EXHIBIT 10.21
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets (this "Agreement") is entered
into and effective as of September 25, 1997 by and among LOONEY & COMPANY, a
Texas corporation (the "Buyer"), U.S. LEGAL SUPPORT, INC., a Texas corporation
and the parent of Buyer (the "Parent"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a resident of
Houston, Texas d.b.a. COMMANDER ▇▇▇▇▇▇ INC. (the "Seller"). Buyer, Parent and
Seller are hereinafter sometimes referred to collectively as the "Parties" or
singularly as a "Party."
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Seller is the owner of various assets associated with the
Business (as hereinafter defined);
WHEREAS, the Buyer desires to purchase certain of the Assets (as hereinafter
defined) owned by the Seller and used in the Business (such purchase of the
Assets being sometimes herein referred to as the "Acquisition"), and the Seller
desires to sell such Assets to the Buyer;
WHEREAS, in connection with the purchase and sale of the Assets, the Parties
desire to set forth in this Agreement the terms and conditions with respect to
the transfer of such Assets; and
WHEREAS, the parties understand that the Parent or its Affiliates may enter
into other agreements similar or dissimilar to this Agreement (the "Other
Agreements") for the acquisition by the Parent or such Affiliates of the assets
or stock of other entities (collectively, the "Other Acquired Businesses," and
each of those entities, individually, an "Other Acquired Business"), which Other
Agreements will be among those entities and their equity owners, the Parent and
Affiliates of the Parent;
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
ACCOUNTS PAYABLE. The term "Accounts Payable" shall mean all of the
accounts payable of the Business existing as of the Effective Date.
ACCOUNTS RECEIVABLE. The term "Accounts Receivable" shall mean all of the
accounts receivable, notes receivable, trade receivables and intercompany
receivables relating to the Business and existing as of the Effective Date.
ACQUISITION. The term "Acquisition" shall have the meaning set forth in the
preamble hereto.
AFFILIATE. The term "Affiliate" of a person shall mean, with respect to
that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of the ability to affect the management and
policies of a person whether through the ownership of voting securities, by
contract, through the holding of a position as a director or officer of such
person, or otherwise. As used in this definition, the term "person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a joint stock company, a trust, an incorporated organization, or a
Governmental Authority.
AGREEMENT. The term "Agreement" shall have the meaning set forth in the
preamble hereto.
ANCILLARY AGREEMENTS. The term "Ancillary Agreements" shall have the
meaning set forth in Section 3.2.
ASSETS. The term "Assets" shall have the meaning set forth in Section 2.1.
ASSUMED LIABILITY. The term "Assumed Liability" shall have the meaning set
forth in Section 2.4.
▇▇▇▇ OF SALE. The term "▇▇▇▇ of Sale" shall have the meaning set forth in
Section 6.3(x).
BOOKS AND RECORDS. The term "Books and Records" shall have the meaning set
forth in Section 2.1(c).
BUSINESS. The term "Business" shall mean the legal staffing business of the
Seller as presently conducted.
BUYER. The term "Buyer" shall have the meaning set forth in the preamble
hereto.
BUYER INDEMNIFIED PARTIES. The term "Buyer Indemnified Parties" shall have
the meaning set forth in Section 7.1A.
CAPITAL STOCK. The term "Capital Stock" shall mean, with respect to: (a)
any corporation, any share, or any depositary receipt or other certificate
representing any share, of an equity ownership interest in that corporation; and
(b) any other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity interest
in that Entity.
-2-
CASH PURCHASE PRICE. The term "Cash Purchase Price" shall have the meaning
set forth in Section 2.3(a).
CLOSING. The term "Closing"shall have the meaning set forth in Section 6.1.
CLOSING DATE. The term "Closing Date" shall have the meaning set forth in
Section 6.1.
CLOSING MEMORANDUM. The term "Closing Memorandum" shall mean the form of
closing memorandum to be prepared by the Buyer and the Parent and approved by
the Seller (which approval will not be unreasonably withheld) for the Closing
under this Agreement in which are included the forms of officers certificates,
certificates of the Seller, opinions of counsel and certain other documents to
be delivered at the Closing as provided herein.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
CONTRACTS. The term "Contracts" shall have the meaning as contained in
Section 2.1(b).
CUSTOMERS. The term "Customers" shall have the meaning as contained in
Section 3.25.
DAMAGES. The term "Damages" shall have the meaning set forth in
Section 7.1A.
EFFECTIVE DATE. The term "Effective Date" shall mean 12:01 a.m. on the
"Closing Date."
EMPLOYEE. The term "Employee" shall mean any employee of the Business who,
as of the Effective Date, is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Seller's applicable policies, are eligible to return to active status,
but shall not include any independent contractor providing staffing services to
Seller from time to time.
EMPLOYMENT AGREEMENTS. The term "Employment Agreements" shall have the
meaning ascribed to it in Section 3.18.
ENTITY. The term "Entity" shall mean any sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
ENVIRONMENTAL, HEALTH & SAFETY LAWS. The term "Environmental, Health &
Safety Laws" shall mean all laws (including rules and regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign Governmental Authorities concerning pollution
or protection of the environment, public health and safety, or employee health
and safety.
EQUIPMENT. The term "Equipment" shall have the meaning as contained in
Section 2.1(a).
-3-
ERISA. The term "ERISA" shall have the meaning as contained in
Section 3.17.
EXCHANGE ACT. The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
EXCLUDED ASSETS. The term "Excluded Assets" shall have the meaning as
contained in Section 2.2.
EXPIRATION DATE. The term "Expiration Date" shall have the meaning set forth
in the introductory paragraph to Article III.
FINAL PROSPECTUS. The term "Final Prospectus shall mean the prospectus
included in the Registration Statement at the time it becomes effective, except
that if the prospectus first furnished to the Underwriter after the Registration
Statement becomes effective for use in connection with the IPO differs from the
prospectus included in the Registration Statement at the time it becomes
effective (whether or not that prospectus so furnished is required to be filed
with the SEC pursuant to Securities Act Rule 424(b)), the prospectus so first
furnished is the "Final Prospectus."
FINANCIAL STATEMENTS. The term "Financial Statements" shall mean the
balance sheet, income statement and statement of changes of financial position
of the Business at and for twelve-month periods ended December 31, 1995 and 1996
and at and for the six-month periods ended June 30, 1996 and 1997, with June 30,
1997, being referred to herein as the "Balance Sheet Date".
GAAP. The term "GAAP" shall mean generally accepted accounting principles
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
GENERAL INTANGIBLES. The term "General Intangibles" shall have the meaning
set forth in Section 2.1(g).
GOVERNMENTAL APPROVAL. The term "Governmental Approval" shall mean at any
time any authorization, consent, approval, permit, franchise, certificate,
license, implementing order or exemption of, or registration or filing with, any
Governmental Authority, including any certification or licensing of a natural
person to engage in a profession or trade or a specific regulated activity, at
that time.
GOVERNMENTAL AUTHORITY. The term "Governmental Authority" shall mean (a)
any national, state, county, municipal or other government, domestic or foreign,
or any agency, board, bureau, commission, court, department or other
instrumentality of any such government, or (b) any Person having the authority
under any applicable Governmental Requirement to assess and collect Taxes for
its own account.
GOVERNMENTAL REQUIREMENT. The term "Governmental Requirement" shall mean at
any time (a) any law, statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, writ, edict, award, authorization or other
requirement of any Governmental Authority in effect at that time or
-4-
(b) any obligation included in any certificate, certification, franchise, permit
or license issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
INTELLECTUAL PROPERTY. The term "Intellectual Property" shall have the
meaning as contained in Section 2.1(e).
IPO. The term "IPO" shall mean the first time a registration statement filed
under the Securities Act with respect to an underwritten primary offering by the
Parent to the public of Parent Shares is declared effective under the Securities
Act and the shares registered by that registration statement are issued and sold
by the Parent (otherwise than pursuant to the exercise by the Underwriter of any
over-allotment option).
IPO CLOSING. The term "IPO Closing" shall mean the delivery to the Parent of
payment for the Parent Shares it sells to the Underwriter in the IPO.
IPO CLOSING DATE. The term "IPO Closing Date" shall mean the date on which
the Parent first receives payment for the Parent Shares it sells to the
Underwriter in the IPO.
IPO PRICE. The term "IPO Price" shall mean the price per share of Parent
Shares which is set forth as the "price to public" on the cover page of the
Final Prospectus.
LEASED ASSETS. The term "Leased Assets" shall have the meaning ascribed
thereto in Section 3.6.
LICENSES. The term "Licenses" shall have the meaning ascribed thereto in
Section 3.10.
LITIGATION. The term "Litigation" shall mean any action, case, proceeding,
claim, grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
MATERIAL. The term "Material" shall mean, as applied to any Entity or the
Business, material to the business, operations, property or assets, liabilities,
financial condition or results of operations of the Business or that Entity and
its Subsidiaries considered as a whole, as the case may be.
MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" shall mean, with
respect to the consequences of any fact or circumstance (including the
occurrence or non-occurrence of any event) to the Business, that such fact or
circumstance has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and circumstances,
any material damages.
MINIMUM CASH AMOUNT. The term "Minimum Cash Amount" shall have the meaning
set forth in Section 6.2(iv).
-5-
NOTICE OF ACTION. The term "Notice of Action" shall have the meaning set
forth in Section 7.1C.
NOTICE OF ELECTION. The term "Notice of Election" shall have the meaning
set forth in Section 7.1C.
OFFSET. The term "Offset" shall have the meaning set forth in Section 8.2.
ORDINARY COURSE OF BUSINESS. The term "Ordinary Course of Business" shall
mean the ordinary course of Seller's Business consistent with past custom and
practice (including with respect to quantity and frequency).
OTHER ACQUIRED BUSINESSES. The term "Other Acquired Businesses" shall have
the meaning set forth in the preamble hereto.
OTHER AGREEMENTS. The term "Other Agreements" shall have the meaning set
forth in the preamble hereto.
