AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ALLIANCE NATIONAL INCORPORATED,
ANI HOLDING, INC.,
RECKSON EXECUTIVE CENTERS, INC., AND
RECKSON OFFICE CENTERS, LLC
DATED AS OF NOVEMBER 9, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1998 (this
"Agreement"), by and among ALLIANCE NATIONAL INCORPORATED, a Nevada
corporation ("Parent"), ANI Holding, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Holding"), RECKSON EXECUTIVE CENTERS, INC., a
Delaware corporation ("Subject Company"), and RECKSON OFFICE CENTERS, LLC, a
Delaware limited liability company (the "Shareholder").
WHEREAS, the Boards of Directors of Parent and Subject Company have
each approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination transaction
provided for herein; and
WHEREAS, the Boards of Directors of Parent and Subject Company have
each determined that the transactions provided for herein and contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals.
NOW, THEREFORE,
In consideration of the mutual covenants, representations, warranties
and agreements contained herein, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINED TERMS. As used in this Agreement, the following terms have
the meanings indicated:
(a) "AFFILIATE"of a person shall mean any (i) person which directly
or indirectly Controls, is Controlled by, or is under common Control with such
person, or (ii) executive officer, director or member of such person. For this
purpose, "executive officer" shall have the meaning given to such term in Rule
501 promulgated under the Securities Act.
(b) "AFFILIATED GROUP" shall mean any affiliated group within the
meaning of Code ss.1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
(c) "AMENDED AND RESTATED ARTICLES" shall mean the Amended and
Restated Articles of Incorporation of Parent, substantially in the form of
Exhibit A annexed to the Interoffice Merger Agreement.
(d) "BUSINESS DAY" shall mean a day other than a Saturday or Sunday
on which both federally and New York State chartered banks are open for
business in New York City.
(e) "CAPITAL LEASE" shall mean a lease accounted for as a capital
lease in accordance with GAAP.
(f) "CENTER" shall mean an executive office suite center.
(g) "CERTIFICATE OF MERGER" shall mean the certificate of merger to
be filed with the Delaware Secretary.
(h) "CERTIFICATES OF DESIGNATION" shall mean the Series A
Certificate of Designation, the Series B Certificate of Designation and the
Series C Certificate of Designation.
(i) "CLOSING DATE" shall have the meaning set forth in Section 3.1
hereof.
(j) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(k) "CONTROL" shall mean the power, through voting control,
contract or otherwise, to direct the management and policies of the Person
controlled and the terms "Controls" and "Controlled" shall have a correlative
meaning.
(l) "CREDIT AGREEMENT" shall mean the Credit Agreement dated as of
January 16, 1997, as such agreement has been and may be amended, supplemented,
refinanced, modified or replaced, with certain financial institutions party
thereto from time to time and Paribas, as Agent, or any other successor Agent
thereto.
(m) "DELAWARE SECRETARY" shall mean the Secretary of State of the
State of Delaware.
(n) "DGCL" shall mean the Delaware General Corporation Law.
(o) "EFFECTIVE TIME" shall be the date and time when
the Merger becomes effective, as set forth in the Certificate of Merger.
(p) "ENVIRONMENTAL LAWS" shall mean common law standards relating
to environmental protection, human health or safety, and any local, state or
federal environmental statute, regulation or ordinance, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended. (a)
(q) "GAAP" shall mean generally accepted accounting principles as
in effect from time to time.
(r) "GOVERNMENTAL ENTITY" shall mean any court, administrative
agency or commission or other governmental authority or instrumentality or
self-regulatory organization, whether foreign, federal, state or local.
(s) "HAZARDOUS MATERIAL" means any substance, material or waste
that is regulated by the United States, the foreign jurisdictions in which the
party in question conducts business, or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance that is defined as a "hazardous
waste," "hazardous substance," "hazardous material," "restricted hazardous
waste," "industrial waste," "solid waste," "contaminant," "pollutant," "toxic
waste" or "toxic substance" under any provision of Environmental Law.
(t) "HSR ACT "shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
(u) "INJUNCTION" shall mean any order, decree or injunction issued
by any court or agency of competent jurisdiction.
(v) "INTEROFFICE" shall mean Interoffice Superholdings Corporation.
(w) "INTEROFFICE MERGER" shall mean the merger of Alliance Holding,
Inc., a wholly owned subsidiary of Parent, with and into Interoffice
immediately prior to the Effective Time.
(x) "INTEROFFICE MERGER AGREEMENT" shall mean the merger agreement
relating to the Interoffice Merger.
(y) "LIEN" shall mean any lien, charge, encumbrance, mortgage,
pledge, adverse right or claim or security interest, whether or not recorded.
(z) "LOSSES" shall mean any and all losses, amounts paid in
settlement of demands and claims, actions, liabilities, costs, penalties,
fines, tax obligations, damages, judgments, proceedings, Injunctions, awards,
costs of investigation and expenses (including, without limitation attorneys',
accountants' consultants' and experts' reasonable fees and expenses),
including, without limitation, any of the foregoing relating to the
enforcement of any party's rights to indemnification hereunder.
(aa) "LOSS THRESHOLD" shall mean $750,000.
(bb) "LP ROLL UP" shall mean the proposed purchase by Parent of the
limited partnership units of the seven partnerships set forth on Section
5.2(c) of the Parent Disclosure Schedule.
(cc) "MATERIAL ADVERSE EFFECT" when used with respect to any party,
shall mean a material adverse effect, individually or in the aggregate with
other applicable items, transactions or events, on the business, assets,
liabilities, results of operations, financial condition or prospects of such
party and its Subsidiaries taken as a whole.
(dd) "NEVADA SECRETARY" shall mean the Secretary of State of the
State of Nevada.
(ee) "PARENT BOARD" shall mean the Board of Directors of Parent.
(ff) "PARENT CLASS A COMMON STOCK" shall mean the Class A Common
Stock, par value $.01 per share of Parent which will be created upon filing of
the Amended and Restated Articles and into which shares of Parent Common Stock
outstanding immediately prior to such filing will be redesignated
automatically and without any action on the part of Parent or any holder
thereof upon such filing.
(gg) "PARENT CLASS B COMMON STOCK" shall mean the Class B Common
Stock, par value $.01 per share of Parent which will be created upon filing of
the Amended and Restated Articles, and shares of which may be issued upon the
conversion of the Series C Preferred Stock (which shall be effected by
delivery of the certificates therefor and without payment of any additional
consideration by the holder thereof).
(hh) "PARENT COMMON STOCK" shall mean (i) prior to the filing of the
Amended and Restated Articles, the common stock, par value $0.01 per share of
Parent as existing on the date hereof, and (ii) after such filing, the Parent
Class A Common Stock and the Parent Class B Common Stock, collectively.
(ii) "PARENT DISCLOSURE SCHEDULE" shall mean that certain disclosure
schedule of Parent delivered to the Shareholder pursuant to the terms of this
Agreement.
(jj) "PARENT NEW ACQUIRED CENTER" shall mean any Center listed on
and specified as a "Parent New Acquired Center" on Schedule 1 (which
specifically shall indicate whether such Center has been acquired or whether a
definitive contract has been executed by the parties thereto) and any other
Center acquired by Parent from the date hereof to the Closing Date if such
acquisition was approved by the Subject Company in accordance with Section 6.1
hereof.
(kk) "PARENT NEW DEVELOPED CENTER" shall mean any Center listed on
and specified as a "Parent New Developed Center" on Schedule 1 and any other
Center developed by Parent from the date hereof to the Closing Date if such
development was approved by the Subject Company in accordance with Section 6.1
hereof. (a)
(ll) "PARENT PREFERRED STOCK" shall mean, collectively, the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred
Stock.
(mm) "PARTNERS" shall mean RSI I/O Holdings, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
(nn) "PERMITTED LIENS" shall mean any (i) Liens expressly reflected
in the financial statements of a party delivered pursuant to this Agreement or
described in the Parent Disclosure Schedule or Subject Company Disclosure
Schedule, as the case may be, delivered pursuant to this Agreement, (ii) Liens
on the use of any properties or assets of a party hereto or irregularities in
title thereto which, individually and in the aggregate, do not in any material
respect detract from the value of, or impair the use of, such properties or
assets by such party in the operation of its business, (iii) Liens for current
taxes, assessments or governmental charges of levies on property not yet due
and delinquent, (iv) inchoate Liens arising in the ordinary course of business
with respect to matters not yet due and delinquent and (v) Liens which
constitute valid leases or subleases between any party hereto (or any
Subsidiaries of such party) and any other Person; provided, however, that,
notwithstanding the foregoing, no Lien shall be considered a Permitted Lien if
not expressly permitted under the terms of the Credit Agreement (as in effect
on the date of this Agreement).
(oo) "PERSON" means any individual, proprietorship, partnership,
corporation, limited liability company, trust, estate, or other form of
entity.
(pp) "REPRESENTATIVE" shall mean, with respect to any party, any of
such party's officers, directors, employees, representatives or agents.
(qq) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(rr) "SERIES A CERTIFICATE OF DESIGNATION" shall mean the Fourth
Amended and Restated Certificate of Designation of Series A Preferred Stock to
the Articles of Incorporation of Parent, substantially in the form of Exhibit
B annexed to the Interoffice Merger Agreement.
(ss) "SERIES A PREFERRED STOCK" shall mean the Series A Convertible
Preferred Stock, par value $0.01 per share, of Parent.
(tt) "SERIES B CERTIFICATE OF DESIGNATION" shall mean the Amended
and Restated Certificate of Designation of Series B Preferred Stock to the
Articles of Incorporation of Parent, substantially in the form of Exhibit C
annexed to the Interoffice Merger Agreement.
(uu) "SERIES B PREFERRED STOCK" shall mean the Series B Convertible
Preferred Stock, par value $0.01 per share, of Parent.
(vv) "SERIES C CERTIFICATE OF DESIGNATION" shall mean the
Certificate of Designation of Series C Preferred Stock to the Articles of
Incorporation of Parent, substantially in the form of Exhibit D annexed to the
Interoffice Merger Agreement.
(ww) "SERIES C PREFERRED STOCK" shall mean the Series C Convertible
Preferred Stock, par value $0.01 per share, of Parent.
(xx) "STOCKHOLDERS' AGREEMENT" shall mean the Amended and Restated
Stockholders' Agreement in the form of Exhibit E annexed to the Interoffice
Merger Agreement.
(yy) "SUBJECT COMPANY BOARD" shall mean the Board of Directors of
Subject Company.
(zz) "SUBJECT COMPANY COMMON STOCK" shall mean the shares of Subject
Company common stock, par value $0.01 per share.
(aaa) "SUBJECT COMPANY DISCLOSURE SCHEDULE" shall mean that certain
disclosure schedule of Subject Company delivered to Parent pursuant to the
terms of this Agreement.
(bbb) "SUBJECT COMPANY NEW ACQUIRED CENTER" shall mean any Center
listed on and specified as a "Subject Company New Acquired Center" on Schedule
2 (which specification shall indicate whether such Center has been acquired or
whether a definitive contract has been executed by the parties thereto) and
any other Center acquired by the Subject Company from the date hereof to the
Closing Date if such acquisition was approved by Parent in accordance with
Section 6.1 hereof.
(ccc) "SUBJECT COMPANY NEW DEVELOPED CENTER" shall mean any Center
listed on and specified as a "Subject Company New Developed Center" on
Schedule 2 and any other Center developed by Subject Company from the date
hereof to the Closing Date if such acquisition was approved by Parent in
accordance with Section 6.1 hereof.
(ddd) "SUBSIDIARY" when used with respect to any party shall mean any
corporation, partnership or other organization, whether incorporated or
unincorporated, of which a majority of the outstanding voting securities or
other voting equity interests are owned or Controlled, directly or indirectly,
by such party or of which such party or any Subsidiary of such party is acting
as general partner.
(eee) "TAXES" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code ss.59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
(a)
(fff) "TAX RETURN" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
ARTICLE II
THE MERGER
2.1. THE MERGER. Subject to the terms and conditions of this Agreement,
in accordance with Section 251 of the DGCL at the Effective Time, Holding
shall merge with and into Subject Company (the "Merger"). Subject Company
shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger, and shall continue its corporate
existence under the laws of the State of Delaware. The name of the Surviving
Corporation shall be ANI Holding, Inc. Upon consummation of the Merger, the
separate corporate existence of Holding shall terminate.
2.2. EFFECTIVE TIME. The Merger shall become effective as set forth in
the Certificate of Merger which shall be filed with the Delaware Secretary on
the Closing Date. The term "Effective Time" shall be the date and time when
the Merger becomes effective, as set forth in the Certificate of Merger.
2.3. EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 259 and 261 of the DGCL.
2.4. CONVERSION OF SUBJECT COMPANY COMMON STOCK. At the Effective Time by
virtue of the Merger and without any action on the part of Parent, Holding,
Subject Company or the Shareholder:
(a) All of the issued and outstanding shares of the Subject Company
Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted, at the Effective Time, by operation of law and pursuant to
this Agreement into an aggregate number of shares (the "Aggregate C Shares")
of Series C Preferred Stock (which Aggregate C Shares issued hereunder, when
added to the shares of Series C Preferred Stock to be issued pursuant to the
Interoffice Merger, will represent 100% of the issued and outstanding shares
of the Series C Preferred Stock) that would represent 7.36% of the Fully
Diluted Capitalization (as defined in the Stockholders' Agreement) as of the
Effective Time (and giving effect to the Merger and the Interoffice Merger).
(b) All of the shares of Subject Company Common Stock converted into
the right to receive Series C Preferred Stock pursuant to this Article II
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist as of the Effective Time, and each certificate (each a "Common
Certificate") previously representing any such shares of Subject Company
Common Stock shall thereafter represent the right to receive a certificate
representing the number of whole shares (after rounding to the nearest whole
share) of Series C Preferred Stock into which the Subject Company Common Stock
has been converted pursuant to this Article II.
2.5. PARENT COMMON STOCK; PARENT PREFERRED STOCK. At and after the
Effective Time, each share of Parent Common Stock, Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Parent Common Stock, Series A Preferred Stock or Series B Preferred
Stock, as the case may be, and shall not be affected by the Merger.
2.6. HOLDING COMMON STOCK. Each of the issued and outstanding shares of
the common stock of Holding immediately prior to the Effective Time shall
remain issued and outstanding after the Merger as shares of the Surviving
Corporation, which shall thereafter constitute all of the issued and
outstanding shares of common stock of the Surviving Corporation. No capital
stock of Holding will be issued or used in the Merger.
2.7. CERTIFICATE OF INCORPORATION. At the Effective Time, the Certificate
of Incorporation of Holding, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation.
2.8. BYLAWS. At the Effective Time, the Bylaws of Holding, as in effect
at the Effective Time, shall be the Bylaws of the Surviving Corporation.
2.9. TAX CONSEQUENCES; ACCOUNTING TREATMENT. It is intended that the
Merger shall constitute a reorganization within the meaning of Section 368(a)
of the Code, and that this Agreement shall constitute a "plan of
reorganization" for purposes of the Code; provided, however, that each party
hereto acknowledges and agrees that no party hereto shall have any liability
to any other party hereto and there shall be no claims made against any party
hereto in the event that such intended tax consequences are not realized. The
Merger shall be accounted for under the purchase method of accounting.
ARTICLE III
CLOSING
3.1. CLOSING
(a) Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place at the offices of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Singer & ▇▇▇▇▇▇▇▇▇, LLP, at 9:00 a.m. on a date to be specified
by the parties, which shall be the first day which is (x) at least two
Business Days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VIII hereof, other
than conditions which by their terms are to be satisfied at Closing, and (y)
the last Business Day of a month, or such other date or time as the parties
may mutually agree (the "Closing Date"). (a)
(b) On the Closing Date, the following actions shall be taken:
(i) Parent shall deliver to each Partner a certificate for the
number of shares equal to the Aggregate C Shares multiplied by a ratio,
the numerator of which is the number of shares of Subject Company Common
Stock owned by such Partner immediately prior to the Effective Time, and
the denominator of which is the total number of issued and outstanding
shares of Subject Company Common Stock immediately prior to the Effective
Time;
(ii) the Partners shall deliver to Parent all of their respective
Common Certificates, together with such other documents as Parent may
reasonably request in order to effect the surrender and cancellation of
such Common Certificates;
(iii) the Shareholder shall deliver to Parent the original stock
certificates representing all of the issued and outstanding shares of
Subsidiaries of Subject Company; and
(iv) each party shall take such other actions (including, without
limitation, the filing of the Certificate of Merger), and shall execute
and deliver such other documents or certificates as shall be required
under the terms of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SUBJECT COMPANY AND THE SHAREHOLDER
Each of Subject Company and the Shareholder hereby represents and
warrants, jointly and severally, to Parent as follows:
4.1. CORPORATE ORGANIZATION
(a) Subject Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Subject
Company (i) has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, (ii) does business in the jurisdictions set forth in Section 4.1(a)
of the Subject Company Disclosure Schedule and (iii) is duly licensed or
qualified to do business in each jurisdiction set forth in Section 4.1(a) of
the Subject Company Disclosure Schedule. The copies of the Certificate of
Incorporation and Bylaws of Subject Company included in Section 4.1 of the
Subject Company Disclosure Schedule are true, complete and correct copies of
such documents as in effect as of the date of this Agreement.
