STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of November 19,
1999, is by and among HydroChem Industrial Services, Inc., a Delaware
corporation ("Buyer"), Xxxxxx Service Co., Inc., a Delaware corporation (the
"Company"), Xxxxxxx X. Xxxxxx, a resident of Galveston County, Texas ("KCL"),
Xxxxxxx X. Xxxxxx, Xx., a resident of Galveston County, Texas ("CAL") (KCL and
CAL being collectively referred to herein as the "Landrys"), and the sellers
listed on the signature page to this Agreement (collectively, with the Landrys,
being referred to herein as "Sellers"). Buyer, the Company, and Sellers agree as
follows:
SECTION ONE
GENERAL
1.1 INTRODUCTION. Sellers own all of the issued and outstanding shares
of capital stock of the Company (the "Shares"). Sellers desire to sell, and
Buyer desires to purchase, all of the Shares, for the consideration and on the
terms set forth in this Agreement, and Sellers, Buyer, and the Company desire to
enter into certain related transactions. It is the intent of the parties and the
purpose of this Agreement to set forth the terms and conditions pursuant to
which such transactions shall be consummated.
1.2 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
"Accounts Receivable" shall have the meaning specified in Section 3.12.
"Affiliate" means any Person that, directly or indirectly, controls, is
controlled by, or is under common control with, another Person. For purposes of
this definition, "control" means the power to direct or cause the direction of
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract, or otherwise.
"Agreement" shall mean this Stock Purchase Agreement and the Schedules
hereto.
"Audited Financial Statements" shall have the meaning specified in
Section 3.5.
"Balance Sheet" shall have the meaning specified in Section 3.5.
"Buyer" shall have the meaning specified in the first paragraph of this
Agreement.
"Buyer's Audited Financial Statements" shall have the meaning specified
in Section 5.4.
"Buyer Indemnified Persons" shall have the meaning specified in Section
7.3.
"Buyer's Interim Financial Statements" shall have the meaning specified
in Section 5.4.
"Buyer's Financial Statements" shall have the meaning specified in
Section 5.4.
"Buyer's Transaction Documents" shall mean this Agreement, and any and
all agreements, instruments, documents, and certificates executed and delivered
by or on behalf of Buyer at the Closing pursuant to this Agreement, including
the Promissory Notes, the Guaranties, the Employment Agreements, the KCL
Consulting Agreement, and the Sellers' Releases.
"CAL" shall have the meaning specified in the first paragraph of this
Agreement.
"Closing" shall have the meaning specified in Section 2.3.
"Closing Date" shall have the meaning specified in Section 2.3.
"Code" shall mean the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"Company" shall have the meaning specified in the first paragraph of
this Agreement.
"Company Contracts" shall have the meaning specified in Section 3.8.
"Company's Financial Statements" shall have the meaning specified in
Section 3.5.
"Consent" shall mean any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contract" shall mean any contract, agreement, order, obligation,
commitment, or undertaking, whether written or oral, that is legally binding.
"Copyrights" shall have the meaning specified in Section 3.14.
"Customer" shall mean any Person for whom the Company or the Subsidiary
or the Company's predecessor or former subsidiaries of the Company or its
predecessor have provided services or products on or prior to the Closing Date.
"Damages" shall have the meaning specified in Section 7.3.
"Employment Agreements" shall have the meaning specified in Section
2.4(c).
"Encumbrance" shall mean any lien, security interest, pledge, right of
first refusal, option, easement, right-of-way, community property interest,
restriction on transferability or voting, or any other restriction on the
exercise of any kind of attribute of ownership.
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"Environment" shall mean soil, land surface or subsurface strata,
surface waters (including navigable water, ocean waters, streams, ponds,
drainage basins, and wetlands), ground water, sediments, ambient air (including
indoor air), plant, animal, and human life, and any other environmental medium
or natural resource.
"Environmental Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901.,
et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Toxic Substances
Control Act, 15 U.S.C. ss. 2601, et seq., the Clean Air Act, 42 U.S.C. ss.7401,
et seq., the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq., the Hazardous
Materials Transportation Uniform Safety Act, 49 App. U.S.C. ss. 2001, et seq.,
and the Federal Insecticide, Fungicide & Rodenticide Act, 7 U.S.C. ss. 136,
et seq., and any other Law relating to protection of the Environment, including
those Laws relating to the storage, handling, use, manufacture, generation,
processing, treatment, transport, disposal, release, discharge or emission of
Hazardous Materials.
"Environmental Liabilities" shall mean any cost, damages, expense,
fine, penalty, obligation, or liability arising from or under any Environmental
Law, including investigatory and remediation costs and consultant, expert, and
attorney's fees arising from or under any duty or obligation mandated by any
Environmental Law or any breach or violation of any Environmental Law.
"Escrow Agreement" shall have the meaning specified in Section 2.4(e).
"Facilities" shall mean any real property, real property leaseholds, or
other real property interests currently owned or operated by the Company and any
buildings, plants, or structures currently owned or operated by the Company.
"Former Facilities" shall mean any real property, real property
leaseholds, or other real property interests formerly owned or operated by the
Company or any predecessor to the Company or any former subsidiaries of the
Company or such a predecessor or the Subsidiary and any buildings, plants, or
structures formerly owned or operated by the Company or the predecessor to the
Company or any former subsidiaries of the Company or such predecessor or the
Subsidiary.
"GAAP" shall mean United States generally accepted accounting
principles, applied on a consistent basis.
"Governmental Authority" shall mean any foreign governmental authority,
the United States of America, any state of the United States, any political
subdivision of any of the foregoing, and any body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"Governmental Authorizations" shall have the meaning specified in
Section 3.15.
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"Guaranties" shall have the meaning specified in Section 2.5(c).
"Hazardous Materials" shall mean any hazardous substance or waste,
solid waste, pollutant, contaminant, petroleum, oil, or natural gas liquids, and
any other material or substance with respect to which remedial obligations may
be imposed under any Environmental Law or which is defined or regulated as a
hazardous substance or hazardous waste under any Environmental Law.
"Health and Safety Laws" shall mean any Law relating to the protection
of employees, including, without limitation, the Occupational Health and Safety
Act, 29 U.S.C. ss.651 et seq.
"Indemnitee" shall have the meaning specified in Section 7.13.
"Indemnitor" shall have the meaning specified in Section 7.13.
"Insurance Policies" shall have the meaning specified in Section 3.21.
"Intellectual Property Assets" shall have the meaning specified in
Section 3.14.
"Interim Balance Sheet" shall have the meaning specified in Section
3.5.
"Interim Financial Statements" shall have the meaning specified in
Section 3.5.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KCL" shall have the meaning specified in the first paragraph of this
Agreement.
"KCL Consulting Agreement" shall have the meaning specified in Section
2.4(d).
"Key Employees" shall mean Xxxxx Xxxxx, Xxxx Xxxxxx, and F. Xxxx
Xxxxxxx.
"Knowledge" shall mean, with respect to a Person who is an individual,
such individual is actually aware of such fact or other matter, and with respect
to a Person who is not an individual, any director, officer, partner, executor,
or trustee of such Person (or in any similar capacity) is actually aware of such
fact or other matter, in each case without any duty of inquiry.
"Landrys" shall have the meaning specified in the first paragraph of
this Agreement.
"Law" shall mean any applicable law, statute, ordinance, rule,
regulation (or interpretation of any of the foregoing), ruling, writ,
injunction, decree, order, or judgment issued by any Governmental Authority.
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"Legal Requirement" shall mean the requirements or terms of any Law or
Governmental Authorization.
"Marks" shall have the meaning specified in Section 3.14.
"Material" shall mean if an item or event, by its presence or absence,
as required by the context, would have a material adverse effect upon the
assets, financial condition, results of operations, business, or affairs of a
Person and any Affiliates of such Person with whom such Person, in accordance
with GAAP, consolidates financial statements, taken as a whole.
"Net Accounts Receivable" shall have the meaning specified in Section
3.12.
"Order" shall mean any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Authority.
"Parent" shall mean HydroChem Holding, Inc., a Delaware corporation.
"Patents" shall have the meaning specified in Section 3.14.
"Permitted Encumbrances" shall mean: (a) Encumbrances for current Taxes
and assessments not yet due and payable, or which are being contested in good
faith by appropriate proceedings and for which an adequate reserve has been set
aside; (b) mechanic's, xxxxxxx'x, repairman's, warehouseman's, landlord's,
vendor's, carrier's, or similar statutory Encumbrances arising in the ordinary
course of business and securing sums that are not yet due and payable, or
deposits or pledges to obtain the release of any such Encumbrances; (c) purchase
money Encumbrances incurred in the ordinary course of business or Encumbrances
securing rental payments under capital lease arrangements; (d) Encumbrances
reflected on the Company's Financial Statements; and (e) with respect to Real
Property, (1) Encumbrances, zoning laws, land use restrictions, or minor defects
in title that do not Materially affect the value or impair the use of the
property affected thereby, or (2) Encumbrances reflected in applicable title
insurance policies or surveys.
"Person" shall mean any individual, corporation, general or limited
partnership, joint venture, limited liability company, association, joint stock
company, estate, trust, unincorporated organization, Governmental Authority, or
any other form of entity.
"Personal Property" shall have the meaning specified in Section 3.10.
"Proceeding" shall mean any citation, notice of violation or
administrative order issued by, or any action, arbitration, audit, hearing,
litigation, suit, or, to the Knowledge of the Landrys, investigation commenced,
brought, conducted, or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator.
"Promissory Notes" shall have the meaning specified in Section 2.5(b).
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"Purchase Price" shall have the meaning specified in Section 2.2.
"Restriction Period" shall have the meaning specified in Section 6.1.
"Securities Act" shall mean the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to the Securities Act of 1933 or
any successor law.
"Seller Indemnified Persons" shall have the meaning specified in
Section 7.5.
