, its business;
(h) acquired or disposed of any Company Assets except in the
ordinary course of business consistent with past practice or as permitted by
Section 1.04 hereof;
(i) written up or written down the carrying value of any of
the Company Assets, except in the ordinary course of business consistent with
past practice;
(j) changed any accounting principles methods or practices
followed or changed the costing system or depreciation methods of accounting for
the Company Assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or
Company Assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business consistent with past practice;
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(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights or paid any
dividends or made any distribution to the holders of the Company's or any
Subsidiary's capital stock;
(r) entered into any material agreement with any person or
group, or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit
Plan; or
(t) entered into any agreement (written or oral) to do any of
the foregoing, except in the ordinary course of business consistent with past
practice.
Section 3.12 Commitments. (a) Except the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which the Company or any Subsidiary is a party (the "Company Contracts") set
forth in Schedule 3.12, neither the Company nor any Subsidiary has entered into,
nor is the capital stock, the assets or the business of the Company or any
Subsidiary bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business;
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest
in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission
agents, investment bankers, financial advisors, business brokers, public
relations or advertising agencies, accountants or attorneys, except with respect
to confidentiality agreements;
(ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee, except in the ordinary course of
business and excluding the real estate leases set forth on Schedule 3.15(c);
(x) agreement between the Company, any Subsidiary
and any Affiliate;
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(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Company or any Subsidiary;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that
involves either an unperformed commitment in excess of $5,000 or that terminates
more than thirty (30) days after the date hereof, except in the ordinary course
of business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 3.23 hereof; or
(xvii) any other agreement or commitment not made in
the ordinary course of business that is material to the business or financial
condition of the Company or any Subsidiary.
True, correct and complete copies of the written Company Contracts, and true,
correct and complete written descriptions of the oral Company Contracts, have
heretofore been delivered or made available to GRS in accordance with, and
subject to the limitations of, GRS' Due Diligence Investigation. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by the Company, and no material penalties
have been incurred nor are amendments pending, with respect to the Company
Contracts. The Company Contracts are in full force and effect and are valid and
enforceable obligations of the Company, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity). The Company has not received
notice of any material default with respect to any Company Contracts. For the
purposes of this Section 3.12(a), the term "material" shall mean a condition the
existence or breach of which could result in damage or loss to the Company
valued in excess of $5,000 individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, neither the Company nor any
Subsidiary has received notice of any plan or intention of any other party to
any Company Contract to exercise any right to cancel or terminate any Company
Contract. Neither the Company nor any Subsidiary currently contemplates, or has
reason to believe any person or entity currently contemplates, any amendment or
change to any Company Contract. None of the customers, joint venture partners or
suppliers of the Company or any Subsidiary has refused, or communicated that it
will or may refuse, to purchase or supply goods or services, as the case may be,
or has communicated that it will or may substantially reduce the amounts of
goods or services that it is willing to purchase from, or sell to, the Company
or any Subsidiary.
Section 3.13 Insurance. Each of the Company and any Subsidiary has had
in effect, and will maintain through the Closing Date, comprehensive insurance
coverage with respect to all completed operations of the Company and each
Subsidiary. The Company has previously made available to GRS all insurance
policies of the Company. All of such policies are valid and enforceable against
the Company, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
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Section 3.14 Patents, Trade-marks, Service Marks and Copyrights.
(a) Except as set forth on Schedule 3.14(a), the Company and
each Subsidiary owns all patents, trade-marks, service marks and copyrights
(collectively "Proprietary Rights"), if any, necessary to conduct its business,
or possesses adequate licenses or other rights, if any, therefor, without
conflict with the rights of others. Set forth in Schedule 3.14(a) is a true and
correct description of all Proprietary Rights.
(b) The Company and each Subsidiary has the sole and exclusive
right to use the Proprietary Rights without infringing or violating the rights
of any third parties and, upon the consummation of the Stock Purchase, GRS will
have the right to use all Proprietary Rights without any obligation to pay any
additional amounts whatsoever. Use of the Proprietary Rights does not require
the consent of any other person and the Proprietary Rights are freely
transferable. No claim has been asserted by any person to the ownership of or
right to use any Proprietary Right or challenging or questioning the validity or
effectiveness of any license or agreement constituting a part of any Proprietary
Right. Each of the Proprietary Rights is valid and subsisting, has not been
canceled, abandoned or otherwise terminated and, if applicable, has been duly
issued or filed.
Section 3.15 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by
the Company and each Subsidiary is set forth in Schedule 3.15(a).
(b) Except as disclosed on Schedule 3.15(b), the Company and
each Subsidiary has good and marketable title to the Company Assets, including,
without limitation, those reflected on the Interim Balance Sheet (other than
those since disposed of in the ordinary course of business), free and clear of
all security interests, liens, charges and other encumbrances, except for (i)
liens for taxes not yet due and payable or being contested in good faith in
appropriate proceedings, and (ii) encumbrances that are incidental to the
conduct of its businesses or ownership of property, not incurred in connection
with the borrowing of money or the obtaining of credit, and which do not in the
aggregate materially detract from the value of the assets affected or materially
impair their use by the Company or any Subsidiary. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company or any Subsidiary are in good operating condition and repair, normal
wear and tear excepted, are adequate and sufficient for the Company's and each
Subsidiary's business and conform in all material respects with all applicable
ordinances, regulations and laws relating to their use and operation.
(c) A listing of all real property leases, their terms and
total lease payments is attached hereto as Schedule 3.15(c). The Company and
each Subsidiary enjoys peaceful and undisturbed possession under all real
property leases under which the Company and each Subsidiary is operating, and
all such leases are valid and subsisting and none of them is in default, except
for those defaults, which, individually or in the aggregate, would not have a
material adverse effect upon the Company or each Subsidiary.