(b) Each Subsidiary of Subject Company (i) is duly organized and
validly existing as a corporation, partnership or limited liability company
under the laws of its jurisdiction of organization and (ii) has all requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as it is now being conducted. Section 4.1(b) of the
Subject Company Disclosure Schedule lists all Subsidiaries of the Subject
Company and, for each Subsidiary, its jurisdiction of organization and all
other jurisdictions where such Subsidiary does business and is qualified to do
business.
4.2. CAPITALIZATION.
(a) The authorized capital stock of Subject Company consists of
1,000 shares of Subject Company Common Stock. As of the date of this
Agreement, there are 100 shares of Subject Company Common Stock issued and
outstanding (all of which are owned by the Partners), no shares of Subject
Company Common Stock held in Subject Company's treasury and no shares of
Subject Company Common Stock reserved for issuance. Except for those
agreements set forth on Section 4.2(a) of the Subject Company Disclosure
Schedule (which shall be terminated and of no force and effect on or prior to
the Effective Time), Subject Company does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Subject
Company Common Stock or any other equity securities of Subject Company or any
securities representing the right to purchase or otherwise receive any shares
of Subject Company Common Stock. Except for those agreements set forth on
Section 4.2(a) of the Subject Company Disclosure Schedule (which shall be
terminated and of no force and effect on or prior to the Effective Time),
there are no agreements or understandings with respect to the voting, sale,
transfer, preemptive rights, rights of first refusal, rights of first offer,
proxy or registration of any shares of capital stock of Subject Company. The
Partners own all of the issued and outstanding shares of Subject Company
Common Stock, free and clear of any Liens (other than those resulting from the
agreements listed on Section 4.2(a) of the Subject Company Disclosure
Schedule, which shall be terminated and of no force and effect prior to the
Effective Time).
(b) Subject Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of or all other equity interests in
each of the Subsidiaries of Subject Company, free and clear of any Liens, and
all of such shares or equity interests are duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. Neither Subject Company
nor any of its Subsidiaries has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling
for the purchase, sale or issuance of any shares of capital stock or any other
equity interests of any Subsidiary of Subject Company or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity interests of any such Subsidiary. Except for the
Subsidiaries listed on Section 4.1(b) of the Subject Company Disclosure
Schedule, Subject Company does not own or hold, directly or indirectly, any
capital stock of, or any equity interest in, any corporation, partnership,
limited liability company or other entity. (a)
4.3. AUTHORITY; NO VIOLATION.
(a) Subject Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly approved by the Subject Company Board and by the Partners. No other
corporate proceedings on the part of Subject Company are necessary to approve
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Subject Company
and (assuming due authorization, execution and delivery by Parent and Holding)
constitutes a valid and binding obligation of Subject Company, enforceable
against Subject Company in accordance with its terms.
(b) The Shareholder represents and warrants that this Agreement has
been duly and validly executed and delivered by it and (assuming due
authorization, execution and delivery by Parent and Holding) constitutes a
valid and binding obligation of it, enforceable against it to the extent
applicable to it.
(c) Neither the execution and delivery of this Agreement by Subject
Company nor the consummation by Subject Company of the transactions
contemplated hereby, nor compliance by Subject Company with any of the terms
or provisions hereof, will (i) violate any provision of the Certificate of
Incorporation or Bylaws of Subject Company or any of the similar governing
documents of any of its Subsidiaries or (ii) assuming that the consents and
approvals referred to in Section 4.4 are duly obtained, (x) violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Subject Company or any of its Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with, result
in a breach of any provision of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Subject Company or any of
its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Subject Company or any of its
Subsidiaries is a party which will remain in full force and effect at the
Effective Time, or by which they or any of their respective properties or
assets may be bound or affected or result in the termination of or a right of
termination or cancellation of any such note, bond, mortgage, deed of trust,
license, lease, agreement or instrument or obligation.
(d) The Shareholder represents and warrants that neither the
execution and delivery of this Agreement by it nor the consummation by it of
the transactions contemplated hereby, nor compliance by it with any of the
terms or provisions hereof, will (i) violate any provision of the governing
documents of the Shareholder or (ii) assuming that the consents and approvals
referred to in Section 4.4 are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to it any of its properties or assets.
4.4. CONSENTS AND APPROVALS. Except for (i) the filing of the Certificate
of Merger and (ii) the consents and approvals which are set forth in Section
4.4 of the Subject Company Disclosure Schedule, no consents or approvals of,
or filings or registrations with, any Governmental Entity or with any third
party are necessary in connection with (A) the execution and delivery by
Subject Company and the Shareholder of this Agreement and (B) the consummation
by Subject Company and the Shareholder of the Merger and the other
transactions contemplated hereby and the succession as a result of the Merger
by the Surviving Corporation and its Subsidiaries, respectively, to the rights
and obligations of Subject Company and its Subsidiaries under the terms of any
agreement binding on Subject Company or any of its Subsidiaries; provided,
however, that no representation is made hereby as to any consents which may be
necessary to obtain from any landlord under a Subject Company Real Property
Lease.
4.5. FINANCIAL STATEMENTS. Subject Company has previously made available
to Parent copies of the financial statements listed on Section 4.5 of the
Subject Company Disclosure Schedule (the "Subject Company Financial
Statements"). Each of the Subject Company Financial Statements (including the
related notes, where applicable) fairly present (subject, in the case of the
unaudited statements, to normal recurring adjustments, none of which are
expected to be material in nature or amount) the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of the entities included within the coverage of such Subject Company
Financial Statements for the respective fiscal periods or as of the respective
dates therein set forth. Each of such Subject Company Financial Statements
(including the related notes, where applicable) complies in all material
respects with applicable accounting requirements and each of such statements
(including the related notes, where applicable) has been prepared in
accordance with GAAP consistently applied during the periods involved, except
in each case as indicated in such statements or in the notes or in Section 4.5
of the Subject Company Disclosure Schedule. The financial books and records of
Subject Company and its Subsidiaries have been, and are being, maintained in
all material respects in accordance with GAAP and any other applicable legal
and accounting requirements and reflect actual transactions.
4.6. BROKER'S FEES. Except as set forth in Section 4.6 of the Subject
Company Disclosure Schedule, neither Subject Company nor any of its
Subsidiaries or any of their respective officers or directors, nor the
Shareholder or any of its Affiliates has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or the Interoffice Merger.
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS
(a) Except as set forth in Section 4.7(a) of the Subject Company
Disclosure Schedule, since June 30, 1998, no event has occurred which has had
or could reasonably be expected to have, individually or in the aggregate,
(net of any revenues or other tangible benefits related to such event) a
Material Adverse Effect.
(b) Except as set forth in Section 4.7(b) of the Subject Company
Disclosure Schedule, since June 30, 1998, Subject Company and its Subsidiaries
have carried on their respective businesses in all material respects in the
ordinary course of business, and neither Subject Company nor any of its
Subsidiaries has (i) except for normal increases in the ordinary course of
business consistent with past practice and except as required by applicable
law, increased the wages, salaries, compensation, pension or other fringe
benefits or perquisites payable to any officer or director, other than Persons
newly hired for such position, from the amount thereof in effect as of June
30, 1998, or granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any bonus,
in each case to any such officer or director, other than pursuant to
preexisting agreements or arrangements, (ii) suffered any strike, work
stoppage, slow-down or other labor disturbance, (iii) incurred any liability
or obligation of any nature (whether accrued, absolute, contingent or
otherwise), except those liabilities or obligations (A) reflected on the most
recent consolidated balance sheet of Subject Company and its Subsidiaries
referred to in Section 4.5 hereof or (B) incurred in the ordinary course of
business consistent with past practice, (iv) permitted any of its assets to be
subjected to any Lien, except for Permitted Liens, (v) discharged or satisfied
any Lien or paid any obligation or liability in an amount exceeding $10,000,
except in the ordinary course of business consistent with past practice, (vi)
sold, transferred or otherwise disposed of any assets except for assets sold,
transferred or otherwise disposed of in the ordinary course of business
consistent with past practice, (vii) made any capital expenditure or
commitment therefor, except those made in the ordinary course of business in
an amount less than $10,000 other than Subject Company New Acquired Centers
and Subject Company New Developed Centers, (viii) declared or paid any
dividend or made any distribution on any shares of its capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock or
any option, warrant or other right to purchase or acquire any such shares,
(ix) entered into any agreement or transaction, or amended or terminated any
agreement, with an Affiliate, (x) canceled or waived any material claims or
rights, (xi) made any change in any method of accounting or auditing practice,
(xii) made any acquisition of, or investment in, all or substantially all of
the property or assets of any other individual, corporation or other entity
other than a wholly owned Subsidiary and other than Subject Company New
Acquired Centers and Subject Company New Developed Centers, (xiii) otherwise
conducted its business or entered into any transaction, other than this
Agreement and related transactions, except in the ordinary course of business
consistent with past practices, or (xiv) agreed, whether or not in writing, to
do any of the foregoing.
4.8. LEGAL PROCEEDINGS.
(a) Except as set forth in Section 4.8 of the Subject Company
Disclosure Schedule, neither Subject Company nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Subject Company's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against Subject
Company or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement.
(b) There is no Injunction imposed upon Subject Company, any of its
Subsidiaries or the assets of Subject Company or any of its Subsidiaries.
(c) There is no state of facts or conditions existing on or prior to
the Effective Time which, without any further action or omissions on the part
of Subject Company or its Subsidiaries, could form the basis of or give rise
to a claim by a third party, including any Governmental Entity, against
Subject Company, the Surviving Corporation or any of their respective
Subsidiaries and which could be brought in a legal, administrative, arbitral
or other judicial proceeding or governmental investigation (a "Legal
Proceeding") other than (A) claims arising out of facts or conditions that
constitute the ordinary course of business of Subject Company and that would
not constitute a breach of any of the representations contained in this
Article IV, (B) such claims which may be enforced in Legal Proceedings solely
due to non-payment or other actions or inactions of Parent or any of its
Subsidiaries from and after the Effective Time, (C) such claims for which
adequate reserves or accruals are set forth on the most recent balance sheet
included within the Subject Company Financial Statements, or (D) such claims
or threatened claims which are specifically set forth in Section 4.8 of the
Subject Company Disclosure Schedule (and for this purpose, and notwithstanding
any statements to the contrary which may be made in the Subject Company
Disclosure Schedule, no matter which is disclosed on any part of the Subject
Company Disclosure Schedule other than Section 4.8 thereof shall be deemed
disclosed for purposes of this Section 4.8).
(d) Section 4.8(d) of the Subject Company Disclosure Schedule
accurately lists the specific claims for which reserves or accruals are set
forth on the most recent balance sheet included within the Subject Company
Financial Statements, and the specific amount of the reserve or accrual for
each specific claim.
4.9. TAXES
(a) Each of Subject Company and its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed for the period ending on or prior to
the date of the Closing Date (and for any Tax Year beginning before and ending
after the Closing Date to the extent allocable to the portion of such period
beginning before and ending on the Closing Date) by any of Subject Company and
its Subsidiaries (whether or not shown on any Tax Return) have been paid,
except for (i) Taxes that are being contested in good faith and as to which
adequate reserves have been disclosed on Section 4.9 of the Subject Company
Disclosure Schedule, and (ii) Taxes as to which adequate reserves have been
disclosed on Section 4.9 of the Subject Company Disclosure Schedule. None of
Subject Company and its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made by a Governmental Entity in a jurisdiction where any of Subject Company
and its Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction, except for (i) claims for Taxes that are being
contested in good faith and as to which adequate reserves have been disclosed
on Section 4.9 of the Subject Company Disclosure Schedule, and (ii) claims for
Taxes as to which adequate reserves have been disclosed on Section 4.9 of the
Subject Company Disclosure Schedule. There are no Liens on any of the assets
of any of Subject Company and its Subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Each of Subject Company and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) There is no dispute or claim concerning any liability for Taxes
of any of Subject Company and its Subsidiaries either (A) claimed or raised by
any authority in writing or (B) as to which any of the directors and officers
(or employees responsible for Tax matters) of Subject Company and its
Subsidiaries has knowledge based upon personal contact with any agent of such
authority. Section 4.9(c) of the Subject Company Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to
any of Subject Company and its Subsidiaries that currently are the subject of
audit. Subject Company has delivered to Parent correct and complete copies of
all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of Subject Company and its
Subsidiaries since December 31, 1994.
(d) Except for any such matters that have been settled, none of
Subject Company and its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) None of Subject Company and its Subsidiaries has filed a consent
under Code ss.341(f) concerning collapsible corporations. None of Subject
Company and its Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Code
ss.280G. Each of Subject Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to
a substantial understatement of federal income Tax within the meaning of Code
ss.6662. None of Subject Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement. None of Subject Company and its Subsidiaries
(A) has been a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was Subject
Company) or (B) has any liability for the Taxes of any Person (other than any
of Subject Company and its Subsidiaries) under Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
4.10. ERISA
(a) Section 4.10(a) of the Subject Company Disclosure Schedule sets
forth a true and complete list of each material employee benefit plan,
arrangement or agreement and any amendments or modifications thereof
(including, without limitation, all stock purchase, stock option, severance,
employment, change-in-control, health/welfare and section 125 plans, fringe
benefit, bonus, incentive, deferred compensation and other agreements,
programs, policies and arrangements, whether or not subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) that is
maintained as of the date of this Agreement (the "Plans") by Subject Company
or any of its Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), all of which together with Subject
Company would be deemed a "single employer" within the meaning of Section 4001
of ERISA.
(b) Except as set forth in Section 4.10(b) of the Subject Company
Disclosure Schedule, Subject Company has previously made available to Parent
true and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for such
Plan.
(c) Except as set forth in Section 4.10(c) of the Subject Company
Disclosure Schedule, (i) each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of Subject Company, its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(b) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of Subject
Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v) no
liability under Title IV of ERISA has been incurred by Subject Company, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full (other
than payment of premiums to the Pension Benefit Guaranty Corporation (the
"PBGC")), and no condition exists that presents a material risk to Subject
Company, its Subsidiaries or any ERISA Affiliate of incurring a material
liability thereunder, (vi) no Plan is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by Subject Company or its Subsidiaries as of the Effective Time
with respect to each Plan in respect of current or prior plan years have been
paid or accrued in accordance with GAAP and Section 412 of the Code, (viii)
neither Subject Company, its Subsidiaries nor any ERISA Affiliate has engaged in
a transaction in connection with which Subject Company, its Subsidiaries or any
ERISA Affiliate could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) there are no pending, or to the best
knowledge of Subject Company threatened, claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
(d) Except as set forth in Section 4.10(d) of the Subject Company
Disclosure Schedule, no Plan exists which provides for or could result in the
payment to any Subject Company employee of any money or other property or
rights or accelerate the vesting or payment of such amounts or rights to any
Subject Company employee as a result of the transactions contemplated by this
Agreement, including the Merger, whether or not such payment or acceleration
would constitute a parachute payment within the meaning of Code Section 280G.
Since December 31, 1996, neither Subject Company nor any of its Subsidiaries
has taken any action that would result in the payment of any amounts, or the
accelerated vesting of any rights or benefits, under the Plans set forth in
Section 4.10(d) of the Subject Company Disclosure Schedule.
4.11. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in Section 4.11
of the Subject Company Disclosure Schedule, Subject Company and each of its
Subsidiaries hold, and have at all applicable times held, all material
licenses, franchises, permits and authorizations necessary for the lawful
conduct of their respective businesses under and pursuant to all, and have
complied with and are not in default in any material respect under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of
any Governmental Entity relating to Subject Company or any of its
Subsidiaries.
4.12. MATERIAL AGREEMENTS
(a) Except as set forth on Section 4.12 of the Subject Company
Disclosure Schedule, there are no material contracts, agreements, commitments,
understandings or proposed transactions, whether written or oral, to which
Subject Company or any of its Subsidiaries is a party or by which any of them
is bound that involve or relate to: (i) any of their respective officers,
directors stockholders, members, managers or partners or any Affiliate
thereof; (ii) the sale of any assets of Subject Company or any of its
Subsidiaries, other than in the ordinary course of business; (iii) covenants
of Subject Company or any of its Subsidiaries to not compete in any line of
business or with any Person in any geographical area or covenants of any other
Person not to compete with Subject Company or any of its Subsidiaries in any
line of business or in any geographical area; (iv) the acquisition by Subject
Company or any of its Subsidiaries of any operating business or the capital
stock of any other Person; (v) the borrowing of money (including any Capital
Lease); (vi) the expenditure or guarantee of more than $100,000 in the
aggregate or $25,000 annually or the performance by any party more than one
year from the date hereof except for any agreements terminable upon 60 days'
or less notice without payment in connection therewith; or (vii) the license
of any intellectual property, other material proprietary right to or from
Subject Company or any of its Subsidiaries. Any operating leases (other than
Capital Leases) that relate to the leasing of furniture, fixtures or equipment
at any single center of Subject Company shall not be required to be set forth
on Section 4.12(a) of the Subject Company Disclosure Schedule. Each contract,
arrangement, commitment or understanding of the type described in this Section
4.12(a), whether or not set forth or required to be set forth in Section
4.12(a) of the Subject Company Disclosure Schedule, is referred to herein as a
"Subject Company Contract."
