EXHIBIT 2.4
ASSET PURCHASE AGREEMENT
BY AND AMONG
U.S. REMODELERS, INC.,
AS PURCHASER,
AND
REUNION HOME SERVICES, INC.,
AND
KITCHEN MASTERS, INC.,
AS SELLERS
DATED AS OF NOVEMBER 30, 1997
TABLE OF CONTENTS
ARTICLE I
Definition
Section 1.1. Definitions..................................................... 1
ARTICLE II
Purchase and Sale
Section 2.1. Purchase and Sale of Assets..................................... 5
Section 2.2. Purchase Price.................................................. 6
ARTICLE III
Representations and Warranties of Sellers
Section 3.1. Organization and Good Standing; Qualification................... 8
Section 3.2. Corporate Records............................................... 8
Section 3.3. Authorization and Validity...................................... 8
Section 3.4. No Violation.................................................... 8
Section 3.5. Consents........................................................ 9
Section 3.6. Financial Statements............................................ 9
Section 3.7. Liabilities and Obligations..................................... 9
Section 3.8. Employee Matters................................................ 9
Section 3.9. Employee Benefit Plans.......................................... 10
Section 3.10. Absence of Certain Changes...................................... 11
Section 3.11. Title; Leased Assets............................................ 11
Section 3.12. Commitments..................................................... 12
Section 3.13. Adverse Agreements.............................................. 12
Section 3.14. Insurance....................................................... 13
Section 3.15. Patents, Trade-marks, Service Marks and Copyrights.............. 13
Section 3.16. Trade Secrets and Customer Lists................................ 14
Section 3.17. Taxes........................................................... 14
Section 3.18. Compliance with Laws............................................ 14
Section 3.19. Finder's Fee.................................................... 14
Section 3.20. Litigation...................................................... 14
Section 3.21. Accuracy of Information Furnished............................... 15
Section 3.22. Inventory....................................................... 15
Section 3.23. Books of Account................................................ 15
Section 3.24. Backlog......................................................... 15
Section 3.25. Accounts Receivable............................................. 15
Section 3.26. Product Warranties.............................................. 15
Section 3.27. Banking Relations............................................... 15
Section 3.28. Ownership Interests of Interested Persons....................... 15
Section 3.29. Environmental Laws.............................................. 16
Section 3.30. Securities Act Representations.................................. 16
ARTICLE IV
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Representations and Warranties of Purchaser
Section 4.1. Organization and Good Standing.......................................... 17
Section 4.2. Authorization and Validity.............................................. 17
Section 4.3. Capital Stock of Purchaser.............................................. 17
Section 4.4. No Violation............................................................ 17
Section 4.5. Finder's Fee............................................................ 17
ARTICLE V
Closing Deliveries
Section 5.1. Deliveries of Sellers................................................... 18
Section 5.2. Deliveries of Purchaser................................................. 19
ARTICLE VI
Post Closing Matters
Section 6.1. Further Instruments of Transfer......................................... 20
Section 6.2. Employee Matters........................................................ 20
Section 6.3. Sales Taxes Applicable to Sales Prior to or On the Closing Date......... 20
Section 6.4. Sales and Transfer Taxes................................................ 20
ARTICLE VII
Remedies
Section 7.1. Indemnification by Sellers.............................................. 21
Section 7.2. Indemnification by Purchaser............................................ 21
Section 7.3. Conditions of Indemnification........................................... 22
Section 7.4. Indemnification Limitations............................................. 23
Section 7.5. Waiver.................................................................. 23
Section 7.6. Remedies Not Exclusive.................................................. 23
Section 7.7. Offset.................................................................. 23
Section 7.8. Costs, Expenses and Legal Fees.......................................... 24
Section 7.9. Specific Performance.................................................... 24
Section 7.10. Tax Effect of Indemnification........................................... 24
ARTICLE VIII
Miscellaneous
Section 8.1. Amendment............................................................... 24
Section 8.2. Assignment.............................................................. 24
Section 8.3. Parties In Interest; No Third Party Beneficiaries....................... 24
Section 8.4. Entire Agreement........................................................ 24
Section 8.5. Severability............................................................ 25
Section 8.6. Survival of Representations, Warranties and Covenants................... 25
Section 8.7. Governing Law........................................................... 25
Section 8.8. Captions................................................................ 25
Section 8.9. Gender and Number....................................................... 25
Section 8.10. Reference to Agreement.................................................. 25
Section 8.11. Confidentiality; Publicity and Disclosures.............................. 26
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Section 8.12. Notice......................................................... 26
Section 8.13. Choice of Forum................................................ 27
Section 8.14. Service of Process............................................. 27
Section 8.15. Counterparts................................................... 27
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of November 30,
1997, among Reunion Home Services, Inc., a Texas corporation, ("Reunion"),
Kitchen Masters, Inc., a Texas corporation ("KMI"), (Reunion and KMI sometimes
referred to herein individually as a "Seller" and collectively as "Sellers"),
and U.S. Remodelers, Inc., a Delaware corporation ("Purchaser"),
W I T N E S S E T H :
WHEREAS, Reunion desires to sell substantially all of the assets of Reunion
to Purchaser, and KMI desires to sell certain assets of KMI to Purchaser, and
Purchaser desires to purchase such assets from Reunion and KMI;
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants herein contained, and on the terms and subject to the conditions
herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Assigned Commitments" shall mean those Commitments listed on Exhibit
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1.1(a); provided, however, than any Commitments which require consent to
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assignment shall not be deemed "Assigned Commitments" or assumed by Purchaser
until the required consent has been received by Purchaser.
(b) "Assumed Reunion Liabilities" shall mean (i) those fixed and
determinable liabilities of Reunion in the amounts as set forth in the Closing
Balance Sheet (ii) the obligations of Reunion under the Assigned Commitments
arising after the Effective Date, and (iii) those liabilities listed in Exhibit
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1.1(b). Except for the Assumed Reunion Liabilities, Purchaser shall not assume
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or agree to pay, perform or discharge any liabilities or obligations of Reunion
or KMI, whether contingent or otherwise, including without limitation the
Excluded Liabilities.
(c) "best knowledge", "have no knowledge of", or "do not know of" and
similar phrases shall mean (i) in the case of a natural person, the particular
fact was known, or not known, as the context requires, to such person after
diligent investigation and inquiry by such person, and (ii) in the case of an
entity, the particular fact was known, or not known, as the context requires, to
any
employee of such entity after diligent investigation and inquiry by the
principal executive officer of such entity.
(d) "Call Center" shall mean the telemarketing center of Reunion located
at 1591 Xxxxxx X. Xxxxxx Xxxxxxxxx, X. X., Xxxxx 000, Xxxx Xxx, Xxxxxxx.
(e) "Cash Compensation" shall have the meaning set forth in Section
3.8(a).
(f) "Closing" shall mean the closing of the transactions contemplated by
this Agreement, which shall occur at 10:00 a.m., local time, on the Closing Date
in the offices of Xxxxxxx Xxxxxx L.L.P., Suite 6000, 000 Xxxx Xxxxxx, Xxxxxx,
Xxxxx 00000, or at such other time and place as shall be mutually agreed in
writing by the parties hereto.
(g) "Closing Balance Sheet" shall have the meaning set forth in Sections
2.2(c).