Section 3.16 Compliance with Laws. The Company and each Subsidiary has
all material franchises, Permits, licenses and other rights and privileges
necessary to permit it to own its properties and to conduct its businesses as
presently conducted. The business and operations of the Company and each
Subsidiary have been and are being conducted in accordance in all material
respects with all applicable laws, rules and regulations, and neither the
Company or any Subsidiary is in violation of any judgment, law or regulation
except where any such violation would not have a material adverse effect on the
Company's consolidated results of operations, business, assets or financial
condition.
Section 3.17 Litigation: Default. Except as otherwise set forth in
Schedule 3.17, there are no claims, actions, suits, investigations or
proceedings against the Company or any Subsidiary pending or, to
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37
the Knowledge of the Company or any Subsidiary, threatened in any court or
before or by any Governmental Authority, or before any arbitrator, that could
reasonably be expected to have a material adverse effect (whether covered by
insurance or not) on the business, operations, prospects, Properties, securities
or financial condition of the Company or any Subsidiary. Except as otherwise set
forth in Schedule 3.17, neither the Company or any Subsidiary is in default
under, and no condition exists (whether covered by insurance or not) that with
or without notice or lapse of time or both would (i) constitute a default under,
or breach or violation of, any Company Contract and each Subsidiary or any Legal
Requirement or Permit applicable to the Company or any Subsidiary, or (ii)
accelerate or permit the acceleration of the performance required under, or give
any other party the right to terminate, any Company Contract, other than
defaults, breaches, violations or accelerations that would not have a material
adverse effect on the business, operations, prospects, Properties, securities or
financial condition (a "Material Adverse Effect") of the Company or any
Subsidiary.
Section 3.18 Environmental Matters.
(a) Except as listed in Schedule 3.18(a), to the Knowledge of
the Company, there are no PCBs, TCE, PCE, or asbestos containing materials
generated, used, treated, stored, maintained, disposed of, or otherwise
deposited in, or located on any premises at which the Company's or the
Subsidiary's business (the "Company Business") is or was, or at which the
business or, to the Knowledge of the Company, its predecessors was, located
which would have a Material Adverse Effect on the Company.
(b) Except as described in Schedule 3.18(b), there are and
were no underground storage tanks used, stored, maintained, located on any
premises at which Company Business is or was, or, to knowledge of the Company,
at which the business of its predecessors was, located which would have a
Material Adverse Effect on the Company or the Subsidiary. With respect to
underground storage tanks, Schedule 3.18(b) sets forth the size, location,
construction, installation date, use and testing history of all underground
storage tanks (whether or not excluded from regulation under Environmental Law),
including all underground storage tanks in use, out of service, closed,
abandoned, decommissioned, or sold to a third party.
(c) Except as listed in Schedule 3.18(c), to the Knowledge of
the Company, there has been no "release" as defined in 42 U.S.C. 9601(22) or, to
the best knowledge of the Company, threat of a "release" of any Hazardous
Substance on, from or under any premises from which (i) the Company's operations
have been or are being conducted related to the Company Business. or (ii) to the
Knowledge of the Company, the operations of any predecessor of the Company or
any Subsidiary which would have a Material Adverse Effect on the Company or any
Subsidiary.
(d) Except as listed in Schedule 3.18(d), the Company, any
Subsidiary and their respective predecessors have not received written notice
alleging any potential liability with respect to the contamination,
investigation, or cleanup of any site at which Hazardous Substances have been or
have alleged to have been generated, treated, stored, discharged, emitted or
disposed of and, to the Knowledge of the Company, there are no past or present
events, facts, conditions or circumstances which may interfere with or prevent
material compliance by the Company or any Subsidiary with Environmental Law, or
with any order, decree, judgment, injunction, notice or demand issued, entered,
promulgated or approved thereunder, or which may give rise to any liability
under applicable law including, without limitation, any Environmental Law, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, process, distribution, use, treatment, storage, disposal, transport
or handling, or the emission, discharge, release or threatened release into the
environment of Hazardous Substances by the Company or, to the Knowledge of the
Company, by any predecessor of the Company or any Subsidiary, as a result of any
act or omission of the Company or any Subsidiary or their respective
predecessors related to the Company Business.
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(e) Except as disclosed in Schedule 3.18(e), all of the
Company's, each Subsidiary's and, to the Knowledge of the Company, their
predecessors', Hazardous Substances disposal and recycling practices related to
the Company Business have been accomplished in material compliance with all
applicable Environmental Laws.
The Company's representation(s) with respect to this Section 3.18 shall
not be interpreted to imply that GRS has constructive knowledge regarding any
aspect of the Company Business with respect to environmental matters nor to
limit the scope of any of the Company's or any Stockholders' representations
under this Agreement. No such due diligence examination or related activities
of, or on behalf of, GRS however, shall constitute a waiver or relinquishment by
GRS of its right to rely upon the Company's or any Stockholders'
representations, warranties, covenants and agreements as made herein or pursuant
hereto, and no such disclosure shall constitute an assumption by GRS of any
conditions or liabilities, and such disclosure shall not relieve the Company or
any Stockholder of its duties and obligations hereunder.
Section 3.19 Banks. Schedule 3.19 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which the Company or any Subsidiary has an account, credit line or safe deposit
box or vault, (ii) the names of all persons authorized to draw thereon or to
have access to any safe deposit box or vault, (iii) the purpose of each such
account, safe deposit box or vault, and (iv) the names of all persons authorized
by proxies, powers of attorney or other like instrument to act on behalf of the
Company or any Subsidiary in matters concerning any of its business or affairs.
Except as otherwise set forth in Schedule 3.19, no such proxies, powers of
attorney or other like instruments are irrevocable.