(b) (i) Each Subject Company Contract is valid and binding and in
full force and effect, (ii) Subject Company and each of its Subsidiaries has
in all material respects performed all obligations required to be performed by
it under each Subject Company Contract, (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute
a material default on the part of Subject Company or any of its Subsidiaries
under any such Subject Company Contract, and (iv) to the knowledge of Subject
Company, each other party to each Subject Company Contract has in all material
respects performed all obligations required to be performed by it under such
Subject Company Contract and no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute a material default
on the part of such other party under any such Subject Company Contract.
4.13. UNDISCLOSED LIABILITIES. Except (i) for those liabilities that have
been fully reflected or reserved against on the most recent balance sheet
included within the Subject Company Financial Statements, (ii) for liabilities
incurred in the ordinary course of business consistent with past practice
since the date of the most recent balance sheet included within the Subject
Company Financial Statements, and (iii) for those liabilities set forth in
Section 4.13 of the Subject Company Disclosure Schedule, neither Subject
Company nor any of its Subsidiaries has incurred any material liability to any
third party of any nature whatsoever (whether absolute, accrued or contingent
or otherwise and whether due or to become due) which has not been satisfied on
or prior to June 30, 1998.
4.14. ENVIRONMENTAL LIABILITY. Except as set forth in Section 4.14 of the
Subject Company Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably could be
expected to result in the imposition, on Subject Company or any of its
Subsidiaries of any liability or obligation arising under any Environmental
Laws, pending or, to the knowledge of Subject Company, threatened against
Subject Company or any of its Subsidiaries, nor to the knowledge of Subject
Company is there any reasonable basis for any of the foregoing. During or, to
the knowledge of Subject Company, prior to the period of (i) its or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its Subsidiaries' participation in the
management of any property, or (iii) its or any of its Subsidiaries' holding
of a security interest in any property, there were no releases or threatened
releases of Hazardous Materials in, on, under or affecting any such property.
Neither Subject Company nor any of its Subsidiaries is subject to any
agreement, order, judgment, decree, letter or memorandum by or with any court,
governmental authority, regulatory agency or third party imposing any material
liability or obligation pursuant to or under any Environmental Law.
4.15. PATENTS, TRADEMARKS, ETC. Subject Company and its Subsidiaries own
or possess all legal rights to use all intellectual proprietary rights,
including without limitation all patents, trademarks, trade names, service
marks and copyrights, that are material to the conduct of Subject Company's
existing businesses. Section 4.15 of the Subject Company Disclosure Schedule
sets forth all such intellectual proprietary rights of Subject Company and
sets forth whether such rights have been registered (or applications have been
filed therefor) with the United States Patent and Trademark Office. Except for
the agreements listed on Section 4.15 of the Subject Company Disclosure
Schedule, Subject Company is not bound by or a party to any options, licenses
or agreements of any kind with respect to any trademarks, service marks or
trade names which Subject Company claims to own other than to any Subsidiary
of Subject Company. Subject Company has not received any communications
alleging that it or its Subsidiaries has violated or would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights of any other Person or entity.
4.16. RELATIONSHIPS WITH EMPLOYEES. Subject Company is not a party to or
bound by any collective bargaining agreement with respect to its business, and
Subject Company has no knowledge, after due inquiry, of any pending or
threatened organizing activities, employee associations, or unfair labor
practice charges relating to its business. There is no strike or other
material labor dispute involving Subject Company or any of its Subsidiaries
pending, or to the knowledge of Subject Company, threatened. To the knowledge
of Subject Company, no officer or key employee, or any group of key employees,
intends to terminate their employment at or prior to the Effective Time with
Subject Company or any of its Subsidiaries, nor does Subject Company or any of
its Subsidiaries have a present intention to terminate the employment of any
of the foregoing.
4.17. BOOKS AND RECORDS. The minute books of Subject Company and its
Subsidiaries, as previously made available to Parent and its Representatives,
contain accurate records of all formal meetings of, and material corporate
action taken by, the stockholders of Subject Company and the Subject Company
and the stockholders and the Board of Directors of each of its Subsidiaries.
4.18. REAL PROPERTY
(a) None of Subject Company or any of its Subsidiaries owns any real
property or interests in real property, other than the Subject Company Real
Property Leases (as defined below). Section 4.18 of the Subject Company
Disclosure Schedule sets forth a complete list of all real property and
interests in real property leased by Subject Company and its Subsidiaries
(individually, a "Subject Company Real Property Lease" and the real properties
specified in such leases, being referred to herein individually as a "Subject
Company Property" and collectively as the "Subject Company Properties") as
lessee, other than customer subleases or customer agreements relating to the
Centers of Subject Company or its Subsidiaries, and the following information
for each Subject Company Real Property Lease: (i) location, (ii) term, (iii)
square footage of space demised thereunder, and (iv) rent over the term of
such Subject Company Real Property Lease. The Subject Company Property
constitutes all interests in real property currently used or currently held
for use in connection with the business of Subject Company and its
Subsidiaries and which are necessary for the continued operation of the
business of Subject Company and its Subsidiaries as the business is currently
conducted. Each Subject Company Real Property Lease is valid, binding,
enforceable and in full force and effect. Subject Company and each of its
Subsidiaries has in all material respects performed all obligations required
to be performed by it under each Subject Company Real Property Lease. Assuming
that the consents set forth on Schedule 3 to this Agreement have been
obtained, no event or condition exists which constitutes or, after notice or
lapse of time or both, would constitute a material default on the part of
Subject Company or any of its Subsidiaries under any such Subject Company Real
Property Lease. To the knowledge of Subject Company, each other party to each
Subject Company Real Property Lease has in all material respects performed all
obligations required to be performed by it under such Subject Company and no
event or condition exists which constitutes or, after notice or lapse of time
or both, would constitute a material default on the part of such other party
under any such Subject Company Real Property Lease. Parent acknowledges and
agrees that Subject Company and the Shareholder are not making any
representations as to the enforceability of any renewal or expansion options
contained in any Subject Company Real Property Lease. All of the Subject
Company Property, buildings, fixtures and improvements thereon owned or leased
by Subject Company and its Subsidiaries are in good operating condition and
repair (subject to normal wear and tear); provided, however, that the
representation or warranty contained in this sentence is not being made to any
part of the Subject Company Property that is not within the exclusive
possession and control of the Subject Company and its Subsidiaries (it being
agreed and understood that the Centers of Subject Company and its Subsidiaries
shall be deemed to be in the exclusive possession and control of Subject
Company and its Subsidiaries notwithstanding the occupancy thereof by
customers) including, without limitation, any condition of the building or
building systems.
(b) Subject Company and its Subsidiaries have all material
certificates of occupancy and permits and licenses of any Governmental Entity
necessary for the current use and operation of each Subject Company Property,
and Subject Company and its Subsidiaries have fully complied with all material
conditions of such permits and licenses applicable to them. No default or
violation, or event which, with the lapse of time or giving of notice or both
would become a default or violation, has occurred in the due observance of any
such permit or license.
(c) There does not exist any actual or, to the knowledge of Subject
Company, threatened or contemplated condemnation or eminent domain proceedings
that affect any Subject Company Property or any part thereof, and none of
Subject Company or any of its Subsidiaries has received any notice, oral or
written, of the intention of any Governmental Entity or other Person to take
or use all or any part thereof.
(d) None of Subject Company or any of its Subsidiaries has received
any written notice from any insurance company that has issued a policy with
respect to any Subject Company Property requiring performance of any
structural or other repairs or alterations to such Subject Company Property.
(e) Except as set forth on Section 4.18 of the Subject Company
Disclosure Schedule, none of Subject Company or any of its Subsidiaries owns
or holds, and is not obligated under or a party to, any option, right of first
refusal or other contractual right to purchase, acquire, sell, assign or
dispose of any real estate or any portion thereof or interest therein.
4.19. TANGIBLE PERSONAL PROPERTY.
(a) Each of Subject Company and its Subsidiaries has a valid
leasehold interest under each of the leases of personal property ("Subject
Company Personal Property Leases") involving annual payments in excess of
$25,000 relating to personal property used in the business of Subject Company
and its Subsidiaries under which it is a lessee, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and, assuming that the consents set forth on
Section 4.4 of the Subject Company Disclosure Schedule have been obtained,
there is no default under any Subject Company Personal Property Lease by
Subject Company or its Subsidiaries or, to the knowledge of Subject Company,
by any other party thereto, and no event has occurred which, with the lapse of
time or the giving of notice or both would constitute a default thereunder.
(b) Except as set forth on Section 4.19 of the Subject Company
Disclosure Schedule, each of Subject Company and its Subsidiaries has or will
have good and marketable title to all of the items of tangible personal
property reflected in the most recent balance sheet included within the
Subject Company Financial Statements or acquired thereafter (except as sold or
disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practice), free and clear of any and all Liens other than
the Permitted Liens and other than any mechanic liens with respect to invoices
or obligations which are not delinquent. All such items of tangible personal
property that, individually or in the aggregate, are material to the operation
of the business of Subject Company and its Subsidiaries are in good condition
and in a state of good maintenance and repair (ordinary wear and tear
excepted) and are fit for the purposes used.
(c) All of the items of tangible personal property used by Subject
Company and its Subsidiaries under the Subject Company Personal Property
Leases are in good condition and repair (ordinary wear and tear excepted) and
are fit for the purposes used.
4.20. INSURANCE. Section 4.20 of the Subject Company Disclosure Schedule
sets forth an accurate summary of all of the insurance policies or programs of
Subject Company and its Subsidiaries in effect as of the date hereof. Such
policies are in full force and effect. There are no outstanding unpaid
premiums with respect to such policies except in the ordinary course of
business, and neither Subject Company nor its Subsidiaries has received any
notice of cancellation or non-renewal of any such policy. Since December 31,
1997, there has not been any material adverse change in the relationship of
Subject Company or any of its Subsidiaries with its insurers or in the
premiums payable pursuant to such policies except for any changes approved or
authorized by the Subject Company Board with respect to any such insurance
policy providing terms more favorable to Subject Company and its Subsidiaries
or with respect to any insurance policy which was replaced. There exists no
event of default by Subject Company or any of its Subsidiaries or event,
occurrence, condition or act (including the transactions contemplated by this
Agreement) which, with the giving of notice, the lapse of time or the
happening of any further event or condition would become a default of Subject
Company or any of its Subsidiaries under any such policy or give rise to, and
Subject Company has no anticipation of, any termination or cancellation
thereof. Except as set forth on Section 4.20 of the Subject Company Disclosure
Schedule, Subject Company and its Subsidiaries are covered by one or more
policies or insurance of the types described therein for all services provided
by, with responsible insurance companies, in such types and amounts and
covering such risks as are consistent with customary practices and standards
of similarly situated companies in business and operations similar to those of
Subject Company and its Subsidiaries. Since December 31, 1997, none of Subject
Company or any of its Subsidiaries has been refused insurance or had any
policy of insurance terminated (other than at its request).
4.21. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ INFORMATION. For purposes of the HSR Act, Subject
Company (and any entities that would be consolidated with Subject Company
under the HSR Act) does not have aggregate net sales or gross assets of One
Hundred Million Dollars ($100,000,000) or more as defined in and calculated
under the HSR Act.
4.22. INVESTMENT COMPANY. Subject Company is not an Investment Company
within the meaning of the Investment Company Act of 1940, as amended.
4.23. POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Section
4.23 of the Subject Company Disclosure Schedule, no officer, director,
stockholder or other beneficial owner (as such term is defined under Rule
13d-3 of the Exchange Act) of securities of Subject Company or any of its
Subsidiaries (other than any beneficial owners that are public shareholders of
Reckson Service Industries, Inc. and are not Qualifying Series C Beneficial
Holders (as such term is defined in the Stockholders' Agreement) or Affiliates
thereof): (a) owns, directly or indirectly, any interest in (excepting less
than 5% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any entity or Person that is, or is engaged in business as, a competitor,
lessor, lessee, supplier, distributor, sales agent or customer of, or lender
to or borrower from, Subject Company or any of its Subsidiaries; (b) owns,
directly or indirectly, in whole or in part, any tangible or intangible
property that Subject Company or any of its Subsidiaries uses in the conduct
of business; or (c) has any cause of action or other claim whatsoever against,
or owes or has advanced any amount to, Subject Company or any of its
Subsidiaries, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans,
employment arrangements and similar matters and agreements existing on the
date hereof.
4.24. DISCLOSURE. Neither this Agreement, any schedule hereto, nor any
certificates, instruments or other documents (except for agreements that have
expired or have been terminated on or prior to the Effective Time) delivered
by Subject Company or its Representatives to the Parent in connection with
this Agreement or the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact required to be
contained herein or therein or necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading.
4.25. ACCREDITED INVESTOR. The Shareholder hereby warrants and represents
to Parent that it and each of the Partners is an accredited investor within
the definition of Regulation D of the Securities Act. 1.1.
4.26. INVESTMENT. The Shareholder is acquiring the Series C Preferred
Stock for investment purposes only, for its own account and not as a nominee
or agent for any other Person, and not with a view to, or for resale in
connection with, any distribution thereof in violation of applicable law. The
Shareholder understands that the Series C Preferred Stock has not been
registered under the Securities Act or applicable state securities laws and
that, accordingly, neither the Series C Preferred Stock nor the shares of
Parent Common Stock issuable upon conversion thereof will be transferable
except upon satisfaction of the registration and prospectus delivery
requirements of such laws or pursuant to an available exemption therefrom.
4.27. ACCOUNTS RECEIVABLE. To the knowledge of Subject Company, except as
set forth in Section 4.27 of the Subject Company Disclosure Schedule, the
amount of all accounts receivable, including unbilled invoices which are
reflected as accounts receivable on the Subject Company Financial Statements,
due or recorded in the most recent financial statements included within the
Subject Company Financial Statements as being due to Subject Company and its
Subsidiaries as of the date of such financial statements (less the amount of
any provision or reserve therefor made in such financial statements)
constitute validly generated receivables for goods or services rendered; and
to the knowledge of Subject Company, the amount of any asserted or threatened
counterclaim or right of set-off relating to such accounts receivable or other
debts does not exceed the amount of such provision or reserve plus (without
double counting), with respect to accounts receivable due from any specific
customer, the amount of any tenant security deposit of such customer which is
being held by Subject Company or its Subsidiaries. The foregoing
representations and warranties shall not be construed to constitute a guaranty
of collection of any account receivable, unbilled invoices and other debts due
or recorded in the most recent financial statements of Subject Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent hereby represents and warrants to Subject Company and the
Shareholder as follows (it being agreed and understood that, notwithstanding
any closing of the Interoffice Merger occurring prior to the Effective Time,
the representations and warranties made by Parent in this Agreement shall not
in any manner include the effects of the Interoffice Merger and such
Interoffice Merger shall be deemed not to have occurred for testing the
accuracy of such representations and warranties):
5.1. CORPORATE ORGANIZATION
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Parent (i) has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, (ii) does business
in the jurisdictions set forth in Section 5.1(a) of the Parent Disclosure
Schedule and (iii) is duly licensed or qualified to do business in each
jurisdiction set forth in Section 5.1(a) of the Parent Disclosure Schedule.
The copies of the Restated Articles of Incorporation and Bylaws of Parent
included in Section 5.1 of the Parent Disclosure Schedule are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
(b) Holding (i) is duly organized and validly existing as a
corporation under the laws of the State of Delaware, and (ii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as it is now being conducted.
(c) Each Subsidiary of Parent (i) is duly organized and validly
existing as a corporation, partnership or limited liability company under the
laws of its jurisdiction of incorporation or formation and (ii) has all
corporate power and authority to lease its properties and assets and to carry
on its business as now conducted. Section 5.1(c) of the Parent Disclosure
Schedule lists all Subsidiaries of Parent and, for each Subsidiary, its
jurisdiction of organization and all other jurisdictions where such Subsidiary
does business and is qualified to do business.
5.2. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 35,000,000
shares of Parent Common Stock and 15,000,000 shares of preferred stock of
Parent Preferred Stock, of which 7,574,711 shares have been designated as
Series A Preferred Stock and 3,500,000 shares have been designated as Series B
Preferred Stock. As of the date of this Agreement, there are 4,951,868 shares
of Parent Common Stock issued and outstanding and 7,574,711 shares of Series A
Preferred Stock issued and outstanding, 1,930,062 shares of Series B Preferred
Stock issued and outstanding and no shares of Parent Common Stock are held in
the Parent's treasury. Section 5.2 of the Parent Disclosure Schedule lists the
options ("Options") and warrants ("Warrants") of Parent issued and outstanding
as of the date of this Agreement. As of the date of this Agreement, Parent has
reserved for issuance (i) 7,574,711 shares of Parent Common Stock upon
conversion of the authorized shares of Series A Preferred Stock, (ii)
3,500,000 shares of Parent Common Stock upon conversion of the authorized
shares of Series B Preferred Stock, (iii) 2,658,806 shares of Parent Common
Stock upon exercise of the issued and outstanding Options and Warrants
(exclusive of Options issued under Parent's 1996 Stock Option Plan (the "1996
Option Plan")), (iv) 1,420,250 shares of Parent Common Stock upon exercise of
any options to purchase Parent Common Stock which are issued and outstanding
under the 1996 Stock Option Plan. Except for the Stockholders' Agreement, the
Interoffice Merger Agreement, and as set forth above and on Section 5.2 of the
Parent Disclosure Schedule, Parent does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Parent
Common Stock or any other equity securities of Parent or any securities
representing the right to purchase or otherwise receive any shares of Parent
Common Stock or Parent Preferred Stock. Except as set forth on Section 5.2 of
the Parent Disclosure Schedule, there are no agreements or understandings with
respect to the voting, sale, transfer, preemptive rights, rights of first
refusal, rights of first offer, proxy or registration of any shares of capital
stock of Parent.