(h) "Closing Date" shall mean November 30, 1997 or such other date as may
be mutually agreed in writing by the parties hereto; provided that the date may
not be later than December 15, 1997.
(i) "Code" shall have the meaning set forth in Section 2.2(d).
(j) "Commitments" shall have the meaning set forth in Section 3.12(a).
(k) "Compensation Plans" shall have the meaning set forth in Section
3.8(b).
(l) "Controlled Group" shall have the meaning set forth in Section 3.9(g).
(m) "Damages" shall have the meaning set forth in Section 7.1.
(n) "Effective Date" shall mean November 23, 1997.
(o) "Employee Benefit Plans" shall have the meaning set forth in Section
3.9(a).
(p) "Employee Policies and Procedures" shall have the meaning set forth in
Section 3.8(d).
(q) "Employment Agreements" shall have the meaning set forth in Section
3.8(c).
(r) "Environmental Laws" shall have the meaning set forth in Section 3.29.
(s) "ERISA" shall have the meaning set forth in Section 3.9(a).
(t) "Excluded Assets" shall mean the following assets and properties:
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(i) The consideration delivered to Reunion pursuant to this
Agreement for the Reunion Assets sold, transferred, assigned, conveyed and
delivered to Purchaser pursuant hereto;
(ii) The consideration delivered to KMI pursuant to this Agreement
for the KMI assets sold, transferred, assigned, conveyed and delivered to
Purchaser pursuant hereto;
(iii) The right of each of Reunion and KMI to enforce Purchaser's
representations, warranties and covenants hereunder and the obligations of
Purchaser to pay, perform or discharge the Assumed Reunion Liabilities and
all other rights, including rights of indemnification, of Reunion and KMI
under this Agreement or any instrument executed pursuant hereto;
(iv) The Articles of Incorporation and all amendments thereto,
Bylaws, corporate seal, minute books, stock books and other corporate
records of each of Reunion and KMI having exclusively to do with the
corporate organization and capitalization of Reunion and KMI, respectively;
(v) The books of account of Reunion and KMI, but each of Reunion and
KMI agree that Purchaser shall have the right at Purchaser's request to
inspect such books and make copies thereof;
(vi) Rights to claims for refunds of taxes of Reunion and KMI which
cannot be assigned by law;
(vii) Shares of the capital stock of each of Reunion and KMI;
(viii) Unclaimed dividends and other money and property that are held
in trust by each of Reunion or KMI or subject to escheat;
(ix) All assets owned or leased by Reunion located at the Call Center
and relating solely to the operation of the Call Center; and
(x) The utility deposits on the Illinois Facility and the Call
Center.
(u) "Excluded Liabilities" shall mean the liabilities described on
Exhibit 1.1(u), which Excluded Liabilities shall include, without
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limitation, any pension or other benefit liability relating to employees of
Reunion or KMI and their termination.
(v) "Financial Statements" shall have the meaning set forth in
Section 3.6.
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(w) "HFS License Agreement" shall mean that certain License Agreement,
dated March 1, 1997 by and between Reunion and HFS Licensing, Inc.
(x) "indemnifying party" shall have the meaning set forth in Section 7.3.
(y) "Illinois Facility" shall have the meaning set forth in Section 10.6.
(z) "KMI Assets" shall mean the assets described on Exhibit 1.1(z).
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(aa") "KMI Purchase Price" shall have the meaning set forth in Section
2.2(b).
(bb) "Lien" shall have the meaning set forth in Section 2.1(a).
(cc) "ordinary course of business" means the usual and customary way in
which Sellers have conducted its business in the past.
(dd) "party to be indemnified" shall have the meaning set forth in Section
7.3.
(ee) "Permitted Liens" shall mean financing statements filed of record
with respect to personal property leased by Reunion from unaffiliated third
party lessors and reflecting such lessor's ownership of such personal property.
(ff) "Personal Property" shall have the meaning set forth in Section
3.11(b).
(gg) "Proprietary Rights" shall have the meaning set forth in Section
3.15(a).
(hh) "Purchaser Common Stock" shall mean common stock, par value $0.01 per
share, of Purchaser.
(ii) "Purchaser Preferred Stock" shall mean preferred stock, par value
$0.01 per share, of Purchaser issued pursuant to and containing the terms and
conditions set forth in the Statement of Designation attached hereto as Exhibit
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1.1(ii).
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(jj) "Real Property" shall have the meaning set forth in Section 3.11(a).
(kk) "Referee" shall have the meaning set forth in Section 2.2(c).
(ll) "Related Parties" shall mean any affiliates of Sellers which have
loaned or advanced funds to the Sellers.
(mm) "Related Party Debt" shall mean the approximately $525,000 of
indebtedness owed by Reunion to the Related Parties included in the Assumed
Reunion Liabilities.
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(nn) "Reunion Assets" shall mean, with respect to Reunion, all of the
business, properties and assets (real and personal, tangible and intangible) of
Reunion of every kind and wherever situated that are owned by Reunion or in
which it has any right or interest (including without limitation and to the
extent owned, its business as a going concern, its goodwill, franchises, trade-
names, trade-marks, trade-xxxx registrations and trade-xxxx applications,
service marks, service xxxx registrations and service xxxx applications,
copyrights, copyright registrations and copyright applications, patents, patent
registrations and patent applications, processes, formulae, proprietary and
technical information, computer software, know-how, permits, licenses, trade
secrets, inventions and royalties (including all rights to xxx for past
infringement of any of the foregoing, if any); its land, leaseholds and other
interests in land; its inventory of finished goods, work-in-process and raw
materials, backlog, equipment and supplies; its cash, money on deposit with
banks and others, certificates of deposit, commercial paper, stocks, bonds and
other investments; its accounts receivable; rights under its insurance policies
and warranties through the Closing Date; its causes of action, judgments, claims
and demands of whatever nature; its deferred charges, advance payments, prepaid
items, claims for refunds, rights of offset and credits of all kinds; all credit
balances of or inuring to Reunion under any state unemployment compensation plan
or fund; its rights under restrictive covenants and obligations of present and
former officers and employees and of individuals and corporations; its rights
under partnership or joint venture agreements or arrangements; its rights under
all agreements assumed by Purchaser; and its files, papers and records relating
to the aforesaid business, properties and assets) including, other than the
Excluded Assets.
(oo) "Reunion Purchase Price" shall have the meaning set forth in Section
2.2(a).
(pp) "SEC" shall mean the United States Securities and Exchange
Commission.
(qq) "Securities Act" shall have the meaning set forth in Section 3.30.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE OF ASSETS.
(a) REUNION ASSETS. Subject to and upon the terms and conditions contained
herein, at the Closing, Reunion shall sell, transfer, assign, convey and deliver
to Purchaser, free and clear of all security interests, liens, claims,
mortgages, deeds of trust, charges, encumbrances and security agreements of any
nature (collectively "Liens") except for Permitted Liens and Purchaser shall
purchase, accept and acquire from Reunion, the Reunion Assets.
(b) KMI ASSETS. Subject to and upon the terms and conditions contained
herein, at the Closing, KMI shall sell, transfer, assign, convey and deliver to
Purchaser, free and clear of all Liens, and Purchaser shall purchase, accept and
acquire from KMI, the KMI Assets.