"Sellers" shall have the meaning specified in the first paragraph of
this Agreement.
"Sellers' Transaction Documents" shall mean with respect to each
Seller, this Agreement, limited to the extent that this Agreement pertains to
the representations, warranties, covenants, indemnities, and other rights and
obligations of such Seller under this Agreement, and any and all agreements,
instruments, documents, and certificates executed and delivered by or on behalf
of such Seller at the Closing pursuant to this Agreement, including the Seller's
Release and stock powers executed by such Seller, and, additionally, with
respect to each Key Employee, the Employment Agreement executed by such Key
Employee, and, additionally, with respect to KCL, the KCL Consulting Agreement,
and, additionally, with respect to CAL and KCL, the Promissory Notes, the
Guaranties, and the Escrow Agreements.
"Sellers' Releases" shall have the meaning specified in Section 2.4(b).
"Shares" shall have the meaning specified in the Section 1.1.
"Subsidiary" shall have the meaning specified in the Section 3.1.
"Tax" shall mean any tax (including any income tax, capital gains tax,
value-added tax, sales tax, use tax, franchise tax, excise tax, fuel tax,
property tax, gift tax, or estate tax), levy, assessment, tariff, duty
(including any customs duty), deficiency, or other fee, and any related charge
or amount (including any fine, penalty, interest, or addition to tax), imposed,
assessed, or collected by or under the authority of any Governmental Authority
or payable pursuant to any Contract relating to the sharing or payment of any
such tax, levy, assessment, tariff, duty, deficiency, or fee.
"Tax Return(s)" shall mean any return (including any information
return), report, statement, schedule, notice, or form filed with or submitted
to, or required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
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"Threatened" shall mean any notice has been received (orally or in
writing) that would lead a prudent Person to conclude that a Proceeding is more
likely than not to be asserted, commenced, taken, or otherwise pursued in the
future.
"Trade Secrets" shall have the meaning specified in Section 3.14.
"Transactions" shall mean the execution, delivery, and performance of
the transactions contemplated by this Agreement.
"Vendor" shall mean any Person selling or licensing a product or
service to the Company on or within one year prior to the Closing Date.
1.3 CONSTRUCTION. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement, all references to
"Schedule" refer to the corresponding Schedule to this Agreement, and all
references to "Exhibit" refer to the corresponding Exhibit to this Agreement.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
SECTION TWO
SALE AND TRANSFER OF SHARES
2.1 SALE OF SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will sell and transfer the Shares to Buyer,
and Buyer will purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares will be $35,500,000.
2.3 CLOSING. The closing of the Transactions (the "Closing") will take
place at the offices of Xxxxxx and Xxxxx, L.L.P., counsel to Buyer, at 0000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, on the as of date appearing in the first
paragraph of this Agreement (the "Closing Date"). The effective time of Closing
shall be 12:01 a.m. on the Closing Date.
2.4 SELLERS' CLOSING OBLIGATIONS. At the Closing:
(a) each Seller will deliver to Buyer a certificate or certificates
representing the Shares owned by such Seller, duly endorsed (or accompanied by
duly executed stock powers), for transfer to Buyer;
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(b) each Seller will execute and deliver to Buyer a release
substantially in the form of Exhibit 2.4(b) (the "Sellers' Releases");
(c) each Key Employee will execute and deliver to Buyer an employment
agreement substantially in the form of Exhibit 2.4(c) (the "Employment
Agreements");
(d) KCL will execute and deliver to Buyer a consulting agreement
substantially in the form of Exhibit 2.4(d) (the "KCL Consulting Agreement");
(e) KCL and CAL will each execute and deliver to Buyer and the escrow
agent an escrow agreement each substantially in the form of Exhibit 2.4(e) (the
"Escrow Agreement");
(f) Xxxxxxx & Xxxxx, P.C. will execute and deliver to Buyer a legal
opinion substantially in the form of Exhibit 2.4(f);
(g) the Landrys will cause all officers and directors of the Company
and the Subsidiary (except for Xxxxx X. Xxxxxx) to resign their positions as
officers and directors of the Company and the Subsidiary by written resignation
addressed to the Company and delivered to Buyer dated effective as of the
Closing Date, and the Landrys will cause Xxxxx Xxxxxx and Xxxxx Xxxxxxx to
resign their positions as employees of the Company by written resignation
addressed to the Company and delivered to Buyer dated effective as of the
Closing Date; and
(h) the Landrys will execute and deliver to Buyer, or will cause the
execution and delivery to Buyer, of such documentation as the Landrys and Buyer
may agree with respect to the termination of the Company's 401(k) profit sharing
plan effective as of the Closing Date.
2.5 BUYER'S CLOSING OBLIGATIONS. At the Closing:
(a) Buyer will deliver to each Seller by wire transfer the respective
amounts specified on Schedule 2.5(a);
(b) Buyer will execute and deliver to KCL a promissory note in the
principal amount of $2,006,494, and Buyer will execute and deliver to CAL a
promissory note in the principal amount of $1,493,506, each note to be
substantially in the form of Exhibit 2.5(b) (the "Promissory Notes");
(c) Buyer will deliver to each of KCL and CAL a guaranty substantially
in the form of Exhibit 2.5(c) executed by Parent (the "Guaranties");
(d) Buyer will execute and deliver to each of the Key Employees an
Employment Agreement;
(e) Buyer will execute and deliver to KCL the KCL Consulting
Agreement; and
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(f) Buyer will execute and deliver and cause the escrow agent to
execute and deliver to KCL and CAL the Escrow Agreements; and
(g) Xxxxxx and Xxxxx, L.L.P. will execute and deliver to Sellers a
legal opinion substantially in the form of Exhibit 2.5(g).
2.6 FURTHER ASSURANCES. Sellers, Buyer, and the Company shall from
time to time and without further consideration execute and deliver or cause to
be executed and delivered to the other parties hereto such instruments of
transfer, conveyance, and assignment, and shall take such other actions, as
such other parties may reasonably request to consummate the Transactions.
SECTION THREE
REPRESENTATIONS AND WARRANTIES
OF THE LANDRYS
The Landrys jointly and severally represent and warrant to Buyer that
the statements contained in this Section Three are correct and complete as of
the Closing Date, as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware. The Company has all
corporate power and authority and has satisfied all Legal Requirements necessary
to own, operate, or lease its properties and to carry on its business as
presently conducted. The Company is duly qualified to do business and in good
standing in each jurisdiction in which such qualification is required by Law and
the failure to be so qualified would have a Material affect on the Company.
Schedule 3.1 sets forth for the Company each foreign jurisdiction in which it is
qualified to do business. Current and complete copies of the certificate of
incorporation and bylaws of the Company have been delivered to Buyer. The only
predecessor to the Company is Xxxxxx Service Company, Inc., a Texas corporation,
which was merged with and into the Company in accordance with applicable Law.
The only former subsidiaries of the Company or its predecessor are as set forth
on Schedule 3.1, all of which have been dissolved in accordance with applicable
Law. Except for Lansco Foreign Sales Corporation, a Barbados corporation
("Subsidiary"), there is no corporation, partnership, joint venture, business
trust, or other legal entity in which the Company either directly or indirectly
through one or more intermediaries, owns or holds beneficial or record ownership
of at least a majority of the outstanding voting shares or other equity
interests of such an entity entitled to vote. Subsidiary has no active business
operations or liabilities of any nature, other than liabilities associated with
maintaining its corporate existence and good standing. Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of Barbados (the jurisdiction of its incorporation), and has full corporate
power and authority to carry on business and perform all agreements and
instruments to which it is a party or by which it is bound. The authorized stock
of Subsidiary consists of 1,000 shares of common stock, all of the issued and
outstanding shares of which are owned and held by the Company free and clear of
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all Encumbrances (other than restrictions on transfer imposed pursuant to the
Securities Act). Such shares are duly authorized, validly issued, and are fully
paid and non-assessable. Subsidiary has complied with all applicable Laws in
connection with the issuance of such shares, and none of such shares have been
issued in violation of any Contract binding upon Subsidiary. There are no
existing options, warrants, calls, commitments, or other rights of any character
(including conversion or preemptive rights) relating to the acquisition of any
issued or unissued stock or other securities of Subsidiary. Subsidiary does not
own and is not subject to any commitment to acquire securities of any other
Person or any direct or indirect equity or ownership interests in any other
business. Except where the context requires otherwise, the representations set
forth elsewhere in this Section 3 are hereby restated herein by this reference
as to Subsidiary and are true and correct as to Subsidiary but are subject to
the same qualifications and conditions as are applicable to the Company.
3.2 AUTHORITY AND ENFORCEABILITY. The execution and delivery by the
Company of the Sellers' Transaction Documents and the performance by the Company
of the Transactions are within the requisite corporate power and authority of
the Company, and have been duly authorized, executed, and delivered by the
Company. The Landrys have the absolute and unrestricted right, power, authority,
and capacity to execute and deliver the Sellers' Transaction Documents and to
perform their obligations under the Sellers' Transaction Documents. The Sellers'
Transaction Documents constitute legal, valid, and binding obligations of the
Landrys and the Company, as the case may be, enforceable against each of them in
accordance with their terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application referring to or
affecting creditors' rights generally or by general equitable principles.
3.3 NONCONTRAVENTION. The execution and delivery of the Sellers'
Transaction Documents and the performance of the Transactions by the Landrys and
the Company do not: (a) conflict with, violate, breach, or result in a default
under, or the termination of, or give rise to an event which with notice, lapse
of time, or both, would result in any such conflict, violation, breach, default,
or termination of; (b) result in the creation or imposition of any Encumbrance
upon any of the Company's assets pursuant to the terms of; (c) require any
Consent from or notice to any Person (except as has been obtained) under any
provision of; or (d) accelerate or permit the acceleration of the performance of
any obligation required by: (x) the articles or certificate of incorporation or
bylaws of the Company; (y) any applicable Legal Requirement; or (z) any Contract
or Governmental Authorization to which the Landrys or the Company is a party or
by which the Company's assets may be bound or affected.