(b) The shares of Series C Preferred Stock to be issued pursuant to
the Merger, and the shares of Parent Class B Common Stock or Parent Class A
Common Stock issuable upon conversion of such Series C Preferred Stock when
issued upon conversion of such Series C Preferred Stock in accordance with the
Series C Certificate of Designation, (i) will be validly issued, fully paid
and nonassessable, (ii) will be free and clear of all Liens, other than any
created by the holder thereof and the restrictions imposed by the
Stockholders' Agreement and (iii) assuming that the representations of each of
the Shareholder in Section 4.25 and Section 4.26 hereof are true and correct,
will be issued in compliance with all applicable federal and state securities
laws, as presently in effect.
(c) Except as set forth in Section 5.2(c) of the Parent Disclosure
Schedule, Parent owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of or all other equity interests in each
of the Subsidiaries of Parent, free and clear of any Liens, and all of such
shares or equity interests are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Neither Parent nor any of its
Subsidiaries has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase, sale or issuance of any shares of capital stock or any other equity
interest of any Subsidiary of Parent or any securities representing the right
to purchase or otherwise receive any shares of capital stock or any other
equity interest of any such Subsidiary. Except for the Subsidiaries listed on
Section 5.1(c) of the Parent Disclosure Schedule and except as set forth in
Section 5.2(c), Parent does not own or hold, directly or indirectly, any
capital stock of, or any equity interest in, any corporation, partnership,
limited liability company or other entity.
5.3. AUTHORITY; NO VIOLATION
(a) Each of Parent and Holding has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and validly approved by the Parent Board and by the Board of Directors and
stockholder of Holding, and except for approval by the requisite vote of
Parent's stockholders, no other corporate action on the part of Parent or
Holding is necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Holding (assuming due authorization,
execution and delivery by Subject Company and the Shareholder) constitutes a
valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by Parent
or Holding nor the consummation by Parent or Holding of the transactions
contemplated hereby, nor compliance by Parent or Holding with any of the terms
or provisions hereof, will (i) violate any provision of the Articles of
Incorporation (giving effect to the filing of the Amended and Restated
Articles and the Certificates of Designation) or Bylaws of Parent or any of
the similar governing documents of any of its Subsidiaries or (ii) assuming
that the consents and approvals referred to in Section 5.4 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Parent or any of its Subsidiaries or
any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under,
accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Parent or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party
which will remain in full force and effect at the Effective Time, or by which
they or any of their respective properties or assets may be bound or affected
or result in the termination of a right of termination or cancellation of any
such note, bond, mortgage, deed of trust, license, lease, agreement or
instrument or obligation.
5.4. CONSENTS AND APPROVALS. Except for (i) the filing of the
Certificate of Merger, (ii) the filing of the Certificates of Designation and
the Amended and Restated Articles with the Nevada Secretary, and (iii) the
consents, approvals and filings which are set forth in Section 5.4 of the
Parent Disclosure Schedule, no consents or approvals of, or filings or
registrations with, any Governmental Entity or with any third party are
necessary in connection with (A) the execution and delivery by Parent and
Holding of this Agreement and (B) the consummation by Parent and Holding of
the Merger and the other transactions contemplated hereby and the succession
by the Surviving Corporation and its Subsidiaries to the rights and
obligations of Parent and its Subsidiaries; provided, however, that no
representation is made hereby as to any consents which may be necessary to
obtain from any landlord under a Parent Real Property Lease.
5.4. FINANCIAL STATEMENTS. Parent has previously made available to
Subject Company copies of (a) the consolidated balance sheets of Parent and
its Subsidiaries for the fiscal year ended June 30, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the fiscal year ended June 30, 1998, accompanied by the audit report of
PricewaterhouseCoopers LLP, independent auditors with respect to Parent (the
"Parent Financial Statements"). The Parent Financial Statements referred to in
this Section 5.5 (including the related notes, where applicable) fairly
present the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of Parent and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth. Each of such Parent Financial Statements (including the
related notes, where applicable) complies in all material respects with
applicable accounting requirements and each of such statements (including the
related notes, where applicable) has prepared in accordance with GAAP
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes. The financial books and records
of Parent and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect actual transactions.
5.6. BROKER'S FEES. Neither Parent nor any of its Subsidiaries or any of
their respective officers, directors or stockholders has employed any broker
or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with the Merger or the Interoffice Merger. 1.1.
5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS
(a) Except as set forth in Section 5.7(a) of the Parent Disclosure
Schedule, since June 30, 1998, no event has occurred which has had or could
reasonably be expected to have, individually or in the aggregate, (net of any
revenues or other tangible benefits related to such event) a Material Adverse
Effect.
(b) Except as set forth in Section 5.7(b) of the Parent Disclosure
Schedule, since June 30, 1998, Parent and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary course of
business, and neither Parent nor any of its Subsidiaries has (i) except for
normal increases in the ordinary course of business consistent with past
practice and except as required by applicable law, increased the wages,
salaries, compensation, pension or other fringe benefits or perquisites
payable to any officer or director, other than Persons newly hired for such
position, from the amount thereof in effect as of June 30, 1998, or granted
any severance or termination pay, entered into any contract to make or grant
any severance or termination pay, or paid any bonus, in each case to any such
officer or director, other than pursuant to preexisting agreements or
arrangements, (ii) suffered any strike, work stoppage, slow-down or other
labor disturbance, (iii) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except those liabilities
or obligations (A) reflected on the most recent consolidated balance sheet of
Parent and its Subsidiaries referred to in Section 5.5 hereof, (B) incurred in
the ordinary course of business consistent with past practice or (C) incurred
under the Credit Agreement, (iv) permitted any of its assets to be subjected
to any Lien except pursuant to the Credit Agreement and the security documents
executed in connection therewith and except for any Permitted Liens, (v)
discharged or satisfied any Lien or paid any obligation or liability in an
amount exceeding $10,000, except in the ordinary course of business consistent
with past practice, (vi) sold, transferred or otherwise disposed of any assets
except for assets sold, transferred or otherwise disposed of in the ordinary
course of business consistent with past practice, (vii) made any capital
expenditure or commitment therefor, except those made in the ordinary course
of business in an amount less than $10,000 other than Parent New Acquired
Centers and Parent New Developed Centers, (viii) declared or paid any dividend
or made any distribution on any shares of its capital stock, or redeemed,
purchased or otherwise acquired any shares of its capital stock or any option,
warrant or other right to purchase or acquire any such shares, (ix) entered
into any agreement or transaction, or amended or terminated any agreement,
with an Affiliate, (x) canceled or waived any material claims or rights, (xi)
made any change in any method of accounting or auditing practice, (xii) made
any acquisition of, or investment in, all or substantially all of the property
or assets of any other individual, corporation or other entity other than a
wholly owned Subsidiary and other than Parent New Acquired Centers and Parent
New Developed Centers, (xiii) otherwise conducted its business or entered into
any transaction, other than this Agreement and related transactions, except in
the ordinary course of business consistent with past practices, or (xiv)
agreed, whether or not in writing, to do any of the foregoing.
5.8. LEGAL PROCEEDINGS.
(a) Except as set forth in Section 5.8 of the Parent Disclosure
Schedule, neither Parent nor any of its Subsidiaries is a party to any, and
there are no pending or, to the best of Parent's knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against Parent or any of its Subsidiaries or
challenging the validity or propriety of the transactions contemplated by this
Agreement.
(b) There is no Injunction imposed upon Parent, any of its
Subsidiaries or the assets of Parent or any of its Subsidiaries.
(c) There is no state of facts or conditions existing on or prior to
the Effective Time which, without any further action or omissions on the part
of Parent or its Subsidiaries, could form the basis of or give rise to a claim
by a third party, including any Governmental Entity, against Parent or any of
its Subsidiaries and which could be brought in a Legal Proceeding other than
(A) claims arising out of facts or conditions that constitute the ordinary
course of business of Parent and that would not constitute a breach of any of
the representations contained in this Article V, (B) such claims which may be
enforced in Legal Proceedings solely due to non-payment or other actions or
inactions of Parent or any of its Subsidiaries from and after the Effective
Time, (C) such claims or threatened claims for which adequate reserves or
accruals are set forth on the most recent balance sheet included within the
Parent Financial Statements, or (D) such claims or threatened claims which are
specifically set forth in Section 5.8 of the Parent Disclosure Schedule (and
for this purpose, and notwithstanding any statements to the contrary which may
be made in the Parent Disclosure Schedule, no matter which is disclosed on any
part of the Parent Disclosure Schedule other than Section 5.8 thereof shall be
deemed disclosed for purposes of this Section 5.8).
(d) Section 5.8(d) of the Parent Disclosure Schedule accurately
lists the specific claims for which reserves or accruals are set forth on the
most recent balance sheet included within the Parent Financial Statements, and
the specific amount of the reserve or accrual for each specific claim.
5.9. TAXES
(a) Each of Parent and its Subsidiaries has filed all Tax Returns
that it was required to file. All such Tax Returns were correct and complete
in all respects. All Taxes owed for the period ending on or prior to the
Closing Date (and for any Tax year beginning before and ending after the
Closing Date to the extent allocable to the portion of such period beginning
before and ending on the Closing Date), by any of Parent and its Subsidiaries
(whether or not shown on any Tax Return) have been paid, except for (i) Taxes
that are being contested in good faith and as to which adequate reserves have
been disclosed on Section 5.9 of the Parent Disclosure Schedule and (ii) Taxes
as to which adequate reserves have been disclosed on Section 5.9 of the Parent
Disclosure Schedule. None of Parent and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Entity in a jurisdiction where any
of Parent and its Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction, except for (i) claims for Taxes that
are being contested in good faith and as to which adequate reserves have been
disclosed on Section 5.9 of the Parent Disclosure Schedule, and (ii) claims
for Taxes as to which adequate reserves have been disclosed on Section 5.9 of
the Parent Disclosure Schedule. There are no Liens on any of the assets of any
of Parent and its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) Each of Parent and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(c) There is no dispute or claim concerning any liability for Taxes
of any of Parent and its Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any of the directors and officers (or
employees responsible for Tax matters) of Parent and its Subsidiaries has
knowledge based upon personal contact with any agent of such authority.
Section 5.9(c) of the Parent Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to any of Parent and
its Subsidiaries that currently are the subject of audit. Parent has delivered
to Subject Company correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against
or agreed to by any of Parent and its Subsidiaries since December 31, 1994.
(d) Except for any such matters that have been settled, none of
Parent and its Subsidiaries has waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) None of Parent and its Subsidiaries has filed a consent under
Code ss.341(f) concerning collapsible corporations. None of Parent and its
Subsidiaries has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code ss.280G. Each of
Parent and its Subsidiaries has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code ss.6662. None
of Parent and its Subsidiaries is a party to any Tax allocation or sharing
agreement. None of Parent and its Subsidiaries (A) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Parent) or (B) has any liability for the
Taxes of any Person (other than any of Parent and its Subsidiaries) under Reg.
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
5.10. ERISA
(a) Section 5.10(a) of the Parent Disclosure Schedule sets forth a
true and complete list of each material employee benefit plan, arrangement or
agreement and any amendments or modifications thereof (including, without
limitation, all stock purchase, stock option, severance, employment,
change-in-control, health/welfare and section 125 plans, fringe benefit,
bonus, incentive, deferred compensation and other agreements, programs,
policies and arrangements, whether or not subject to ERISA that is maintained
as of the date of this Agreement (the "Parent Plans") by Parent or any of its
Subsidiaries or by any ERISA Affiliate of Parent, all of which together with
Parent would be deemed a "single employer" within the meaning of Section 4001
of ERISA.
(b) Except as set forth in Section 5.10(b) of the Parent Company
Disclosure Schedule, Parent has previously made available to Subject Company
true and complete copies of each of the parent Plans and all related
documents, including but not limited to (i) the actuarial report for such
Parent Plan (if applicable) for each of the last two years, and (ii) the most
recent determination letter from the Internal Revenue Service (if applicable)
for such Parent Plan.
(c) Except as set forth in Section 5.10(c) of the Parent Disclosure
Schedule, (i) each of the Parent Plans that is maintained by Parent or any of
its ERISA Affiliates as of the date of this Agreement has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to ERISA and the Code, (ii) each of the Parent Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified, (iii) with respect to each Parent Plan which is subject to Title
IV of ERISA, the present value of accrued benefits under such Parent Plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Parent Plan's actuary with respect to
such Parent Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Parent Plan allocable to such accrued
benefits, (iv) no Parent Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of Parent, its Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under
any "employee pension plan," as that term is defined in Section 3(b) of ERISA,
(y) deferred compensation benefits accrued as liabilities on the books of
Parent, its Subsidiaries or any ERISA Affiliate or (z) benefits the full cost
of which is borne by the current or former employee (or his beneficiary), (v)
no liability under Title IV of ERISA has been incurred by Parent, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full (other
than payment of premiums to the PBGC, and no condition exists that presents a
material risk to Parent, its Subsidiaries or any ERISA Affiliate of incurring
a material liability thereunder, (vi) no Parent Plan is a "multiemployer
pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all
contributions or other amounts payable by Parent or its Subsidiaries as of the
Effective Time with respect to each Parent Plan in respect of current or prior
plan years have been paid or accrued in accordance with GAAP and Section 412
of the Code, (viii) neither Parent, its Subsidiaries nor any ERISA Affiliate
has engaged in a transaction in connection with which Parent, its Subsidiaries
or any ERISA Affiliate could be subject to either a material civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed
pursuant to Section 4975 or 4976 of the Code, and (ix) there are no pending,
or to the best knowledge of Parent, threatened claims (other than routine
claims for benefits) by, on behalf of or against any of the Parent Plans or
any trusts related thereto.
(d) Except as set forth in Section 5.10(d) of the Parent Disclosure
Schedule, no Parent Plan exists which provides for or could result in the
payment to any Parent employee of any money or other property or rights or
accelerate the vesting or payment of such amounts or rights to any Parent
employee as a result of the transactions contemplated by this Agreement,
including the Merger, whether or not such payment or acceleration would
constitute a parachute payment within the meaning of Code Section 280G. Since
December 31, 1996, neither Parent nor any of its Subsidiaries has taken any
action that would result in the payment of any amounts, or the accelerated
vesting of any rights or benefits, under the Parent Plans.
5.11. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in Section 5.11
of the Parent Disclosure Schedule, Parent and each of its Subsidiaries hold,
and have at all applicable times held, all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and
are not in default in any material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Parent or any of its Subsidiaries.
5.12. MATERIAL AGREEMENTS
(a) Except as set forth on Section 5.12 of the Parent Disclosure
Schedule, there are no material contracts, agreements, commitments,
understandings or proposed transactions, whether written or oral, to which
Parent or any of its Subsidiaries is a party or by which any of them is bound
that involve or relate to: (i) any of their respective officers, directors
stockholders, members, managers or partners or any Affiliate thereof; (ii) the
sale of any assets of Parent or any of its Subsidiaries, other than in the
ordinary course of business; (iii) covenants of Parent or any of its
Subsidiaries to not compete in any line of business or with any Person in any
geographical area or covenants of any other Person not to compete with Parent
or any of its Subsidiaries in any line of business or in any geographical
area; (iv) the acquisition by Parent or any of its Subsidiaries of any
operating business or the capital stock of any other Person; (v) the borrowing
of money (including any lease accounted for as a Capital Lease), other than
the Credit Agreement; (vi) the expenditure or guarantee of more than $100,000
in the aggregate or $25,000 annually or the performance by any party more than
one year from the date hereof except for any agreements terminable upon 60
days' or less notice without payment in connection therewith; or (vii) the
license of any intellectual property, other material proprietary right to or
from Parent or any of its Subsidiaries. Any operating leases (other than
Capital Leases) that relate to the leasing of furniture, fixtures or equipment
at any single Center of Parent shall not be required to be set forth on
Section 5.12(a) of the Parent Disclosure Schedule. Each contract, arrangement,
commitment or understanding of the type described in this Section 5.12(a),
whether or not set forth or required to be set forth in Section 5.12(a) of the
Parent Disclosure Schedule, is referred to herein as a "Parent Contract."
(b) (i) Each Parent Contract is valid and binding and in full force
and effect, (ii) Parent and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it under each
Parent Contract, (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute a material default on
the part of Parent or any of its Subsidiaries under any such Parent Contract,
and (iv) to the knowledge of Parent, each other party to each Parent Contract
has in all material respects performed all obligations required to be
performed by it under such Parent Contract and no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute
a material default on the part of such other party under any such Parent
Contract.
5.13. UNDISCLOSED LIABILITIES. Except (i) for those liabilities that have
been fully reflected or reserved against on the most recent balance sheet
included within the Parent Financial Statements, (ii) for liabilities incurred
in the ordinary course of business consistent with past practice since the
date of the most recent balance sheet included within the Parent Financial
Statements, and (iii) for those liabilities set forth on Section 5.13 of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries has
incurred any material liability to any third party of any nature whatsoever
(whether absolute, accrued or contingent or otherwise and whether due or to
become due) which has not been satisfied on or prior to June 30, 1998.