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SECTION 2.2. PURCHASE PRICE. Subject to adjustment as provided in
Section 2.2(c), the consideration to be paid by Purchaser hereunder shall be as
follows:
(a) REUNION PURCHASE PRICE. The total purchase price for the Reunion
Assets (the "Reunion Purchase Price") shall be $1.00 plus the assumption by
Purchaser of the Assumed Reunion Liabilities.
(b) KMI PURCHASE PRICE. The total purchase price for the KMI Assets (the
"KMI Purchase Price") shall be the delivery of 80,000 shares of Purchaser
Preferred Stock, provided such shares will not be delivered to KMI until the
delivery of the Closing Balance Sheet (but that the shares of Purchaser
Preferred Stock will be deemed issued as of the Closing Date) and conclusion of
any adjustments required by Section 2.2(c) to the number of shares of Purchaser
Preferred Stock due to KMI.
(c) POST-CLOSING ADJUSTMENT. No later than ninety (90) days after the
Closing Date, Reunion shall deliver to Purchaser a balance sheet as of the
Effective Date reflecting only the Reunion Assets and the Assumed Reunion
Liabilities, prepared in accordance with GAAP (the "Closing Balance Sheet").
Purchaser and their representatives will be given advance notice of and the
opportunity to observe all physical inventories taken in connection with
preparation of the Closing Balance Sheet.
The Closing Balance Sheet delivered pursuant to this Section 2.2(c) hereof
shall be prepared by Reunion in accordance with this Agreement and generally
accepted accounting principles, consistently applied. In preparing the Closing
Balance Sheet, Reunion shall permit Purchaser's independent auditors to review
the work papers, schedules and calculations related thereto.
If Purchaser does not dispute such Closing Balance Sheet and report within
five (5) business days of Purchaser's receipt of the Closing Balance Sheet, such
Closing Balance Sheet shall be final. In the event Purchaser has any dispute
with regard to the Closing Balance Sheet or any item included therein, such
dispute shall be resolved in the following manner:
(i) Purchaser shall notify Reunion in writing within five (5) business
days after Purchaser's receipt of the Closing Balance Sheet, which
notice shall specify in reasonable detail the nature of the dispute;
(ii) during the five (5) business day period following Reunion's receipt
of such notice, Purchaser and Reunion shall attempt to resolve such
dispute; and
(iii) if at the end of the five (5) business day period specified in
subsection (ii) above, Purchaser and Reunion shall have failed to
reach a written accord with shall be referred to the offices of a
mutually agreed upon accounting firm located in Dallas, Texas (the
"Referee"), which shall act as an arbitrator and shall issue its
report
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resolving all disputes as to the Closing Balance Sheet within sixty
(60) days after such dispute is referred to it. The Closing Balance
Sheet, as modified by any adjustments determined to be appropriate by
the Referee, shall then be the final Closing Balance Sheet. Each of
the parties hereto shall bear all costs and expenses incurred by it
in connection with such arbitration, except that the fees and
expenses of the Referee hereunder shall be borne equally by Purchaser
and Reunion. This provision for arbitration shall be specifically
enforceable by the parties; the decision of the Referee in accordance
with the provisions hereof shall be final and binding (absent
manifest error); and there shall be no right of appeal therefrom.
If the amount of the Assumed Reunion Liabilities (excluding the Related
Party Debt) reflected on the Closing Balance Sheet exceeds the value of Reunion
Assets shown thereon, then (a) first, the cash portion of the Reunion Purchase
Price shall be reduced, dollar for dollar, by the difference between the value
of the Assumed Reunion Liabilities and the value of the Reunion Assets, but not
below $0.00 and (b) second, the KMI Purchase Price shall be reduced by the
number of shares of Purchaser Preferred Stock that, if multiplied by the
liquidation preference for such shares, would equal the remaining difference
between the value of the Assumed Reunion Liabilities and value of Reunion Assets
reflected on the Closing Balance Sheet. The KMI Purchase Price, as adjusted
pursuant to this Section 2.2(c), shall be delivered to KMI within 10 days
following final determination of the Closing Balance Sheet.
(d) ALLOCATION OF PURCHASE PRICE. The Reunion Purchase Price and the KMI
Purchase Price shall be allocated among the Reunion Assets and the KMI Assets
respectively as set forth in Exhibit 2.2(d), such allocation to be made as
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provided in Section 1060 of the Internal Revenue Code of 1986 (the "Code").
Purchaser, Reunion and KMI shall each file Form 8594 (Asset Acquisition
Statement Under Section 1060) on a timely basis reporting the allocation of the
Reunion Purchase Price and the KMI Purchase Price consistent with the allocation
in Exhibit 2.2(d). Exhibit 2.2(d) also reflects the aggregate fair market
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values for each of Class I assets, Class II assets and Class III assets, as such
terms are defined in regulations promulgated pursuant to Section 1060 of the
Code. Purchaser, Reunion and KMI shall file on a timely basis any amendments
required to such Form 8594 as a result of a subsequent increase or decrease of
the Reunion Purchase Price or the KMI Purchase Price. Purchaser, Reunion and
KMI shall not take any position on their respective income tax returns that is
inconsistent with the allocation of the Reunion Purchase Price or the KMI
Purchase Price as agreed to in Exhibit 2.2(d) or as adjusted as a result of a
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subsequent increase or decrease in such purchase price. Purchaser, Reunion and
KMI shall each indemnify, defend and hold harmless the other party from and
against any and all claims, losses, liabilities, damages, costs and expenses
that may be incurred as a result of the failure to file Form 8594, the failure
to file such Form 8594 on a timely basis or the failure to file its income tax
return on a basis as required by this Section 2.2(d).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of Reunion and KMI (each constituting individually a "Seller" for
purposes of this Article III) represents and warrants that the following are
true and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. Each Seller
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Each Seller is duly qualified and licensed to
do business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Exhibit 3.1, except where the failure to be qualified or licensed would not have
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a material adverse effect on the business of each Seller. Neither Seller has
any assets or offices in any state other than the states listed in Exhibit 3.1.
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Neither Seller owns, directly or indirectly, any of the capital stock of any
other corporation or any equity, profit sharing, participation or other interest
in any corporation, partnership, joint venture or other entity.
SECTION 3.2. CORPORATE RECORDS. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of each Seller that have
been delivered or made available to Purchaser are true, correct and complete
copies thereof, as in effect on the date hereof. The minute books of each
Seller, copies of which have been delivered or made available to Purchaser,
contain accurate minutes of all meetings of, and accurate consents to all
actions taken without meetings by, the Board of Directors (and any committees
thereof) and the shareholders of Seller since the formation of each Seller.
SECTION 3.3. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by each Seller of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by each Seller. This Agreement and
each other agreement contemplated hereby have been or will be as of the Closing
Date duly executed and delivered by each Seller and constitute or will
constitute legal, valid and binding obligations of each Seller, enforceable
against each Seller in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
SECTION 3.4. NO VIOLATION. Except as set forth in Exhibit 3.4, neither
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the execution, delivery or performance of this Agreement or the other agreements
contemplated hereby nor the consummation of the transactions contemplated hereby
or thereby will (i) conflict with, or result in a violation or breach of the
terms, conditions or provisions of, or constitute a default under, the Articles
of Incorporation or Bylaws of either Seller or any agreement, indenture or other
instrument
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under which either Seller is bound or to which any of the assets of either
Seller are subject, or result in the creation or imposition of any security
interest, lien, charge or encumbrance upon any of the assets of either Seller or
(ii) violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over either Seller or the assets of either Seller. Each
Seller has complied with all laws, regulations and licensing requirements and
has filed with the proper authorities all necessary statements and reports.