OTHER FINANCING SOURCES. The term "Other Financing Sources" shall have the
meaning set forth in Section 6.2(iv).
PARENT. The term "Parent" shall have the meaning set forth in the preamble
hereto.
PARENT SHARES. The term "Parent Shares" shall mean any of the shares of
common stock of the Parent.
PARTY. The terms "Party" and "Parties" shall have the meanings set forth in
the preamble hereto.
PBGC. The term "PBGC" shall mean the Pension Benefits Guaranty Corporation.
PERSON. The term "Person" shall mean any natural person, Entity, estate,
trust, union or employee organization or Governmental Authority.
PRICING. The term "Pricing" shall have the meaning set forth in Section 6.1.
REAL PROPERTY. The term "Real Property" shall have the meaning as contained
in Section 3.12.
REGISTRATION RIGHTS AGREEMENT. The term "Registration Rights Agreement"
shall have the meaning set forth in Section 6.2(xi).
REGISTRATION STATEMENT. The term "Registration Statement" shall mean the
registration statement, including (a) each preliminary prospectus included
therein prior to the date on which that registration statement is declared
effective under the Securities Act (including any prospectus filed
-6-
with the SEC pursuant to Securities Act Rule 424(b)), (b) the Final Prospectus
and (c) any amendments and all supplements and exhibits thereto, filed by the
Parent with the SEC to register the Parent Shares under the Securities Act for
public offering and sale in the IPO.
RETAINED LIABILITIES. The term "Retained Liabilities" shall mean all
liabilities of the Business other than the Assumed Liabilities.
SCHEDULE OF ACCRUED LIABILITIES. The term "Schedule of Accrued Liabilities"
shall mean a schedule of all accrued liabilities of the Business prepared for
the period and as of the date specified.
SEC. The term "SEC" means the Securities and Exchange Commission or any
successor Governmental Authority.
SECURITIES ACT. The term "Securities Act" shall mean the Securities Act of
1933, as amended.
SELLER. The term "Seller" shall have the meaning set forth in the preamble
hereto.
SELLER EMPLOYMENT AGREEMENT. The term "Seller Employment Agreement" shall
have the meaning ascribed to it in Section 6.2(x).
SELLER'S NAMES. The term "Seller's Names" shall have the meaning set forth
in Section 2.1(i).
STOCK PLEDGE AGREEMENT. The term "Stock Pledge Agreement" shall have the
meaning set forth in Section 6.3(xiii).
SUBSIDIARY. The term "Subsidiary," of any specified Person at any time,
shall mean any Entity a majority of the Capital Stock of which is at that time
owned or controlled, directly or indirectly, by the specified Person.
SUPPLEMENTAL INFORMATION. The term "Supplemental Information" shall have
the meaning set forth in Section 5.10.
TAXES. The term "Taxes" shall mean any and all local, state or federal
taxes imposed upon the Business or the Seller, including, without limitation,
tax obligations, tax claims, tax charges, tax fines or any related tax
liabilities, regardless of the source, cause or origin of such tax liabilities,
including taxes imposed as a result of the consummation of the Acquisition.
UNDERWRITER. The term "Underwriter" shall mean collectively (a) the
investment banking firms that prospectively may enter into the Underwriting
Agreement and (b) from and after the IPO Pricing Date, the investment banking
firms party to the Underwriting Agreement.
UNDERWRITING AGREEMENT. The term "Underwriting Agreement" shall mean the
underwriting agreement to be entered into between the Parent and the Underwriter
with respect to the IPO.
-7-
ARTICLE II
PURCHASE OF ASSETS AND PURCHASE PRICE
2.1 SALE OF ASSETS. Subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer agrees to purchase from the Seller on the Closing Date,
all assets owned by Seller and used in or derived from the Business (other than
those specifically excluded under Section 2.2 below) including the following
(such assets to be referred to herein as the "Assets"):
(a) All office equipment, furniture, artwork, service equipment,
supplies, computer hardware, computer software, data processing equipment,
and tools (the "Equipment"), including the Equipment described on SCHEDULE
2.1(A);
(b) All contracts, leases, documents, franchises, instruments,
Licenses, agreements and other written or oral agreements relating to the
Business of Seller to which Seller is a party or by which Seller or any of
the Assets may be bound as well as all rights, privileges, claims and
options relating to the foregoing (the "Contracts"), including the Contracts
described on SCHEDULE 2.1(B);
(c) All customer and supplier files and databases, including Seller's
attorney database, customer and supplier lists, accounting and financial
records, invoices, and other books and records relating principally to the
Business (the "Books and Records"), including the Books and Records described on
SCHEDULE 2.1(C);
(d) Employee files for those Employees actually hired by Buyer;
(e) All right, title and interest of Seller, in, to and under all
service marks, trademarks, patents, inventions, copyrights, trademarks,
trade secrets and trade and assumed names, principally related to the
Business together with the right to receive royalties with respect thereto
or recover for infringement thereon, if any (the "Intellectual Property"),
and other marks and/or names described on SCHEDULE 2.1(E);
(f) All advertising materials and all other printed or written
materials related to the conduct of the Business;
(g) All of the Seller's general intangibles, claims, rights of set
off, rights of recoupment and other proprietary intangibles, licenses and
sublicenses granted and obtained with respect thereto, and rights
thereunder, which are used in the Business, and remedies against
infringements thereof, and rights to protection of interests therein under
the laws of all jurisdictions (the "General Intangibles"), including the
General Intangibles described on SCHEDULE 2.1(G);
(h) All goodwill, going concern value and other intangible properties
related to the Business; and
-8-
(i) All of Seller's right to use the name "Commander ▇▇▇▇▇▇ Inc.,"
any similar name or derivative thereof, and any present assumed names in
connection with the Business or Seller's use of the Assets (the "Seller's
Names").
2.2 EXCLUDED ASSETS. Seller is not selling and Buyer is not purchasing any
of the following excluded assets related to the Business ("Excluded Assets"):
(i) cash, (ii) cash investments, cash deposits, right to receive cash refunds,
and other cash equivalents, or (iii) Seller's Accounts Receivable, all as more
specifically described on SCHEDULE 2.2.
2.3 PURCHASE PRICE. Upon the terms and subject to the conditions
contained herein and as consideration for the sale of the Assets and the
performance by the Seller of various other matters as provided herein, the Buyer
shall pay or deliver to the Seller, on the IPO Closing Date and as soon as
practicable after the IPO Closing, payable by delivery of the following
consideration (collectively the "Purchase Price"):
(a) cash in the amount of One Million Four Hundred Seventeen Thousand
Five Hundred Dollars ($1,417,500.00) (the "Cash Purchase Price"), paid by
the wire transfer of immediately available funds; and
(b) such number of whole Parent Shares on the IPO Closing Date as,
when multiplied by 90% of the IPO Price, will most nearly approximate, but
not exceed, $607,500.00.
2.4 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions contained herein, the Buyer agrees that on the Closing Date, it will
not assume any liabilities of the Business except for Seller's liability under
that certain real property lease listed on SCHEDULE 3.12 (the"Assumed
Liability").
2.5 ALLOCATION OF PURCHASE PRICE. For all federal, state and local tax
purposes, the Purchase Price shall be allocated among the various Assets in the
manner agreed to by the parties within 60 days of the Closing; provided,
however, that the Purchase Price allocated to fixed assets shall not exceed
their book value. None of the Parties shall file any tax return or report or
take any position with any Governmental Authority which is inconsistent with the
foregoing allocation, except to the extent mandated by a Governmental Authority
in a determination binding upon one Party provided that such Party has given
written notice and reasonable opportunity to the other Party, at its expense, to
contest and appeal such determination on behalf of both Parties and such
determination has nevertheless become final. Within ninety (90) days after the
Closing Date, the Parties shall prepare for filing with the Internal Revenue
Service a Form 8594 in accordance with the foregoing allocation.
2.6 TAXES. Seller shall be liable for the payment of all sales and use
taxes arising out of the sale and transfer or removal of the Assets, if any, and
the assumption of the Assumed Liability. On or before the Closing Date, the
Seller agrees to use his best efforts to furnish to the Buyer certificates from
the state taxing authorities, and any related certificates that the Buyer may
reasonably request, as evidence that all sales and use tax liabilities of the
Business accruing before
-9-
the Effective Date have been fully provided for or satisfied. The Buyer shall
not be responsible for any business, occupation, withholding or similar tax, or
any taxes of any kind of the Business, related to any period before the
Effective Date.
2.7 TITLE TO ASSETS AND RISK OF LOSS. Title to the Assets and risk of
loss or damage to the Assets by casualty (whether or not covered by insurance)
will pass to the Buyer immediately upon completion of the Closing. Following the
Closing, the Buyer shall own the Business and the Business shall be operated for
the Buyer's account.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants that all of the following representations and
warranties in this Article III are true at the date of this Agreement and shall
be true at the time of Closing and the IPO Closing Date, and that such
representations and warranties shall survive the IPO Closing Date for a period
of two years (the last day of such period being the "Expiration Date"), except
that (i) the warranties and representations set forth in Section 3.21 hereof
shall survive until such time as the limitations period has run for all tax
periods ended on or prior to the IPO Closing Date, which shall be deemed to be
the Expiration Date for Section 3.21, and (ii) solely for purposes of
determining whether a claim for indemnification under Section 7.1 hereof has
been made on a timely basis, and solely to the extent that in connection with
the IPO, the Seller actually incurs liability under the Securities Act, the
Exchange Act, or any other federal or state securities laws, the representations
and warranties set forth herein shall survive until the expiration of any
applicable limitations period, which shall be deemed to be the Expiration Date
for such purposes.
3.1 COMMUNITY PROPERTY. The Business constitutes the sole management
community property of the Seller.
3.2 AUTHORITY. Seller has the full right, power, legal capacity and
authority to execute, deliver and perform Seller's obligations under this
Agreement and all agreements ancillary to this Agreement which are part of the
underlying transaction made the basis of this Agreement and executed in
connection herewith, including but not limited to the Exhibits hereto
("Ancillary Agreements").