3.4 CAPITALIZATION; SUBSIDIARIES. The authorized capital stock of the
Company consists of: (a) 3,000,000 shares of common stock, par value $.01 per
share, of which 1,215,000 shares are issued and outstanding; and (b) 350,000
shares of preferred stock, of which 200,000 shares are designated Series A, none
of which are issued and outstanding, and of which 150,000 shares are designated
Series B, 33,250 of which are issued and outstanding. The issued and outstanding
shares of common stock together with the issued and outstanding shares of Series
B preferred stock constitute the Shares. Sellers are the sole record owners of
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all of the Shares. There are no existing options, warrants, calls, commitments,
or other rights of any character (including conversion or preemptive rights)
relating to the acquisition of any issued or unissued capital stock or other
securities of the Company. The correct number of Shares owned by each Seller,
and address and social security number or federal tax identification number of
each Seller, is set forth opposite such Seller's name on Schedule 3.4. All of
the outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. The Company has not
entered into any Contract relating to the issuance, sale, or transfer of any
equity securities or other securities of the Company, other than this Agreement.
The Company has complied with all applicable Laws in connection with the
issuance of the Shares, and none of the Shares were issued in violation of any
Contract binding upon the Company.
3.5 FINANCIAL STATEMENTS. The following financial statements have been
delivered to Buyer (collectively referred to as the "Company's Financial
Statements"): (a) audited balance sheets of the Company as at February 28, 1997,
1998, and 1999 (the audited balance sheet of the Company as at February 28,
1999, being referred to herein as the "Balance Sheet"), and the related audited
statements of operations, stockholders' equity, and cash flows for the fiscal
years then ended, including in each case the notes thereto, together with the
report thereon of Xxxxxxx Xxxx Xxxxxxx of Texas, P.C., independent certified
public accountants (the audited balance sheets and related audited financial
statements and notes thereto referred to in subpart (a) of this Section 3.5
being referred to herein as the "Audited Financial Statements"); and (b) an
unaudited balance sheet of the Company as at September 30, 1999 (the "Interim
Balance Sheet"), and the related unaudited statements of operations,
stockholders' equity, and cash flows for the seven months then ended (the
Interim Balance Sheet and the related unaudited financial statements being
referred to herein as the "Interim Financial Statements"). The Company regularly
prepares monthly financial statements, of which the Interim Financial Statements
are an example, and such monthly interim financial statements, including the
Interim Financial Statements, are and have been distributed within the Company
to its president, treasurer, and senior members of the accounting department.
The Company's Financial Statements fairly present in all Material respects the
financial condition and the results of operations, stockholders' equity, and
cash flows of the Company and the Subsidiary as at the respective dates of and
for the periods referred to in such financial statements, all in accordance with
GAAP, subject, in the case of Interim Financial Statements, to normal year-end
adjustments and the absence of notes. No financial statements of any Person,
other than the Company and the Subsidiary, are required by GAAP to be included
in the Company's Financial Statements.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.6, the Company has no Material liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued, contingent, unmatured,
unaccrued, unliquidated, or otherwise) except for: (a) liabilities or
obligations reflected or reserved against in the Balance Sheet or the Interim
Balance Sheet; or (b) liabilities and obligations incurred in the ordinary
course of business since the respective dates thereof, there being no such
liability or obligation that would have a Material affect on the Company other
than those scheduled on Schedule 3.6.
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3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for actions taken in
order to consummate the Transactions, or as described on Schedule 3.7, since the
date of the Audited Financial Statements, the Company has not:
(a) entered into any Material transaction or conducted its business
other than in the ordinary course of business;
(b) undergone or otherwise experienced any Material change in its
condition (financial or other), properties, assets, liabilities (including
contingent liabilities), working capital, business, or operations;
(c) entered into any Contract with any employee other than standard
employment agreements entered into in the ordinary course of business (correct
and complete copies of the form or forms of such standard employment agreements
having been delivered to Buyer), or granted or paid to any employee any increase
in compensation or benefits, other than ordinary merit increases consistent with
past practice;
(d) entered into, adopted, or amended in any respect any collective
bargaining agreement or adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
insurance, or other similar plan, agreement, trust, or fund for the benefit of
employees;
(e) suffered any strike or other labor trouble or suffered any change
in its relationship with, or loss of, employees, suppliers, or customers that
resulted in or could result in a Material effect on the Company;
(f) incurred any Material liability, obligation, or commitment
(whether absolute, accrued, contingent or otherwise), except in the ordinary
course of business;
(g) other than in the ordinary course of business, entered into,
amended, terminated, or suffered the termination of any Contract to which the
Company is a party or by which any of its assets or properties are subject;
(h) purchased or acquired, or sold, encumbered, assigned, or disposed
of, or suffered the loss or destruction of, any Material assets, tangible or
intangible;
(i) been cited for any violations of any Legal Requirement;
(j) made any change in its accounting policies or methods;
(k) entered into any Contract with any Affiliate, declared or paid any
bonus to any Seller or Key Employee, or made or declared any distribution,
payment, or dividend of any kind with respect to the Shares;
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(l) cancelled or waived any Material claims or rights;
(m) made or experienced any change in the capitalization or ownership
(as applicable) of the Company, including, without limitation, the issuance by
the Company of any shares of stock of any class, any subscriptions, options,
warrants, convertible securities, rights, calls, agreements, commitments, or
rights affecting or relating in any manner whatsoever to any ownership, voting
interest, or control of the Company; or
(n) agreed, whether in writing or otherwise, to do any of the
foregoing.
3.8 CONTRACTS. Schedule 3.8 describes all of the Material Contracts of
the following types to which the Company is a party or by which the Company or
the Company's assets are bound as of the date hereof (collectively referred to
as the "Company Contracts"):
(a) Contracts for money borrowed and Contracts for any money lent to
any other Person, other than advances to employees for expenses in the ordinary
course of business;
(b) employment, management, and consulting agreements, collective
bargaining agreements, or other agreements with any labor union or group of
employees;
(c) Contracts under which the Company currently is or will become
obligated to purchase goods or services of an aggregate value in excess of
$25,000;
(d) Contracts under which the Company currently is or will become
obligated to provide goods or services of an aggregate value in excess of
$25,000 and all master service agreements and blanket purchase orders with
Customers;
(e) Contracts entered into outside of the ordinary course of business
and that involve the expenditure or receipt by the Company of money, goods, or
services of an aggregate value in excess of $25,000;
(f) Contracts under which the Company is the lessor of, or permits any
other Person to hold or operate, any personal property used by the Company in
the conduct of its business, and Contracts under which the Company is the lessee
of, or holds or operates, any personal property owned or controlled by any other
Person, in each case except for any Contracts: (1) cancelable upon 30 days
notice or less or involving a term of less than one year, and (2) involving an
aggregate commitment for payments of less than $25,000;
(g) Contracts under which the Company is the lessor of, or permits any
other Person to hold or operate, any real property owned or controlled by the
Company, and Contracts under which the Company is the lessee of, or holds or
operates, any real property owned or controlled by any other Person;
13
(h) Contracts relating to any Intellectual Property Assets or
containing noncompetition or confidentiality provisions, other than standard
agreements not to disclose information that are entered into between the Company
and its employees on a customary basis;
(i) Contracts involving an agreed sharing of profits, losses, costs,
or liabilities by the Company with any other Person, including joint venture
and partnership agreements;
(j) Contracts providing for payments by the Company to any Person or
by any Person to the Company based on sales, purchases, or profits, other than
direct payments for goods;
(k) each power of attorney entered into by the Company that is
currently effective and outstanding;
(l) Contracts entered into other than in the ordinary course of
business that contain or provide for an express undertaking by the Company to be
responsible for consequential damages;
(m) Contracts for capital expenditures by the Company in excess of
$25,000;
(n) each written warranty, guaranty, and or other similar undertaking
with respect to contractual performance extended by the Company other than in
the ordinary course of business; and
(o) each amendment, supplement, and modification in respect of any of
the foregoing.
3.9 STATUS OF COMPANY CONTRACTS. Complete and correct copies of the
written Company Contracts have been delivered to Buyer. All Contracts to which
the Company is a party or by which the Company's assets are bound are in full
force and effect and, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application
referring to or affecting enforcement of creditors' rights generally, and by
general equitable principles, are valid and enforceable in accordance with their
respective terms. The Company and, to the Knowledge of the Landrys, all other
parties to any Contract to which the Company is a party or by which the
Company's assets are bound, have in all Material respects performed all
obligations required to be performed by them to date and are not in default in
any Material respect. To the Knowledge of the Landrys, there does not exist any
event, condition, or omission that (with or without notice or lapse of time) may
result in a violation or breach of, or give the Company or other party to any
Contract to which the Company is a party or by which the Company's assets are
bound, the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any such Contract. The Company has not given to or received from any other
Person at any time any notice or other communication (whether oral or written)
14
regarding any Material violation or breach of, or default under, any Contract to
which the Company is a party or by which the Company's assets are bound. The
Company has not received notice of any plan or intention of any other party to
any Contract to which the Company is a party or by which the Company's assets
are bound to exercise any right to cancel or terminate any such Contract.
3.10 PERSONAL PROPERTY. The Company has good and indefeasible title to,
or, in the case of leased properties, a good and indefeasible leasehold interest
in, all of the personal property of whatever kind or nature and wherever located
(excluding Intellectual Property Assets), including furniture, fixtures, and
equipment, reflected on the Company's Financial Statements (collectively
referred to as the "Personal Property"), in each case free and clear of all
Encumbrances other than Permitted Encumbrances. None of the Personal Property
are subject to or held under a title retention agreement, or is other than in
the sole possession and under the sole control of the Company, other than
Personal Property in the possession or control of customers in the ordinary
course of business. The Personal Property is adequate for the uses to which it
is put by the Company, and conforms in all Material respects with all applicable
Legal Requirements.