5.14. ENVIRONMENTAL LIABILITY. Except as set forth in Section 5.14 of the
Parent Disclosure Schedule, there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could be expected to result in
the imposition, on Parent or any of its Subsidiaries of any liability or
obligation arising under any Environmental Laws, pending or, to the knowledge
of Parent, threatened against Parent or any of its Subsidiaries, nor to the
knowledge of Parent is there any reasonable basis for any of the foregoing.
During or, to the knowledge of Parent, prior to the period of (i) its or any
of its Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its Subsidiaries' participation in the
management of any property, or (iii) its or any of its Subsidiaries' holding
of a security interest in any property, there were no releases or threatened
releases of Hazardous Materials in, on, under or affecting any such property.
Neither Parent nor any of its Subsidiaries is subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any material liability or
obligation pursuant to or under any Environmental Law.
5.15. PATENTS, TRADEMARKS, ETC. Except as set forth on Section 5.15 of
the Parent Disclosure Schedule, Parent and its Subsidiaries own or possess all
legal rights to use all intellectual proprietary rights, including without
limitation all patents, trademarks, trade names, service marks and copyrights,
that are material to the conduct of Parent's existing and proposed businesses.
Parent makes no representation as to any new trade name, trademark or service
▇▇▇▇ that it may adopt in the future. Section 5.15 of the Parent Disclosure
Schedule sets forth all such intellectual property rights of Parent and sets
forth whether such rights have been registered (or applications have been
filed therefor) with the United States Patent and Trademark Office. Except for
the agreements listed on Section 5.15 of the Parent Disclosure Schedule,
Parent is not bound by or a party to any options, licenses or agreements of
any kind with respect to any trademarks, service marks or trade names which
Parent claims to own other than to any Subsidiary of Parent. Parent has not
received any communications alleging that it or its Subsidiaries has violated
or would violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other Person or
entity.
5.16. RELATIONSHIPS WITH EMPLOPEES. Parent is not a party to or bound by
any collective bargaining agreement with respect to its business, and Parent
has no knowledge, after due inquiry, of any pending or threatened organizing
activities, employee associations, or unfair labor practice charges relating
to its business. There is no strike or other material labor dispute involving
Parent or any of its Subsidiaries pending, or to the knowledge of Parent,
threatened. To the knowledge of Parent, no officer or key employee, or any
group of key employees, intends to terminate their employment at or prior to
the Effective Time with Parent or any of its Subsidiaries, nor does Parent or
any of its Subsidiaries have a present intention to terminate the employment
of any of the foregoing.
5.17. BOOKS AND RECORDS. The minute books of Parent and its Subsidiaries,
as previously made available to Subject Company and its Representatives,
contain accurate records of all formal meetings of, and material corporate
action taken by, the stockholders of Parent and the Parent Board and the
stockholders and the Board of Directors of each of its Subsidiaries.
5.18. REAL PROPERTY.
(a) None of Parent or any of its Subsidiaries owns any real property
or interests in real property, other than Parent Real Property Leases (as
defined below). Section 5.18 of the Parent Disclosure Schedule sets forth a
complete list of all real property and interests in real property leased by
Parent and its Subsidiaries (individually, a "Parent Real Property Lease" and
the real properties specified in such leases, being referred to herein
individually as a "Parent Property" and collectively as the "Parent
Properties") as lessee, other than customer subleases or customer agreements
relating to the Centers of Parent, and the following information for each
Parent Real Property Lease: (i) location, (ii) term, (iii) square footage of
space demised thereunder, and (iv) rent over the term of such Parent Real
Property Lease. The Parent Property constitutes all interests in real property
currently used or currently held for use in connection with the business of
Parent and its Subsidiaries and which are necessary for the continued
operation of the business of Parent as the business is currently conducted.
Each Parent Real Property Lease is valid, binding, enforceable and in full
force and effect. Parent and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it under each
Parent Real Property Lease. No event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute a material default on
the part of Parent or any of its Subsidiaries under any such Parent Real
Property Lease. To the knowledge of Parent, each other party to each Parent
Real Property Lease has in all material respects performed all obligations
required to be performed by it under such Parent Real Property Lease and no
event or condition exists which constitutes or, after notice or lapse of time
or both, would constitute a material default on the part of such other party
under any such Parent Real Property Lease. Subject Company and the Shareholder
acknowledge and agree that Parent is not making any representations as to the
enforceability of any renewal or expansion options contained in any Parent
Real Property Lease. All of the Parent Property, buildings, fixtures and
improvements thereon owned or leased by Parent and its Subsidiaries are in
good operating condition and repair (subject to normal wear and tear);
provided, however, that the representation or warranty contained in this
sentence is not being made to any part of the Parent Property that is not
within the exclusive possession and control of Parent and its Subsidiaries (it
being agreed and understood that the Centers of Parent and its Subsidiaries
shall be deemed to be in the exclusive possession and control of Parent and
its Subsidiaries notwithstanding the occupancy thereof by customers)
including, without limitation, any condition of the building or building
systems.
(b) Parent and its Subsidiaries have all material certificates of
occupancy and permits and licenses of any Governmental Entity necessary or
useful for the current use and operation of each Parent Property, and Parent
and its Subsidiaries have fully complied with all material conditions of such
permits and licenses applicable to them. No default or violation, or event
which, with the lapse of time or giving of notice or both would become a
default or violation, has occurred in the due observance of any such permit or
license.
(c) There does not exist any actual or, to the knowledge of Parent,
threatened or contemplated condemnation or eminent domain proceedings that
affect any Parent Property or any part thereof, and none of Parent or any of
its Subsidiaries has received any notice, oral or written, of the intention of
any Governmental Entity or other Person to take or use all or any part
thereof.
(d) None of Parent or any of its Subsidiaries has received any
written notice from any insurance company that has issued a policy with
respect to any Parent Property requiring performance of any structural or
other repairs or alterations to such Parent Property.
(e) Except as set forth on Section 5.18 of the Parent Disclosure
Schedule, none of Parent or any of its Subsidiaries owns or holds, and is not
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any real
estate or any portion thereof or interest therein.
5.19. TANGIBLE PERSONAL PROPERTY.
(a) Each of Parent and its Subsidiaries has a valid leasehold
interest under each of the leases of personal property ("Parent Personal
Property Leases") involving annual payments in excess of $25,000 relating to
personal property used in the business of Parent and its Subsidiaries under
which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity), and there is no default under any Parent Personal Property Lease
by Parent or its Subsidiaries or, to the knowledge of Parent, by any other
party thereto, and no event has occurred which, with the lapse of time or the
giving of notice or both would constitute a default thereunder.
(b) Except as set forth on Section 5.19 of the Parent Disclosure
Schedule, each of Parent and its Subsidiaries has or will have good and
marketable title to all of the items of tangible personal property reflected
in the most recent balance sheet included within the Parent Financial
Statements or acquired thereafter (except as sold or disposed of subsequent to
the date thereof in the ordinary course of business consistent with past
practice), free and clear of any and all Liens other than the Permitted Liens
and other than any mechanic liens with respect to invoices or obligations
which are not delinquent. All such items of tangible personal property that,
individually or in the aggregate, are material to the operation of the
business of Parent and its Subsidiaries are in good condition and in a state
of good maintenance and repair (ordinary wear and tear excepted) and are fit
for the purposes used.
(c) All of the items of tangible personal property used by Parent
and its Subsidiaries under the Parent Personal Property Leases are in good
condition and repair (ordinary wear and tear excepted) and are fit for the
purposes used.
5.20. INSURANCE. Section 5.20 of the Parent Disclosure Schedule sets
forth an accurate summary of all of the insurance policies or programs of
Parent and its Subsidiaries in effect as of the date hereof. Such policies are
in full force and effect There are no outstanding unpaid premiums with respect
to such policies except in the ordinary course of business, and neither Parent
nor any of its Subsidiaries has received any notice of cancellation or
non-renewal of any such policy. Since December 31, 1997, there has not been
any material adverse change in the relationship of Parent or any of its
Subsidiaries with its insurers or in the premiums payable pursuant to such
policies. There exists no event of default by Parent or any of its
Subsidiaries or event, occurrence, condition or act (including the
transactions contemplated by this Agreement) which, with the giving of notice,
the lapse of time or the happening of any further event or condition would
become a default of Parent or any of its Subsidiaries under any such policy or
give rise to, and neither Parent nor any of its Subsidiaries has anticipation
of, any termination or cancellation thereof. Parent and its Subsidiaries are
covered by one or more policies or insurance for all services provided by it,
with responsible insurance companies, in such types and amounts and covering
such risks as are consistent with customary practices and standards of
similarly situated companies in business and operations similar to those of
Parent. Since December 31, 1997, none of Parent or any of its Subsidiaries has
been refused insurance or had any policy of insurance terminated (other than
at its request).
5.21. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ INFORMATION. For purposes of the HSR Act, Parent
(and any entities that would be consolidated with Parent under the HSR Act)
does not have aggregate net sales or gross assets of One Hundred Million
Dollars ($100,000,000) or more as defined in and calculated under the HSR Act.
5.22. INVESTMENT COMPANY. Parent is not an Investment Company within the
meaning of the Investment Company Act of 1940, as amended.
5.23. POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Section
5.23 of the Parent Disclosure Schedule, no officer, director, stockholder or
other beneficial owner (as such term is defined under Rule 13d-3 of the
Exchange Act) (other than any beneficial owner or stockholder that is not a
party to the Stockholders' Agreement) of securities of Parent or any of its
Subsidiaries: (a) owns, directly or indirectly, any interest in (excepting
less than 5% stock holdings for investment purposes in securities of publicly
held and traded companies), or is an officer, director, employee or consultant
of, any entity or Person that is, or is engaged in business as, a competitor,
lessor, lessee, supplier, distributor, sales agent or customer of, or lender
to or borrower from, Parent or any of its Subsidiaries; (b) owns, directly or
indirectly, in whole or in part, any tangible or intangible property that
Parent or any of its Subsidiaries uses in the conduct of business; or (c) has
any cause of action or other claim whatsoever against, or owes or has advanced
any amount to, Parent or any of its Subsidiaries, except for claims in the
ordinary course of business such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements existing on
the date hereof.
5.24. DISCLOSURE. Neither this Agreement, any schedule hereto, nor any
certificates, instruments or other documents (except for agreements that have
expired or have been terminated on or prior to the Effective Time) delivered
by Parent or its Representatives to Subject Company in connection with this
Agreement or the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact required to be
contained herein or therein or necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made,
not misleading.
5.25. ACCOUNTS RECEIVABLE. To the knowledge of Parent, except as set
forth in Section 5.25 of the Parent Disclosure Schedule, the amount of all
accounts receivable, including unbilled invoices which are reflected as
accounts receivable on the Parent Financial Statements, due or recorded in the
most recent financial statements included within the Parent Financial
Statements as being due to Parent and its Subsidiaries as of the date of such
financial statements (less the amount of any provision or reserve therefor
made in such financial statements) constitute validly generated receivables
for goods or services rendered; and to the knowledge of Parent, the amount of
any asserted or threatened counterclaim or right of set-off relating to such
accounts receivable or other debts does not exceed the amount of such
provision or reserve plus (without double counting), with respect to accounts
receivable due from any specific customer, the amount of any tenant security
deposit of such customer which is being held by Parent or its Subsidiaries.
The foregoing representations and warranties shall not be construed to
constitute a guaranty of collection of any account receivable, unbilled
invoices and other debts due or recorded in the most recent financial
statements included within the Parent Financial Statements.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. Except as set
forth in the Subject Company Disclosure Schedule or the Parent Disclosure
Schedule, as the case may be, as expressly contemplated or permitted by this
Agreement, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Effective Time, each of Parent
and Subject Company shall, and shall cause each of their respective
Subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course consistent with past practice, and (ii) use reasonable good faith
efforts to maintain and preserve intact its business organization, employees
and advantageous business relationships and retain the services of its
officers and key employees; provided, however, that from the date hereof to
the Effective Time neither Parent nor the Subject Company shall acquire or
develop any Center not listed on Schedule 1 or Schedule 2, as the case may be,
without the prior approval of the other party. The parties acknowledge and
agree that the acquisition or development of any Center listed on Schedule 1
or Schedule 2, as the case may be, shall be deemed to be approved by the
parties.
6.2. FORBEARANCE. Without limiting Section 6.1 hereof, except as set
forth in Section 6.2 of the Subject Company Disclosure Schedule or Section 6.2
of the Parent Disclosure Schedule, as the case may be, or as expressly
contemplated or permitted by this Agreement or the Interoffice Merger
Agreement, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Effective Time, neither Parent
nor Subject Company shall, and neither Parent nor Subject Company shall permit
any of their respective Subsidiaries to, without the prior written consent of
the other:
(a) adjust, split, combine or reclassify any of its capital stock;
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of
its capital stock, membership or partnership interests or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock or membership or partnership interests; issue, deliver or sell any
shares of its capital stock or membership or partnership interests or any
securities convertible into or exercisable for, or any rights, options or
warrants to acquire, any such shares or securities (whether for cash or
property) to any person other than: (i) existing shareholders of Parent or
Subject Company, (ii) employees of Parent or Subject Company, or (iii) in the
case of Parent, shares of Parent capital stock issued in connection with the
LP Roll Up (including, without limitation, issuance of shares to
securityholders of Parent for the purpose of raising cash to fund any cash
payments which may be made to limited partners in connection with the LP Roll
Up); provided, however, that neither any issuance of shares or securities in
Subject Company nor any issuance of shares or securities in Parent shall
result in any change to the percentage set forth in Section 2.4(a) hereof.
(b) sell, lease, transfer, or otherwise dispose of, or subject to
any Lien, any of its properties or assets, or cancel, release or assign any
material indebtedness owed to it or any material claim held by it, except (i)
in the ordinary course of business consistent with past practice and, in the
case of Parent, as required under the Credit Agreement or (ii) pursuant to
contracts or agreements in force as of the date of this Agreement and listed
in Section 6.2 of the Subject Company Disclosure Schedule or Section 6.2 of
the Parent Disclosure Schedule, as the case may be;
(c) except as contemplated by Section 6.1 hereof, other than in the
ordinary course consistent with past practice and, in the case of Parent,
under the terms of the Credit Agreement, incur or assume any liabilities or
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or entity (other than a wholly owned Subsidiary
of such party);
(d) except as contemplated by Section 6.1 hereof make any material
acquisition or investment either by purchase of stock or securities, merger or
consolidation, contributions to capital, property transfers, or purchases of
any property or assets of any other individual, corporation or other entity
other than a wholly owned Subsidiary thereof;
(e) make any material change in any of its leases or contracts or
enter into, renew or terminate any contract or agreement that calls for
aggregate annual payments of $25,000 or more and which either (i) is not
terminable at will on 60 days or less notice without payment of a penalty or
(ii) has a term of more than one year;
(f) other than general salary increases consistent with past
practice, increase in any material respect the compensation or fringe benefits
of any of its employees or pay any bonus, pension or retirement allowance not
required by any existing plan or agreement to any such employees or become a
party to, amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee or accelerate the vesting of any stock options or
other stock-based compensation;
(g) authorize or permit any of its Representatives to directly or
indirectly solicit, initiate or encourage any inquiries relating to, or that
may reasonably be expected to lead to, (i) the making of any proposal which
constitutes, a Takeover Proposal (as defined below), or participate in any
discussions or negotiations, or provide third parties with any nonpublic
information, relating to any such inquiry or proposal or otherwise facilitate
any effort or attempt to make or implement a Takeover Proposal or (ii) the
termination of any discussions between any third party, on the one hand, and
either Subject Company or Parent, on the other hand, with respect to the
acquisition by Subject Company or Parent, as the case may be, of the centers
owned or operated by such third party. Each of Parent and Subject Company
shall inform the other party as promptly as practicable after the receipt of
any such inquiry or proposal, of the material terms and conditions of any such
inquiries or proposals (including the identity of the party making such
inquiry or proposal) and shall keep the other party informed of the status
thereof. As used in this Agreement, "Takeover Proposal" shall mean, with
respect to any Person, any proposal for a merger, consolidation or other
business combination involving Subject Company or Parent or any of their
respective Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Subject Company or Parent or any of their respective Subsidiaries, other than
the transactions contemplated by this Agreement;
(h) make any capital expenditures in excess of (A) $25,000
individually or (B) $100,000 in the aggregate, other than expenditures
necessary to maintain existing assets in good repair;
(i) except as otherwise permitted elsewhere in Section 6.1 hereof or
in this Section 6.2, engage or participate in any material transaction or
incur or sustain any material obligation not in the ordinary course of
business;
(j) settle any claim, action or proceeding involving money damages
which is material to Parent or Subject Company, as applicable, on a
consolidated basis except in the ordinary course of business consistent with
past practice and except for settlements for monetary damages that are not,
individually or in the aggregate with any other such settlements, material in
amount;
(k) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code provided that no party hereto shall be deemed to be making any
representation as to such qualification;
(l) amend its certificate of incorporation, bylaws or similar
governing documents, as the case may be;
(m) enter into any new line of business;
(n) take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time prior
to the Effective Time, or in any of the conditions to the Merger set forth in
Article VIII not being satisfied or in a violation of any provision of this
Agreement;
(o) make any changes in its accounting methods, except as may be
required under law, rule, regulation or GAAP, in each case as concurred in by
such party's independent public accountants;
(p) enter into any agreement or perform any transaction (except
pursuant to agreements in force as of the date of this Agreement and listed in
Section 6.2 of the Subject Company Disclosure Schedule or Section 6.2 of the
Parent Disclosure Schedule, as the case may be) with any Affiliate;
(q) solely in the case of Parent, amend or restate its Credit
Agreement, other than any amendment or restatement on terms substantially
similar to the terms contained in the term sheet previously delivered to
Subject Company (or on any amended term sheet which Parent may submit to and
which is approved by Subject Company, such approval (as to terms not affecting
the rights or obligations of Subject Company prior to the Merger or the rights
or obligations of the Shareholder or the holders of Series C Preferred Stock)
not to be unreasonably withheld); or
(r) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.2.