SECTION 3.5. CONSENTS. Except as set forth in Exhibit 3.5, no consent,
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authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender or lessor or any other person or entity
is required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of Seller.
SECTION 3.6. FINANCIAL STATEMENTS. Reunion has furnished to Purchaser an
unaudited balance sheet and related unaudited statements of operations, retained
earnings and cash flows for the month period ended October 26, 1997, (the
"Financial Statements"). The Financial Statements are in accordance with the
books and records of each Seller, fairly present the financial condition and
results of operations of Seller as of the dates and for the periods indicated
and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis with prior periods.
SECTION 3.7. LIABILITIES AND OBLIGATIONS. Except as set forth in Exhibit
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3.7, the Financial Statements reflect all liabilities of Seller, accrued,
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contingent or otherwise (known or unknown and asserted or unasserted), arising
out of transactions effected or events occurring on or prior to the date hereof
other than transaction arising in the ordinary course of business. All reserves
shown in the Financial Statements are appropriate, reasonable and sufficient to
provide for losses thereby contemplated. Except as set forth in the Financial
Statements and in the Closing Balance Sheet, neither Seller is liable upon or
with respect to, or obligated in any other way to provide funds in respect of or
to guarantee or assume in any manner, any debt, obligation or dividend of any
person, corporation, association, partnership, joint venture, trust or other
entity, and neither Seller knows of any basis for the assertion of any other
claims or liabilities of any nature or in any amount.
SECTION 3.8. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Exhibit 3.8(a) contains a complete and accurate
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list of the names, titles and cash compensation, including without limitation
wages, salaries, bonuses (discretionary and formula) and other cash compensation
(the "Cash Compensation") of all employees of Seller who are currently
compensated at a rate in excess of $20,000 per year and who earned in excess of
such amount during Seller's preceding fiscal year. In addition, Exhibit 3.8(a)
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contains a complete and accurate description of any promised increases in Cash
Compensation of employees of Seller that have not yet been effected.
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(b) COMPENSATION PLANS. There are no compensation plans, arrangements or
practices (the "Compensation Plans") sponsored by each Seller or to which each
Seller contributes on behalf of its employees, other than Employee Benefit Plans
listed in Exhibit 3.9(a). The term "Compensation Plans" includes, without
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limitation, plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options.
(c) EMPLOYMENT AGREEMENTS. All employees of each Seller are terminable at
will of the Company. There are no employment agreements (the "Employment
Agreements") to which either Seller is a party with respect to its employees.
The term "Employment Agreements" includes, without limitation, employee leasing
agreements, employee services agreements and noncompetition agreements.
(d) EMPLOYEE POLICIES AND PROCEDURES. There are no employee manuals,
policies, procedures and work-related rules (the "Employee Policies and
Procedures") that apply to employees of each Seller.
(e) LABOR COMPLIANCE. Neither Seller is a party to any collective
bargaining or other labor union contract. No collective bargaining agreement is
being negotiated by either Seller. To the best knowledge of each Seller, the
employees of such Seller have no intention to and have not threatened to
organize or join a union, labor organization or collective bargaining unit. Each
Seller is in compliance in all material respects with all applicable laws
respecting employment, employment practices, and wages and hours. There is no
pending or to the knowledge of either Seller, threatened labor dispute, strike,
or work stoppage against either Seller that may interfere with the business
activities of either Seller. Except as set forth in Exhibit 3.8(e), neither
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Seller or any of its respective representatives or employees has committed any
unfair labor practices in connection with the operation of the business of such
Seller, and there is no pending or to the knowledge of either Seller, threatened
charge or complaint against either Seller by the National Labor Relations Board
or any comparable Governmental Entity.
(f) ALIENS. All employees of each Seller have provided documentation to
Seller reflecting that such employees are citizens of, or are authorized to be
employed in, the United States.
SECTION 3.9. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Exhibit 3.9(a) contains a complete and accurate list
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of all employee benefit plans (the "Employee Benefit Plans") (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) sponsored by each Seller or to which such Seller contributes
on behalf of its employees and all Employee Benefit Plans previously sponsored
or contributed to on behalf of its employees within the three years preceding
the date hereof.
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(b) COMPLIANCE. Each Employee Benefit Plan has been administered and
maintained in compliance with all laws, rules and regulations. No Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency. No
prohibited transactions (within the meaning of Section 4975 of the Code) have
occurred with respect to any Employee Benefit Plan.
(c) QUALIFICATION. Neither Seller has an Employee Benefit Plan intended
to be qualified within the meaning of Section 401(a) of the Code and/or tax-
exempt within the meaning of Section 501(a) of the Code.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Since the date of the Financial
Statements, there has not been (i) any material adverse change in the financial
position of Reunion, (ii) any entry of either Seller into any commitments or
transactions material to their business, (iii) any change in the accounting
methods or principles of either Seller, (iv) any revaluation by either Seller of
any of its respective assets, or (v) any indebtedness of borrowed money incurred
or committed for either Seller. Reunion has applied its standard credit policies
for accepting new customers in a manner consistent with prior practice.
SECTION 3.11. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. Neither Seller owns any interests in real property
other than the leasehold interests described in Section 3.11(c)
(b) REUNION PERSONAL PROPERTY. A description of all material fixed assets
owned by Reunion is set forth in Exhibit 3.11(b). Except as set forth in
---------------
Exhibit 3.11(b), Reunion has good, valid and marketable title to all the
---------------
tangible and intangible personal property (collectively, the "Personal
Property"). The Personal Property and the leased personal property referred to
in Section 3.11(c) constitute the only personal property used in the conduct of
Seller's business. Upon consummation of the transactions contemplated hereby,
Purchaser shall receive good, valid and marketable title to the Personal
Property free and clear of all security interests, liens, claims and
encumbrances other than Permitted Liens and those described in Exhibit 3.11(b).
---------------
(c) REUNION LEASES. A list and brief description of all leases of real
and personal property to which Reunion is a party, either as lessor or lessee,
are set forth in Exhibit 3.11(c). All such leases are valid and enforceable in
---------------
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
(d) REUNION RIGHT TO USE ASSETS. All tangible assets used in the conduct
of Reunion's business are reflected in the Financial Statements in a manner that
is in conformity with generally accepted accounting principles applied on a
consistent basis with prior periods. Reunion owns, leases
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or otherwise possesses a transferable right to use all assets used in the
conduct of its business, and except for the Excluded Assets, will transfer all
of such rights to Purchaser at Closing.
(e) KMI ASSETS. Except as set forth on Exhibit 3.11(e), KMI has good,
---------------
valid and marketable title to the KMI Assets and upon consummation of the
transactions contemplated hereby, Purchaser shall receive good, valid and
marketable title to the KMI Assets, free and clear of all liens, claims and
encumbrances, other than those described on Exhibit 3.11(e).
---------------
SECTION 3.12. COMMITMENTS.