3.11 FACILITIES AND FORMER FACILITIES. Schedule 3.11 sets forth a
description of all of the Facilities and Former Facilities (other than customer
job sites or temporary lodging for employees), and with respect to Former
Facilities, the time periods during which those facilities were owned or
operated by the Company or the Subsidiary or the predecessor of the Company or
former subsidiaries of the Company or its predecessor. Copies of the deeds and
other instruments (as recorded) by which the Company or the Subsidiary acquired
the Facilities, and correct and complete copies of all title insurance policies,
opinions, abstracts, surveys, appraisals, and environmental reports in the
possession of the Company and relating to the Facilities, have been delivered to
Buyer. The Company has good and indefeasible title to all of the Facilities,
subject to no Encumbrances other than Permitted Encumbrances. All buildings,
plants, and structures owned by the Company lie wholly within the boundaries of
the real property owned by the Company and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other Person. The
buildings, plants, and structures of the Company are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are put by the Company, and none of such buildings, plants, and structures are
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs.
3.12 ACCOUNTS RECEIVABLE. Schedule 3.12 sets forth all accounts
receivable (billed and unbilled) of the Company as of the date set forth thereon
(as supplemented pursuant to Section 8.2, "Accounts Receivable"), which list
sets forth the customer name, amount, and invoice date of such Accounts
Receivable. The Accounts Receivable are (and, with respect to the Accounts
Receivable reflected on the supplement to be delivered pursuant to Section 8.2,
will be) current and collectible, net of a reserve of 2% ("Net Accounts
Receivable"). The Net Accounts Receivable will be collected in full, without any
set-off, within 120 days after the Closing Date.
15
3.13 INVENTORY. The Company has no Material inventory or supplies.
3.14 INTELLECTUAL PROPERTY ASSETS. "Intellectual Property Assets" shall
mean all: (a) names, assumed names, tradenames, trademarks, and service marks
("Marks"); (b) patents, patent applications and rights, and patents pending
("Patents"); (c) registered copyrights ("Copyrights"); and (d) trade secrets,
confidential information, know-how, processes, formulas, data, customer lists,
technology, drawings, blueprints, and computer software ("Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor. The
Intellectual Property Assets are all those necessary for the operation of the
Company's business as it is currently conducted. The Company is the owner of all
right, title, and interest in and to each of the Intellectual Property Assets,
or, in the case of leased Intellectual Property Assets, is the owner of a
leasehold interest in such Intellectual Property Assets, free and clear of all
Encumbrances other than Permitted Encumbrances, and has the right to use without
payment to any other Person all of the Intellectual Property Assets. Schedule
3.14 describes all of the Marks, Patents, and Copyrights. To the Knowledge of
the Landrys, all Intellectual Property Assets are valid and enforceable and are
being used in Material compliance with all Legal Requirements. There are no
pending, or to the Knowledge of Landrys, Threatened infringement claims against
the Company with respect to any Intellectual Property Assets. To the Knowledge
of the Landrys, the use of the Intellectual Property Assets will not, and the
operation of the Company's business as presently conducted does not, infringe on
the intellectual property rights of any other Person. The Company has taken all
reasonable precautions to protect the secrecy, confidentiality, and value of the
Trade Secrets.
3.15 GOVERNMENTAL AUTHORIZATIONS. To the Knowledge of the Landrys, all
licenses, permits, approvals, registrations, or other authorizations issued or
granted under Law or by any Governmental Authority and currently held by the
Company are listed on Schedule 3.15 (the "Governmental Authorizations"). The
Governmental Authorizations are valid and in full force and effect. The Company
is, and at all times has been, in Material compliance with the terms of the
Governmental Authorizations. To the Knowledge of the Landrys, the Governmental
Authorizations constitute all of the authorizations of the type described in the
first sentence of this Section 3.15 that are necessary for or incident to the
operation of the Company's business or the ownership or use of the Company's
assets. There are no Proceedings pending or, to the Knowledge of the Landrys,
Threatened that may result in the revocation, cancellation, or suspension of, or
any Material adverse modification of, any Governmental Authorization. Correct
and complete copies of all Governmental Authorizations have been delivered to
Buyer.
3.16 COMPLIANCE WITH LAWS. The Company is, and at all times has been,
in Material compliance with all Laws currently or then applicable to the
Company, or to the conduct or operation of its business or the ownership or use
of its assets. The Company has not received at any time any notice or other
communication (whether oral or written) from any Governmental Authority
regarding any Material violation of, or failure to comply with, any Law.
16
3.17 TAXES. Except as set forth on Schedule 3.17, all Tax Returns
required to be filed by the Company or Subsidiary or the predecessor to the
Company or any former subsidiary to the Company or its predecessor, as the case
may be, for all periods ended on or before the Closing Date, have been timely
filed or submitted. All Taxes due on or before the Closing Date have been duly
paid in full by the Company and the Subsidiary and the predecessor to the
Company and any former subsidiary to the Company or its predecessor, as the case
may be. Adequate provision has been made in the Company's Financial Statements
for the payment of all unpaid Taxes for all periods ending at or prior to
September 30, 1999. There are no examinations in progress or claims against the
Company or the Subsidiary for any period or periods ending at or prior to the
Closing Date, and no notice of any claim for Taxes, whether pending or
Threatened, has been received. Correct and complete copies of: (a) any tax
examinations of; (b) extensions of statutory limitations with respect to; and
(c) all Tax Returns filed or submitted by the Company or any former subsidiary
or the Subsidiary for the last three fiscal years have been provided to Buyer.
The Company currently uses the accrual method of accounting for income tax
purposes. Such method of accounting has not been changed within the last five
years.
3.18 EMPLOYEE BENEFITS. Schedule 3.18 sets forth an accurate schedule
of all employee benefit plans as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and all other employee
benefits programs or arrangements, including but not limited to, deferred
compensation agreements and stock plans sponsored or maintained by the Company,
its predecessor, the Subsidiary, or any former subsidiaries of the Company or
its predecessor (collectively "Employee Benefit Plans"). Copies of all Employee
Benefit Plans and of all agreements and trusts related thereto have been
delivered to Buyer. Except for the employee benefit plans described on Schedule
3.18, neither the Company nor its predecessor, the Subsidiary, or any former
subsidiaries of the Company or its predecessor sponsors, maintains, or
contributes to any plan, program, fund, or arrangement that constitutes an
employee pension benefit plan and neither the Company nor its predecessor, the
Subsidiary, or any former subsidiaries of the Company or its predecessor have
any obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity). Neither the Company nor its predecessor, the
Subsidiary, or any former subsidiaries of the Company or its predecessor has
sponsored, maintained, or contributed to any employee pension benefit plan other
than the plans set forth on Schedule 3.18, nor is the Company or its
predecessor, the Subsidiary, or any former subsidiaries of the Company or its
predecessor required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement. All accrued contribution
obligations of the Company, its predecessor, the Subsidiary, or any former
subsidiaries of the Company or its predecessor, with respect to any plan listed
on Schedule 3.18 have either been fulfilled in their entirety or are fully
reflected on the Balance Sheet, except for accruals since the date of the
Balance Sheet incurred in the ordinary course of business. All Employee Benefit
Plans have been operated in accordance with all applicable Laws and the Employee
Benefit Plans' terms in all material respects. There are no actions, claims,
suits, or government audits or occurrences pending (other than for routine
17
benefits) or, to the Knowledge of the Landrys, threatened against, any Employee
Benefit Plan. Each Employee Benefit Plan that is intended to be tax-qualified
under Section 401(a) of the Code is so qualified and nothing has occurred which
could adversely affect the qualified status of any such plan.
3.19 EMPLOYEES. Schedule 3.19 contains a complete and accurate list of
the following information for each employee, officer, or director of the
Company, including each employee on leave of absence or layoff status: (a) name;
(b) job title; (c) date of hire; (d) hourly or semi-monthly compensation rate in
effect currently and on December 31, 1998; (e) vacation accrued; and (f) service
credited for purposes of vesting and eligibility to participate under the
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock ownership
(including investment credit or payroll stock ownership), severance pay,
insurance, medical, welfare, vacation, or other employee benefit plan. No
director or officer or, to the Knowledge of the Landrys, employee of the Company
or the Subsidiary, is prohibited or in any way limited in his or her ability to
engage in the Company's business, nor does any such person have plans to
terminate his or her employment or other relationship with the Company. Neither
the Company nor the Subsidiary has any retired employees, officers, or
directors.
3.20 LABOR RELATIONS. Other than as set forth in Schedule 3.20, neither
the Company nor the Subsidiary has been and neither is a party to any collective
bargaining or other labor Contract. Other than as set forth in Schedule 3.20,
there is not presently pending or existing, and, to the Knowledge of the
Landrys, there is not Threatened: (a) any organizational activity, strike,
slowdown, picketing, work stoppage, employee grievance, or other labor or
employment claim against the Company or the Subsidiary; (b) any Proceeding
against the Company or the Subsidiary relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Authority against the Company or the Subsidiary; or (c) any
application for certification of a collective bargaining agent with respect to
the Company or the Subsidiary. There is no lockout of any employees by the
Company or the Subsidiary, and no such action is contemplated by the Company.
The Company and the Subsidiary have complied in all Material respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Neither the Company nor the Subsidiary is liable for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements.