Section 3.20 Suppliers and Customers Sales. Schedule 3.20 sets forth
all the Company's and each Subsidiary's material suppliers, together with the
dollar amount of goods purchased by the Company from each such supplier during
the twelve month period ended December 31, 1997 as well as each of the principal
customers of the Company and each Subsidiary. Except as otherwise set forth in
Schedule 3.20, since December 31, 1997, there has been no material adverse
change in the business relationship of the Company or any Subsidiary with any
supplier or customer named in Schedule 3.20. Except as disclosed on Schedule
3.20, no customer or supplier named in Schedule 3.20 has terminated or
materially altered, or notified the Company or any Subsidiary of any intention
to terminate or materially alter, its relationship with the Company, and the
Company has no reason to believe that any such customer or supplier will
terminate or materially alter its relationship with the Company or any
Subsidiary or to materially decrease its services or supplies to the Company or
any Subsidiary or its direct or indirect usage of the services of the Company or
any Subsidiary. For purposes of Sections 3.20 and 3.23, "material suppliers"
refers to suppliers from whom the Company purchased five percent (5%) or more of
the total amount of the goods purchased by the Company or any Subsidiary during
the twelve month period ended December 31, 1997 and "principal customers" refers
to customers who accounted for 5% or more of the Company's total consolidated
revenues during the twelve month period ended December 31, 1997.
Section 3.21 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by the
Company, any Subsidiary or any Stockholder.
Section 3.22 Disclosure; Due Diligence. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by the Company, any Subsidiary or the Stockholders to GRS
or its counsel, do not contain any untrue statement of material fact or omit any
material fact necessary in order to make the statements therein not misleading;
provided, however, certain materials provided to GRS contain projections and
estimates of future events, and such projections and estimates have been based
upon certain assumptions that management of the Company made in good faith and
believed are reasonable at the time such materials were prepared.
Section 3.23 Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.23, no director or executive officer of the Company or any
Subsidiary or their respective spouses or children,
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owns directly or indirectly, on an individual or joint basis, any material
interest in, or serves as an officer or director of, any principal customer or
material supplier which has a business relationship with the Company or any
Subsidiary or any organization that has a material contract or arrangement with
the Company or any Subsidiary.
Section 3.24 Investments in Competitors. No director or executive
officer of the Company or any Subsidiary owns directly or indirectly any
material interest or has any investment equal to 5% or more of the outstanding
voting securities in any corporation, business or other person that is a direct
competitor of the Company or any Subsidiary.
Section 3.25 Certain Payments. Neither the Company nor any Subsidiary,
nor any director, officer or employee of the Company or any Subsidiary, has paid
or caused to be paid, directly or indirectly, in connection with the business of
the Company: (a) to any government or agency thereof or any agent of any
supplier or customer any bribe, kick-back or other similar payment; or (b) any
material contribution to any political party or candidate (other than from
personal funds of directors, officers or employees not reimbursed by their
respective employers or as otherwise permitted by applicable law).
Section 3.26 Government Inquiries. Except as set forth on Schedule
3.26, there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by the Company or any Subsidiary
from, or any material statement, report or other document filed by the Company
or any Subsidiary with, the federal government or any federal administrative
agency (including but not limited to, the Justice Department, Internal Revenue
Service, Department of Labor, Occupational Safety and Health Administration,
Federal Trade Commission, National Labor Relations Board, and Interstate
Commerce Commission), any state securities administrator or any local or state
taxing authority.
Section 3.27 Other Transactions. Neither the Company, the Stockholders
nor any Subsidiary has entered into any agreements or arrangements and there are
no pending offers or discussions concerning or providing for the merger or
consolidation of the Company or all or any substantial portion of its assets,
the sale by the Company or any Subsidiary or any Stockholder of any securities
of the Company or any Subsidiary or any similar transaction affecting the
Company or any Subsidiary or the Stockholders.
Section 3.28 Tax Matters.
(a) Except as set forth in Schedule 3.28:
(i) the Company and each Subsidiary has timely
filed all federal income Tax Returns, and all other material Tax Returns which
it is required to file under applicable laws and regulations;
(ii) all such Tax Returns are true and accurate in
all material respects;
(iii) the Company and each Subsidiary has paid all
Taxes due and owing by it (whether or not such Taxes are required to be shown on
a Tax Return) and has withheld and paid over to the appropriate taxing authority
all Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party, except where the amounts
of such unpaid Taxes or the amounts that have not been withheld and paid over do
not, in the aggregate, exceed $25,000;
(iv) the accrual for Taxes on the Closing Date
Unaudited Balance Sheet is sufficient to pay in full all liabilities for Taxes
of the Company and each Subsidiary related to periods prior to the Closing;
(v) the federal income Tax Returns of the Company
have been filed through December 31, 1997, and, as of the date hereof, none of
such Tax Returns has been audited; and
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(vi) the Company and each Subsidiary has disclosed
in its federal income Tax Returns, all positions taken therein that could give
rise to a substantial understatement of federal income tax within the meaning of
IRC ss. 6662.
(b) To the Knowledge of the Company, no claim has been made by
a taxing authority in a jurisdiction where the Company does not file Tax Returns
that the Company and each Subsidiary is or may be subject to taxation by that
jurisdiction.
(c) To the Knowledge of the Company:
(i) there are no foreign, federal, state or local
Tax audits or administrative or judicial proceedings pending or being conducted
with respect to the Company or any Subsidiary;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by the Company or any Subsidiary from any foreign, federal, state or
local taxing authority; and
(iii) there are no material unresolved claims
concerning the Company's or any
Subsidiary's Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to the Company in connection with any Tax Returns
covering the Company or any Subsidiary, except where such waiver would not have
a material adverse effect on the Company or any Subsidiary.
(e) Neither the Company nor any Subsidiary has executed or
entered into a closing agreement pursuant to IRC ss. 7121 or any predecessor
provision thereof or any similar provision of state, local or foreign law; nor
has the Company agreed to or is required to make any adjustments pursuant to IRC
ss. 481(a) or any similar provision of state, local or foreign law by reason of
a change in accounting method initiated by the Company or any Subsidiary. The
Company has no knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any knowledge with respect to any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company.
(f) Neither the Company nor any Subsidiary has made an
election under IRC ss. 341(f).
(g) Neither the Company nor any Subsidiary is liable for the
Taxes of another person.
(h) Neither the Company nor any Subsidiary is a party to any
Tax sharing agreement.
(i) Neither the Company nor any Subsidiary has made any
payments nor is it obligated to make payments nor is it a party to an agreement
that could obligate it to make any payments that would not be deductible under
IRC ss. 280G.