6.3. TRANSFER OF AGREEMENTS. Subject Company shall deliver to Parent, on
or prior to the Effective Time, evidence in form and substance reasonably
satisfactory to Parent that each agreement referred to in the Subject Company
Disclosure Schedule that is to be terminated or to be assumed by the
Shareholder on or prior to the Effective Time shall have been so terminated or
assumed, and that none of Parent, Subject Company or any of their respective
Subsidiaries will have any obligations or liability thereunder from and after
the Effective Time.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1. ACEESS TO INFORMATION
(a) Upon reasonable notice, each of Parent and Subject Company
shall, and shall cause each of their respective Subsidiaries to, afford to the
Representatives of the other party, during normal business hours during the
period prior to the Effective Time, access to all its properties, books,
contracts, commitments and records, including, without limitation, any
information relating to any pending or planned acquisitions, and to its
officers, employees, accountants, counsel and other representatives and,
during such period, each of Parent and Subject Company shall, and shall cause
their respective Subsidiaries to, make available to the other party all
information concerning its business, properties and personnel as such other
party may reasonably request. Neither Parent nor Subject Company nor any of
their respective Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would, in the opinion of
such counsel, waive the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which
the restrictions of the preceding sentence apply.
(b) All information furnished by a party to the other party pursuant
to this Agreement (the "Confidential Information") shall be treated as the
sole property of the furnishing party and, if this Agreement shall be
terminated, each party receiving information shall upon request promptly
return to the furnishing party all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. Each party hereto receiving
Confidential Information shall keep confidential all such information, and
shall not directly or indirectly use such information for any competitive or
other commercial purpose.
(c) The obligation to keep Confidential Information as such shall
not apply to (i) any information which (A) was already in the receiving
party's possession on a non-confidential basis prior to the disclosure thereof
by the furnishing party, (B) was then generally known to the public other than
as a result of disclosure by the receiving party in violation of the
provisions hereof, or (C) was disclosed to the receiving party by a third
party not bound by any obligation of confidentiality or (ii) disclosures made
as required by law. If the receiving party is requested or required (by oral
question or request for information or documents in legal proceedings,
interrogatories, subpoena, civil investigative demand or similar process) to
disclose any information concerning the receiving party, the receiving party
will promptly notify the furnishing party of such request or requirement so
that the furnishing party may seek an appropriate protective order and/or
waive the receiving party's compliance with the provisions or this Agreement.
It is further agreed that, if in the absence of a protective order or the
receipt of a waiver hereunder the receiving party is nonetheless, in the
opinion of counsel, compelled to disclose information concerning the
furnishing party to any tribunal or governmental body or agency or else stand
liable for contempt or suffer other censure or penalty, the receiving party
may disclose such information to such tribunal or governmental body or agency
to the extent necessary to comply with such order as advised by counsel
without liability hereunder.
(d) Each receiving party understands and agrees that the furnishing
party will suffer immediate, irreparable harm in the event such receiving
party fails to comply with any of its obligations of confidentiality under
this Agreement, that monetary damages will be inadequate to compensate the
furnishing party for such breach and that such furnishing party shall be
entitled to specific performance as a remedy for any such breach without the
necessity of posting a bond or proving special damages. Such remedy shall not
be deemed to be the exclusive remedy in the event of breach of this Agreement
by any receiving party, but shall be in addition to all other remedies
available to the furnishing party at law or in equity.
(e) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.2. LEGAL CONDITIONS TO MERGER. Subject to the terms and conditions of
this Agreement, each of Parent and Subject Company shall, and shall cause its
Subsidiaries to, use their reasonable good faith efforts (i) to take, or cause
to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements which may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set
forth in Article VIII hereof, to consummate the transactions contemplated by
this Agreement and (ii) to obtain (and to cooperate with the other party at
such other party's expense to obtain) any consent, authorization, order or
approval of, or any exemption by, any third party which is required to be
obtained by Subject Company or Parent or any of their respective Subsidiaries
in connection with the Merger and the other transactions contemplated by this
Agreement. Prior to obtaining the consent of any third party required in
connection with the transactions contemplated hereby, each party shall have
the opportunity to review such proposed form of consent and provide reasonable
comments with respect thereto.
7.3. ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, the proper officers and directors of each party to this
Agreement and their respective Subsidiaries shall take all such necessary
action as may be reasonably requested by Parent.
7.4. ADVICE OF CHANGES. Parent and Subject Company shall promptly advise
the other party of any change or event which, individually or in the aggregate
with other such changes or events, has a Material Adverse Effect on it or
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants
contained herein. From time to time prior to the Closing, Parent and Subject
Company shall promptly supplement or amend the Parent Disclosure Schedule or
the Subject Company Disclosure Schedule, respectively, to reflect any matter
which, if existing, occurring or known at the date of this Agreement, would
have been required to be set forth or described in such disclosure schedule or
which is necessary to correct any information in such disclosure schedule
which has been rendered inaccurate thereby. No supplement or amendment to such
disclosure schedule shall have any effect for the purpose of determining the
accuracy of any party's representations and warranties contained herein, the
satisfaction of any of the conditions in Article VIII hereof, the compliance
by any party with its covenants or agreements contained herein or the
obligation of any party to indemnify any other party pursuant to Article X
hereof.
7.5. ADOPTION OF OPTION PLAN. Prior to the Closing Date, Parent shall
adopt a stock option plan, in form and substance substantially similar to
Parent's 1996 Option Plan, other than with respect to the vesting of options
granted under such new stock option plan (which vesting terms shall be
reasonably satisfactory to the Shareholder). Such new stock option plan shall
relate to the grant of options to acquire that number of shares as are equal
to 7.5% of the Fully Diluted Capitalization (as defined in the Stockholders'
Agreement) of Parent after giving effect to the Merger and the Interoffice
Merger (the "1998 Option Plan"). Parent shall use commercially reasonable
efforts to cause its shareholders to approve the 1998 Option Plan. Subject to
its reasonable satisfaction with the vesting terms of the 1998 Option Plan and
provided that the remainder of the 1998 Option Plan is substantially similar
to Parent's 1996 Option Plan, the Shareholder shall vote all of its shares of
Series C Preferred Stock in favor of the adoption of such plan when so
requested by Parent. No grants or allocations of options shall be made under
the 1998 Option Plan until the consummation of the Merger.
7.6. FINANCIAL AND TAX REPORTING. From and after the Effective Time,
Parent shall adopt the calendar year for financial and tax reporting purposes.
7.7. LEGENDS; OPINION REQUIREMENT. The Shareholder hereby agrees with
Parent as follows:
(a) The certificates evidencing the Series C Preferred Stock and the
shares of Parent Class B Common Stock or Parent Class A Common Stock issuable
upon conversion thereof, and each certificate issued in transfer thereof, will
bear the following legend and any applicable legend required by the
Stockholders' Agreement:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE SOLD, OR OTHERWISE TRANSFERRED WITHOUT
SUCH REGISTRATION, EXCEPT UPON DELIVERY TO PARENT OF SUCH
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE COMPANY
TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER."
(b) If the Shareholder desires to otherwise dispose of all or any
part of the Series C Preferred Stock or shares of Parent Class B Common Stock
or Parent Class A Common Stock issuable upon conversion thereof owned by it
under an exemption from registration under the Securities Act, and if
requested by Parent, such Shareholder shall deliver to Parent an opinion of
counsel, which may be counsel for Parent, that such exemption is available.
7.8. RESTRICTION ON MERGER. Parent shall not merge the Surviving
Corporation with and into Parent for the period commencing on the Effective
Time and ending on the first anniversary thereof. Parent has no current
intention to merge Surviving Corporation with and into Parent.
7.9. RESERVATION OF SHARES. Parent shall take all necessary action to
reserve for issuance the number of shares of Parent Class B Common Stock and
Parent Class A Common Stock as may be issuable from time to time upon
conversion of the Series C Preferred Stock and the number of shares of Parent
Class A Common Stock as may be issuable from time to time upon conversion of
the Parent Class B Common Stock.
7.10. CONTINUATION OF EMPLOYEE BENEFITS. From and after the Effective
Time, Parent shall, and shall cause its Subsidiaries including, without
limitation, Subject Company and its Subsidiaries, to:
(a) permit employees of Subject Company or any of its Subsidiaries
on the Closing Date (collectively, the "Continuing Employees") to participate
in Parent's employee benefit plans to the same extent to which similarly
situated employees of Parent participate; provided, however, that Parent shall
not terminate any health or disability plan of Subject Company or its
Subsidiaries until such time as the Continuing Employees are covered under the
health and disability plans of Parent; provided, further, that this shall not
be construed as a guarantee of employment of any such employees
(b) credit the Continuing Employees with their respective length of
service with Subject Company or its Subsidiaries (to the extent Subject
Company gave effect) for purposes of eligibility and vesting (but not for
benefit accrual) under all pension, welfare and fringe benefit plans (and any
other similar plans, programs, agreements or policies) and give credit, to the
extent possible, for purposes of waiting periods, deductibles or co-payments
under any health plans.
7.11. REAL PROPERTY AND OTHER CONVEYANCE TAXES. Parent shall pay (after
giving effect to the consummation of the Merger and the Interoffice Merger and
the payment of the Final Shareholder Contribution pursuant to the Interoffice
Merger Agreement) all state and local taxes on the transfer of stock and/or
real property or any interest therein contemplated by this Agreement, and
arising by reason of the transfer or deemed transfer of any leasehold interest
of Parent, Subject Company or any of their respective Subsidiaries, and all
expenses incident thereto, including the fees and disbursements of counsel and
accountants selected by Parent in the preparation of the applicable tax forms.
The parties acknowledge that it is intended that the Shareholder bear its
proportionate responsibility for such taxes and expenses through its ownership
of the Series C Preferred Stock. It is acknowledged and agreed that such taxes
include, without limitation, any New York Stock Transfer Tax and New York Real
Property Transfer Tax which may be due.
7.12. DIRECTOR AND OFFICER INSRUANCE. On or prior to the Closing Date,
Parent shall deliver or cause to be delivered (a) an agreement with respect to
the continuation of director and officer and errors and omissions insurance in
form and substance reasonably acceptable to the Shareholder or (b) evidence
that the directors and officers of Subject Company shall be covered under the
applicable insurance policies of Parent.
7.13. ELIMINATION OF LIENS. Each of Parent and Subject Company shall, and
shall cause its Subsidiaries to, take, or cause to be taken, all actions
necessary so that the assets of such party and its Subsidiaries are, as of the
Effective Time, free and clear of (i) any Liens, other than Permitted Liens,
set forth on Schedule 7.13 to this Agreement, and (ii) any Liens, other than
Permitted Liens, incurred from and after the date hereof and prior to the
Closing Date. Notwithstanding the foregoing, if the Required Banks (as defined
in the Credit Agreement) require, as a condition to their giving consent to
the Merger, that Liens be removed other than those which are required to be
removed under this Section 7.13, then the removal of such Liens required by
the Required Banks shall be a condition to the obligations of Parent pursuant
to Section 8.1(j), but the failure to obtain such removal shall not be a
breach of this Agreement.
7.14. PRESS RELEASES. None of Parent, Subject Company, Shareholder or any
of their Affiliates shall make any press release or other public announcement
of the transaction contemplated by this Agreement without having given the
other parties the opportunity to review and comment on it, and the parties
shall endeavor to jointly agree on the text of a press release.
7.15. DEBT; WORKING CAPITAL. The Shareholder shall take such steps as are
necessary to pay and discharge in full without cost to Subject Company, any
indebtedness of Subject Company other than (i) intercompany indebtedness
between Subject Company and Interoffice Superholdings Corporation, (ii) tenant
security deposits, (iii) indebtedness related to capital leases disclosed in
the Subject Company Disclosure Schedule or included within the balance sheet
contained in the Subject Company Financial Statements, (iv) payables for goods
and services purchased in the ordinary course of business, (v) accrued
expenses incurred in the ordinary course of business, and (vi) rent and other
payments which are contractual obligations under leases and contracts
disclosed in the Subject Company Disclosure Schedule, and the Shareholder
shall deliver to Parent evidence reasonably satisfactory to Parent of such
payment and discharge. The Shareholder shall take such steps, without cost to
Subject Company, as are necessary to ensure that the working capital (which
shall be defined as the consolidated current assets (as defined in accordance
with GAAP) of Subject Company less the consolidated current liabilities (as
defined in accordance with GAAP) of Subject Company) shall be not less than
$0, and shall deliver evidence reasonably satisfactory thereof to Parent.
7.16. CERTAIN POST-CLOSING SERVICES. For the first thirty days following
the Closing Date, Reckson Service Industries, Inc. ("RSI") will continue to
provide the same administrative services it provided (prior to the Closing
Date) in the ordinary course of business to the Subject Company, without
reimbursement. For the period commencing on the thirty-first day following the
Closing Date and continuing through the date that is six months following the
Closing Date, at the request of Parent, RSI will continue to provide such part
or all of the same administrative services (as Parent may request) it provided
(prior to the Closing Date) in the ordinary course of business to the Subject
Company, and RSI shall be reimbursed for all out of pocket costs of RSI in
providing such services, within 30 days after receipt by Parent of RSI's
invoices therefor.
7.17. BYLAW AMENDMENTS. If and to the extent that the ByLaws of Parent
are inconsistent with any provision of the Amended and Restated Articles, any
of the Certificates of Designation, or the Stockholders Agreement, such ByLaws
shall be amended (in a manner reasonably satisfactory to all of the parties
hereto) to conform to the provisions of such other documents.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1. Conditions of Obligations of Parent. The obligation of Parent
to effect the Merger is subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Subject Company and the Shareholder set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that the condition to Parent's obligations
set forth in this first sentence of this Section 8.1(a) shall be deemed to be
satisfied unless the failure or failures of such representations and
warranties contained herein or the representations and warranties of
Interoffice contained in the Interoffice Merger Agreement to be so true and
correct, in the aggregate, could be reasonably expected to result in Losses to
Parent of $5,000,000 or more. If Parent shall assert the failure of the
condition to be satisfied, it shall set forth in reasonable detail the alleged
breaches of representation and warranties and an estimate of the Losses
anticipated in connection therewith. Parent shall have received a certificate
signed on behalf of the Subject Company by the Co-Chairman and Vice
President-Treasurer of Subject Company and from the Shareholder to the
foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF SUBJECT COMPANY. Subject Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date (provided
that Section 8.1(i) shall be the sole closing condition with respect to
Subject Company's obligation to obtain required consents under the Subject
Company Real Property Leases), and Parent shall have received a certificate
signed on behalf of Subject Company by the Co-Chairman and Vice
President-Treasurer of Subject Company to such effect. It is agreed and
understood that to the extent the covenants contained in Section 7.2(a)(i)
require Subject Company to take actions to ensure that the condition contained
in Section 8.1(a) is satisfied, such covenant shall not supersede the proviso
contained in the first sentence of such Section 8.1(a).
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Injunction
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits or makes
illegal the consummation of the Merger.
(d) FILING OF AMENDED AND RESTATED ARTICLES; CERTIFICATES OF
DESIGNATION. Each of the Amended and Restated Articles and the Certificates of
Designation shall be effective.
(e) OPINION OF COUNSEL. Parent shall have received an opinion of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ LLP, counsel to Subject Company, covering matters and
containing qualifications of the type normally covered and contained in an
opinion relating to a transaction such as the Merger. Such opinion shall be
substantially similar to the opinion of counsel to Parent.
(f) STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement shall have
been duly executed and delivered by the Shareholder, any Affiliates of
Shareholder required to be a party thereto and each of the other parties
thereto (other than Parent).
(g) SECRETARY'S CERTIFICATES. Parent shall have received
certificates from Subject Company, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of Subject Company, certifying (a) that
the attached copies of the Certificate of Incorporation and By-laws of Subject
Company, and resolutions of the Subject Company Board and the stockholders of
Subject Company approving this Agreement and the other agreements referred to
herein to which it is a party and the transactions contemplated hereby and
thereby are all true, complete and correct and remain unamended and in full
force and effect, and (b) the incumbency and specimen signature of each
officer of Subject Company executing this Agreement and the other agreements
referred to herein to which it is a party or any other document delivered in
connection herewith or therewith on behalf of Subject Company.
(h) CONSENTS UNDER SUBJECT COMPANY REAL PROPERTY LEASES. Each Lease
Consent listed on and designated as such on Schedule 3 annexed hereto shall
have been obtained.
(i) INTEROFFICE MERGER. The consummation of the Interoffice Merger
shall have occurred.
(j) BANK CONSENT. The consent or approval of the Required Banks (as
defined in the Credit Agreement) to the Merger and the Interoffice Merger and
to the other transactions contemplated by this Agreement shall have been
obtained.