3.3 CONSENTS AND APPROVALS; NO BREACH OR DEFAULT. Except as set forth on
SCHEDULE 3.3(A), no consent, approval or authorization of, or filing or
registration with, any Person or Entity, is required to be made or obtained by
Seller in connection with the execution, delivery or performance of this
Agreement, or the consummation by Seller of the transactions contemplated
hereby. Except as set forth on SCHEDULE 3.3(B), neither the execution and
delivery of this Agreement or the Ancillary Agreements by Seller, nor the
consummation of the transactions contemplated herein by Seller, will (a) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any Governmental Authority to
which Seller is, or the Assets are, subject, or (b) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, promissory
note,
-10-
conditional sales contract, partnership agreement or other arrangement to which
Seller or any of Seller's Affiliates is a party, or by which Seller is bound, or
to which the Assets are subject.
3.4 VALID AND BINDING OBLIGATION. Subject to the exception described on
Schedule 3.3(a), upon execution and delivery, this Agreement and each document,
instrument or agreement to be executed by Seller in connection herewith, will
constitute the legal, valid, and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as same may be limited by
applicable bankruptcy laws, insolvency laws, or other similar laws affecting the
rights of creditors generally.
3.5 TITLE TO ASSETS. Except as set forth on SCHEDULE 3.5, Seller has
good, indefeasible and marketable title to the Assets, free and clear of
restrictions or conditions to transfer or assignment, or mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights-of-way,
covenants, conditions or restrictions. Seller shall, subject to the exceptions
set forth on SCHEDULE 3.5 deliver to Buyer at Closing good, indefeasible and
marketable title to the Assets, free and clear of restrictions or conditions to
transfer or assignment, or mortgages, liens, pledges, charges, encumbrances,
equities, claims, easements, rights-of-way, covenants, conditions or
restrictions.
3.6 POSSESSION OF ASSETS; LEASED ASSETS. Seller is in possession of all
of the Assets, and all assets leased to the Business from others. All assets
leased to Seller from others and used in the Business, whether real, personal or
mixed, are described on SCHEDULE 3.6 and SCHEDULE 3.12 attached hereto (the
"Leased Assets"). The Assets and the Leased Assets constitute all of the
property, whether real, personal, mixed, tangible, or intangible, that is owned
or used in the Business by Seller. Seller does not own legal or equitable title
to any assets or interests in assets except the Assets and the Leased Assets.
Seller shall deliver to Buyer on the Closing Date, possession of and/or control
or dominion over all of the Assets and the Leased Assets.
3.7 CONDITION. All of the Assets and the Leased Assets are in good
operating condition and repair for their intended use, ordinary wear and tear
excepted.
3.8 CONTRACTS AND LEASES. All of the Contracts, leases, documents,
instruments, agreements, and other written or oral arrangements to which Seller
is a party or by which Seller or the Assets may be bound are set forth on
SCHEDULE 2.1(B). Except as set forth on SCHEDULE 2.1(B), all of the Contracts
are valid and in full force and effect, and there has not been any default by
Seller or any third party to any of said Contracts, or any event, fact or
circumstance which with notice or lapse of time or both, would constitute a
default by Seller or any other party to any of the Contracts. Seller has not
received notice that any party to any of the Contracts intends to cancel or
terminate any of the Contracts or exercise or not exercise any options that such
party might have under any of the Contracts.
3.9 EQUIPMENT. All of the equipment owned by the Business is set forth on
SCHEDULE 2.1(A).
3.10 LICENSES. All licenses and sublicenses owned by Seller or in which
Seller has any rights (collectively, the "Licenses"), together with a brief
description of each, are set forth on
-11-
SCHEDULE 2.1(B). Seller has not infringed, and is not now infringing, on any
license belonging to any other Person or Entity. Seller owns and holds adequate
licenses necessary for the Business as now conducted by him, and that use does
not, and will not, conflict with, infringe on or otherwise violate any rights of
others. Buyer is hereby acquiring, and will continue to enjoy the use and
benefit of, the Licenses.
3.11 INTELLECTUAL PROPERTY. All of the Intellectual Property of the
Business is set forth on SCHEDULE 2(E). The Intellectual Property constitutes
all of the intellectual property necessary to the lawful conduct of the Business
without any infringement or conflict with the rights of others, and no adverse
claims have been asserted against the Intellectual Property, Seller or the
Business with respect thereto.
3.12 REAL PROPERTY; LEASED REAL PROPERTY. Except as set forth on SCHEDULE
3.12 with respect to real property leased by the Business (such real property
being hereinafter referred to collectively as the "Real Property"), Seller
neither owns nor leases any real property or improvements or interests therein.
Except for Seller and Seller's spouse, there are no parties in possession of any
portion of the Real Property as lessees, tenants at will or at sufferance,
trespassers or otherwise. The heating, electrical, plumbing and other building
equipment, as of the Closing, will be adequate in quantity and quality for
normal operations of the Business, as presently conducted.
3.13 INSURANCE. Attached hereto as SCHEDULE 3.13 is a true, complete and
accurate list of all insurance policies maintained by the Business. The Seller
has maintained and now maintains insurance protection against all liabilities,
claims and risks against which, with respect to the Business and the Assets, it
is customary to insure in the Ordinary Course of Business.
3.14 BANKING. The names and addresses of all banks or other financial
institutions in which the Business has an account, deposit or safe deposit box,
with the names of all persons authorized to draw on these accounts or deposits
or having access to these boxes, are set forth on SCHEDULE 3.14 attached hereto.
3.15 POWERS OF ATTORNEY. No Person or Entity holds a general or special
power of attorney from Seller.
3.16 PERSONNEL. Attached hereto as SCHEDULE 3.16 (A) is a list of the
names, addresses, hire dates, dates of birth and job descriptions of all
Employees of Seller, stating their rates of compensation including, if
determined, bonuses payable to each. Attached hereto as SCHEDULE 3.16 (B) is a
list of the names, addresses, dates of birth and services provided by all
independent contractors used by Seller during the preceding one (1) year,
stating their rates and methods of compensation.
3.17 EMPLOYEE BENEFITS. SCHEDULE 3.17 is a true, correct and complete list
of each "employee benefit plan," within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which has ever been
maintained or sponsored by Seller or any of his Affiliates. Each such employee
benefit plan (and each related trust, insurance contract, or fund) is in full
force and effect, and complies in form and in operation in all respects with the
-12-
applicable requirements of ERISA, the Code, and other applicable laws. Neither
Seller nor any other party is in default under any of the plans, there have been
no claims of default, and there are no facts, conditions or circumstances which
if continued, or on notice, will result in a default, under any plan. None of
the plans will, by its terms or under applicable law, become binding upon or
become an obligation of the Buyer. No assets of any plan are being transferred
to Buyer or to any plan of Buyer. Seller does not contribute to, and has never
contributed to, and has never been required to contribute to, any multiemployer
plan, and Seller does not have, and has never had, any liability (including
withdrawal liability) under any multiemployer plan.
3.18 EMPLOYMENT AGREEMENTS. SCHEDULE 3.18 is a list of all employment
agreements, consulting agreements, collective bargaining agreements, and other
agreements or arrangements providing for employee or other remuneration,
severance payments or benefits to which Seller or any of his Affiliates is a
party or by which Seller or any of his Affiliates is bound (collectively, the
"Employment Agreements"). Buyer will not have any duty, liability or obligation
with respect to any of the Employment Agreements. Except as set forth on
SCHEDULE 3.18, no Employees are represented by any labor organization.
3.19 LIABILITIES. Seller does not have any liabilities, obligations or
commitments of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, except (a) liabilities which are expressly set
forth on SCHEDULE 3.19, and (b) liabilities which have been incurred in the
Ordinary Course of the Business since the Balance Sheet Date, and in accordance
with standard, customary and historical practices and experiences of Seller.
Buyer shall not incur any duty, liability or obligation with respect to any
liabilities set forth on SCHEDULE 3.19. In no event shall the Buyer be liable
for (or have paid any) legal, accounting or other costs or expenses incurred by
Seller in connection with any of the transactions contemplated in this
Agreement; provided, however, that the Buyer shall pay all costs of the audit
conducted by Coopers & ▇▇▇▇▇▇▇ LLP as well as the costs of generating monthly
financial statements for the Business as required by the Buyer.
3.20 LITIGATION. Except as set forth on SCHEDULE 3.20, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, threatened against or affecting Seller, his
Affiliates, the Assets, the Leased Assets or the Business.
3.21 TAX MATTERS. Seller has filed all tax returns that Seller was
required to file, and all such tax returns were correct and complete in all
respects. All Taxes owed by Seller (whether or not shown on any tax return)
have been paid. Except for an extension with regard to Seller's federal income
tax return for the year ended December 31, 1996, Seller is not the beneficiary
of any extension of time within which to file any tax return, and Seller has not
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency. Seller has withheld and
paid all Taxes required to have been withheld or paid in connection with amounts
paid or owing to any Employee, independent contractor, creditor, or other third
party. Seller has no reason to believe that any authority might assess any
additional Taxes for any period for which tax returns have been filed. There is
no dispute or claim concerning any Tax liability of Seller.
-13-
3.22 COMPLIANCE WITH LAWS. Seller has complied with, and is not in
violation of, applicable federal, state or local ordinances, statutes, laws,
rules, restrictions and regulations (including, without limitation, any
applicable Environmental, Health & Safety Laws) that affect, or are likely to
affect, directly or indirectly, the Business, the Assets, the Leased Assets, the
Real Property or the Customers, suppliers or financial prospects of Seller.
There are not any uncured violations of federal, state or local laws,
ordinances, statutes, orders, rules, restrictions, regulations or requirements
affecting any portion of the Business, the Real Property, the Assets or the
Leased Assets, and neither any of the Assets, the Leased Assets or the Real
Property, nor the operation thereof nor the conduct of the Business, violates
any applicable federal, state or municipal laws, ordinances, orders, regulations
or requirements. Seller has not received notice of any past, present or future
event, condition, circumstance, activity, practice, incident, action or plan
which may interfere with or prevent compliance or continued compliance with the
Environmental, Health & Safety Laws or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, demand,
lawsuit, proceeding, hearing, study or investigation, based on, related to, or
alleging any violation of the Environmental Health & Safety Laws.