3.21 INSURANCE. Schedule 3.21 describes all insurance policies
maintained by the Company for the current policy year and the three preceding
policy years (the "Insurance Policies"), indicating with respect to each policy
the type of coverage, name of insured, the insurer, the expiration date, and all
Material claims made and Material payments made or received with respect to each
such policy. All current Insurance Policies: (a) are in full force and effect
18
and will remain in effect following the consummation of the Transactions and
through the expiration date set forth on Schedule 3.21 without the payment of
additional premiums; (b) are sufficient for Material compliance with all Legal
Requirements and Contracts to which the Company is a party or by which the
Company's assets are bound; and (c) except as set forth on Schedule 3.21, do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company. The Company has paid all premiums due and
complied in all Material respects with the provisions of all the Insurance
Policies. The Company has not received any notice of cancellation or any other
indication that any current Insurance Policy is no longer in full force or
effect or will not be renewed or that the issuer of any current Insurance Policy
is not willing or able to perform its obligations thereunder. Correct and
complete copies of all Insurance Policies and pending applications have been
delivered to Buyer.
3.22 LITIGATION. There is no pending Proceeding that has been commenced
against the Company, KCL or CAL and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
contemplated Transactions. To the Knowledge of each of KCL and CAL, no such
Proceeding has been Threatened. Schedule 3.22 describes all pending Proceedings
brought by or against, or to the Knowledge of the Landrys, Threatened against,
the Company, its predecessor or any former subsidiary of the Company or its
predecessor or the Subsidiary, in each case indicating whether the Company or
its predecessor or any such subsidiary or the Subsidiary has given notice of
such Proceeding to any insurer in accordance with the specific reporting
requirements of any applicable Insurance Policy, and whether any refusal of
coverage or any notice that a defense will be afforded with reservation of
rights has been received. Correct and complete copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed on
Schedule 3.22 that are in the possession or control of the Company, and recent
summaries of each such Proceeding as requested by Buyer, have been delivered or
made available to Buyer. To the Knowledge of the Landrys, no event has occurred
that may give rise to or serve as a basis for the commencement of any Proceeding
against the Company or the Subsidiary. There are no currently effective Orders
against the Company, or to the Knowledge of the Landrys, Materially affecting
the business or assets of the Company. All of the Proceedings listed on Schedule
3.22 are covered by insurance maintained by the Company, except as otherwise
disclosed on Schedule 3.22, such coverage being subject to the applicable
deductible under the insurance policy.
3.23 ENVIRONMENTAL MATTERS. The Company and each Facility is, and at
all times has been, in Material compliance with, and has not been and is not in
Material violation of, any then currently applicable Environmental Law or Order,
and the Company has not incurred or become liable for or subject to any Material
Environmental Liabilities at any of its Facilities or any of the Former
Facilities. Neither the Company nor its predecessor nor any of the former
subsidiaries of the Company or its predecessor or the Subsidiary has received
or, to the Knowledge of the Landrys, has the Company any reasonable basis to
expect, any communication from any Person of any actual or potential Material
violation or failure to comply with any Environmental Law, or of any actual or
Threatened Material obligation to undertake or bear the cost of any
19
Environmental Liabilities with respect to any Personal Property, Facilities,
Former Facilities, or with respect to any property at, to, or from which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, processed, transported, treated, stored, handled, disposed,
recycled, or received by the Company or its predecessor or any former subsidiary
of the Company or its predecessor or the Subsidiary. There are no Hazardous
Materials present on or in the Environment at the Facilities, and there has been
no release of any Hazardous Materials by the Company or from any Facilities or
any Former Facility, during ownership or operation by the Company or its
predecessor or any former subsidiary of the Company or its predecessor or the
Subsidiary of such Former Facility, into the Environment, except in Material
compliance with all then applicable Environmental Laws and so as not to create
any Material Environmental Liabilities.
3.24 TRANSACTIONS WITH AFFILIATES. Except as disclosed on Schedule
3.24, the Company has not engaged in any transaction, directly or indirectly,
with any Seller, Affiliate of the Landrys, Affiliate of the Company, or, to the
Knowledge of the Landrys, any Affiliate of any Seller, since the date of the
Audited Financial Statements (other than transactions with persons inherent in
their normal capacities of shareholders, officers, directors, or employees). No
Seller, Affiliate of the Landrys, Affiliate of the Company, or, to the Knowledge
of the Landrys, any Affiliate of any Seller, has any ownership interest,
directly, indirectly, or beneficially, in any competitor, supplier, or customer
of the Company, except for less than one percent of the outstanding equity
securities of any such business that is publicly traded on any recognized
exchange or in the over-the-counter market.
3.25 CERTAIN PAYMENTS. Neither the Company, nor its predecessor or any
former subsidiary of the Company or its predecessor or the Subsidiary, or any
director or officer of the foregoing, or, to the Knowledge of the Landrys, any
agent or employee of the Company or any other Person associated with or acting
for or on behalf of the Company, has, directly or indirectly: (a) in violation
of any Legal Requirement, made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services, to obtain favorable
treatment in securing business, to pay for favorable treatment for business
secured, or to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or its predecessor or any former
subsidiary of the Company or its predecessor or the Subsidiary; or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.26 BROKERS AND FINDERS. The Company does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the Transactions.
3.27 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
20
action taken by, the stockholders, the boards of directors, and committees of
the boards of directors of the Company. At the Closing, all of those books and
records will be in the possession of the Company.
3.28 YEAR 2000 COMPLIANT. All computer software (including the
Company's network operating system and its MAS*90 programs for financial and
payroll modules but excluding any other software licensed under "shrink wrap
licenses") and computer hardware that is used by the Company in the operation or
conduct of its business as presently conducted is "year 2000 compliant," in that
such software and hardware will operate during all times prior to, during, and
after the calendar year 2000 A.D. without error relating to that date.
3.29 HEALTH AND SAFETY MATTERS. The Company is and at all times has
been in Material compliance with, and has not been in Material violation of, any
then currently applicable Health and Safety Law. Neither the Company nor its
predecessor or any former subsidiary of the Company or its predecessor or the
Subsidiary has received, nor to the Knowledge of the Landrys has the Company any
reasonable basis to expect, any communication from any Person, including current
and former employees, or any Governmental Authority, regarding any Material
violation or alleged violation of any Heath and Safety Law.
3.30 MATERIAL DISCLOSURES. No representation or warranty of the Landrys
in this Agreement or in any other certificate or other document furnished or to
be furnished by the Landrys pursuant hereto, and no statement in any Schedule,
contains or will contain any untrue statement of a Material fact or omits or
will omit to state a Material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading
or will omit to state a Material fact necessary in order to provide Buyer with
accurate information as to the Company.
SECTION FOUR
REPRESENTATIONS AND WARRANTIES
OF EACH SELLER
Each Seller hereby severally represents and warrants to Buyer that the
statements contained in this Section Four with respect to such Seller are
correct and complete as of the Closing Date, as follows:
4.1 AUTHORITY AND ENFORCEABILITY. The Sellers' Transaction Documents
constitute legal, valid, and binding obligations of each Seller, enforceable
against each Seller in accordance with their terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other laws of general
application referring to or affecting creditors' rights generally or by general
equitable principles. Each Seller has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver the Sellers' Transaction
Documents and to perform such Seller's obligations under the Sellers'
Transaction Documents. Each Seller neither is or will be required to give any
21
notice to or obtain any Consent from any Person in connection with the execution
and delivery of the Sellers' Transaction Documents or the consummation or
performance of any of the Transactions contemplated by the Sellers' Transaction
Documents.
4.2 CAPITALIZATION. Each Seller is the record and beneficial owner and
holder of such Seller's respective Shares, as described on Schedule 3.4, free
and clear of all Encumbrances (other than restrictions on transfer imposed
pursuant to the Securities Act). Except as set forth on Schedule 4.2, no legend
or other reference to any purported Encumbrance (other than restrictions on
transfer imposed pursuant to the Securities Act) appears upon any certificate
representing such Seller's Shares. Upon Closing, Buyer shall receive valid title
to all of the Shares owned by Seller, free and clear of all Encumbrances (other
than restrictions on transfer imposed pursuant to the Securities Act). Each
Seller has not entered into any Contract relating to the issuance, sale, or
transfer of equity securities or other securities of the Company, other than
this Agreement.
4.3 BROKERS AND FINDERS. No Seller has any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
Transactions.
4.4 INVESTMENT INTENT. Each of KCL and CAL is acquiring his Promissory
Note for his own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act. Each of KCL and CAL is an
"accredited investor" as such term is defined in Rule 501(a) under the
Securities Act.
SECTION FIVE
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Sellers that the statements
contained in this Section Five are correct and complete as of the Closing Date,
as follows:
5.1 ORGANIZATION. Each of Buyer and Parent is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware.
5.2 AUTHORITY AND ENFORCEABILITY. The execution and delivery by Buyer
and Parent of Buyer's Transaction Documents and the performance by Buyer and
Parent of the Transactions are within the requisite corporate power and
authority of Buyer and Parent, and have been duly authorized, executed, and
delivered by Buyer and Parent. Buyer's Transaction Documents constitute legal,
valid, and binding obligations of Buyer and Parent, as the case may be,
enforceable against each of them in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, or other laws
of general application referring to or affecting creditors' rights generally or
by general equitable principles.
22
5.3 NONCONTRAVENTION.The execution and delivery of Buyer's Transaction
Documents and the performance of the Transactions by Buyer and Parent do not:
(a) conflict with, violate, breach, or result in a default under, or the
termination of, or give rise to an event which with notice, lapse of time, or
both, would result in any such conflict, violation, breach, default, or
termination of; (b) except as set forth on Schedule 5.3, result in the creation
or imposition of any Encumbrance upon any of Buyer's or Parent's assets pursuant
to the terms of; (c) require any Consent from or notice to any Person (except as
has been obtained) under any provision of; or (d) accelerate or permit the
acceleration of the performance of any obligation required by: (x) the articles
or certificate of incorporation or bylaws of Buyer or Parent; (y) any applicable
Legal Requirement; or (z) any Contract or Governmental Authorization to which
Buyer or Parent is a party or by which any of Buyer or Parent's assets may be
bound or affected.