(j) The Company shall prepare and permit GRS to review,
comment on and approve the federal and state income Tax Returns for the Company
and its Subsidiaries for the period ending on or before the Closing Date, and
shall make such revisions to such Tax Returns as are reasonably requested by
GRS.
(k) GRS, the Company and its Subsidiaries, if any, and the
Stockholders shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing
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of Tax Returns pursuant to this Section 3.28 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such audit, litigation or other proceeding
an making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
(l) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any New York State Gains Tax, New York
City Transfer Tax, if applicable, and any similar Tax imposed in other states or
subdivisions), shall be paid by the Stockholders when due, and the Stockholders
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes and fees, and, if required by
applicable law, GRS will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
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EXHIBIT E
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as follows:
Section 4.01 Title to the Shares. As of the Closing Date, such
Stockholder shall own beneficially and of record, free and clear of any lien,
option or other encumbrance, the shares of Company Common Stock set forth
opposite such Stockholders' name on Exhibit A hereof, and, upon consummation of
the Stock Purchase, GRS will acquire good and valid title thereto, free and
clear of any lien or other encumbrance.
Section 4.02 Authority to Execute and Perform Agreement. Such
Stockholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
such Stockholders' obligations hereunder. This Agreement has been duly executed
and delivered by such Stockholder and is a valid and binding obligation of such
Stockholder enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless of
whether such equitable principles are applied in a proceeding at law or in
equity). The execution and delivery by such Stockholder of this Agreement and
the performance by such Stockholder of this Agreement in accordance with its
terms and conditions will not (i) require the approval or consent of any
foreign, federal, state, county, local or other governmental or regulatory body
or the approval or consent of any other person; or (ii) conflict with or result
in any breach or violation of any of the terms and conditions of, or constitute
(or with notice or lapse of time or both constitute) a default under, any
statute, regulation, order, judgment or decree applicable to such Stockholder or
to the shares of Company Common Stock held by such Stockholder, or any
instrument, contract or other agreement to which such Stockholder is a party or
by or to which such Stockholder is or the shares of Company Common Stock held by
such Stockholder are bound or subject.
Section 4.03 No Stockholder Defaults or Consents. The execution and
delivery of this Agreement and the Collateral Agreements by such Stockholder and
the performance by such Stockholder who is a party thereto of his or her
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree or any indenture, agreement or other instrument to
which such Stockholder is a party, or by which such Stockholder or any
properties or assets of such Stockholder is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the properties or assets of such
Stockholder. Any and all consents required to be obtained by such Stockholder as
set forth in Schedule 4.03 shall be obtained and copies thereof delivered to GRS
upon execution of this Agreement.
Section 4.04 Investment Representations
(a) Such Stockholder is acquiring the shares of GRS Common
Stock to be issued to it pursuant to the Stock Purchase (the "GRS Shares") for
its own account and not on behalf of any other person; such Stockholder is aware
and acknowledges that the GRS Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold unless the GRS Shares are registered under the Securities Act or
an exemption from the registration requirements of the Securities Act is
available;
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(b) Such Stockholder has been furnished all information that
it deems necessary to enable it to evaluate the merits and risks of an
investment in GRS; such Stockholder has had a reasonable opportunity to ask
questions of and receive answers from GRS concerning GRS and the GRS Shares, and
all such questions, if any, have been answered to the full satisfaction of such
Stockholder;
(c) No person or entity other than such Stockholder has (i)
any rights in and to the GRS Shares, which rights were obtained through or from
such Stockholder or (ii) any rights to acquire the GRS Shares, which rights were
obtained through or from such Stockholder;
(d) Such Stockholder has such knowledge and expertise in
financial and business matters (including knowledge and expertise in the roofing
industry) that it is capable of evaluating the merits and risks involved in an
investment in the GRS Shares: and such Stockholder is financially able to bear
the economic risk of the investment in the GRS Shares, including a total loss of
such investment;
(e) Such Stockholder represents that it has adequate means of
providing for its current needs and has no need for liquidity in its investment
in the GRS Shares; such Stockholder has no reason to anticipate any material
change in its financial condition for the foreseeable future;
(f) Such Stockholder is aware that the acquisition of the GRS
Shares is an investment involving a risk of loss and that there is no guarantee
that such Stockholder will realize any gain from this investment, and that such
Stockholder could lose the total amount of its investment;
(g) Such Stockholder understands that no United States federal
or state agency has made any finding of determination regarding the fairness of
the offering of the GRS Shares for investment, or any recommendation or
endorsement of the offering of the GRS Shares;
(h) Such Stockholder is acquiring the GRS Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of the GRS Shares, and shall not make
any sale, transfer or pledge thereof without registration under the Securities
Act and any applicable securities laws of any state or unless an exemption from
registration is available;
(i) Except as set forth herein, no representations or
warranties have been made to such Stockholder by GRS or any agent, employee or
Affiliate of GRS, and in entering into this transaction such Stockholder is not
relying upon any information, other than from the results of independent
investigation by such Stockholder;
(j) Such Stockholder understands that the GRS Shares are being
offered to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that GRS is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Stockholder set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Stockholder to acquire the GRS Shares; and
(k) Such Stockholder will not sell, assign or transfer any of
the GRS Shares except (i) pursuant to an effective registration statement under
the Securities Act, (ii) in a transaction which, in the opinion of the general
counsel of GRS or other counsel reasonably satisfactory to GRS, is not required
to be registered under the Securities Act.
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EXHIBIT F
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Company and the Stockholders that:
Section 5.01 Corporate Existence and Qualification: Corporate
Documents.
(a) GRS is a corporation duly organized, validly existing and
in good standing under the laws of Florida, and is not required to be qualified
to do business as a foreign corporation in any other jurisdiction where the
failure to so qualify would have a material adverse effect on GRS. GRS has all
required corporate power and authority to own its properties and to carry on its
business as presently conducted. The Articles of Incorporation and By-laws of
GRS, copies of which are attached as Schedule 5.01(a), are complete and reflect
all amendments thereto through the date hereof.