(a) COMMITMENTS; DEFAULTS. Exhibit 3.12 lists each agreement, contract or
------------
commitment to which Reunion is a party or by which it is bound and that is
material to the business, financial condition, results of operations or
prospects of Reunion. Those items set forth on Exhibit 3.12 are hereinafter
------------
collectively referred to as the "Commitments." True, correct and complete copies
of the written Commitments, and true, correct and complete written descriptions
of the oral Commitments, have heretofore been delivered or made available to
Purchaser. There are no existing defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of time
or both, would constitute defaults by such Seller, and no penalties have been
incurred nor are amendments pending, with respect to the Commitments, except as
described in Exhibit 3.12. The Commitments are in full force and effect and are
------------
valid and enforceable obligations of the parties thereto in accordance with
their respective terms, and no defenses, off-sets or counterclaims have been
asserted or, to the best knowledge of such Seller, may be made by any party
thereto, nor has such Seller waived any rights thereunder, except as described
in Exhibit 3.12. Neither Seller has received notice of any default with respect
------------
to any Commitment to which it is a party.
(b) NO CANCELLATION OR TERMINATION OF COMMITMENT. Except as contemplated
hereby, neither Seller has received notice of any plan or intention of any other
party to any Commitment to which it is a party to exercise any right to cancel
or terminate any such Commitment or agreement, and such Seller knows of no fact
that would justify the exercise of such a right. Neither Seller currently
contemplates, or has reason to believe any other person or entity currently
contemplates, any amendment or change to any Commitment to which such Seller is
a party. Except as listed in Exhibit 3.12, none of the customers or suppliers
------------
of either Seller has refused, or communicated that it will or may refuse, to
purchase or supply goods or services, as the case may be, or has communicated
that it will or may substantially reduce the amounts of goods or services that
it is willing to purchase from, or sell to, such Seller.
SECTION 3.13. ADVERSE AGREEMENTS. Neither Seller is a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects, or so far as such Seller can now foresee, may
in the future materially and adversely affect, the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of such
Seller.
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SECTION 3.14. INSURANCE. Each Seller carries property, liability,
workers' compensation and such other types of insurance as is customary in such
Seller's industry. A list and brief description of all insurance policies of
each Seller are set forth in Exhibit 3.14. All of such policies are valid and
------------
enforceable policies, issued by insurers of recognized responsibility in amounts
and against such risks and losses as is customary in such Seller's industry.
Such insurance shall be outstanding and duly in force without interruption up to
and including the Closing Date. True, complete and correct copies of all such
policies have been provided to Purchaser on or prior to the date hereof.
SECTION 3.15. PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS.
(a) OWNERSHIP. Each Seller owns all patents, trade-marks, service marks
and copyrights, if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the rights of
others. Set forth in Exhibit 3.15(a) is a true and correct description of the
---------------
following ("Proprietary Rights"):
(i) all trade-marks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents, copyrights and applications currently owned, in
whole or in part, by each Seller with respect to such Seller's assets and
business, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which such Seller is a party
(including expiration date if applicable); and
(ii) all agreements relating to technology, know-how or processes that
either Seller is licensed or authorized to use by others, or which it
licenses or authorizes others to use.
(b) CONFLICTING RIGHTS OF THIRD PARTIES. Except as set forth in Exhibit
-------
3.15(b), each Seller has the sole and exclusive right to use the Proprietary
-------
Rights without infringing or violating the rights of any third parties. No
consent of third parties will be required for the transfer thereof to Purchaser
or the use thereof by Purchaser upon consummation of the transactions
contemplated hereby and the Proprietary Rights are freely transferable. No claim
has been asserted by any person to the ownership of or right to use any
Proprietary Right or challenging or questioning the validity or effectiveness of
any license or agreement constituting a part of any Proprietary Right, and such
Seller knows of no valid basis for any such claim. Each of the Proprietary
Rights is valid and subsisting, has not been canceled, abandoned or otherwise
terminated and, if applicable, has been duly issued or filed.
(c) CLAIMS OF OTHER PERSONS. Neither Seller has knowledge of any claim
that, or inquiry as to whether, any product, activity or operation of such
Seller infringes upon or involves, or has resulted in the infringement of, any
proprietary right of any other person, corporation or other entity; and no
proceedings have been instituted, are pending or are threatened that challenge
the rights of such Seller with respect thereto. Neither Seller has given or is
bound by any agreement of
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indemnification for any Proprietary Right as to any property manufactured, used
or sold by such Seller.
SECTION 3.16. TRADE SECRETS AND CUSTOMER LISTS. Each Seller has the right
to use, free and clear of any claims or rights of others except claims or rights
specifically set forth in Exhibit 3.16, all trade secrets, customer lists and
------------
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by such Seller. Neither Seller
is using or in any way making use of any confidential information or trade
secrets of any third party, including without limitation any past or present
employee of such Seller.
SECTION 3.17. TAXES. All income, excise, corporate, franchise, property,
sales, use, payroll, withholding and other taxes related to taxable periods or
portions thereof ending prior to or on the Effective Date, including, without
limitation, governmental charges, assessments and required contributions of
either Seller that may result in the filing of a Lien on the Reunion Assets or
KMI Assets or that may result in the imposition of transferee or other liability
on Purchaser for the payment of such taxes, have been accurately recorded and
duly paid, collected or withheld and remitted to the appropriate Governmental
Authority, except for current taxes not due and payable prior to or on the
Effective Date (such taxes to be paid when due by each Seller) unless such taxes
are accrued on the Closing Balance Sheet (in which case, such taxes to be paid
when due by Purchaser).
SECTION 3.18. COMPLIANCE WITH LAWS. Each Seller, to the best of Seller's
knowledge, has complied, in all material respects, with all laws, regulations
and licensing requirements and has filed with the proper authorities all
necessary statements and reports. There are no existing violations by either
Seller of any federal, state or local law or regulation that could affect the
property or business of such Seller in any material respect. Each Seller
possesses all necessary licenses, franchises, permits and governmental
authorizations to conduct its business as now conducted, all of which are listed
in Exhibit 3.18, except where the failure to possess such licenses, permits and
------------
governmental authorizations, would not have a material adverse effect on the
business, condition (financial or otherwise) or properties of the Sellers.
SECTION 3.19. FINDER'S FEE. Neither Seller has incurred any obligation
for any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
SECTION 3.20. LITIGATION. Except as described in Exhibit 3.20, there are
------------
no legal actions or administrative proceedings or investigations instituted, or
to the best knowledge of either Seller threatened, against or affecting, or that
could affect, such Seller, or the business or assets of such Seller. Neither
Seller is subject to any continuing court or administrative order, writ,
injunction or decree applicable specifically to such Seller or to its business,
assets, operations or employees or (ii) in default with respect to any such
order, writ, injunction or decree. Neither Seller knows of any basis for any
such action, proceeding or investigation.
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SECTION 3.21. ACCURACY OF INFORMATION FURNISHED. All information
furnished to Purchaser by each Seller hereby or in connection with the
transactions contemplated hereby is true, correct and complete in all respects.
Such information states all facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements are made, true, correct and complete.