5.4 FINANCIAL STATEMENTS. The following financial statements have been
delivered to Sellers (collectively referred to as the "Buyer's Financial
Statements"): (a) audited consolidated balance sheet of Buyer as at December 31,
1998, and the related audited consolidated statements of operations,
stockholders' equity, and cash flows for the fiscal year then ended, including
in each case the notes thereto, together with the report thereon of Ernst &
Young, LLP, independent certified public accountants (the consolidated balance
sheet and related consolidated financial statements and notes thereto referred
to in subpart (a) of this Section 5.4 being referred to herein as the "Buyer's
Audited Financial Statements"); and (b) an unaudited consolidated balance sheet
of Buyer as at September 30, 1999, and the related unaudited consolidated income
statement for the nine months then ended (the "Buyer's Interim Financial
Statements"). The Buyer's Financial Statements fairly present in all Material
respects the financial condition and the results of operations, stockholders'
equity, and cash flows of Buyer, on a consolidated basis, as at the respective
dates of and for the periods referred to in such financial statements, all in
accordance with GAAP, subject, in the case of Buyer's Interim Financial
Statements, to normal year-end adjustments and the absence of notes. No
financial statements of any Person, other than as reflected thereon, are
required by GAAP to be included in the Buyer's Financial Statements.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Buyer and Parent have no
Material liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, unmatured, unaccrued, unliquidated, or
otherwise) except for liabilities or obligations reflected or reserved against
in the Buyer's Financial Statements and liabilities and obligations incurred in
the ordinary course of business since the respective dates thereof.
5.6 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer or Parent and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
23
5.7 BROKERS AND FINDERS. Neither Buyer nor Parent has any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the Transactions.
5.8 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Buyer has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risk of its purchase of the Shares pursuant to this Agreement. Buyer
acknowledges that the sale of the Shares to it under this Agreement have not
been registered under the Securities Act or qualified or been registered for
sale under the securities laws and regulations of any state or other
jurisdiction. Buyer acknowledges that the Shares purchased by it under this
Agreement must be held indefinitely unless their transfer or sale is registered
under the Securities Act and applicable state securities laws or an exemption
from such registration is available.
5.9 MATERIAL DISCLOSURES. No representation or warranty of Buyer in
this Agreement or in any other certificate or other document furnished or to be
furnished by Buyer pursuant hereto, and no statement in any Schedule, contains
or will contain any untrue statement of a Material fact or omits or will omit to
state a Material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading or will omit
to state a Material fact necessary in order to provide Sellers with accurate
information as to Buyer and Parent.
SECTION SIX
RESTRICTIVE COVENANTS
6.1 CUSTOMERS. Each of the Sellers covenants and agrees that he or she
shall not (personally, nor will he or she direct any third party to do so) for a
period of: (a) four years from and after the Closing Date, in the case of Xxxxx
Xxxxx and F. Xxxx Xxxxxxx; (b) two years from and after the Closing Date, in the
case of Xxxx Xxxxxx; (c) one year from and after the Closing Date, in the case
of Xxxxx X. Xxxxxxx; and (d) five years from and after the Closing Date, in the
case of all Sellers other than those identified in clauses (a), (b), and (c) of
this sentence (as the case may be, the "Restriction Period"): (1) provide or
offer to provide to any Customer any product or service the same or similar to
that offered by the Company as of the Closing Date; or (2) induce or attempt to
induce any Customer to withdraw, curtail, or cancel its business with the
Company or in any manner modify or fail to enter into any actual or potential
business relationship with the Company.
6.2 EMPLOYEES AND VENDORS. Each of the Sellers covenants and agrees
that he or she shall not (personally, nor will he or she direct any third party
to do so), during the Restriction Period: (a) recruit or otherwise solicit or
induce any Person who is on the Closing Date an employee or Vendor of the
Company to terminate their employment with, or otherwise cease their
relationship with, the Company; or (b) hire, recruit, or otherwise solicit any
24
person who, at any time during the six months immediately preceding the date of
his or her hire or the date of commencement of recruitment or solicitation of
such person, as applicable, had been an employee or Vendor of the Company.
6.3 NONCOMPETITION.Each of the Sellers covenants and agrees that he or
she shall not, during the Restriction Period, working alone or in conjunction
with one or more other Persons, for compensation or not, permit such Seller's
name to be used by or engage in or carry on, directly or indirectly, either for
himself or herself or as a member of a partnership or other entity or as a
stockholder or investor (other than as the holder of one percent or less of the
equity of any entity with a class of equity securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended) in any
business competing with the business of the Company as such business exists or
is being conducted upon the Closing Date, but only for as long as such business
is carried on by: (a) the Company; or (b) any Person deriving title from the
Company to the assets and goodwill of the business being carried on by the
Company upon the Closing Date, in any county of any state of the United States,
or in any country or political subdivision of the world. The parties intend that
the covenants contained in this Section 6.3 shall be deemed to be a series of
separate covenants, one for each county in each state of the United States and
for each country and political subdivision of the world, and except for
geographic coverage, each such separate covenant shall be identical in terms to
the covenant contained in this Section 6.3.
6.4 TOLLING OF TERM. If any Seller violates any covenant contained in
Section 6.1, Section 6.2, or Section 6.3, then the term of such violated
covenant shall be tolled for the period commencing on the commencement of such
violation and ending upon the earlier of: (a) such time as such violation shall
be cured by such Seller to the reasonable satisfaction of Buyer; or (b) final
adjudication (including appeals) of any action filed for injunctive relief or
damages arising out of such violation.
6.5 REFORMATION.If, in any judicial proceeding, the court shall refuse
to enforce any of the separate covenants contained in Section 6.1, Section 6.2,
or Section 6.3, because the time limit is too long, it is expressly understood
and agreed between the parties hereto that for purposes of such proceeding such
time limitation shall be deemed reduced to the extent necessary to permit
enforcement of such covenants. If, in any judicial proceeding, the court shall
refuse to enforce any of the separate covenants contained in Section 6.1,
Section 6.2, or Section 6.3, because they are more extensive than necessary to
protect the business and goodwill of the Company, it is expressly understood and
agreed between the parties hereto that for purposes of such proceeding such
provisions shall be deemed reduced to the extent necessary to permit enforcement
of such covenants.
6.6 INJUNCTIVE RELIEF. Sellers acknowledge that a breach of Section
6.1, Section 6.2, or Section 6.3 would cause irreparable damage to Buyer, and in
the event of an actual or threatened breach by any Seller of the provisions of
Section 6.1, Section 6.2, or Section 6.3, Buyer shall be entitled to seek a
temporary restraining order and injunction restraining such Seller from
breaching such covenants. Nothing herein shall be construed as prohibiting Buyer
25
from pursuing any other available remedies for such breach, including the
recovery of damages from Sellers. Each Seller acknowledges that the restrictions
set forth in Section 6.1, Section 6.2, and Section 6.3 are ancillary to an
otherwise enforceable agreement and are reasonable in scope and duration, given
the nature of the business of the Company.
SECTION SEVEN
INDEMNIFICATIONS
7.1 NATURE OF INVESTIGATIONS. It is acknowledged that,in the course of
negotiating this Agreement and during due diligence conducted by the parties
prior to the Closing, certain disclosures have been made and each party and its
representatives and agents have become aware of certain information regarding
the other parties and the Transactions. Neither any investigation by any party
hereto, nor any failure to make any investigation by any party hereto, nor any
information acquired or capable of being acquired at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the Transactions, shall constitute a waiver of any representation,
warranty, covenant, agreement, right, or remedy of any party hereto, nor relieve
such other party of any obligation or liability with respect to the accuracy or
fulfillment thereof.
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect hereof, all representations and
warranties made in Sections Three, Four, and Five shall survive the Closing and
shall continue in effect for a period of two years after the Closing Date;
provided, however, notwithstanding the foregoing:
(a) the representations and warranties made by the Landrys in Section
3.4 and Section 3.17 shall continue in effect until expiration of the period of
limitations provided under Law for any breach thereof; and
(b) the representations and warranties made by Sellers in Section Four
shall continue in effect until expiration of the period of limitations provided
under Law for any breach thereof.
7.3 INDEMNIFICATION BY EACH SELLER. Each Seller agrees to severally
indemnify and hold harmless Buyer, the Company, and their respective officers,
directors, employees, agents, consultants, advisors, other representatives,
including legal counsel and accountants, and Affiliates (collectively, the
"Buyer Indemnified Persons") for, and will pay to the Buyer Indemnified Persons
the amount of, any loss, liability, claim, damage (including reasonably
foreseeable incidental and consequential damages), expense (including reasonable
costs of investigation, defense, and attorneys' fees), fines, and penalties,
whether or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with any breach of warranty or
inaccurate or erroneous representation made by any such Seller in Section Four.