(b) The stock and minute books of GRS that have been made
available to the Stockholder for review contain a complete and accurate record
of all stockholders of GRS, and all material actions of the stockholders and
directors (and any committees thereof) of GRS.
(c) Except as set forth on Schedule 5.01(c), GRS does not have
any subsidiaries, participate in any partnership or joint venture, or own any
outstanding capital stock of any other corporation.
Section 5.02 Authority, Approval and Enforceability. This Agreement has
been duly executed and delivered by GRS and GRS has all requisite power and
legal authority to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered in connection
with the transactions provided for hereby, to consummate the transactions
contemplated hereby and by the Collateral Agreements, and to perform its
obligations hereunder and under the Collateral Agreements. This Agreement and
each Collateral Agreement to which GRS is a party constitutes, or upon execution
and delivery will constitute, the legal, valid and binding obligation of GRS,
enforceable in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 5.03 Capitalization and Ownership. As of the date of this
Agreement, the entire authorized capital stock of GRS consists of 100,000,000
shares of which 90,000,000 have been designated as GRS Common Stock and
10,000,000 have been designated as Preferred Stock. All of the presently
outstanding shares of capital stock of GRS have been validly authorized and
issued and are fully paid and nonassessable. Except as set forth on Schedule
5.03, GRS has not issued any other shares of its capital stock and there are no
outstanding options, warrants, subscriptions or other rights or obligations to
purchase or acquire any of such shares, nor any outstanding securities
convertible into or exchangeable for such shares. No dividends are accrued but
unpaid on any capital stock of GRS.
Section 5.04 No Preemptive Rights. There are no preemptive rights
affecting the issuance or sale of the capital stock of GRS.
Section 5.05 No GRS Defaults or Consents. Except as otherwise set forth
in Schedule 5.05 attached hereto, neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
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(i) violate or conflict with any of the terms,
conditions or provisions of the articles of incorporation or bylaws of GRS;
(ii) violate any Legal Requirements applicable to
GRS;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or Permit
applicable to GRS;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of GRS; or
(v) require GRS to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party or any
Governmental Authority. Any and all consents required to be obtained by GRS as
set forth in Schedule 5.05 shall be obtained and copies thereof delivered to the
Company and the Stockholders upon execution of this Agreement.
Section 5.06 No Proceedings. Except as set forth on Schedule 5.06, no
suit, action or other proceeding is pending or, to the Knowledge of GRS,
threatened before any Governmental Authority seeking to restrain GRS or prohibit
its entry into this Agreement or prohibit the Closing, or seeking damages
against GRS or its Properties, as a result of the consummation of the
transaction contemplated by this Agreement.
Section 5.07 [Reserved]
Section 5.08 Liabilities and Obligations. Except as set forth in
Schedule 5.08, GRS' balance sheet at December 31, 1997 and 1996 (the "GRS
Balance Sheets") and the related statements of income, stockholders' equity and
cash flow for the fiscal years ended December 31, 1997, 1996 and 1995 (the "GRS
Financial Statements") reflect all liabilities of GRS as determined in
accordance with generally accepted accounting principles arising out of
transactions effected or events occurring on or prior to the date of the GRS
Balance Sheet, except for liabilities not exceeding $10,000 in the aggregate.
All reserves shown in the GRS Financial Statements are appropriate and
reasonable to provide for losses thereby contemplated. Except as set forth in
the GRS Financial Statements, GRS is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity.
Section 5.09 Accounts Receivable. Except as otherwise set forth in
Schedule 5.09, the accounts receivable reflected on the GRS Balance Sheet and
all accounts receivable arising between December 31, 1997 and the date hereof,
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered and performed to the
account of the obligors, and no further filings (with Governmental Authorities,
insurers or others) are required to be made, no further goods are required to be
provided and no further services are required to be rendered in order to
complete the sales and fully render the services and to entitle GRS to collect
the accounts receivable in full. No such account has been assigned or pledged to
any other person, firm or corporation, and, except only to the extent fully
reserved against as set forth in the Interim GRS Balance Sheet, no defense or
setoff to any such account has been asserted by the account obligor.
Section 5.10 Employee Matters.
(a) Schedule 5.10(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of GRS, regardless
of compensation levels, and other employees
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who are currently compensated at a rate in excess of $50,000 per year (including
any reasonably anticipated bonus) or who earned in excess of $50,000 during GRS'
fiscal year ended October 31, 1997 (collectively, the "GRS Key Employees"). In
addition, Schedule 5.10(a) contains a complete and accurate description of (i)
all increases in compensation of the GRS Key Employees during the fiscal years
of GRS ending October 31, 1997 and October 31, 1996, respectively, and (ii) any
promised increases in compensation of the Key Employees of GRS that have not yet
been effected.
(b) Schedule 5.10(b) contains a complete and accurate list of
all Compensation Plans sponsored by GRS or to which GRS contributes on behalf of
its employees, other than Employee Benefit Plans listed in Schedule 5.11. As
used in this Section 5.10, "Compensation Plans" shall mean and include, without
limitation, plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options.
(c) Schedule 5.10(c) contains a complete and accurate list of
all Employment Agreements. As used in this Section 5.10(c) and in Section
5.10(e) hereof, "Employment Agreements" shall mean and include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements to which GRS is a party.
(d) GRS has provided the Company and the Stockholders with a
complete and accurate list of all significant written employee policies and
procedures.
(e) To the Knowledge of GRS, no unwritten material amendments
have been made, whether by oral communication, pattern of conduct or otherwise,
with respect to any Compensation Plans, Employment Agreements or employee
policies and procedures.
(f) To the Knowledge of GRS, except as set forth in Schedule
5.10(f), GRS (i) has been and is in material compliance with all laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, and (ii) is not liable in any
material amount for any arrears of wages or penalties for failure to comply with
any of the foregoing. GRS has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age
or handicap in its employment conditions or practices. To the Knowledge of GRS,
there are no (i) material unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, race or handicap discrimination charges
or complaints pending or threatened against GRS before the National Labor
Relations Board or any similar state or foreign commission or agency or (ii)
existing or threatened material labor strikes, disputes, grievances,
controversies or other labor troubles affecting GRS.