3.23 FINANCIAL STATEMENTS. The Financial Statements (a) are true,
complete, and correct in all material respects, (b) fairly and accurately
present the financial position of the Business as of the periods described
therein, and the results of the operations of the Business for the periods
indicated, and (c) have been prepared consistently and in accordance with the
Business's historical customs and practices.
3.24 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in SCHEDULE
3.24, since the Balance Sheet Date.
(A) there has been no: (i) Material adverse change in the financial
condition, assets, liabilities, business or prospects of the Business; (ii)
loss, destruction or damage to any property of the Business, whether or not
insured; (iii) labor trouble, pending or threatened, involving the Business,
or change in the personnel of the Business or the terms or conditions of
their employment or other engagement; nor (iv) other event or condition of
any character that has or could have a Material Adverse Effect on the
Business;
(B) Seller and his Affiliates have used their best efforts to
maintain the goodwill of the Business and to preserve the present
relationships of Seller with his Customers, regulatory authorities and
others having business relationships with him related to the Business;
(C) Seller has maintained and operated the Business in the Ordinary
Course of Business and in accordance with industry practices and Seller's
historical policies;
-14-
(D) Seller has not made any payment of any type to any Employee or
Affiliate other than ordinary salary or expenses which have been paid in the
Ordinary Course of Business and fully disclosed to Buyer;
(E) Seller has neither waived nor released any Material right of or
Material claim held by him, nor discounted any of his Accounts Receivable,
nor revalued any of his Assets or liabilities, in either case related to the
Business;
(F) Seller has not acquired nor disposed of any assets having a value
of $5,000 individually or $15,000 in the aggregate related to the Business,
and has not entered into any contract, commitment or arrangement therefor,
and has not entered into any other transaction related to the Business,
other than for value in the Ordinary Course of Business and in accordance
with industry practices;
(G) Seller has not changed the salary or other compensation payable
or to become payable by Seller to the Employees, independent contractors,
agents or other personnel, and has not declared, made or committed to any
kind of payment of a bonus or other additional salary or compensation to any
such person;
(H) Seller has not made a loan to any Person or Entity related to the
Business, and has not guarantied any loan, in an amount in excess of $5,000
individually or $15,000 in the aggregate related to the Business;
(I) Seller has not amended nor terminated any material contract,
agreement, permit or license to which Seller is a party, or by which Seller
or any of the Assets or Leased Assets are bound and which is related to the
Business;
(J) Seller has maintained all debt and lease instruments related to
the Business, and has not entered into any new or amended debt or lease
instruments related to the Business;
(K) Seller has not entered into any agreement or instrument which
would constitute an encumbrance, mortgage or pledge of the Assets, or which
would bind Buyer or the Assets after Closing, in an amount in excess of
$5,000 individually or $15,000 in the aggregate;
(L) Seller has provided to Buyer any and all books, records,
contracts, and other documents or data pertaining to the ownership, use,
insurance, operation, renovation and maintenance of the Assets, the Leased
Assets and the Business;
(M) Seller has performed all of Seller's obligations under all
contracts and commitments applicable to the Business, the Assets and the
Leased Assets, and has
-15-
maintained the Business's books of account and records in the usual, regular
and customary manner;
(N) Seller has complied with all statutes, laws, ordinances and
regulations applicable to the Business, the Assets, the Leased Assets and
the conduct of the Business;
(O) Seller has paid all bills and other payments due with respect to
the ownership, use, insurance, operation and maintenance of the Business,
the Assets and the Leased Assets, as and when such bills or other payments
were due, and has taken all action necessary or prudent to prevent liens or
other claims for the same from being filed or asserted against any part of
the Assets or the Leased Assets; provided however, Seller has not made any
expenditures outside the Ordinary Course of Business, nor any capital
expenditures, in excess of $5,000 individually or $15,000 in the aggregate
related to the Business;
(P) Seller has not made any Material changes in the Business's
management, operations, accounting or business practices or methods
(including without limitation, any change in depreciation or amortization
policies or rates); and
(Q) all revenues or cash or other receipts from all sources in all
media received by the Business have been deposited in the Seller's account
in accordance with past practice.
3.25 CUSTOMERS. SCHEDULE 3.25 to this Agreement is a true, complete and
correct list of all Customers of Seller, together with summaries of the services
provided to each Customer during the one (1) year preceding the Closing Date.
"Customer" means a customer or client of the Seller during the one year
preceding the Closing Date. Except as indicated in SCHEDULE 3.25, Seller does
not have any information, nor is he aware of any facts or circumstances,
indicating that any of these Customers intend not to do business with Buyer to
the same volume and extent, and on the same terms, as they have historically
done business with Seller.
3.26 INTERESTS IN CUSTOMERS, SUPPLIERS AND COMPETITORS. No Affiliate or
Employee of Seller, nor any relative of any of them, has any direct or indirect
interest in any competitor, supplier or customer of Seller, nor any Person or
Entity who has done business with Seller in the one (1) year preceding the
Closing Date.
3.27 BULK SALE WARRANTY FOR SALES TAX PURPOSES. Prior to Closing, Seller
has never sold a substantial or significant part of his assets in any single
transaction or series of transactions. The transaction contemplated herein is
the sale of the entire operating assets of a business, and a sale outside the
ordinary course of Seller's business, and therefor no sales tax is due upon the
Closing of the Acquisition.
-16-
3.28 DISCLOSURE. Seller has provided to Buyer actual copies of all Material
Contracts, and has provided Buyer with access to all documents concerning all
litigation and administrative proceedings, insurance policies and Customers, and
such information covers all Material commitments and liabilities of Seller. In
addition, (a) Buyer has been kept fully informed with respect to all Material
developments in the business of Seller since the Balance Sheet Date, (b)
management of Seller has not made any Material business decisions, nor taken any
Material actions, since the Balance Sheet Date of which Buyer has not been
advised, and (c) Buyer and its agents have been granted unlimited access to the
books and records of Seller (whether retained electronically, on disc or on
paper).
3.29 FULL DISCLOSURE. This Agreement, the schedules and exhibits hereto,
and all other documents and written information furnished by Seller to Buyer or
its representatives pursuant hereto or in connection herewith, are true,
complete and correct in all Material respects, and do not include any untrue
statement of a Material fact or omit to state any Material fact necessary to
make the statements made herein and therein not misleading. There are no facts
or circumstances relating to the Business or Seller's liabilities, prospects,
operations or financial condition, or the Assets, which Materially and adversely
affect or, so far as the Seller can now reasonably foresee, will Materially and
adversely affect, the Business, Seller or the assets, liabilities, prospects,
operations or financial condition thereof, or the ability of the Seller to
perform this Agreement or the obligations of Seller hereunder.
3.30 BROKERS. Neither the Seller nor his Affiliates, officers,
directors, or employees, has employed any broker, agent, or finder, or incurred
any liability for any brokerage fees, agent's fees, commissions or finder's fees
in connection with the transactions contemplated herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Parent and Buyer jointly and severally represent and warrant that all
of the following representations and warranties in this Article IV are true at
the date of this Agreement and shall be true at the time of Closing and the IPO
Closing Date, and that such representations and warranties shall survive the IPO
Closing Date until the Expiration Date, except that solely for purposes of
determining whether a claim for indemnification under Section 7.1 hereof has
been made on a timely basis, and solely to the extent that in connection with
the IPO, the Seller actually incurs liability under the Securities Act, the
Exchange Act, or any other federal or state securities laws, the representations
and warranties set forth herein shall survive until the expiration of any
applicable limitations period, which shall be deemed to be the Expiration Date
for such purposes.
4.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has all
the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
-17-
Texas and has all the necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it.
4.2 AUTHORITY. Each of Buyer and Parent, as applicable, has the right,
power, legal capacity, and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party. The execution,
delivery and performance of this Agreement and any Ancillary Agreements by Buyer
and Parent, as applicable, have been duly authorized by all necessary corporate
action.
4.3 CAPITAL STOCK OF PARENT AND BUYER. The respective designations and
numbers of outstanding shares and voting rights of each class of outstanding
capital stock of the Parent and the Buyer are as follows: (i) immediately prior
to the Closing Date and the IPO Date, the authorized capital stock of Parent
will consist of 100,000,000 shares of common stock, of which the number of
issued and outstanding shares will be set forth in the Registration Statement,
and 10,000,000 shares of preferred stock, $.01 par value, of which no shares
will be issued and outstanding, and a number of shares of restricted voting
common stock, $.01 par value, to be determined by Parent in good faith, all of
which will be issued and outstanding except as otherwise set forth in the
Registration Statement, and (ii) as of the date of this Agreement, the
authorized capital stock of Buyer consists of 10,000 shares of common stock, all
of which shares are issued and outstanding.
4.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on in the Registration Statement,
(i) no option, warrant, call, conversion right or commitment of any kind exists
which obligates the Parent or the Buyer to issue any of their respective
authorized but unissued capital stock, and (ii) neither the Parent nor the Buyer
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. SCHEDULE 4.4 includes
complete and accurate copies of all stock option or stock purchase plans,
including a list of all outstanding options, warrants or other rights (excluding
the Other Agreements) to acquire Parent Shares.
4.5 COMMON STOCK. At the time of issuance thereof and delivery to the
Seller, the Parent Shares to be delivered to the Seller pursuant to this
Agreement will constitute valid and legally issued Parent Shares, fully paid and
nonassessable, and with the exception of restrictions upon resale (a) set forth
in Sections 9.2 and 9.3 hereof and (b) contained in the Stock Pledge Agreement,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the Parent Shares issued and outstanding as
of the date hereof by reason of the provisions of the Texas Business Corporation
Act. Except as provided in the previous sentence, the Parent Shares issued and
delivered to the Seller shall at the time of such issuance and delivery be free
and clear of any liens, claims or encumbrances of any kind or character. The
Parent Shares to be issued to the Seller pursuant to this Agreement will not be
registered under the 1933 Act, except as provided in Registration Rights
Agreement.