26
7.4 INDEMNIFICATION BY THE LANDRYS. The Landrys agree to jointly and
severally indemnify and hold harmless the Buyer Indemnified Persons for, and
will pay to the Buyer Indemnified Persons the amount of, any Damages, arising,
directly or indirectly, from or in connection with:
(a) any breach or default in the performance by the Landrys of any
covenant or agreement of the Landrys contained in the Sellers' Transaction
Documents; provided, however, that any claim for indemnification for breach or
default in the performance by either CAL or KCL of any covenant or agreement of
CAL or KCL contained in the KCL Consulting Agreement or in the Sellers' Releases
shall be asserted solely against the party in breach or default, and not jointly
and severally; or
(b) any breach of warranty or inaccurate or erroneous representation
made by the Landrys in Section Three; or
(c) any claim or liability, including any Environmental Liabilities,
known or unknown: (x) arising out of, or by virtue of, or based upon the
business and operations conducted by the Company, the Subsidiary, or any of
their predecessors or any former subsidiaries of the foregoing prior to the
effective time of Closing; or (y) arising out of, or by virtue of, or based upon
the ownership, management, use, or operation of the respective assets and
properties of the Company, the Subsidiary, the predecessor to the Company or
former subsidiaries of the Company or its predecessor, including Facilities and
Former Facilities, prior to the effective time of Closing, other than, in the
case of both (x) and (y): (1) claims or liabilities reflected on the Company's
Financial Statements; (2) claims or liabilities incurred in the ordinary course
of business since the dates thereof, none of which are in excess of $25,000
individually or in the aggregate as to any related claims or liabilities, but
excluding from the exception provided in this clause (2): (A) any claims or
liability that arises from a tort, breach of Contract, or violation of any Legal
Requirement; and (B) any and all Environmental Liabilities; or (3) those claims
or liabilities disclosed on Schedule 7.4.
7.5 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
harmless Sellers and their respective agents, consultants, advisors, other
representatives, including legal counsel and accountants, heirs and
representatives (the "Seller Indemnified Persons"), for, and will pay to the
Seller Indemnified Persons the amount of, any Damages, arising, directly or
indirectly, from or in connection with:
(a) any breach or default in the performance by Buyer of any covenant
or agreement of Buyer contained in this Agreement;
(b) any breach of warranty or inaccurate or erroneous representation
made by Buyer in Section Five; or
(c) any claim or liability, including any Environmental Liabilities,
known or unknown, arising out of, or by virtue of, or based upon the business
and operations conducted by Buyer after the effective time of Closing or arising
27
out of, or by virtue of, or based upon the ownership, management, use or
operation of the assets and properties of the Company or the Subsidiary after
the effective time of Closing.
7.6 TIME LIMITATIONS WITH RESPECT TO CLAIMS AGAINST SELLERS. No Seller
will have any liability (including liability for indemnification or any other
claim, including claims for breach of contact, fraud, misrepresentation, breach
of federal securities laws, or under any other federal or state statutory or
common law cause of action) arising, directly or indirectly, from or in
connection with a breach of such Seller's representations and warranties
contained in Section Four or for indemnification by such Seller under Section
7.3, unless on or before the expiration of the period of limitations provided
under Law for any breach of such representation and warranty, the Buyer
Indemnified Person notifies such Seller of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known by the Buyer
Indemnified Person.
7.7 TIME LIMITATIONS WITH RESPECT TO CLAIMS AGAINST THE LANDRYS. The
Landrys will not have any liability (including liability for indemnification or
any other claim, including claims for breach of contact, fraud,
misrepresentation, breach of federal securities laws, or under any other federal
or state statutory or common law cause of action) arising, directly or
indirectly, from or in connection with a breach of the Landrys' representations
and warranties contained in Section Three, or for indemnification by the Landrys
under Section 7.4, unless on or before the second anniversary of the Closing
Date the Buyer Indemnified Person notifies the Landrys of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Buyer Indemnified Person; provided, however, notwithstanding the foregoing:
(a) claims arising, directly or indirectly, from or in connection with
a breach of the Landrys' representations and warranties contained in Section 3.4
or Section 3.17 may be asserted and brought against the Landrys or either of
them until the expiration of the period of limitations applicable under Law for
any breach thereof; and
(b) claims for liability or indemnification based upon: (x) breach by
the Landrys of any covenant or obligation made by either of them in Section Six,
Section Seven, or Section Eight of this Agreement, the Promissory Notes, the
Guaranties, the Sellers' Releases, the KCL Consulting Agreement, or the Escrow
Agreements; or (y) claims made or asserted by parties other than Buyer or its
Affiliates may be made or asserted until expiration of the period of limitations
provided under Law for the prosecution of any such claims.
7.8 TIME LIMITATIONS WITH RESPECT TO CLAIMS AGAINST BUYER. Buyer will
not have any liability (including liability for indemnification or any other
claim, including claims for breach of contact, fraud, misrepresentation, breach
of federal securities laws, or under any other federal or state statutory or
common law cause of action) for breach of Buyer's representations and warranties
contained in Section Five or for indemnification by Buyer under Section 7.5,
unless on or before the second anniversary of the Closing Date the Seller
28
Indemnified Person notifies Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by the Seller
Indemnified Person; provided, however, notwithstanding the foregoing, claims for
liability or indemnification based upon: (x) breach by Buyer of any covenant or
obligation made by it in Section Six, Section Seven, or Section Eight of this
Agreement, the Promissory Notes, the Guaranties, the KCL Consulting Agreement,
or the Escrow Agreements; or (y) claims made or asserted by parties other than
Sellers or their respective Affiliates may be made or asserted until expiration
of the period of limitations provided under Law for the prosecution of any such
claims.
7.9 LIMITATIONS ON DAMAGES WITH RESPECT TO SELLERS OTHER THAN THE
LANDRYS. Each Seller, other than the Landrys, will have no liability (including
liability for indemnification or any other claim, including claims for breach of
contact, fraud, misrepresentation, breach of federal securities laws, or under
any other federal or state statutory or common law cause of action) under
Section 7.3 to the extent all Damages with respect to such matters exceed the
Purchase Price received by such Seller.
7.10 LIMITATIONS ON DAMAGES WITH RESPECT TO THE LANDRYS. The Landrys
will have no liability (including liability for indemnification or any other
claim, including claims for breach of contact, fraud, misrepresentation, breach
of federal securities laws, or under any other federal or state statutory or
common law cause of action) under Section 7.3 or Section 7.4 until the total of
all Damages with respect to such matters exceeds $200,000, and then only for the
amount by which such Damages exceed $200,000; provided, however, that this
limitation shall have no affect on and shall not be applicable to the Landrys'
obligation to repurchase the Net Accounts Receivable pursuant to the terms of
Section 8.2. Each of KCL and CAL will have no liability (with respect to a claim
for indemnification or otherwise, including for breach of contact, fraud,
misrepresentation, breach of federal securities laws, or any other federal or
state statutory or common law cause of action) under Section 7.3 or Section 7.4
to the extent all Damages with respect to such matters exceeds the Purchase
Price received by KCL or CAL, respectively. Notwithstanding anything in this
Agreement to the contrary, with respect to any claim (for indemnification or
otherwise, including for breach of contact, fraud, misrepresentation, breach of
federal securities laws, or any other federal or state statutory or common law
cause of action) for any breach of Section 3.16, Section 3.23, or Section 3.29
or for indemnification under Section 7.4(c), the Landrys shall have no
obligation to pay Damages to Buyer as a result of Laws which were not in effect
at or prior to the effective time of Closing to the extent Damages under the new
Laws exceed the Damages which would have resulted under Laws existing at the
effective time of Closing.
7.11 LIMITATIONS ON DAMAGES WITH RESPECT TO BUYER. Buyer will have no
liability (including liability for indemnification or any other claim, including
claims for breach of contact, fraud, misrepresentation, breach of federal
securities laws, or under any other federal or state statutory or common law
cause of action) under Section 7.5 until the total of all Damages with respect
to such matters exceeds $200,000, and then only for the amount by which such
Damages exceed $200,000. Buyer will have no liability (with respect to a claim
for indemnification or otherwise, including for breach of contact, fraud,
29
misrepresentation, breach of federal securities laws, or any other federal or
state statutory or common law cause of action) under Section 7.5 to the extent
all Damages with respect to such matters exceeds the Purchase Price.
7.12 RIGHT OF SET-OFF. Upon notice to the Landrys specifying in
reasonable detail the basis for such set-off, Buyer may set off any amount to
which it may reasonably believe it is entitled under Section 7.4 against amounts
otherwise payable under the Promissory Notes or under the Escrow Agreements if
funded pursuant to Section 7 of the Promissory Notes, as more fully described in
Section 12 of the Promissory Notes. The exercise of such right of set-off by
Buyer in good faith, whether or not ultimately determined to be justified, will
not constitute an event of default under the Promissory Notes. Neither the
exercise of nor the failure to exercise such right of set-off will constitute an
election of remedies or limit Buyer in any manner in the enforcement of any
other remedies that may be available to it.
7.13 PROCEEDINGS UNDER INDEMNIFICATION. If any third party shall assert
a claim against any party hereto that, if successful, might result in a claim
for indemnification pursuant to this Agreement, or if any party hereto shall
seek indemnification from any other party hereto with respect to a claim on its
own behalf, the party claiming indemnification ("Indemnitee") shall, within
twenty days (or such earlier time as might be required to avoid prejudicing the
position of the party obligated to provide indemnification ("Indemnitor")) after
receipt of notice of commencement of any action evidenced by service of process
or other legal pleading, or with reasonable promptness after the assertion in
writing of any claim by a third party, or with reasonable promptness after
discovery of a claim arising on its own behalf, give written notice thereof to
Indemnitor, together with a copy of such claim, process, or other legal
pleading. Indemnitor shall have the obligation to undertake the defense thereof
by representatives of its own choosing, reasonably satisfactory to Indemnitee,
and at its own expense; provided, however, that Indemnitee may participate in
the defense with counsel of its own choosing and at its own expense. Indemnitee
agrees to assign any counterclaims or crossclaims with respect to such claim to
Indemnitor. In the event that Indemnitor fails to defend such claim in good
faith and diligently, Indemnitee shall (upon further notice to Indemnitor) have
the right to undertake the defense, compromise, or settlement of such claim on
behalf of and for the account and risk of Indemnitor and at Indemnitor's
expense. Anything in this Section 7.13 to the contrary notwithstanding,
Indemnitor shall not settle any claim without the consent of Indemnitee unless
such settlement involves only the payment of money and the claimant provides to
Indemnitee a release from all liability in respect to such claim, and such claim
does not involve a continuing business interest of Indemnitee. If the settlement
of the claim involves more than the payment of money, or involves a continuing
business interest of Indemnitee, Indemnitor shall not settle the claim without
the prior written consent of Indemnitee, which consent shall not be unreasonably
withheld. The limitations on Damages set forth in Section 7.10 and Section 7.11
shall have no effect on Indemnitor's obligation to defend any third party claim
against Indemnitee pursuant to this Section 7.13. To the extent, however, that
Indemnitor expends funds in defense or settlement of such claim that are not
Indemnitor's responsibility due to the limitations on Damages set forth in
Section 7.10 or Section 7.11, Indemnitee shall reimburse Indemnitor for such
amounts.