(g) GRS has not ever been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of GRS are
represented by any union, labor organization or collective bargaining unit. The
employees of GRS have not threatened to organize or join a union, labor
organization or collective bargaining unit.
(h) Except as disclosed on Schedule 5.10(h), no GRS Key
Employee has indicated his or her desire or intent to terminate employment with
GRS, and GRS has no present intent of terminating the employment of any GRS Key
Employee.
Section 5.11 Employee Benefit Matters.
(a) Schedule 5.11 contains a complete and accurate list of all
Employee Benefit Plans sponsored by GRS or to which GRS contributes on behalf of
its employees and all Employee Benefit Plans previously sponsored or contributed
to on behalf of its employees within the three years preceding the date hereof.
No unwritten amendment exists with respect to any Employee Benefit Plan.
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(b) Each Employee Benefit Plan has been administered and
maintained in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on GRS. No Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency. No
prohibited transactions (within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code")) have occurred with respect to any Employee Benefit Plan. No
pending or, to the Knowledge of GRS, threatened, claims, suits or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
(c) GRS has received a favorable determination letter or
ruling from the Internal Revenue Service for each Employee Benefit Plan intended
to be qualified within the meaning of Section 401 (a) of the Code and/or tax
exempt within the meaning of Section 501(a) of the Code, which letter or ruling
is current and covers all required amendments to each such Employee Benefit Plan
through the Closing Date. No proceedings exist or, to the Knowledge of GRS, have
been threatened that could result in the revocation of any such favorable
determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither GRS or any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA. GRS nor
any member of a Controlled Group is or ever has been obligated to contribute to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) GRS has no obligation or commitment to provide medical,
dental or life insurance benefits to or on behalf of any of its employees who
may retire or any of its former employees who have retired from employment with
GRS.
Section 5.12 Absence of Certain Changes. Except as set forth in
Schedule 5.12, from the date of the GRS Balance Sheet to the date of this
Agreement, GRS has not:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of GRS or any stockholder of GRS, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
(b) contracted for the purchase of any capital assets having a
cost in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or
sold any debt securities, except in the ordinary course of business consistent
with past practice;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
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(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its properties or assets,
except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any of
its assets (whether or not covered by insurance) that has materially adversely
affected, or could materially adversely affect, its business;
(h) acquired or disposed of any of its assets except in the
ordinary course of business consistent with past practice;
(i) written up or written down the carrying value of any of
its assets, except in the ordinary course of business consistent with past
practice;
(j) changed any accounting principles methods or practices
followed or changed the costing system or depreciation methods of accounting for
its assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or its
assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights, paid any
dividends or made any distribution to the holders of GRS' capital stock;
(r) entered into any material agreement with any person or
group, or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit
Plan; or
(t) entered into any agreement (written or oral) to do any of
the foregoing, except in the ordinary course of business consistent with past
practice.
Section 5.13 Commitments. (a) Except the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which GRS is a party (the "GRS Contracts") set forth in
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Schedule 5.13, GRS has not entered into, nor is the capital stock, the assets or
the business of GRS bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business consistent with past practice;
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest
in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission
agents, investment bankers, financial advisors, business brokers, public
relations or advertising agencies, accountants or attorneys, except with respect
to confidentiality agreements;
(ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee, except in the ordinary course of
business and excluding the real estate leases set forth on Schedule 5.16(c);
(x) agreement between GRS and any Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of GRS;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that
involves either an unperformed commitment in excess of $5,000 or that terminates
more than thirty (30) days after the date hereof, except in the ordinary course
of business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 5.24 hereof; or
(xvii) any other agreement or commitment not made in
the ordinary course of business that is material to the business or financial
condition of GRS.
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True, correct and complete copies of the written GRS Contracts, and true,
correct and complete written descriptions of the oral GRS Contracts, have
heretofore been delivered or made available to the Stockholders. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by GRS, and no material penalties have been
incurred nor are amendments pending, with respect to the GRS Contracts. The GRS
Contracts are in full force and effect and are valid and enforceable obligations
of GRS, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity). GRS has not received notice of any
material default with respect to any GRS Contracts. For the purposes of this
Section 5.13(a), the term "material" shall mean a condition the existence or
breach of which could result in damage or loss to GRS valued in excess of $5,000
individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, GRS has not received notice
of any plan or intention of any other party to any GRS Contract to exercise any
right to cancel or terminate any GRS Contract. GRS does not currently
contemplate, and has reason to believe any person or entity currently
contemplates, any amendment or change to any GRS Contract. None of the
customers, joint venture partners or suppliers of GRS has refused, or
communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, GRS.
Section 5.14 Insurance. GRS has previously delivered or made available
to the Stockholders all insurance policies of GRS. All of such policies are
valid and enforceable against GRS, except as such enforceability may be limited
by any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 5.15 Patents, Trade-marks, Service Marks and Copyrights.
(a) GRS owns all patents, trade-marks, service marks and
copyrights (collectively "Proprietary Rights"), if any, necessary to conduct its
business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in Schedule 5.15(a) is a
true and correct description of all Proprietary Rights.
(b) GRS has the sole and exclusive right to use the
Proprietary Rights without infringing or violating the rights of any third
parties. Use of the Proprietary Rights does not require the consent of any other
person and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or right to use any Proprietary Right
or challenging or questioning the validity or effectiveness of any license or
agreement constituting a part of any Proprietary Right. Each of the Proprietary
Rights is valid and subsisting, has not been canceled, abandoned or otherwise
terminated and, if applicable, has been duly issued or filed.
Section 5.16 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by
GRS is set forth in Schedule 5.16(a).