SECTION 3.22. INVENTORY. All of the inventory included in the Reunion
Assets and the KMI Assets is in good, current, standard and merchantable
condition and is not obsolete or defective. Purchase commitments for merchandise
are not in excess of normal requirements and, taken as a whole, are not at
prices in excess of market prices. Each Seller has presently, and at the
Closing Date will have, the types and quantities of inventories appropriate,
taken as a whole, to conduct its business consistently with past practices.
SECTION 3.23. BOOKS OF ACCOUNT. The books of account of each Seller have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of such Seller have been properly recorded in such books.
SECTION 3.24. BACKLOG. Exhibit 3.24 sets forth the backlog of each
------------
Seller's business as of October 26, 1997 and has been accurately derived from
such Seller's internal records of backlog of unfilled firm orders for products
manufactured or sold by such Seller as of the date hereof.
SECTION 3.25. ACCOUNTS RECEIVABLE. Exhibit 3.25 sets forth the accounts
------------
receivable of each Seller's business from sales made as of October 26, 1997 and
the payments and rights to receive payments related thereto, is complete and
accurate. All the accounts receivable of Sellers have arisen from bona fide
transactions in the ordinary course of business and are valid and enforceable
claims subject to no right of set-off or counterclaim.
SECTION 3.26. PRODUCT WARRANTIES. Except as set forth in Exhibit 3.26,
------------
there is no claim against or liability of either Seller on account of product
warranties or with respect to the manufacture, sale or rental of defective
products and there is no basis for any such claim on account of defective
products heretofore manufactured, sold or rented that is not fully covered by
insurance.
SECTION 3.27. BANKING RELATIONS. Set forth in Exhibit 3.27 is a complete
------------
and accurate list of all arrangements that each Seller has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
SECTION 3.28. OWNERSHIP INTERESTS OF INTERESTED PERSONS. Except as set
forth in Exhibit 3.28, no officer, supervisory employee, director or shareholder
------------
of either Seller, or their respective spouses or children, owns directly or
indirectly, on an individual or joint basis, any material interest
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in, or serves as an officer or director of, any customer or supplier of such
Seller, or any organization that has a material contract or arrangement with
such Seller.
SECTION 3.29. ENVIRONMENTAL LAWS. To the best knowledge of Sellers,
neither of the Sellers nor any of the Reunion Assets or the KMI Assets are
currently in violation of, or subject to any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
and this representation and warranty would continue to be true and correct
following disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances, if any, pertaining to the Reunion Assets or
the KMI Assets.
SECTION 3.30. SECURITIES ACT REPRESENTATIONS. KMI acknowledges that the
shares of Purchaser Preferred Stock to be delivered to KMI pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933, as amended (the "Securities Act") and therefore may not be resold without
compliance with the Securities Act and the rules and regulations promulgated
thereunder. The Purchaser Preferred Stock to be acquired by KMI pursuant to this
Agreement is being acquired by it solely for its own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
(a) COMPLIANCE WITH LAW. KMI covenants, warrants and represents that the
Purchaser Preferred Stock issued to KMI will not be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Securities Act and the
rules and regulations of the SEC. All of the Purchaser Preferred Stock issued
to KMI shall bear the following legend: THE SHARES REPRESENTED HEREBY HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE SECURITIES ACT AND APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
(b) ECONOMIC RISK; SOPHISTICATION. KMI is able to bear the economic risk
of an investment in the Purchaser Preferred Stock acquired pursuant to this
Agreement, and can afford to sustain a total loss of such investment and each
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in such
stock. KMI has had an adequate opportunity to ask questions and receive answers
from the officers of Purchaser concerning any and all matters relating to the
transactions described herein including, without limitation, the background and
experience of the current and proposed officers and directors of Purchaser, the
plans for the operations of the business of Purchaser, and any plans for
additional acquisitions and the like. KMI has asked any and all questions in the
nature described in the preceding sentence and all questions have been answered
to their satisfaction.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date as
if made on that date:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to carry on
the business in which it is engaged, to own the properties it owns, to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
SECTION 4.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Purchaser of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Purchaser. This Agreement and each other
agreement contemplated hereby have been or will be as of the Closing Date duly
executed and delivered by Purchaser and constitute or will constitute legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
SECTION 4.3. CAPITAL STOCK OF PURCHASER. The Purchaser Preferred Stock to
be issued to KMI and the Purchaser Common Stock to be issued to Xxxxxx have been
duly authorized and when issued to KMI and Xxxxxx, respectively, such shares
will be validly issued, fully-paid and non-assessable. As of the date of this
Agreement, the authorized capital stock of Purchaser consists of (a) 1,000,000
shares of Purchaser Common Stock, of which 229,625 shares are issued and
outstanding and (b) 100,000 shares of Purchaser Preferred Stock authorized of
which none are issued and outstanding.
SECTION 4.4. NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Certificate of Incorporation
or Bylaws of Purchaser or any agreement, indenture or other instrument under
which Purchaser is bound or (ii) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.
SECTION 4.5. FINDER'S FEE. Purchaser has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the transactions
contemplated hereby.
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ARTICLE V
CLOSING DELIVERIES
SECTION 5.1. DELIVERIES OF SELLERS. At the Closing, Reunion and KMI shall
deliver to Purchaser the following, all of which shall be in a form satisfactory
to counsel to Purchaser:
(a) bills of sale conveying the Reunion Assets and the KMI Assets to
Purchaser;
(b) an assignment of each lease including in the Reunion Assets or the KMI
Assets, assigning the interest of the Seller being a party to Purchaser;
(c) assignments for all funds of Reunion on deposit with banks or other
persons (other than Excluded Assets);
(d) an Assignment and Assumption Agreement in the form attached as Exhibit
-------
5.1(d) with respect to each Seller's rights and obligations under the Assigned
------
Commitments.
(e) a copy of resolutions of the Board of Directors of each Seller
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by the Secretary of such Seller
as being true and correct copies of the originals thereof subject to no
modifications or amendments;
(f) a certificate of the Secretary of each Seller certifying as to the
incumbency of the directors and officers of such Seller and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of such Seller;
(g) a certificate, dated within ten days of the Closing Date, of the
Secretary of State of Texas establishing that each Seller is in existence, has
paid all franchise taxes and otherwise is in good standing to transact business
in its state of incorporation;
(h) certificates, dated within ten days of the Closing Date, of the
Secretaries of State of each of the states in which a Seller is qualified to do
business, to the effect that such Seller is qualified to do business and is in
good standing as a foreign corporation in such state;
(i) an opinion of Xxxxx & Associates, counsel to each Seller, dated as of
the Closing Date, in the form attached as Exhibit 5.1(i);
--------------
(j) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.5 including the consent to assignment from HFS with
respect to the HFS License Agreement;
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(k) an executed Confidentiality and Noncompetition Agreement between each
Seller, and Purchaser in the form attached as Exhibit 5.1(k);
--------------
(l) a Transition Services Agreement in the form attached hereto as Exhibit
-------
5.1(l); and
------
(m) such other instrument or instruments of transfer as shall be necessary
or appropriate, as Purchaser or its counsel shall reasonably request, to vest in
Purchaser good and marketable title to the Reunion Assets and the KMI Assets.