-18-
4.6 VALID AND BINDING OBLIGATIONS. Upon execution and delivery, each of
this Agreement and the Ancillary Agreements will constitute the legal, valid,
and binding obligation of Buyer or Parent, as applicable, enforceable in
accordance with its terms, except as limited by bankruptcy laws, insolvency
laws, and other similar laws affecting the rights of creditors generally.
4.7 BROKERS. Except for The GulfStar Group, Inc. neither Buyer nor any of
its respective Affiliates, officers, directors, or employees, has employed any
broker, agent, or finder, or incurred any liability for any brokerage fees,
agent's fees, commissions or finder's fees in connection with the transactions
contemplated herein. Seller shall not be liable for the fee paid to The
GulfStar Group, Inc.
4.8 CONSENTS AND APPROVALS. Except as expressly contemplated herein, no
consent, approval or authorization of, or filing or registration with, any
Person or Entity, is required to be made or obtained by Buyer or Parent in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE PARTIES
Buyer and Seller covenant and agree as follows:
5.1 CONDUCT OF THE BUSINESS. Except as otherwise permitted by this
Agreement or consented to by Buyer in writing, Seller shall through the IPO
Closing Date conduct the Business in the ordinary course in substantially the
same manner as heretofore, using his best efforts to preserve his relationships
with Customers and others having business dealings with him.
5.2 CERTAIN CHANGES. Except as otherwise permitted by this Agreement or
consented to by Buyer in writing, Seller shall not: (a) subject any of the
Assets to any lien or encumbrance; (b) dispose of any of the Assets; or (c)
grant any increase in compensation or benefits to any Employee; (d) Materially
modify any of the liabilities, or (e) with respect to the Business, perform any
act outside the Ordinary Course of Business except as otherwise contemplated by
this Agreement.
5.3 NOTICE. Seller will notify Buyer immediately in writing if (i) to
Seller's knowledge any of Seller's representations or warranties set forth in
this Agreement are or become untrue prior to the IPO Closing Date, (ii) Seller
fails to fully perform all of the covenants of Seller set forth in this
Agreement, or (iii) to Seller's knowledge there occurs any Material adverse
development in the Business or Seller's market position, sales, profit trends,
labor regulations, litigation or insurance claims or otherwise.
5.4 RECORDS. From the date of execution of this Agreement until the
Closing, Seller shall permit Buyer the right, during normal business hours, to
inspect any documents, Books and Records or other information pertaining to the
Assets.
-19-
5.5 U.C.C. SEARCHES. Within five (5) days from the date of execution
hereof, Buyer, at Buyer's sole cost and expense, shall deliver to Seller current
searches of all Uniform Commercial Code financing statements filed with the
Office of the Secretary of State of Texas and in any other state, or county in
which the Seller has an office, against Seller. Any and all liens, pledges,
mortgages, security interests and encumbrances affecting the Assets, regardless
of whether same are disclosed in such lien searches, shall be released and
discharged by Seller at or prior to Closing.
5.6 BULK SALES. It may not be practicable to comply or attempt to comply
with the procedures of the "Bulk Sales Act" or similar law in any or all of the
states in which the Assets are situated or of any other state which may be
asserted to be applicable to the transactions contemplated hereby. Accordingly,
to induce Buyer to waive any requirements for compliance with any or all of such
laws, Seller hereby agrees that except for the Assumed Liabilities, the
indemnity provisions of Article VII hereof shall apply to any damages of Buyer
arising out of or resulting from the failure of Buyer or Seller to comply with
any such laws or any similar law which may be asserted to be applicable.
5.7 TERMINATION OF EMPLOYMENT OF SELLER'S EMPLOYEES. Buyer anticipates
extending an offer of employment to substantially all of the Employees of the
Seller on substantially the same terms and conditions as the Employees currently
are employed by Seller. Notwithstanding the foregoing, nothing herein shall
imply or guarantee employment of any Employee of Seller by Buyer. If Seller's
Employees desire employment with Buyer, they will be interviewed in conjunction
with the applicants from other sources and given strong consideration for
available positions with Buyer, at the wages, hours, and conditions of
employment established by Buyer prior to hiring any Employees. Seller agrees to
use his best efforts to make available the Employees to the Buyer that Buyer
desires to hire for the purpose of operating the Business. Notwithstanding
anything to the contrary contained herein, Buyer agrees that it will offer to
employ substantially all of Seller's Employees. Nothing shall prohibit Buyer
from terminating any of Seller's Employees subsequent to their employment by
Buyer.
5.8 COOPERATION IN CONNECTION WITH THE IPO. The Seller will (a) provide
the Parent and the Underwriter with all the Information concerning Seller which
is reasonably requested by the Parent and the Underwriter from time to time in
connection with effecting the IPO and (b) cooperate with the Parent and the
Underwriter and their respective representatives in the preparation and
amendment of the Registration Statement (including the Financial Statements) and
in responding to the comments of the SEC staff, if any, with respect thereto, to
the extent that any of the foregoing concern or reasonably relate to the Seller.
Provided that the Seller is given access to a copy of the Registration
Statement, the Seller agrees promptly to (a) advise the Parent if, at any time
during the period in which a prospectus relating to the IPO is required to be
delivered under the Securities Act, any information contained in the then
current Registration Statement prospectus concerning the Seller becomes
incorrect or incomplete in any Material respect and (b) provide the Parent with
the information needed to correct or complete that information. Seller
acknowledges that he has received a draft of the Registration Statement and has
delivered comments thereon to the Buyer.
-20-
5.9 ADDITIONAL FINANCIAL STATEMENTS. Seller shall promptly furnish to
Buyer a copy of all Financial Statements for each additional month-end period
beyond the Balance Sheet Date as soon as same is regularly prepared by Seller in
the Ordinary Course of Business. All such additional Financial Statements shall
be subject to the same representations and warranties as contained in Section
3.26 of this Agreement. The Parties acknowledge and agree that Buyer shall be
permitted to conduct at its sole cost and expense an audit of Seller for the
fiscal years ended 1994, 1995, 1996 and 1997 in connection with the IPO. Buyer
shall pay Seller's reasonable costs incurred in preparing such monthly financial
statements.
5.10 SUPPLEMENTAL INFORMATION. The Seller agrees that, with respect to the
representations and warranties of that party contained in this Agreement, that
party will have the continuing obligation through the IPO Closing to provide the
Parent promptly with such additional supplemental Information (collectively, the
"Supplemental Information"), in the form of (a) amendments to then existing
Schedules or (b) additional Schedules, as would be necessary, in the light of
the circumstances, conditions, events and states of facts then known to the
Seller, to make each of those representations and warranties true and correct as
of the Closing and on the IPO Closing Date. For purposes only of determining
whether the conditions to the obligations of the Parent and Buyer which are
specified in Section 6.3 have been satisfied, the Schedules as of the Closing
and on the IPO Closing Date shall be deemed to be the Schedules and the Investor
Representation Letter as of the date hereof as amended or supplemented by the
Supplemental Information provided to the Parent prior to the Effective Date
pursuant to this Section 5.10; provided, however, that if the Supplemental
Information so provided discloses the existence of circumstances, conditions,
events or states of facts which, in any combination thereof, (a) have had a
Material Adverse Effect or (b), in the sole judgment of the Parent (which shall
be conclusive for purposes of this Section 5.10 and 8.3(a)(iv), but not for any
purpose of Article VII), are having or will have a Material Adverse Effect, the
Parent will be entitled to terminate this Agreement pursuant to Section
8.3(a)(iv); and provided, further, that if the Parent is entitled to terminate
this Agreement pursuant to Section 8.3(a)(iv), but elects not to do so, it will
be entitled to treat as Buyer Indemnified Losses (which treatment will not
prejudice the right of the Seller to contest Damage claims made by the Parent in
respect of those Buyer Indemnified Losses) all Damages to the Business which are
attributable to the circumstances, conditions, events and state of facts first
disclosed herein after the date hereof in the Supplemental Information. The
Parent will provide the Seller with copies of the Registration Statement,
including all pre-effective amendments thereto, promptly after the filing
thereof with the SEC under the Securities Act.
5.11 INSURANCE. Seller shall assist, and shall cause his Affiliates to
assist, Buyer in transferring to Buyer any insurance applicable to the Assets or
the Leased Assets which Buyer elects to maintain in effect.
5.12 CONFIDENTIALITY. Seller will not, and will not permit any of his
Affiliates to, disclose any information of a confidential or proprietary nature
concerning the Assets or the Business to any third parties, and in no event
shall Seller use, or allow any of his Affiliates to use, such confidential or
proprietary information for his own benefit or to the detriment of Buyer or the
Business provided
-21-
however, if any party is compelled to disclose such information to any tribunal,
regulatory or Governmental Authority or else stand liable for contempt or suffer
other censure and penalty, such party may so disclose such information without
any liability hereunder.. No public or private announcement shall be made of the
transactions contemplated herein, nor the terms hereof, by Seller or any of his
Affiliates, without the prior written approval of Buyer as to timing, form and
content. Except for disclosure required in the Registration Statement or a
public announcement made in connection therewith, no public announcement shall
be made of the transactions contemplated herein, nor the terms hereof, by Parent
or any of its Affiliates, without the prior written approval of Buyer as to form
and content.