30
7.14 COOPERATION. Indemnitor and Indemnitee shall make available to
each other and their attorneys and accountants, all books, records, and
documents relating to any claim hereunder and the parties shall render to each
other reasonable assistance in the defense of any claim hereunder which arises
as the result of claims made by persons not a party to this Agreement.
SECTION EIGHT
MISCELLANEOUS
8.1 EXERCISE OF STOCK OPTIONS AND RELATED TAX BENEFIT. KCL, the Key
Employees, and Xxxxx X. Xxxxxxx hold non-qualified stock options exercisable
upon the sale of the Company. The stock options are more particularly described
in Schedule 3.4. Upon the exercise of the stock options by KCL, the Key
Employees, and Xxxxx X. Xxxxxxx, it is anticipated that the Company may receive
a substantial federal income tax deduction. The federal income tax deduction may
result in a net operating loss for the Company for the period March 1, 1999
through the Closing Date. Buyer, the Company, and the Landrys agree that any net
operating loss created for the short tax period ending as of the Closing Date
will not be carried back to prior years, but instead shall be carried forward as
allowed under the applicable provisions of the Code. Sellers hereby ratify the
exercise of the stock options described above and acknowledge that such stock
options became exercisable due to the Transactions. Buyer hereby acknowledges
that it is herewith informed of the foregoing ratification and acknowledgment of
Sellers.
8.2 SUPPLEMENT TO SCHEDULE OF ACCOUNTS RECEIVABLE; REPURCHASE OF
UNCOLLECTED NET ACCOUNTS RECEIVABLE. Within ten business days of the Closing,
the Company shall deliver to Buyer and the Landrys a supplement to Schedule
3.12, setting forth all accounts receivable (billed and unbilled) of the Company
arising from the date set forth on Schedule 3.12 through the effective time of
Closing. Such supplement shall be prepared consistent with past practices of the
Company. All amounts reflected on such supplement shall be included within the
definition of "Accounts Receivable." All Net Accounts Receivable not collected
in full within 120 days after the Closing Date shall be purchased by the Landrys
from the Company for an amount in cash equal to the balance of such Net Accounts
Receivable, and such uncollected Net Accounts Receivable shall be assigned by
the Company to the Landrys, without recourse or liability. The obligations of
the Landrys under this Section 8.2 are joint and several obligations.
8.3 EXPENSES. Except as otherwise provided in this Agreement, each of
the respective parties to this Agreement shall pay their own costs and expenses
(including all legal, accounting, broker, finder, and investment banker fees)
relating to the negotiation and execution of this Agreement and the consummation
of the Transactions; provided, however, that the Company shall pay the first
$100,000 in costs and expenses incurred by Sellers relating to the negotiation
and execution of this Agreement.
31
8.4 PUBLIC ANNOUNCEMENTS AND DISCLOSURE. Any public announcement or
similar publicity with respect to this Agreement or the Transactions will be
issued, if at all, at such time and in such manner as Buyer determines.
8.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and shall be: (a) delivered by hand
(with written confirmation of receipt); (b) sent by telecopier (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested; (c) sent by a nationally recognized overnight delivery
service (receipt requested); or (d) deposited in the United States mail, postage
prepaid, certified or registered mail, return receipt requested, in each case to
the appropriate addresses and telecopier numbers set forth below or as set forth
on Schedule 3.4, as applicable (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties). Any notice
sent as described above shall be deemed delivered upon receipt, except that any
notice received on any day that is not a business day shall be deemed delivered
on the next business day, and any notice sent by telecopier and received after
3:00 p.m. local time by the recipient shall be deemed delivered on the next
business day.
If to either Xxxxxx: Xxxxxxx X. Xxxxxx
0000 Xxx Xxxxx
Xxxxxx Xxxx, Xxxxx 00000
Facsimile: 000-000-0000
and: Xxxxxxx X. Xxxxxx, Xx.
0000 Xxx Xxxxx Xxxxx
Xxxxxx Xxxx, Xxxxx 00000
Facsimile: 000-000-0000
With a copy to: Xxxxx X. Xxxxx
Xxxxxxx & Xxxxx, P.C.
Eleven Greenway Plaza; Suite 2806
Xxxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
If to Buyer: HydroChem Industrial Services, Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxx 00000
Attn: Chief Executive Officer
Facsimile: 000-000-0000
and: HydroChem Industrial Services, Inc.
000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxx 00000
Attn: General Counsel
Facsimile: 000-000-0000
32
and: HydroChem Industrial Services, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Vice President
Corporate Development
Facsimile: 000-000-0000
8.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof, supersedes all
prior oral or written agreements, understandings, or arrangements with respect
hereto, and may not be amended, supplemented, or terminated except by written
instrument executed by the parties. Any previous or contemporaneous oral or
written agreements or understandings between the parties regarding the subject
matter hereof are merged into and superseded by this Agreement.
8.7 WAIVER. Any waiver of any provision of this Agreement shall only
be effective if in writing, and any waiver of any provision of this Agreement
shall not constitute a waiver of any other provision of this Agreement, nor
shall such waiver constitute a waiver of any subsequent breach of such
provision.
8.8 ASSIGNMENT, SUCCESSORS AND ASSIGNS. This Agreement shall not be
assignable by any party hereto, by operation of law or otherwise, without the
prior written consent of the other parties hereto, which may be withheld in such
other party's absolute discretion. Any attempted assignment other than as
provided for herein shall be null and void. Subject to the foregoing, the rights
and obligations of the parties hereto shall attach to their respective
successors and assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement and
their permitted successors and assigns any legal or equitable right, remedy, or
claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
8.9 CHOICE OF LAW. The validity and construction of this Agreement
shall be governed by the laws of the State of Texas, excluding any choice of law
rule or principle which might refer to the laws of another state. Each party
consents and submits to the personal jurisdiction of and venue in any federal or
state court of competent jurisdiction sitting in Xxxxxx County, Texas.
8.10 SCHEDULES. The disclosures in the Schedules to this Agreement will
relate only to the representations and warranties in the Section of the
Agreement to which they expressly relate, unless otherwise specifically noted in
the Schedule. All capitalized terms not defined in the Schedules shall have the
meanings given such terms in this Agreement.
8.11 SEVERABILITY. If any provision of this Agreement is declared
unenforceable by a court of competent jurisdiction, such provision shall be
33
enforced to the greatest extent permitted by law, and such declaration shall not
affect the validity of any other provision of this Agreement.
8.12 ATTORNEY'S FEES. In the event of any dispute between the parties
concerning the validity, construction, or enforcement of this Agreement, the
prevailing party shall be entitled to be reimbursed by the non-prevailing party
for the prevailing party's reasonable expenses incurred in enforcing the terms
of this Agreement, including, without limitation, attorney's fees and costs of
court.
8.13 AMBIGUITIES. In the event of any dispute concerning the meaning of
any provision of this Agreement, each of the parties hereto agrees that, through
their respective counsel, they have contributed to the preparation of this
Agreement and have jointly written or composed the provisions herein and that no
party should be given any advantage over the other under the laws of
construction of instruments based upon the authorship hereof.
8.14 JOINDER OF SPOUSES. The spouse of each individual Seller as to
whom there exists a community property interest in such Seller's Shares joins
in the execution of this Agreement solely to evidence such spouse's consent
and agreement to the sale of the Shares of the Company by such Seller that form
a part of the community of such spouse and such Seller.
8.15 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
be deemed one instrument.
Dated as of the date first set forth above.
HydroChem Industrial Services, Inc.
BY: /s/ Pelham X. X. Xxxxx
---------------------------
Pelham X. X. Xxxxx,
Vice President
Xxxxxx Service Co., Inc.
BY: /s/ Xxxxxxx X. Xxxxxx
--------------------------
Xxxxxxx X. Xxxxxx,
President
34
Sellers:
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxxx
--------------------- -----------------------
Xxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
/s/ Xxx Xxxxxx /s/ Xxxx Xxxxxxx
-------------- ----------------------
Xxx Xxxxxx, Spouse of Xxxx Xxxxxxx, Spouse of
Xxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxx, Xx. /s/ Xxxxxx X. Xxxxxxx
-------------------------- ----------------------
Xxxxxxx X. Xxxxxx, Xx. Xxxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxx Xxxxxxx X. xxxxxx, Xx. Grantor
------------------ Retained Annuity Trust
Xxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxx
----------------------
/s/ Xxxxx Xxxxx Xxxxxxx X. Xxxxxx, Trustee
---------------
Xxxxx Xxxxx Xxxx X. Xxxxxx Grantor Retained
Annuity Trust
/s/ Xxxxxxx Xxxxx
----------------- By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx Xxxxx, Spouse of Xxxxx Xxxxx ----------------------
Xxxxxxx X. Xxxxxx, Trustee
/s/ Xxxx Xxxxxx
---------------
Xxxx Xxxxxx
/s/ Xxxxxxxxx Xxxxxx
--------------------
Xxxxxxxxx Xxxxxx, Spouse of Xxxx Xxxxxx
/s/ F. Xxxx Xxxxxxx
-------------------
F. Xxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
-----------------
Xxxxx Xxxxxxx, Spouse of F. Xxxx Xxxxxxx
35