SECTION 5.2. DELIVERIES OF PURCHASER. At the Closing, Purchaser shall
deliver the following:
(a) to Reunion:
(i) $1.00 in cash;
(ii) an Assumption and Assumption Agreement in the form of that
attached as Exhibit 5.1(d) pursuant to which Purchaser assumes
--------------
the Assumed Reunion Liabilities to which Reunion is a party;
(iii) Confidentiality and Noncompetition Agreement between Reunion
and Purchaser in the form attached as Exhibit 5.1(k);
--------------
(iv) Transition Services Agreement in the form attached as Exhibit
-------
5.1(l); and
------
(v) an opinion of Xxxxxxx Xxxxxx L.L.P., counsel to Purchaser,
dated as of the Closing Date, in the form attached as Exhibit
-------
5.2(a).
------
(b) to KMI:
(i) Confidentiality and Noncompetition Agreement between KMI and
Purchaser in the form attached as Exhibit 5.1(k).
--------------
(ii) an opinion of Xxxxxxx Xxxxxx L.L.P., counsel to Purchaser,
dated as of the Closing Date, in the form attached as Exhibit
-------
5.2(a).
------
(c) a copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by Purchaser's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
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(d) a certificate of the Secretary of Purchaser certifying as to the
incumbency of the directors and officers of Purchaser and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Purchaser; and
(e) a certificate, dated within ten days of the Closing Date, of the
Secretary of State of Purchaser's state of incorporation, establishing that
Purchaser is in existence, has paid all state taxes and otherwise is in good
standing to transact business in such state.
ARTICLE VI
POST CLOSING MATTERS
SECTION 6.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of Purchaser, each Seller shall deliver any further instruments of
transfer and take all reasonable action as may be necessary or appropriate to
(i) vest in Purchaser good and marketable title to the Reunion Assets and the
KMI Assets and (ii) transfer to Purchaser all licenses and permits (to the
extent assignable) necessary for the operation of the Reunion Assets and the KMI
Assets (including, without limitation, all contractor's licenses).
SECTION 6.2. EMPLOYEE MATTERS. Purchaser shall not be obligated to
employ any employees of either Seller, and shall not assume any liability of
either Seller under any Employee Benefit Plans.
SECTION 6.3. SALES TAXES APPLICABLE TO SALES PRIOR TO OR ON THE CLOSING
DATE. Each Seller shall timely file all sales tax returns with respect to sales
occurring in connection with such Seller's business prior to or on the Closing
Date.
SECTION 6.4. SALES AND TRANSFER TAXES. Each Seller shall timely pay all
sales taxes applicable to the sales reported on the tax returns referred to in
Section 6.3. Each Seller shall be liable for and shall indemnify Purchaser
against all sales, transfer, use, excise, registration or other taxes assessed
or payable in connection with the transfer of the Reunion Assets and the KMI
Assets to Purchaser. Each Seller and Purchaser shall sign, and otherwise shall
cooperate in the preparation and filing with the appropriate governmental
agencies of, any affidavits or other transfer documents that are required in
connection with the transfer of vehicles or trailers that constitute part of the
Reunion Assets or KMI Assets.
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SECTION 6.5 USE OF ILLINOIS FACILITY. Purchaser shall be permitted to
occupy and use the facility located at 0000 X. Xxxxxxxxx Xxxx, Xxxxxxxxx
Xxxxxxx, Xxxxxxxx (the "Illinois Facility") without cost to Purchaser, other
than utilities used during such occupancy from the Closing date through January
1, 1998.
ARTICLE VII
REMEDIES
SECTION 7.1. INDEMNIFICATION BY SELLERS. Subject to the terms and
conditions of this Article, each Seller agrees, jointly and severally, to
indemnify, defend and hold Purchaser and its directors, officers, agents,
attorneys and affiliates harmless from and against all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
attorneys' fees and expenses (collectively, "Damages"), asserted against or
incurred by such indemnities by reason of or resulting from:
(a) a breach of any representation, warranty or covenant of such Seller
contained herein, in any exhibit, schedule, certificate or financial statement
delivered hereunder, or in any agreement executed in connection with the
transactions contemplated hereby;
(b) other than liabilities included in the Assumed Reunion Liabilities,
any product liability claims relating to products sold by such Seller prior to
or on the Effective Date, and all general liability claims arising out of or
relating to occurrences of any nature relating to such Seller's business prior
to the Effective Date, whether any such claims are asserted prior to, on or
after the Effective Date;
(c) any obligation or liability under or related to any Employee Benefit
Plan or the termination thereof;
(d) any tax filing or return or payment made, or position taken, by either
Seller that any governmental authority challenges and that results in an
assertion of Damages against Purchaser;
(e) any Excluded Liability; or
(f) any liability imposed upon Purchaser related to or arising from the
transactions contemplated by this Agreement, including, without limitation, any
claims asserted by creditors of Reunion or KMI.
SECTION 7.2. INDEMNIFICATION BY PURCHASER. Subject to the terms and
conditions of this Article, Purchaser hereby agrees to indemnify, defend and
hold each Seller and its respective directors, officers, agents, attorneys and
affiliates harmless from and against all Damages asserted against or incurred by
any of such indemnities by reason of or resulting from:
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(a) a breach by Purchaser of any representation, warranty or covenant of
Purchaser contained herein or in any exhibit, schedule or certificate delivered
hereunder, or in any agreement executed in connection with the transactions
contemplated hereby; or
(b) the failure of Purchaser to pay, perform and discharge when due any of
the Assumed Reunion Liabilities or to pay, perform and discharge, after the
Effective Date, any obligations under the Assigned Commitments; or
(c) any act or omission relating to the use by Purchaser, its employees,
officers, agents and affiliates with respect to Purchaser's occupancy of the
Illinois Facility (other than taxes or other direct costs of occupancy).
SECTION 7.3. CONDITIONS OF INDEMNIFICATION. The respective obligations
and liabilities of each Seller, Xxxxxx and Purchaser (the "indemnifying party")
to the other (the "party to be indemnified") under Sections 7.1 and 7.2 with
respect to claims resulting from the assertion of liability by third parties
shall be subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required to avoid
prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume the
defense of such action or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnifying party and the party to be
indemnified and the party to be indemnified has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party (in which case, if
the party to be indemnified informs the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the party to be indemnified, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the party to be indemnified, which firm shall be designated in writing
by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the 10th day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, the party to be indemnified will (upon further
notice to
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the indemnifying party) have the right to undertake the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the
indemnifying party and at the indemnifying party's expense, subject to the right
of the indemnifying party to assume the defense of such claims at any time prior
to settlement, compromise or final determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall not settle
any claim without the consent of the party to be indemnified unless such
settlement involves only the payment of money and the claimant provides to the
party to be indemnified a release from all liability in respect of such claim.
If the settlement of the claim involves more than the payment of money, the
indemnifying party shall not settle the claim without the prior consent of the
party to be indemnified.
(d) The party to be indemnified and the indemnifying party will each
cooperate with all reasonable requests of the other.
SECTION 7.4. INDEMNIFICATION LIMITATIONS. Notwithstanding the provisions
of Section 7.1, Sellers shall not be obligated to indemnify purchaser unless the
aggregate amount of Damages claimed exceeds $50,000 in which case Sellers shall
indemnify Purchaser for Damages in excess of $50,000.