ARTICLE VI
THE CLOSING
6.1 PRICING. At or prior to Pricing, the Parties shall take all actions
necessary to (a) complete the Acquisition (including the execution and delivery
of this Agreement and the Ancillary Agreements which shall be placed in escrow
under the control of the Parent for release to the Parties on the IPO Closing
Date), and (b) effect the delivery of the Parent Shares referred to in Section
2.3 hereof, provided however, that such actions shall not include the actual
completion of the Acquisition or the delivery of the Common Stock and funds
referred to in Section 2.3 hereof, each of which actions shall only be taken
upon the IPO Closing Date as herein provided. For purposes of this Article VI,
the term "Pricing" shall mean the date of determination by Parent and the
Underwriter of the public offering price of the Parent Shares in the IPO; the
Parties contemplate that the Pricing shall take place on the Closing Date. The
escrow agreement relating to this Agreement and the Ancillary Agreements shall
provide that in the event that there is no IPO Closing Date, and this Agreement
terminates as provided in Section 8.3(b)(ii), the Agreement and the Ancillary
Agreements shall not be delivered to the Parties. The taking of the actions
described in clauses (a) and (b) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
Incorporated, ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. On the IPO
Closing Date, all transactions contemplated by this Agreement, including the
delivery of the Parent Shares, the wire transfer of the cash portion of the
Purchase Price which Seller is entitled to receive pursuant to Section 2.3
hereof, and the closing of the IPO shall occur and be completed. Except as
otherwise provided in Section 8.3 hereof, during the period from the Closing
Date to the IPO Closing Date, this Agreement may only be terminated by the
Parties if the Underwriting Agreement is terminated pursuant to the terms
thereof.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of the
Seller with respect to actions to be taken on the Closing Date are subject to
the satisfaction or waiver on or prior to the Closing Date of all of the
following conditions other than the conditions set forth in this Section 6.2(i)
and (viii) that cannot be satisfied prior to the IPO Closing Date. The
obligations of the Seller with respect to actions to be taken on the IPO Closing
Date are subject to the satisfaction or waiver on or prior to the IPO Closing
Date of the conditions set forth in this Section 6.2(i) and (viii). As of (a)
the Closing Date if any such conditions have not been satisfied other than the
conditions set forth in this Section 6.2(i) and (viii) that cannot be satisfied
prior to the IPO Closing
-22-
Date or (b) the IPO Closing Date, if any such conditions have not been
satisfied, the Seller shall have the right to terminate this Agreement, or in
the alternative, waive any condition not so satisfied. Any act or action of the
Seller in consummating the Closing on the Closing Date to the extent set forth
in the first sentence of Section 6.1 shall constitute a waiver of any conditions
not so satisfied other than the conditions set forth in this Section 6.2(i) and
(viii) that cannot be satisfied prior to the IPO Closing Date. However, no such
waiver shall be deemed to affect the survival of the representations and
warranties of Parent and Buyer contained in Article IV hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of the Parent and the Buyer contained in
Article IV shall be true and correct in all material respects as of the
Closing Date and the IPO Closing Date as though such representations and
warranties had been made as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by the
Parent and the Buyer on or before the Closing Date and the IPO Closing Date
shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and the IPO
Closing Date, respectively, and signed by each of the Parent and the Buyer
shall have been delivered to the Seller.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of the Parent or the Buyer as a result
of which the management of the Seller deems it inadvisable to proceed with
the transactions hereunder.
(iii) OPINION OF COUNSEL. The Seller shall have received an opinion
from counsel for the Parent dated the Closing Date, in the form attached as
Exhibit F-1 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as amended
to cover the offering, issuance and sale by Parent of such number of Parent
Shares at the IPO Price (which need not be set forth in the Registration
Statement when it becomes effective under the Securities Act) as shall
yield aggregate cash proceeds to the Parent from that sale (net of
Underwriter's discount or commissions) in at least the amount (the "Minimum
Cash Amount") that is sufficient, when added to the funds, if any,
available from other sources (if any, and as set forth in the Registration
Statement when it becomes effective under the Securities Act)(the "Other
Financing Sources") to enable the Parent to pay or otherwise deliver on the
IPO Closing Date (i) the total cash portion of the Purchase Price then to
be delivered pursuant to Article II; (ii) the total cash portion of the
acquisition consideration then to be delivered pursuant to the Other
Agreements as a result of the consummation of the acquisition transactions
contemplated thereby, and (iii) the total amount of indebtedness of the
Seller, each Other Acquired Business and the Parent which the Registration
Statement discloses at the time it becomes effective under the Securities
Act will be repaid with proceeds received by the Parent from the IPO and
Other Financing Sources, shall have been declared effective.
-23-
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no
action or proceeding shall have been instituted or threatened to restrain
or prohibit the Acquisition.
(vi) GOOD STANDING CERTIFICATES. Parent and the Buyer each shall
have delivered to the Seller certificates, dated as of a date no later than
ten days prior to the Closing Date, duly issued by the Texas Secretary of
State, and in each state in which the Parent and Buyer is authorized to do
business, showing that each of the Parent and the Buyer is in good standing
and authorized to do business and that all state franchise and/or income
tax returns and taxes for the Parent and the Buyer, respectively, for all
periods prior to the Closing have been filed and paid.
(vii) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to the Parent or the Buyer which would constitute a
Material Adverse Effect.
(viii) CLOSING OF IPO. The closing of the sale of the Parent Shares to
the Underwriters in the IPO shall have occurred simultaneously with the IPO
Closing Date hereunder.
(ix) SECRETARY'S CERTIFICATE. The Seller shall have received a
certificate or certificates, dated the Closing Date and signed by the
secretary of each of the Parent and the Buyer, certifying the truth and
correctness of attached copies of the Parent's and the Buyer's respective
resolutions of their boards of directors and, if required, the stockholders
of the Parent and the Buyer approving the Parent's and the Buyer's entering
into this Agreement and the consummation of the transactions contemplated
hereby.
(x) SELLER EMPLOYMENT AGREEMENT. The Buyer shall have entered into
an employment agreement with the Seller in the form attached as Exhibit A
("Seller Employment Agreement").
(xi) REGISTRATION RIGHTS AGREEMENT. Parent shall have entered into
the Registration Rights Agreement with the Seller in the form attached as
Exhibit B ("Registration Rights Agreement").
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARENT AND THE BUYER. The
obligations of the Parent and the Buyer with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions other than the conditions set
forth in this Section 6.3(i) and (vii) that cannot be satisfied prior to the IPO
Closing Date. The obligations of Parent and Buyer with respect to actions to be
taken on the IPO Closing Date are subject to the satisfaction or waiver on or
prior to the IPO Closing Date of all of the following conditions. As of (a) the
Closing Date if any such conditions other than the
-24-
conditions set forth in this Section 6.3(i) and (vii) that cannot be satisfied
prior to the IPO Closing Date have not been satisfied or (b) as of the IPO
Closing Date, if any such conditions have not been satisfied, Parent and Buyer
shall have the right to terminate this Agreement, or waive any such condition,
but no such waiver shall be deemed to affect the survival of the representations
and warranties contained in Article III hereof.
(i) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATION. All
the representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects as of the
Closing Date and the IPO Closing Date with the same effect as though such
representations and warranties had been made on and as of such date; all of
the terms, covenants and conditions of this Agreement to be complied with
or performed by the Seller on or before the Closing Date or the IPO Closing
Date, as the case may be, shall have been duly performed or complied with
in all Material respects; and the Seller shall have delivered to the Buyer
certificates dated the Closing Date and the IPO Closing Date, respectively,
and signed by them to such effect.
(ii) NO LITIGATION. No action or proceeding before a Governmental
Authority shall have been instituted or threatened to restrain or prohibit
the Acquisition or the IPO and no Governmental Authority shall have taken
any other action or made any request of Parent as a result of which the
management of Parent deems it inadvisable to proceed with the transactions
hereunder.
(iii) OPINION OF COUNSEL. Parent shall have received an opinion from
Counsel to the Seller, dated the Closing Date, substantially in the form
attached as Exhibit F-2 hereto.
(iv) REGISTRATION STATEMENT. The Registration Statement, as amended
to cover the offering, issuance and sale by Parent of such number of Parent
Shares at the IPO Price as shall yield aggregate cash proceeds to the
Parent from that sale (net of Underwriter's discount or commissions) in at
least the Minimum Cash Amount, shall have been declared effective.
(v) CONSENTS AND APPROVALS. All necessary consents of and filings
with any Governmental Authority relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties shall have been obtained; and no
action or proceeding shall have been instituted or threatened to restrain
or prohibit the Acquisition.
(vi) NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to the Seller which would constitute a Material
Adverse Effect, and the Seller shall not have suffered any Material loss or
damages to any of his properties or assets, whether or not covered by
insurance, which change, loss or damage Materially affects or impairs the
ability of the Seller to conduct his business.
-25-
(vii) CLOSING OF IPO. The closing of the sale of the Parent Shares
to the Underwriters in the IPO shall have occurred simultaneously with the
IPO Closing Date hereunder.
(viii) SELLER EMPLOYMENT AGREEMENT. The Seller shall have entered
into the Seller Employment Agreement.
(ix) REGISTRATION RIGHTS AGREEMENT. Seller shall have entered into
the Registration Rights Agreement.
(x) ▇▇▇▇ OF SALE. Seller shall have delivered to the Buyer
instruments of assignment and transfer or bills of sale signed by the
Seller as the Buyer reasonably requests, including the ▇▇▇▇ of Sale
attached as Exhibit C ("▇▇▇▇ of Sale").
(xi) INVESTOR REPRESENTATION LETTER. Seller shall have delivered to
the Parent at or prior to the signing of the Registration Statement an
Investor Representation Letter in the form attached as Exhibit D, with
respect to the acquisition of the Parent Shares to be issued to Seller.
(xii) STOCK PLEDGE AGREEMENT. Seller shall have delivered to Buyer a
Stock Pledge Agreement in the form attached as Exhibit E ("Stock Pledge
Agreement") as well as the Parent Shares issuable to the Seller at the
Closing (complete with stock powers executed in blank).
(xiii) SATISFACTION. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this
Agreement or incidental hereto and all other related legal matters shall
have been approved by counsel to the Parent.