(b) Except as disclosed on Schedule 5.16(b), GRS has good and
marketable title to its respective assets, (other than those disposed of since
the date of the GRS Balance Sheet in the ordinary course of business), free and
clear of all security interests, liens, charges and other encumbrances, except
for (i) liens for taxes not yet due and payable or being contested in good faith
in appropriate proceedings, and (ii) encumbrances that are incidental to the
conduct of its businesses or
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ownership of property, not incurred in connection with the borrowing of money or
the obtaining of credit, and which do not in the aggregate materially detract
from the value of the assets affected or materially impair their use by GRS. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by GRS are in good operating condition and repair, normal wear
and tear excepted, are adequate and sufficient for GRS' business and conform in
all material respects with all applicable ordinances, regulations and laws
relating to their use and operation.
(c) A listing of all real property leases, their terms and
total lease payments is attached hereto as Schedule 5.16(c). GRS enjoys peaceful
and undisturbed possession under all real property leases under which GRS is
operating, and all such leases are valid and subsisting and none of them is in
default, except for those defaults, which, individually or in the aggregate,
would not have a material adverse effect upon GRS.
Section 5.17 Compliance with Laws. GRS has all material franchises,
Permits, licenses and other rights and privileges necessary to permit it to own
its Properties and to conduct its businesses as presently conducted. The
business and operations of GRS have been and are being conducted in accordance
in all material respects with all applicable laws, rules and regulations, and
GRS is not in violation of any judgment, law or regulation except where any such
violation would not have a material adverse effect on GRS' results of
operations, business, assets or financial condition.
Section 5.18 Litigation: Default. Except as otherwise set forth in
Schedule 5.18, there are no claims, actions, suits, investigations or
proceedings against GRS pending or, to the Knowledge of GRS, threatened in any
court or before or by any Governmental Authority, or before any arbitrator, that
could reasonably be expected to have a material adverse effect (whether covered
by insurance or not) on the business, operations, prospects, Properties,
securities or financial condition of GRS. Except as otherwise set forth in
Schedule 5.18, GRS is not in default under, and no condition exists (whether
covered by insurance or not) that with or without notice or lapse of time or
both would (i) constitute a default under, or breach or violation of, any Legal
Requirement or Permit applicable to GRS or any GRS Contract applicable to GRS,
or (ii) accelerate or permit the acceleration of the performance required under,
or give any other party the right to terminate, any GRS Contract, other than
defaults, breaches, violations or accelerations that would not have a material
adverse effect on the business, operations, prospects, Properties, securities or
financial condition of GRS.
Section 5.19 Environmental Matters.
(a) Except as listed in Schedule 5.19(a), to the Knowledge of
GRS, there are no PCBs, TCE, PCE, or asbestos containing materials generated,
used, treated, stored, maintained, disposed of, or otherwise deposited in, or
located on any premises at which GRS' business (the "GRS Business") is or was,
or at which the business or, to the Knowledge of GRS, its predecessors was,
located, which would have a Material Adverse Effect on GRS.
(b) Except as described in Schedule 5.19(b), there are and
were no underground storage tanks used, stored, maintained, located on any
premises at which the GRS Business is or was, or, to knowledge of GRS, at which
the business of its predecessors was, located, which would have a Material
Adverse Effect on GRS. With respect to underground storage tanks, Schedule
5.19(b) sets forth the size, location, construction, installation date, use and
testing history of all underground storage tanks (whether or not excluded from
regulation under Environmental Law), including all underground storage tanks in
use, out of service, closed, abandoned, decommissioned, or sold to a third
party.
(c) Except as listed in Schedule 5.19(c), to the Knowledge of
GRS, there has been no "release" as defined in 42 U.S.C. 9601(22) or, to the
best knowledge of GRS, threat of a "release" of any Hazardous Substance on, from
or under any premises from which (i) GRS' operations have been or are being
conducted related to the GRS Business. or (ii) to the Knowledge of GRS, the
operations of any predecessor of GRS, which would have a Material Adverse Effect
on GRS.
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(d) Except as listed in Schedule 5.19(d), neither GRS nor
their respective predecessors have received written notice alleging any
potential liability with respect to the contamination, investigation, or cleanup
of any site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, discharged, emitted or disposed of and, to the
Knowledge of GRS, there are no past or present events, facts, conditions or
circumstances which may interfere with or prevent material compliance by GRS
with Environmental Law, or with any order, decree, judgment, injunction, notice
or demand issued, entered, promulgated or approved thereunder, or which may give
rise to any liability under applicable law including, without limitation, any
Environmental Law, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of Hazardous Substances by GRS or, to
the Knowledge of GRS, any predecessor, as a result of any act or omission of GRS
or any predecessors related to the GRS Business.
(e) Except as disclosed in Schedule 5.19(e), all of GRS' and,
to the Knowledge of GRS, their respective predecessor's, Hazardous Substances
disposal and recycling practices related to the GRS Business have been
accomplished in material compliance with all applicable Environmental Laws.
GRS' representation(s) with respect to this Section 5.19 shall not be
interpreted to imply that the Stockholders have constructive knowledge regarding
any aspect of the GRS Business with respect to environmental matters nor to
limit the scope of any of GRS' representations under this Agreement. No such due
diligence examination or related activities of, or on behalf of, the
Stockholders however, shall constitute a waiver or relinquishment by the
Stockholders of their right to rely upon GRS' representations, warranties,
covenants and agreements as made herein or pursuant hereto, and no such
disclosure shall constitute an assumption by the Stockholders of any conditions
or liabilities, and such disclosure shall not relieve GRS of its duties and
obligations hereunder.
Section 5.20 Banks. Schedule 5.20 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which GRS has an account, credit line or safe deposit box or vault, (ii) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of GRS in matters concerning
any of its business or affairs. Except as otherwise set forth in Schedule 5.20,
no such proxies, powers of attorney or other like instruments are irrevocable.