(k) DIRECTOR AND OFFICER RESIGNATIONS. Parent shall have received
duly executed resignations from all directors and officers of Subject Company
and its Subsidiaries which are effective immediately following the Effective
Time.
(l) ACCREDITED INVESTOR REPRESENTATIONS. Parent shall have received
from each of the Partners a letter containing customary representations as to
its status as an accredited investor within the definition of Regulation D
under the Securities Act.
(m) NON-COMPETE AGREEMENTS. Parent shall have received a non-compete
agreement executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ for the benefit of Parent, in form and
substance reasonably satisfactory to Parent.
8.2. CONDITIONS TO OBLIGATIONS OF SUBJECT COMPANY AND THE SHAREHOLDER.
The obligation of each of Subject Company and the Shareholder to effect the
Merger is also subject to the satisfaction or waiver by Subject Company and
the Shareholder at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent set forth in this Agreement shall be true and correct in
all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that the
condition to Subject Company's and the Shareholder's obligations set forth in
this first sentence of this Section 8.2(a) shall be deemed to be satisfied
unless the failure or failures of such representations and warranties
contained herein or the representations and warranties of Parent contained in
the Interoffice Merger Agreement to be so true and correct, in the aggregate,
could be reasonably expected to result in Losses to the Shareholder of
$5,000,000 or more. If any of Subject Company or the Shareholder shall assert
the failure of this condition to be satisfied, it shall set forth in
reasonable detail the alleged breaches of representations and warranties and
an estimate of the Losses anticipated in connection therewith. Subject Company
shall have received a certificate signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Subject Company
shall have received a certificate signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent to such effect. It
is agreed and understood that to the extent the covenants contained in Section
7.2(a)(i) require Parent to take actions to ensure that the condition
contained in Section 8.2(a) is satisfied, such covenant shall not supersede
the proviso contained in the first sentence of such Section 8.2(a).
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Injunction
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect. No statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits or makes
illegal the consummation of the Merger.
(d) FILING OF AMENDED AND RESTATED ARTICLES; CERTIFICATES OF
DESIGNATION. Each of the Amended and Restated Articles and the Certificates of
Designation shall have been filed with the Nevada Secretary and shall be
effective.
(e) OPINION OF COUNSEL. Subject Company shall have received an
opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Singer & ▇▇▇▇▇▇▇▇▇, LLP, counsel to Parent, covering
matters and containing qualifications of the type normally covered and
contained in an opinion relating to a transaction such as the Merger. Such
opinion shall be substantially similar to the opinion of counsel to Subject
Company. (a)
(f) STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement shall have
been duly executed and delivered by Parent and each of the other parties
thereto (other than the Shareholder and the Affiliates of Shareholder that are
required to be parties thereto).
(g) SECRETARY'S CERTIFICATES. Subject Company shall have received
certificates from Parent, dated the Closing Date and signed by the Secretary
or an Assistant Secretary of Parent, certifying (a) that the attached copies
of the Amended and Restated Articles of Incorporation and By-laws of Parent,
and resolutions of the Parent Board and the stockholders of Parent approving
this Agreement and the other agreements referred to herein to which it is a
party and the transactions contemplated hereby and thereby are all true,
complete and correct and remain unamended and in full force and effect, and
(b) the incumbency and specimen signature of each officer of Parent executing
this Agreement and the other agreements referred to herein to which it is a
party or any other document delivered in connection herewith or therewith on
behalf of Parent.
(h) APPOINTMENT OF DIRECTORS. Parent shall have taken all corporate
action necessary to appoint the designees of the holders of Series C Preferred
Stock set forth in Section 2.1 of the Stockholders' Agreement to the Parent
Board as of the Effective Time.
(i) INTEROFFICE MERGER. The consummation of the Interoffice Merger
shall have occurred.
(j) INSURANCE AGREEMENT. Parent shall have delivered to the
directors and officers of Subject Company and its Subsidiaries the agreement
or evidence specified in Section 7.12 hereof.
(k) BANK CONSENT. The consent or approval of the Required Banks (as
defined in the Credit Agreement) to the Merger and the Interoffice Merger and
to the other transactions contemplated by this Agreement shall have been
obtained.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Parent and Subject Company in a written
instrument, if the Board of Directors of each so determines;
(b) by either the Parent Board or the Subject Company Board if the
Merger shall not have been consummated on or before three months after the
date of the Interoffice Merger Agreement, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein;
(c) by either the Parent Board or the Subject Company Board
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein) if the
other party shall have breached in any material respect (i) any of the
covenants or agreements made by such other party herein or (ii) any of the
representations or warranties made by such other party herein; provided,
however, that neither party shall have the right to terminate this Agreement
pursuant to this Section 9.1(c) unless the breach of representation or
warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
hereby under Section 8.1(a) or 8.1(b) (in the case of a breach of
representation or warranty or covenant, respectively, by Subject Company) or
Section 8.2(a) or 8.2(b) (in the case of a breach of representation or
warranty or covenant respectively, by Parent), and in either case, such breach
is not cured within fifteen (15) days following written notice to the party
committing such breach, or which breach, by its nature, cannot be cured prior
to the Closing; and
(d) by either the Parent Board or the Subject Company Board if the
Interoffice Merger Agreement shall have been terminated in accordance with the
terms thereof.
9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or Subject Company as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, and none of Parent,
Subject Company, any of their respective Subsidiaries or any of their
Representatives or the Shareholder shall have any liability of any nature
whatsoever hereunder, or in connection with the transactions contemplated
hereby, except that (i) Sections 7.1(b), (c) and (d) and 11.1 shall survive
any termination of this Agreement and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither Parent nor Subject Company or
the Shareholder shall be relieved or released from any liabilities or damages
arising out of its willful breach of any provision of this Agreement.
9.3. AMENDMENT; EXTENSION; WAIVER. The parties hereto may (a) amend any
provision of this Agreement, (b) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (c) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (d) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such amendment, extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but any
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNITY
10.1. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. The respective
representations and warranties of Subject Company, the Shareholder and Parent
contained in this Agreement or in any schedule attached hereto shall survive
the consummation of the Merger and the other transactions contemplated hereby
and shall remain in full force and effect until the earlier of (x) the second
anniversary of the Effective Time, and (y) an initial public offering of the
Parent Common Stock (an "IPO"), except that (i) all of the representations and
warranties of the parties shall survive indefinitely in the event of fraud
with respect thereto, and (ii) the representations in Section 4.9 and Section
5.9 shall remain operative and continue in full force and effect until 30 days
after the expiration of the applicable statute of limitations (for assessment
and collection of taxes taking into account any extensions thereto) pertaining
to the matters represented and warranted in such sections. The period during
which such representation and warranties shall survive is sometimes
hereinafter referred to as the "Representations Period." No claim under this
Agreement, including for indemnification pursuant to Section 10.2, may be
brought after the expiration of the applicable Representations Period, except
for claims made in good faith in writing prior to such expiration setting
forth in reasonable detail the basis for such claims (whether or not any
action, demand or proceeding is instituted with respect to such claims prior
to the expiration of the applicable Representations Period, it being
understood that any and all Losses arising after the expiration of the
Representations Period shall be recoverable upon notice properly given prior
to the expiration of the applicable Representations Period in accordance with
this Section 10.1). Notwithstanding the foregoing, in the event that any claim
under this Agreement (other than Third Party Claims (as defined below)) is
pending prior to an IPO, the parties shall negotiate in good faith to quantify
the Losses relating to such claim and settle such claim in accordance with
this Article X prior to the filing of a registration statement relating to
such IPO. In the event the parties are unable to so quantify and settle such
claim prior to such time, either party may submit the dispute to arbitration
in accordance with the provisions of Section 10.4 hereof. In such arbitration,
the arbitrators shall be instructed to quantify such Losses based on the
information then available, which quantification shall be final and binding on
the parties regardless of subsequent events. Any agreements contained herein
which by their terms are to be performed, in whole or in part, following
consummation of the Merger shall survive in accordance with their respective
terms.
10.2. INDEMNIFICATION
(a) From and after the Effective Time, the Shareholder shall defend,
indemnify and hold harmless Parent and its Affiliates and all of their
respective officers, directors, employees, agents and shareholders, from and
against any and all Losses resulting from, arising out of or attributable to
(i) any breach by Subject Company or the Shareholder of any representation or
warranty contained in or made pursuant to this Agreement or in any other
agreement or certificate delivered to Parent in connection with this Agreement
(it being agreed that solely for purposes of determining if any Loss is
subject to indemnification pursuant to this clause (i), the accuracy of the
representations and warranties made by Subject Company and the Shareholder,
except with respect to Section 4.7(a), Section 4.12(a), Section 4.24 and
Section 4.27, and with respect to any specified dollar threshold contained in
any representation or warranty for purposes of defining the scope of such
representation or warranty, shall be determined without giving effect to the
qualifications to such representations and warranties concerning
"materiality," "knowledge", and "Material Adverse Effect," and all such
representations and warranties shall be tested as if such qualifications were
not included therein), (ii) any breach by Subject Company (on or prior to the
Effective Time) or the Shareholder of any covenant, obligation or agreement by
Subject Company or Shareholder contained in or made pursuant to this Agreement
or in any other agreement or certificate delivered to Parent in connection
with this Agreement, or (iii) any matters set forth on Schedule 10.2(a) to
this Agreement. Notwithstanding the foregoing, no claim shall be made against
the Shareholder for indemnification under clause (i) of this Section 10.2(a)
unless the aggregate of all indemnifiable Losses suffered by Parent (taking
into account Section 10.2(c)) under such clause and under Section 10.2(a)(i)
of the Interoffice Merger Agreement shall exceed the Loss Threshold. If
indemnifiable Losses under clause (i) of this Section 10.2(a) (when aggregated
with such Losses under Section 10.2(a)(i) of the Interoffice Merger Agreement)
suffered by Parent exceed the Loss Threshold, then the Shareholder shall be
required to indemnify Parent for all indemnifiable Losses suffered by it under
clause (i) of this Section 10.2(a) in excess of such Loss Threshold.
Notwithstanding anything to the contrary contained herein, the Loss Threshold
shall not apply to, and Parent shall be entitled to dollar-for-dollar recovery
for, (A) any Losses suffered by it arising out or attributable to any breach
of the representations and warranties contained in Section 4.8 or Section 4.9
(for purposes of determining whether Parent is entitled to indemnification
such breaches shall be measured pursuant to clause (i) above and, with respect
to the representations and warranties contained in Section 4.9, no effect
shall be given to any matters disclosed in the Subject Company Disclosure
Schedule), provided, however, that Parent shall not be entitled to make a
claim for indemnifiable Losses relating to a breach of the representation and
warranty contained in Section 4.8(c) until the aggregate of all such Losses
plus any Losses suffered as a result of the breach of the representation and
warranty of Interoffice contained in Section 4.8(c) of the Interoffice Merger
Agreement equals or exceeds $200,000 and, upon the making of such claim and
thereafter, Parent shall be entitled to dollar-for-dollar recovery for all
Losses indemnifiable under such Section (including the first $200,000 of such
indemnifiable Losses), (B) any Losses indemnifiable under clause (ii) of this
Section 10.2(a); and (C) any Losses indemnifiable under clause (iii) of this
Section 10.2(a). No investigation by Parent or its Representatives of Subject
Company shall affect or limit the representations, warranties or covenants of
Subject Company and the Shareholder or be considered in determining whether
Parent shall have the right to be indemnified for any matter pursuant to this
Agreement. The consummation by any party hereto of the transactions
contemplated hereby with knowledge of a breach of a representation, warranty,
covenant or agreement by the other party shall not constitute a waiver of a
claim for the non-breaching party's Losses, if any, with respect to such
breach. With respect to any breach by Subject Company of the representations
and warranties contained in Section 4.18(a), Parent agrees that indemnifiable
Losses related to such breach shall not include any multiple of lost revenues
attributable to or arising out of such breach. With respect to any breach by
Subject Company of the representations and warranties contained in Section
4.19(a), Parent agrees that Losses related thereto shall be indemnifiable only
to the extent that the Subject Company Personal Property Lease that is the
subject of the breach relates to personal property used in connection with the
business of Parent and its Subsidiaries. With respect to any breach of the
representations and warranties contained in Section 4.29, Parent shall not be
entitled to indemnification to the extent that Parent has been fully
indemnified (or would be entitled to indemnification but for the Loss
Threshold) for a breach of any other representation or warranty of Subject
Company arising from the same facts and circumstances that gave rise to the
breach of the representations and warranties contained in Section 4.29.
(b) From and after the Effective Time, Parent shall defend,
indemnify and hold harmless the Shareholder and its Affiliates and all of
their respective officers, directors, employees, agents and members, from and
against any and all Losses resulting from, arising out of or attributable to
(i) any breach by Parent of any representation or warranty contained in or
made pursuant to this Agreement or in any other agreement or certificate
delivered to the Shareholder in connection with this Agreement (it being
agreed that solely for purposes of determining if any loss is subject to
indemnification pursuant to this clause (i), the accuracy of the
representations and warranties made by Parent, except with respect to Section
5.7(a), Section 5.12(a), Section 5.24 and Section 5.25, and with respect to
any specified dollar threshold contained in any representation or warranty for
purposes of defining the scope of such representation or warranty, shall be
determined without giving effect to the qualifications to such representations
and warranties concerning "materiality," "knowledge", and "Material Adverse
Effect," and all such representations and warranties shall be tested as if
such qualifications were not included therein), (ii) any breach by Parent of
any covenant, obligation or agreement by Parent contained in or made pursuant
to this Agreement (including, without limitation, the agreement contained in
Section 2.4(a); provided, however, that the sole remedy for breach of such
agreement shall be the issuance of additional shares of Series C Preferred
Stock in accordance with such Section 2.4(a)) or in any other agreement or
certificate delivered to the Shareholder in connection with this Agreement,
and (iii) any matters set forth on Schedule 10.2(b) to this Agreement.
Notwithstanding the foregoing, no claim shall be made against Parent for
indemnification under clause (i) of this Section 10.2(b) unless the aggregate
of all indemnifiable Losses suffered by the Shareholder (taking into account
Section 10.2(c)) under such clause and under Section 10.2(b)(i) of the
Interoffice Merger Agreement shall exceed the Loss Threshold. If indemnifiable
Losses under clause (i) of this Section 10.2(b) (when aggregated with such
Losses under Section 10.2(b)(i) of the Interoffice Merger Agreement, but
without double counting) suffered by the Shareholder exceed the Loss
Threshold, then Parent shall be required to indemnify the Shareholder for all
indemnifiable Losses suffered by it under clause (i) of this Section 10.2(b)
in excess of such Loss Threshold. Notwithstanding anything to the contrary
contained herein, the Loss Threshold shall not apply to, and the Shareholder
shall be entitled to dollar-for-dollar recovery for, (A) any Losses suffered
by it arising out or attributable to any breach of the representations and
warranties contained in Section 5.8 or Section 5.9 (for purposes of
determining whether the Shareholder is entitled to indemnification, such
breaches shall be measured pursuant to clause (i) above and, with respect to
the representations and warranties contained in Section 5.9, no effect shall
be given to any matters disclosed in the Parent Disclosure Schedule),
provided, however, that the Shareholder shall not be entitled to make a claim
for indemnifiable Losses relating to a breach of the representation or
warranty contained in Section 5.8(c) until the aggregate of all such Losses
plus any Losses suffered as a result of the breach of the representation and
warranty of Parent contained in Section 5.8(c) of the Interoffice Merger
Agreement equals or exceeds $200,000 and, upon the making of such claim and
thereafter, the Shareholder shall be entitled to dollar-for-dollar recovery
for all Losses indemnifiable under such Section (including the first $200,000
of such indemnifiable Losses), (B) any Losses indemnifiable under clause (ii)
of this Section 10.2(b), and (C) any Losses indemnifiable under clause (iii)
of this Section 10.2(b). No investigation by the Shareholder or its
Representatives of Parent shall affect or limit the representations,
warranties or covenants of Parent or be considered in determining whether the
Shareholder shall have the right to be indemnified for any matter pursuant to
this Agreement. The consummation by any party hereto of the transactions
contemplated hereby with knowledge of a breach of a representation, warranty,
covenant or agreement by the other party shall not constitute a waiver of a
claim for the non-breaching party's Losses, if any, with respect to such
breach. With respect to any breach by Parent of the representations and
warranties contained in Section 5.18(a), the Shareholder agrees that
indemnifiable Losses related to such breach shall not include any multiple of
lost revenues attributable to or arising out of such breach. With respect to
any breach by Parent of the representations and warranties contained in
Section 5.19(a), the Shareholder agrees that Losses related thereto shall be
indemnifiable only to the extent that the Parent Personal Property Lease that
is the subject of the breach relates to personal property used in connection
with the business of Parent and its Subsidiaries. With respect to any breach
of the representations and warranties contained in Section 5.25, the
Shareholder shall not be entitled to indemnification to the extent that the
Shareholder has been fully indemnified (or would be entitled to
indemnification but for the Loss Threshold) for a breach of any other
representation or warranty of Parent arising from the same facts and
circumstances that gave rise to the breach of the representations and
warranties contained in Section 5.25.