(xiv) BANKRUPTCY. The Seller shall have received an order from the
Bankruptcy Court with jurisdiction over the Bankruptcy case ("Bankruptcy")
currently pending against the Seller either (a) permitting the sale of the
Assets hereunder pursuant to the terms hereto or (b) dismissing the
Bankruptcy.
6.4 FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. The Seller, at any time at or after the Closing, will
execute, acknowledge and deliver any further bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by the Buyer, for the purpose of
assigning and confirming to the Buyer, all of the Assets. The Buyer shall
notify the Seller promptly, and in no event more than ten (10) business days
after the Buyer's receipt, of any tax inquiries or notifications thereof which
relate to any period prior to the Effective Date, and the Seller shall prepare
and deliver responses to such inquiries as the Seller deems
-26-
necessary or appropriate. In addition, the Seller shall make available the books
and records of the Business during reasonable business hours and take such other
actions as are reasonably requested by the Buyer to assist the Buyer in the
operation of the Business.
6.5 CONFIDENTIAL INFORMATION. After the Closing and except as otherwise
specifically permitted in this Agreement, each party to this Agreement agrees,
on behalf of itself and its Affiliates, to use reasonable efforts not to
divulge, communicate, use to the detriment of any other party to this Agreement
or its Affiliates or for the benefit of any other person or persons, any
confidential information or trade secrets of such other party with respect to
the Assets or the Business, including personnel information, secret processes,
know-how, customer lists, formulae, or other technical data; provided however,
if any party to this Agreement or any of its Affiliates is compelled to disclose
such information to any tribunal, regulatory or Governmental Authority or else
stand liable for contempt or suffer other censure and penalty, such party may so
disclose such information without any liability hereunder.
6.6 ASSIGNMENT OF CONTRACTS. On or before the Effective Date, Seller
shall have delivered to Buyer all of the Contracts presently in force and shall
have effected a valid assignment of all of Seller's rights and obligations
thereunder.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION.
A. BY THE SELLER. Subject to Section 7.1(E) hereof, the Seller
shall indemnify, save, defend and hold harmless the Parent and Buyer and their
respective shareholders, directors, officers, partners, agents and employees
(collectively, the "Buyer Indemnified Parties") from and against any and all
costs, lawsuits, losses, liabilities, deficiencies, claims and expenses,
including interest, penalties, attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing (collectively
referred to herein as "Damages"), (i) incurred in connection with or arising out
of or resulting from or incident to any breach of any covenant, breach of
warranty as of the Effective Date, or the inaccuracy of any representation as of
the Effective Date, made by the Seller in or pursuant to this Agreement or the
Ancillary Agreements, or any other agreement contemplated hereby or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by the Seller under this Agreement, (ii) based upon, arising out of, or
otherwise in respect of any liability or obligation of the Business or relating
to the Assets (a) relating to any period prior to the Effective Date, other than
those Damages based upon or arising out of the Assumed Liabilities, or (b)
arising out of facts or circumstances existing prior to the Effective Date,
other than those Damages based upon or arising out of the Assumed Liabilities;
provided however, that the Seller shall not be liable for any such Damages to
the extent, if any, such Damages result from or arise out of a breach or
violation of this Agreement by any Buyer Indemnified Parties, and (iii) any
liability under the Securities Act, the Exchange Act or other federal or state
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of
-27-
a Material fact relating to the Seller, and provided to Parent or its counsel by
the Seller, contained in the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a Material fact
relating to the Seller required to be stated therein or necessary to make the
statements therein not misleading, provided however, that such indemnity shall
not inure to the benefit of Parent and Buyer to the extent such untrue statement
(or alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and Seller provided, in writing,
corrected information to Parent and Parent's counsel for inclusion in the Final
Prospectus, and such information was not included or properly delivered.
B. BY THE BUYER. Subject to Section 7.1(E) hereof, the Parent and
Buyer shall indemnify, save, defend and hold harmless the Seller from and
against any and all Damages (i) incurred in connection with or arising out of or
resulting from or incident to any breach of any covenant, breach of warranty as
of the Effective Date, or the inaccuracy of any representation as of the
Effective Date, made by the Buyer or Parent in or pursuant to this Agreement,
the Ancillary Agreements, or any other agreement contemplated hereby or in any
schedule, certificate, exhibit, or other instrument furnished or to be furnished
by the Buyer under this Agreement, (ii) based upon, arising out of or otherwise
in respect of any liability or obligation of the Business or relating to the
Assets (a) relating to any period on and after the Effective Date, other than
those Damages based upon or arising out of the Retained Liabilities, or (b)
arising out of facts or circumstances existing on and after the Effective Date,
other than those Damages based upon or arising out of the Retained Liabilities;
provided, however, that the Buyer shall not be liable for any such Damages to
the extent, if any, such Damages result from or arise out of a breach or
violation of this Agreement by the Seller, (iii) under the Securities Act, the
Exchange Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a Material fact relating to Parent, Buyer or any Other Acquired
Business contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission (or alleged omission) to
state therein a Material fact relating to Parent or Buyer or any of the Other
Acquired Businesses required to be stated therein or necessary to make the
statements therein not misleading, or (vi) under the Securities Act, the
Exchange Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a Material fact relating to the Business contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission (or alleged omission) to state therein a Material
fact relating to the Business required to be stated therein or necessary to make
the statements therein not misleading, to the extent such untrue statement (or
alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and Seller provided, in writing,
corrected information to Parent and Parent's counsel for inclusion in the Final
Prospectus, and such information was not included or properly delivered.
C. DEFENSE OF CLAIMS. If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit
-28-
or enforcement action in reasonable detail and indicating the amount (estimated,
if necessary) or good faith estimate of the reasonably foreseeable estimated
amount of Damages (which estimate shall in no way limit the amount of
indemnification the indemnified Party is entitled to receive hereunder), shall
be given to the indemnifying Party as promptly as practicable (and in any event
within ten (10) days, after the service of the citation or summons) ("Notice of
Action"); provided that the failure of any indemnified Party to give timely
notice shall not affect its rights to indemnification hereunder to the extent
that the indemnified Party demonstrates that the amount the indemnified Party is
entitled to recover exceeds the actual damages to the indemnifying Party caused
by such failure to so notify within ten (10) days and so long as the
indemnifying Party is not materially prejudiced by the failure to receive such
notice. The indemnifying Party may elect to compromise or defend any such
asserted liability and to assume all obligations contained in this Section 7.1
to indemnify the indemnified Party by a delivery of notice of such election
("Notice of Election") within ten (10) days after delivery of the Notice of
Action. Upon delivery of the Notice of Election, the indemnifying Party shall be
entitled to take control of the defense and investigation of such lawsuit or
action and to employ and engage attorneys of its own choice to handle and defend
the same, at the indemnifying Party's sole cost, risk and expense, and the
indemnified Party shall cooperate in all reasonable respects, at the
indemnifying Party's sole cost, risk and expense (except with respect to the
fees and expenses of the indemnified Party's attorney, which shall be borne by
the indemnified Party) with the indemnifying Party and such attorneys in the
investigation, trial, and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified Party may, at its own
cost, risk and expense, participate in such investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. If the Notice of
Election is delivered to the indemnified Party, the indemnified Party shall not
pay, settle or compromise such claim without the indemnifying Party's consent,
which consent shall not be unreasonably withheld. If the indemnifying Party
elects not to defend the claim of the indemnified Party or does not deliver to
the indemnified Party a Notice of Election within ten (10) days after delivery
of the Notice of Action, the indemnified Party may, but shall not be obligated
to, defend, compromise or settle (exercising reasonable business judgment) the
claim or other matter on behalf, for the account, and at the risk, of the
indemnifying Party.
D. THIRD PARTY CLAIMS. The provisions of this Section 7.1 are not
limited to matters asserted by the Parties, but cover Damages incurred in
connection with third party claims. The indemnity hereunder is in addition to
any and all rights and remedies of the Parties in connection herewith.
E. LIMITATION ON INDEMNIFICATION. Notwithstanding the other
provisions of this Section 7.1, Seller shall not be liable to Buyer Indemnified
Parties, and Parent and Buyer shall not be liable to Seller, for the first
$25,000 in aggregate Damages suffered by such indemnified Parties; provided,
however, that once any such indemnified Parties have suffered Damages
aggregating in excess of $25,000, the indemnifying Party shall reimburse the
indemnified Parties for the full amount of such Damages, including the $25,000
in Damages initially excluded. In no event shall the aggregate Damages payable
by an indemnifying Party to indemnified Parties exceed 100% of the Purchase
Price.
-29-
7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements of the Parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the Parties until the
Expiration Date as elsewhere provided herein.
ARTICLE VIII
TERMINATION AND REMEDIES
8.1 SPECIFIC PERFORMANCE; REMEDIES. Each of the Parties hereby agrees
that the transactions contemplated by this Agreement are unique, and that each
Party shall have, in addition to any other legal or equitable remedy available
to it, the right to enforce this Agreement by decree of specific performance.
If any legal action or other proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement, the successful or
prevailing Party or Parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding in addition to any
other remedies to which it, he or they may be entitled at law or equity. The
rights and remedies granted herein are cumulative and not exclusive of any other
right or remedy granted herein or provided by law.
8.2 OFFSET; REMEDIES. To the extent not otherwise prohibited by
applicable law, all amounts due and owing by the Buyer to the Seller under this
Agreement, the Ancillary Agreements, or any other document, instrument, or
agreement executed in connection herewith shall be subject to offset by the
Buyer to the extent of any Damages incurred by any breach by the Seller, under
this Agreement or any Ancillary Agreement, or any document, instrument, or
agreement executed in connection herewith. In the event Buyer elects to offset
any Damages incurred as a result of any such breach, Buyer shall furnish Seller
notice containing detailed information about the breach, the magnitude of the
damages that Buyer has or reasonably expects to incur, and whether the offset is
against the Parent Shares pledged under the Stock Pledge Agreement or otherwise
(the act of offsetting by Buyer shall be referred to as an "Offset"). The
Seller acknowledges and agrees that but for the right of Offset contained in
this Agreement, the Buyer would not have entered into this Agreement or any of
the transactions contemplated herein. If any legal action or other proceeding
is brought for the enforcement of this Agreement, any Ancillary Agreement, or
any document, instrument, or agreement executed in connection herewith, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, or any Ancillary
Agreement, or any document, instrument, or agreement executed in connection
herewith, the successful or prevailing Party or Parties shall be entitled to
recover other remedies to which it or they may be entitled at law or equity.