Section 5.21 Suppliers and Customers Sales. Schedule 5.21 sets forth
all of GRS' material suppliers, together with the dollar amount of goods
purchased by GRS from each such supplier during the twelve month period ended
December 31, 1997 and the four month period ended April 30, 1998, as well as
each of the principal customers of GRS. Except as otherwise set forth in
Schedule 5.21, since December 31, 1997, there has been no material adverse
change in the business relationship of GRS with any supplier or customer named
in Schedule 5.21. No customer or supplier named in Schedule 5.21 has terminated
or materially altered, or notified GRS of any intention to terminate or
materially alter, its relationship with GRS and GRS has no reason to believe
that any such customer or supplier will terminate or materially alter its
relationship with GRS or to materially decrease its services or supplies to GRS
or its direct or indirect usage of the services or products of GRS. For purposes
of Sections 5.21 and 5.24 hereof, "material suppliers" refers to suppliers from
whom GRS purchased five percent (5%) or more of the total amount of the goods
purchased by GRS during the twelve month period ended December 31, 1997 and the
four month period ended April 30, 1998, and "principal customers" refers to
customers who accounted for 5% or more of GRS' revenues during the twelve month
period ended December 31, 1997 and the four month period ended April 30, 1998.
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Section 5.22 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
GRS.
Section 5.23 Disclosure; Due Diligence. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by GRS to the Stockholders or their counsel, do not
contain any untrue statement of material fact or omit any material fact
necessary in order to make the statements therein not misleading; provided,
however, certain materials provided to the Stockholders contain projections and
estimates of future events, and such projections and estimates have been based
upon certain assumptions that management of GRS made in good faith and believed
are reasonable at the time such materials were prepared.
Section 5.24 Ownership Interests of Interested Persons. Except as set
forth in Schedule 5.24, no director or executive officer of GRS or their
respective spouses or children, owns directly or indirectly, on an individual or
joint basis, any material interest in, or serves as an officer or director of,
any principal customer or material supplier which has a business relationship
with GRS or any organization that has a material contract or arrangement with
GRS.
Section 5.25 Investments in Competitors. No director or executive
officer of GRS owns directly or indirectly any material interests or has any
investment equal to 5% or more of the outstanding voting securities in any
corporation, business or other person that is a direct competitor of GRS.
Section 5.26 Certain Payments. Neither GRS, nor any director, officer
or employee of GRS has paid or caused to be paid, directly or indirectly, in
connection with the business of GRS: (a) to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or (b), any material contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
Section 5.27 Government Inquiries. Except as set forth on Schedule
5.27, there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by GRS from, or any material
statement, report or other document filed by GRS with, the federal government or
any federal administrative agency (including but not limited to, the Justice
Department, Internal Revenue Service, Department of Labor, Occupational Safety
and Health Administration, Federal Trade Commission, National Labor Relations
Board, and Interstate Commerce Commission), any state securities administrator
or any local or state taxing authority.
Section 5.28 Tax Matters.
(a) Except as set forth in Schedule 5.28, GRS:
(i) has filed all federal income Tax Returns, and
all other material Tax Returns which it is required to file under applicable
laws and regulations;
(ii) all such Tax Returns are true and accurate in
all material respects;
(iii) has paid all Taxes due and owing by it (whether
or not such Taxes are required to be shown on a Tax Return) and has withheld and
paid over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party, except where the amounts of such unpaid Taxes or the amounts
that have not been withheld and paid over do not, in the aggregate, exceed
$25,000;
(iv) the accrual for Taxes on the Unaudited GRS
Balance Sheet (excluding any amount recorded which is attributable to timing
differences between book and Tax income) would be
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adequate to pay all material Tax liabilities of GRS if its current tax year were
treated as ending on the date of the Unaudited GRS Balance Sheet;
(v) the federal income Tax Returns of GRS have been
filed through the date hereof, and, as of the date hereof, none of such Tax
Returns has been audited.
(b) To the Knowledge of GRS, no claim has been made by a
taxing authority in a jurisdiction where GRS does not file Tax Returns that GRS
is or may be subject to taxation by that jurisdiction.
(c) To the Knowledge of GRS;
(i) there are no foreign, federal, state or local
tax audits or administrative or judicial proceedings pending or being conducted
with respect to GRS;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by GRS from any foreign, federal, state or local taxing authority; and
(iii) there are no material unresolved claims
concerning GRS' Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to GRS in connection with any Tax Returns covering GRS,
except where such waiver would not have a material adverse effect on GRS.
(e) GRS has not executed or entered into a closing agreement
pursuant to IRC ss. 7121 or any predecessor provision thereof or any similar
provision of state, local or foreign law; nor has GRS agreed to or is required
to make any adjustments pursuant to IRC ss. 481(a) or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by GRS. GRS has no knowledge that the IRS has proposed any such adjustment or
change in accounting method, or has any knowledge with respect to any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of GRS.
(f) GRS has not made an election under IRC ss. 341(f).
(g) GRS is not liable for the Taxes of another person.
(h) GRS is not a party to any tax sharing agreement.
(I) GRS has not made any payments nor is it obligated to make
payments nor is it a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC ss. 280G.
Section 5.29 Participation in Secondary Offering. In the event that
after the Offering GRS files a registration statement with the Securities and
Exchange Commission with respect to a subsequent public offering (the "Secondary
Offering") of shares of GRS Common Stock, and any shareholders of GRS
participate in the Secondary Offering through the sale of their respective
shares of GRS Common Stock, then (i) Xxxxx Xxxxxxx shall first be entitled to
participate in the Secondary Offering with respect to 250,000 shares of GRS
Common Stock (in recognition of the fact that Xx. Xxxxxxx is not receiving any
cash proceeds from the sale of the common stock of the Founding Companies owned
by him) and (ii) thereafter the Stockholders shall be entitled to participate in
the Secondary Offering by including therein such number of shares of GRS Common
Stock owned by the Stockholders as shall equal (i)(A) the total number of shares
of GRS Common Stock owned by such Stockholders divided by (B) the total number
of shares of GRS Common Stock owned by all shareholders of the Founding
Companies, multiplied by (ii)
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the total number of shares of GRS Common Stock owned by shareholders of the
Company which are to be included in the Secondary Offering.
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