(c) The amount by which a party shall be indemnified for any Loss
shall be reduced by (i) any insurance proceeds or indemnity, contribution,
warranty or other similar payments recoverable by such party including,
without limitation, amounts recoverable from acquisition hold backs,
retentions, escrows and similar amounts in respect of such Loss, (ii) any
right to income tax or other tax savings that actually reduce or will reduce
the impact to such party of such Loss (provided, however, that in the event
that any party seeking indemnification hereunder is unable to collect a
payment with respect to such right to such insurance proceeds, indemnity,
contribution, warranty or other similar payments (other than as a result of a
waiver, settlement or failure to use commercially reasonable efforts to
diligently prosecute such right by such party), then, at the time such right
under clause (i) or (ii) hereof is uncollectible or it becomes evident that
such right is uncollectible (regardless of when such time occurs), the amount
of Losses will be increased by the amount such Losses were reduced on account
of such right), (iii) the extent to which the amount of such Loss resulted in
an adjustment or indemnification payment under Section 3.5 of the Interoffice
Merger Agreement, and (iv) solely with respect to Losses arising out of a
breach of representation or warranty, the book value of any asset, as
determined in accordance with GAAP, that the party seeking indemnification
could reflect on its financial statements as a result of the transaction
giving rise to the breach (it being agreed and understood that this clause
shall not impose any obligation on such party to accept such asset; provided,
however, such party shall be deemed to have accepted such asset as a result of
any voluntary or involuntary settlement, payment, judgment, order, award or
resolution relating to such indemnification claim whereby the indemnified
party obtains or retains such asset) to the extent the book value of such
asset has not been reflected on the most recent balance sheet included within
the Subject Company Financial Statements or the Parent Financial Statements,
as the case may be.
10.3. MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any party hereto (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this Article X then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party
thereby is prejudiced.
(b) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 10
Business Days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party from
and against any Losses the Indemnified Party may suffer resulting from,
arising out of or attributable to the Third Party Claim and (ii) the
Indemnifying Party conducts and agrees in such notice to conduct the defense
of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 10.3(b) above, (ii) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement and with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld, delayed or conditioned
unreasonably), and (iii) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third Party
Claim which involves any relief other than the payment of money damages
without the prior written consent of the Indemnified Party.
(d) In the event (i) any of the conditions in Section 10.3(b) above
is or becomes unsatisfied, however, and such condition remains unsatisfied
after written notice to the Indemnifying Party specifying the same and a
reasonable opportunity to cure such condition or (ii) the Indemnified Party
shall reasonably conclude, based on the advice of its counsel, that (x) there
is an actual conflict of interest between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such Third Party Claim or
(y) there are specific defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party, (A)
the Indemnified Party may assume and direct the defense of, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner the Indemnified Party reasonably may deem
appropriate with the consent of the Indemnifying Party which consent shall not
be unreasonably withheld, delayed or conditioned, (B) the Indemnifying Party
will reimburse the Indemnified Party for the costs of defending against the
Third Party Claim (including reasonable attorney's fees and expenses), and (C)
the Indemnifying Party will remain responsible for any Losses the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided in this
Article X.
10.4. MATTERS INVOLVING THE PARTIES. Any claim on account of a Loss which
does not involve a Third Party Claim shall be asserted by written notice given
by the party claiming indemnity to the other party. The receiving party shall
have a period of 10 Business Days within in which to respond thereto. If such
party does not respond within such period, such party shall be deemed to have
accepted responsibility to make payment, subject to the provisions hereof, and
shall have no further right to contest the validity of such claim. If the
receiving party does respond within 10 Business Days and rejects such claim in
whole or in part, the parties shall negotiate in good faith to promptly
resolve such dispute. If such dispute has not be resolved within 60 days from
the date of receipt of the notice of claim by the receiving party, either
party may at any time thereafter submit such dispute to arbitration to be
conducted in accordance with the Expedited Procedures of the Commercial
Arbitration Rules of the American Arbitration Association then in effect
except as modified below. The arbitration shall be held in New York, New York.
Any such dispute shall be determined by a panel of three arbitrators with each
party to be provided by the American Arbitration Association with a list of no
less than ten possible arbitrators and to be permitted no more than four
strikes, and if three arbitrators are not selected on the basis of the first
list then provided, another list of no less than ten possible arbitrators
shall be provided for the selection of any additional arbitrators needed, with
each party again receiving no more than four strikes, and this process shall
continue until a full panel is selected. The decision of the arbitrators shall
be final and binding upon the parties. Judgment upon the award may be entered
in any court having jurisdiction. The arbitrators shall (i) award to the
prevailing party, if any, all of its costs and fees, which shall include all
reasonable pre-determination expenses of the arbitration, including the
arbitrators' fees, administrative fees, travel expenses, out-of-pocket
expenses, court costs, and attorneys' fees and (ii) have the power to grant
injunctive relief. The Series C Preferred Directors (as defined in the
Stockholders' Agreement) shall not be entitled to vote with respect to any
determination by the Parent Board relating to the pursuit of any claims for
indemnity by Parent against the Shareholder pursuant to this Article X.
10.5. SOLE RECOURSE; SETTLEMENT OF LOSSES.
(a) In the event that the Merger is consummated, the indemnification
provided for in this Article X shall be the sole and exclusive remedy of the
parties for any Losses arising out of or related to any breach of this
Agreement. No matter which constitutes a Loss under this Agreement as well as
under the Interoffice Merger Agreement shall be double counted for any purpose
hereunder.
(b) If Parent is entitled to be indemnified for any Loss pursuant to
Section 10.2(a), in accordance with the provisions of this Article X, promptly
following the final determination of the amount of any such Losses, the
Shareholder shall at its sole option either (x) surrender to Parent that
number of shares of Series C Preferred Stock, Parent Class B Common Stock (if
the Series C Preferred Stock has been converted into such class) or Parent
Class A Common Stock (if the Series C Preferred Stock or Parent Class B Common
Stock has been converted into such class), as is equal to the amount of any
such Losses divided by $4.75 (subject to adjustments for any stock split,
reverse stock split, combination or any other similar transaction involving
the Series C Preferred Stock, Parent Class B Common Stock (if the Series C
Preferred Stock has been converted into such class) or Parent Class A Common
Stock (if the Series C Preferred Stock or Parent Class B Common Stock has been
converted into such class)), which shares shall be free and clear of any Liens
or (y) pay the amount of such Losses by wire transfer of the immediately
available funds. The surrender of such shares or payment of immediately
available funds shall discharge the Shareholder's indemnification obligations
in respect of such Losses.
(c) If the Shareholder is entitled to be indemnified for any Losses
in accordance with the provisions of this Article X, promptly following the
final determination of any such Losses, (i) if such Loss does not relate to a
Third Party Claim, Parent shall at its sole option either (x) issue to the
Shareholder a certificate representing that number of duly issued, fully paid
and non-assessable shares of Series C Preferred Stock, Parent Class B Common
Stock (if the Series C Preferred Stock has been converted into such class) or
Parent Class A Common Stock (if the Series C Preferred Stock or Parent Class B
Common Stock has been converted into such class), as is equal to the quotient
obtained by dividing (A) the product of (a) 40% and (b) the amount of any such
Losses (such product, the "Indemnity Amount") by (B) $4.75 (subject to
adjustments for any stock split, reverse stock split, combination or any other
similar transaction involving the Series C Preferred Stock, Parent Class B
Common Stock (if the Series C Preferred Stock has been converted into such
class) or Parent Class A Common Stock (if the Series C Preferred Stock or
Parent Class B Common Stock has been converted into such class)) or (y) pay an
amount equal to the Indemnity Amount multiplied by 166 2/3% by wire transfer
of immediately available funds, (ii) if such Loss relates to a Third Party
Claim, Parent shall all at its sole option either (x) issue to the Shareholder
a certificate representing that number of duly issued, fully paid and
non-assessable Shares of Series C Preferred Stock, Parent Class B Common Stock
(if the Series C Preferred Stock has been converted into such class) or Parent
Class A Common Stock (if the Series C Preferred Stock or Parent Class B Common
Stock has been converted into such class), as is equal to the quotient
obtained by dividing (i) the sum of (A) the product of (a) 40% and (b) the
amount of any such Losses (other than any Losses referred to in clause (B) of
this Section 10.5(c)) and (B) the amount of any out-of-pocket Losses suffered
directly by the Shareholder (such sum, the "Third Party Indemnity Amount") by
(ii) $4.75 (subject to adjustments for any stock split, reverse stock split,
combination or any other similar transaction involving the Series C Preferred
Stock, Parent Class B Common Stock (if the Series C Preferred Stock has been
converted into such class) or Parent Class A Common Stock (if the Series C
Preferred Stock or Parent Class B Common Stock has been converted into such
class)), or (y) the Third Party Indemnity Amount multiplied by 166 2/3% by
wire transfer of immediately available funds. The issuance of such shares or
payment of immediately available funds shall discharge Parent's
indemnification obligations in respect of such Losses.
(d) Notwithstanding the provisions of this Section 10.5 to the
contrary, from and after the date of any IPO, all obligations to indemnify a
party hereunder may be paid and discharged only with the payment of cash.
ARTICLE XI
GENERAL PROVISIONS
11.1. EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses of its counsel and accountants and all other expenses incurred by
such party incident to the negotiation, preparation and execution of this
Agreement.
11.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt
requested) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to:
ALLIANCE National Incorporated
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Singer & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Subject Company (prior to the Effective Time), to:
Reckson Executive Centers, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Shareholder, to:
Reckson Office Centers, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.3. INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". 1.1.
11.4. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. This Agreement may be signed by
facsimile copy and shall be valid and binding upon delivery of a signed copy
by facsimile.
11.5. ENTIRE AGREEMENT. This Agreement (together with the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
11.6. GOVERNING LAW. This Agreement (other than Article II hereof) shall
be governed and construed in accordance with the laws of the State of New
York, without regard to any applicable conflicts of law. Article II of this
Agreement shall be governed and construed in accordance with the laws of the
State of Delaware, without regard to any applicable conflicts of law.
11.7. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
11.8. PUBLICITY. Parent and Subject Company shall consult with each other
before issuing any press release with respect to the Merger or this Agreement
and shall not issue any such press release or make any such public statement
without the prior consent of the other party, which shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of
the other party (but after prior consultation, to the extent practicable in
the circumstances) issue such press release or make such public statement as
may upon the advice of outside counsel be required by applicable law.
11.9. ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, provided,
however, that Parent shall be entitled to make such assignment of any of its
indemnification rights hereunder, as collateral security, as may be required
pursuant to the Credit Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns. This
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
IN WITNESS WHEREOF, Parent, Holding, Subject Company and the
Shareholder have caused this Agreement to be duly and validly executed as of
the date first above written.
ALLIANCE NATIONAL INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
ANI HOLDING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
RECKSON EXECUTIVE CENTERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
RECKSON OFFICE CENTERS, LLC
By: RSI I/O HOLDINGS, INC.
its managing member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title:
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.1. DEFINED TERMS..................................................1
ARTICLE II THE MERGER.........................................................7
2.1. THE MERGER.....................................................7
2.2. EFFECTIVE TIME.................................................7
2.3. EFFECTS OF THE MERGER..........................................7
2.4. CONVERSION OF SUBJECT COMPANY COMMON STOCK.....................7
2.5. PARENT COMMON STOCK; PARENT PREFERRED STOCK....................8
2.6. HOLDING COMMON STOCK...........................................8
2.7. CERTIFICATE OF INCORPORATION...................................8
2.8. BYLAWS.........................................................8
2.9. TAX CONSEQUENCES; ACCOUNTING TREATMENT.........................8
ARTICLE III CLOSING...........................................................8
3.1. CLOSING........................................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OFSUBJECT
COMPANY AND THE SHAREHOLDER........................................9
4.1. CORPORATE ORGANIZATION.........................................9
4.2. CAPITALIZATION................................................10
4.3. AUTHORITY; NO VIOLATION.......................................11
4.4. CONSENTS AND APPROVALS........................................12
4.5. FINANCIAL STATEMENTS..........................................12
4.6. BROKER'S FEES.................................................12
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS..........................12
4.8. LEGAL PROCEEDINGS.............................................13
4.9. TAXES.........................................................14
4.10. ERISA.........................................................15
4.11. COMPLIANCE WITH APPLICABLE LAW................................17
4.12. MATERIAL AGREEMENTS...........................................17
4.13. UNDISCLOSED LIABILITIES.......................................18
4.14. ENVIRONMENTAL LIABILITY.......................................18
4.15. PATENTS, TRADEMARKS, ETC......................................18
4.16. RELATIONSHIPS WITH EMPLOYEES..................................19
4.17. BOOKS AND RECORDS.............................................19
4.18. REAL PROPERTY.................................................19
4.19. TANGIBLE PERSONAL PROPERTY....................................20
4.20. INSURANCE.....................................................21
4.21. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ INFORMATION.................................22
4.22. INVESTMENT COMPANY............................................22
4.23. POTENTIAL CONFLICTS OF INTEREST...............................22
4.24. DISCLOSURE....................................................22
4.25. ACCREDITED INVESTOR...........................................22
4.26. INVESTMENT....................................................23
4.27. ACCOUNTS RECEIVABLE...........................................23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT...........................23
5.1. CORPORATE ORGANIZATION........................................23
5.2. CAPITALIZATION................................................24
5.3. AUTHORITY; NO VIOLATION.......................................25
5.4. CONSENTS AND APPROVALS........................................26
5.5. FINANCIAL STATEMENTS..........................................26
5.6. BROKER'S FEES.................................................26
5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS..........................27
5.8. LEGAL PROCEEDINGS.............................................28
5.9. TAXES.........................................................28
5.10. ERISA.........................................................30
5.11. COMPLIANCE WITH APPLICABLE LAW................................31
5.12. MATERIAL AGREEMENTS...........................................31
5.13. UNDISCLOSED LIABILITIES.......................................32
5.14. ENVIRONMENTAL LIABILITY.......................................32
5.15. PATENTS, TRADEMARKS, ETC......................................32
5.16. RELATIONSHIPS WITH EMPLOYEES..................................33
5.17. BOOKS AND RECORDS.............................................33
5.18. REAL PROPERTY.................................................33
5.19. TANGIBLE PERSONAL PROPERTY....................................34
5.20. INSURANCE.....................................................35
5.21. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ INFORMATION.................................35
5.22. INVESTMENT COMPANY. ..........................................36
5.23. POTENTIAL CONFLICTS OF INTEREST...............................36
5.24. DISCLOSURE....................................................36
5.25 ACCOUNTS RECEIVABLE...........................................36
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS.........................37
6.1. CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME.............37
6.2. FORBEARANCE...................................................37
6.3. TRANSFER OF AGREEMENTS........................................40
ARTICLE VII ADDITIONAL AGREEMENTS............................................40
7.1. ACCESS TO INFORMATION.........................................40
7.2. LEGAL CONDITIONS TO MERGER....................................41
7.3. ADDITIONAL AGREEMENTS.........................................42
7.4. ADVICE OF CHANGES.............................................42
7.5. ADOPTION OF OPTION PLAN.......................................42
7.6. FINANCIAL AND TAX REPORTING...................................42
7.7. LEGENDS; OPINION REQUIREMENT..................................43
7.8. RESTRICTION ON MERGER.........................................43
7.9. RESERVATION OF SHARES.........................................43
7.10. CONTINUATION OF EMPLOYEE BENEFITS.............................43
7.11. REAL PROPERTY AND OTHER CONVEYANCE TAXES......................44
7.12. DIRECTOR AND OFFICER INSURANCE................................44
7.13. ELIMINATION OF LIENS..........................................44
7.14. PRESS RELEASES................................................44
7.15. DEBT; WORKING CAPITAL.........................................45
7.16. CERTAIN POST-CLOSING SERVICES.................................45
7.17. BYLAW AMENDMENTS..............................................45
ARTICLE VIII CONDITIONS PRECEDENT............................................46
8.1. CONDITIONS TO OBLIGATIONS OF PARENT...........................46
8.2. CONDITIONS TO OBLIGATIONS OF SUBJECT
COMPANY AND THE SHAREHOLDER...................................48
ARTICLE IX TERMINATION AND AMENDMENT.........................................49
9.1. TERMINATION...................................................49
9.2. EFFECT OF TERMINATION.........................................50
9.3. AMENDMENT; EXTENSION; WAIVER..................................50
ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNITY.............................51
10.1. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS....................51
10.2. INDEMNIFICATION...............................................51
10.3. MATTERS INVOLVING THIRD PARTIES...............................55
10.4. MATTERS INVOLVING THE PARTIES.................................56
10.5. SOLE RECOURSE; SETTLEMENT OF LOSSES...........................56
ARTICLE XI GENERAL PROVISIONS................................................58
11.1. EXPENSES.......................................................58
11.2. NOTICES........................................................58
11.3. INTERPRETATION.................................................59
11.4. COUNTERPARTS; FACSIMILE SIGNATURES.............................60
11.5. ENTIRE AGREEMENT...............................................60
11.6. GOVERNING LAW..................................................60
11.7. SEVERABILITY...................................................60
11.8. PUBLICITY......................................................60
11.9. ASSIGNMENT; THIRD PARTY BENEFICIARIES..........................60
Schedules
Schedule 1 Parent New Acquired Centers and Parent New Developed
Centers
Schedule 2 Subject Company New Acquired Centers and Subject Company
New Developed Centers
Schedule 3 Required Lease Consents
Schedule 7.13 Liens to be Removed
Schedule 10.2(a) Subject Company Line Item Indemnities
Schedule 10.2(b) Parent Line Item Indemnities
Subject Company Disclosure Schedule
Parent Disclosure Schedule