SECTION 7.5. WAIVER. No waiver by any party of any default or breach by
another party of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit or any document, instrument or certificate
contemplated hereby shall be deemed to be a waiver of any subsequent default or
breach by such party of the same or any other representation, warranty, covenant
or condition. No act, delay, omission or course of dealing on the part of any
party in exercising any right, power or remedy under this Agreement or at law or
in equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
SECTION 7.6. REMEDIES NOT EXCLUSIVE. The remedies provided in this
Article shall not be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity.
SECTION 7.7. OFFSET. Any and all amounts owing or to be paid by Purchaser
to either of the Sellers, hereunder or otherwise, including any amounts due to
KMI under the Purchaser Preferred Stock shall be subject to offset and reduction
pro tanto by any amounts that may be owing at any time by such Seller to
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Purchaser in respect of any failure or breach of any representation, warranty or
covenant of such Seller under or in connection with this Agreement or any other
agreement with Purchaser or any transaction contemplated hereby or thereby, as
reasonably determined by Purchaser subject to the limitations set forth in
Section 7.4 hereof. If Purchaser determines that such offset is appropriate,
notice shall be given to such Seller, as the case may be, of such determination
at least 10 days prior to the due date of the payment to be reduced. If the
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conditions upon which the reduction is based are cured by such Seller prior to
such due date, as determined by Purchaser, the amount of such payment shall not
be so reduced.
SECTION 7.8. COSTS, EXPENSES AND LEGAL FEES. Subject to the provisions of
Section 8.13, whether or not the transactions contemplated hereby are
consummated, each party hereto shall bear its own costs and expenses (including
attorneys' fees), except that each party hereto agrees to pay the costs and
expenses (including reasonable attorneys' fees and expenses) incurred by the
other parties in successfully (i) enforcing any of the terms of this Agreement
or (ii) proving that another party breached any of the terms of this Agreement.
SECTION 7.9. SPECIFIC PERFORMANCE. Each Seller acknowledges that a
refusal by such Seller to consummate the transactions contemplated hereby will
cause irreparable harm to Purchaser, for which there may be no adequate remedy
at law and for which the ascertainment of damages would be difficult. Therefore,
Purchaser shall be entitled, in addition to, and without having to prove the
inadequacy of, other remedies at law, to specific performance of this Agreement,
as well as injunctive relief (without being required to post bond or other
security).
SECTION 7.10. TAX EFFECT OF INDEMNIFICATION. Notwithstanding any term or
provision of this Agreement to the contrary, any indemnity payments owed by one
party to another party to this Agreement shall be reduced by any tax benefits to
the party claiming indemnity hereunder and increased by any tax detriments to
the party claiming indemnity hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 8.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
SECTION 8.2. ASSIGNMENT. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Purchaser
to an affiliate of Purchaser.
SECTION 8.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
SECTION 8.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and
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supersede all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.
SECTION 8.5. SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 8.6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties contained herein shall survive the Closing and all
statements contained in any certificate, exhibit or other instrument delivered
by or on behalf of Xxxxxx, either Seller or Purchaser pursuant to this Agreement
shall be deemed to have been representations and warranties by Xxxxxx, either
Seller or Purchaser, as the case may be, and, notwithstanding any provision in
this Agreement to the contrary all such representations and warranties, shall
survive the Closing for a period of nine (9) months, except for representations
and warranties with respect to any tax or tax-related matters or any ERISA
matters, which shall survive the Closing until the running of any applicable
statutes of limitation. All covenants contained herein shall survive the
Closing and shall continue indefinitely.
SECTION 8.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF
LAWS) OF THE STATE OF TEXAS. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE
PERFORMABLE IN DALLAS COUNTY, TEXAS.
SECTION 8.8. CAPTIONS. The captions in this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
SECTION 8.9. GENDER AND NUMBER. When the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
SECTION 8.10. REFERENCE TO AGREEMENT. Use of the words "herein",
"hereof", "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
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SECTION 8.11. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws, (ii) to attorneys, accountants, investment bankers or other
agents of the parties assisting the parties in connection with the transactions
contemplated by this Agreement and (iii) by Purchaser in connection with
obtaining financing for the transactions contemplated by this Agreement and
conducting an examination of the operations and assets of Sellers. In the event
that the transactions contemplated hereby are not consummated for any reason
whatsoever, the parties hereto agree not to disclose or use any confidential
information they may have concerning the affairs of the other parties, except
for information that is required by law to be disclosed. Confidential
information includes, but is not limited to: financial records, surveys,
reports, plans, proposals, financial information, information relating to
personnel, contracts, stock ownership, liabilities and litigation; provided that
should the transactions contemplated hereby not be consummated, nothing
contained in this Section shall be construed to prohibit the parties hereto from
operating businesses in competition with each other.
SECTION 8.12. NOTICE. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person.
Such notice shall be deemed received on the date on which it is hand-delivered
or on the third business day following the date on which it is so mailed. For
purposes of notice, the addresses of the parties shall be:
If to Purchaser: U.S. Remodelers, Inc,
00000 Xxxxxx Xx.
Xxxxxx, Xxxxx 00000
Attn: President
with a copy to: Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Xx.
If to Reunion Reunion Home Services, Inc.
0000 Xxxx Xxxxxxxxxxx, Xxxxx 000X
Xxxxxx, Xxxxx 00000
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with a copy to: Xxxx X. Xxxxx
Xxxxx & Associates
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
If to KMI: Kitchen Masters, Inc.
0000 Xxxx Xxxxxxxxxxx, Xxxxx 000X
Xxxxxx, Xxxxx 00000
with a copy to: Xxxx X. Xxxxx
Xxxxx & Associates
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
party may change its address for notice by written notice given to the other
parties in accordance with this Section.
SECTION 8.13. CHOICE OF FORUM. The parties hereto agree that should any
suit, action or proceeding arising out of this Agreement be instituted by any
party hereto (other than a suit, action or proceeding to enforce or realize upon
any final court judgment arising out of this Agreement), such suit, action or
proceeding shall be instituted only in a state or federal court in Dallas
County, Texas. Each of the parties hereto consents to the in personam
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jurisdiction of any state or federal court in Dallas County, Texas and waives
any objection to the venue of any such suit, action or proceeding. The parties
hereto recognize that courts outside Dallas County, Texas may also have
jurisdiction over suits, actions or proceedings arising out of this Agreement,
and in the event that any party hereto shall institute a proceeding involving
this Agreement in a jurisdiction outside Dallas County, Texas, the party
instituting such proceeding shall indemnify any other party hereto for any
losses and expenses that may result from the breach of the foregoing covenant to
institute such proceeding only in a state or federal court in Dallas County,
Texas, including without limitation any additional expenses incurred as a result
of litigating in another jurisdiction, such as reasonable fees and expenses of
local counsel and travel and lodging expenses for parties, witnesses, experts
and support personnel.
SECTION 8.14. SERVICE OF PROCESS. Service of any and all process that may
be served on any party hereto in any suit, action or proceeding arising out of
this Agreement may be made in the manner and to the address set forth in Section
8.12 and service thus made shall be taken and held to be valid personal service
upon such party by any party hereto on whose behalf such service is made.
SECTION 8.15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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PURCHASER:
U.S. REMODELERS, INC.
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Its: President
--------------------------------
SELLERS:
REUNION HOME SERVICES, INC.
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Its: CEO
--------------------------------
KITCHEN MASTERS, INC.:
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Its: CEO
--------------------------------