The rights and remedies granted herein are cumulative and not exclusive of any
other right or remedy granted herein or provided by law. Buyer shall not effect
an Offset hereunder without giving Seller at least 10 days advance written
notice of its intent to do so.
-30-
8.3 TERMINATION. Termination of This Agreement. (a) This Agreement may be
terminated at any time prior to the Closing solely:
(i) by the mutual written consent of the Parent and the Seller;
(ii) by the Seller, on the one hand, or by the Parent, on the other
hand, if the transactions contemplated by this Agreement to take place at
the Closing shall not have been consummated by December 31, 1997, unless
the failure of such transactions to be consummated results from the willful
failure of the Party seeking to terminate this Agreement to perform or
materially adhere to any agreement required hereby to be performed or
adhered to by it prior to or at the Closing or thereafter on the IPO
Closing Date;
(iii) by the Seller, on the one hand, or by the Parent, on the other
hand, if a Material breach or default shall be made by the other Party in
the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein; or
(iv) by the Parent if it is entitled to do so as provided in
Section 5.10.
(b) this Agreement may be terminated after the Closing solely:
(i) by the Parent or the Seller if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party hereto
if the IPO is not consummated within ten (10) New York City business days
after the date of the Closing.
8.4 LIABILITIES IN EVENT OF TERMINATION. If this Agreement is
terminated pursuant to Section 8.3, there shall be no liability or obligation on
the part of any Party hereto except to the extent that such liability is based
on the breach by that Party of any of its representations, warranties or
covenants set forth in this Agreement. Notwithstanding the foregoing, if and
only if this Agreement is terminated for any reason, Buyer and Parent will pay
to the Seller $325,000 (the "Contingent Obligation") in payment of the
compensation due Seller pursuant to that certain letter agreement between Buyer
and Parent dated May 7, 1997, a copy of which is attached hereto as Schedule 8.4
("Letter Agreement"), in respect of the Parent's acquisition of ▇▇▇▇▇▇ House,
Inc., ▇▇▇▇▇▇ ▇. Dine, Inc., and ▇▇▇▇▇▇ ▇. Dine Temporary Attorneys, L.L.C. The
Contingent Obligation shall accrue interest at the rate of 10% from September
16, 1997, until the date such amount is paid in full; provided however, that
interest shall accrue at the rate of 18% and shall become payable monthly
beginning January 1, 1998 and provided further, that the Contingent Obligation,
plus interest thereon, shall be paid no later than May 1, 1998. The Parent
hereby agrees to promptly and completely honor all other obligations under the
Letter Agreement that accrue prior to any termination thereof.
-31-
ARTICLE IX
COVENANTS OF BUYER AND SELLER AFTER CLOSING
9.1. PREPARATION AND FILING OF TAX RETURNS.
(i) The Seller shall file or cause to be filed all federal income
tax returns of the Seller for all taxable periods that end on or before the
IPO Closing Date, and shall permit the Parent to review all such tax
returns prior to such filings.
(ii) Parent shall file or cause to be filed all separate tax returns
of, or that include, any Other Acquired Business for all taxable periods
ending after the IPO Closing Date.
(iii) Each Party shall, and shall cause its Subsidiaries and
Affiliates to, provide to each of the other Parties hereto such cooperation
and information as any of them reasonably may request in filing any tax
return, amended tax return or claim for refund, determining a liability for
taxes or a right to refund of taxes or in conducting any audit or other
proceeding in respect of taxes. Such cooperation and information shall
include providing copies of all relevant portions of relevant tax returns,
together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by taxing
authorities and relevant records concerning the ownership and tax basis of
property, which such Party may possess. Each Party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each Party required to file tax returns pursuant to
this Agreement shall bear all costs of filing such tax returns.
9.2 RESTRICTIVE LEGEND. The Seller consents to the imprinting on all
certificates representing Parent Shares issued to him as part of the Purchase
Price of the following legend:
THE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE. SUCH SHARES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH
REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF SUCH SHARES OF AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF SUCH
SHARES OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE
EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN
VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS
PROMULGATED THEREUNDER.
-32-
9.3 PLEDGE OF PARENT SHARES. Seller shall deliver all Parent Shares
acquired from the Buyer as part of the Purchase Price to Buyer to be held
pursuant to the terms of the Stock Pledge Agreement.
ARTICLE X
MISCELLANEOUS
10.1 FEES. Except as expressly set forth herein to the contrary, each
Party shall be responsible for all costs, fees and expenses (including attorney
and accountant fees and expenses) paid or incurred by such Party in connection
with the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transaction contemplated hereby.
10.2 MODIFICATION OF AGREEMENT. This Agreement may be amended or modified
only in writing signed by all of the Parties.
10.3 NOTICES. All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed with receipt of
transmission confirmed during regular business hours during a business day to
the appropriate location described below, or three (3) business days after
posting thereof by United States first-class, registered or certified mail,
return receipt requested, with postage and fees prepaid and addressed as
follows:
IF TO SELLER: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1400 Two Houston Center
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
IF TO BUYER OR PARENT: Looney & Company
U.S. Legal Support, Inc.
650 First City Tower, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: 713/▇▇▇-▇▇▇▇
Fax: 713/▇▇▇-▇▇▇▇
-33-
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated
Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: 713/▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any addressee at any time by furnishing notice to the other addressees in the
manner described above may designate additional or different addresses for
subsequent notices or communications.
10.4 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or affect the enforceability of any other
provision of this Agreement.
10.5 ENTIRE AGREEMENT; BINDING EFFECT. This Agreement and the Ancillary
Agreements set forth the entire agreement among the Parties with respect to the
subject matter hereof. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.
10.6 WAIVER. No delay in the exercise of any right under this Agreement
shall waive such rights. Any waiver, to be enforceable, must be in writing.
10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
10.8 ASSIGNMENT. The Seller shall not assign this Agreement or any
interest herein.
10.9 HEADINGS. Headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.
10.10 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this
Agreement or to be delivered by the Seller, upon review and approval by the
Buyer, are and shall be hereby incorporated in and made a part of this
Agreement. All Schedules to this Agreement must be delivered no later than four
(4) days prior to Closing, in order to provide the Buyer ample time to review
and evaluate the items described therein and disclosed thereby. Although the
Schedules remain subject to the review and approval of the Buyer, no such review
or approval shall constitute a waiver by the Buyer of any breach or default
caused by the inaccuracy or incompleteness of any Schedule, the accuracy and
completeness of the Schedules being the sole responsibility of the Seller.
10.11 RIGHTS AND LIABILITIES OF PARTIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the Parties, the Buyer
Indemnified Parties and their respective successors and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any Party to this Agreement, nor shall any provision
give any third person any right of subrogation or action over against any Party
to this Agreement.
-34-
10.12 SURVIVAL. Subject to Section 7.2, this Agreement, including but not
limited to all covenants, warranties, representations and indemnities contained
herein, shall survive the Closing, and the ▇▇▇▇ of Sale and all other documents,
instruments or agreements relating to the Assets and the transactions
contemplated herein shall not be deemed merged therein.
10.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.
10.14 ARBITRATION AND LIMITATION ON CLAIMS. Any controversy, dispute or
claim arising out of, in connection with, or in relation to, the interpretation,
performance or breach of this Agreement, including, without limitation, the
validity, scope and enforceability of this Section which cannot first be settled
through ordinary negotiation between the Parties shall be submitted in good
faith to mediation by and in accordance with the Commercial Mediation Rules of
the American Arbitration Association or any successor organization. In the
event that mediation of such controversy, dispute or claim cannot be settled
through the mediation proceeding, the Parties agree that the controversy,
dispute or claim shall be submitted to binding and final arbitration conducted
in Houston, ▇▇▇▇▇▇ County, Texas by and in accordance with the then existing
Rules for Commercial Arbitration of the American Arbitration Association or any
successor organization. Any such arbitration shall be to a three member panel
selected through the rules governing selection and appointment of such panels of
the American Arbitration Association or any successor organization. The award
rendered by the arbitrators may be confirmed, entered and enforced as a judgment
in any court of competent jurisdiction; however, the Parties otherwise waive any
rights to appeal the award except with regard to fraud by the panel. Any such
action must be brought within two years of the date the cause of action accrues.
The arbitrators shall award the Party which substantially prevails in any
arbitration proceeding recovery of that Party's attorneys' fees, the
arbitrators' fees and all costs in connection with the arbitration from the
Party who does not substantially prevail. The Parties' remedies are limited
solely to the specific remedies provided in this Agreement or in the other. The
parties waive any entitlement to punitive damages, consequential damages and
lost profits and will limit any damage claim to actual economic damages
incurred. Nothing in this Section 10.14 shall restrict any Parties' ability to
seek injunctive or other equitable relief in any court of competent jurisdiction
prior to initiating mediation or arbitration. In the event that such injunctive
or equitable relief is sought by any Party, such Party is specifically entitled
to enforce the appropriate provisions of the Agreement in obtaining such relief
in any court of competent jurisdiction and, thereafter, submit the remaining
controversy, dispute or claim to arbitration in accordance with this Section
10.14.
10.15 DRAFTING. All Parties hereto acknowledge that each Party was
actively involved in the negotiation and drafting of this Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Agreement shall be construed in favor or against any Party hereto because
one is deemed to be the author thereof.
-35-
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement in multiple counterparts effective as of the date first written above.
BUYER:
LOONEY & COMPANY
a Texas corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
PARENT:
U.S. LEGAL SUPPORT, INC.,
a Texas corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
SELLER:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, by her execution of this Agreement, acknowledges that she is
fully aware of, understands and agrees to the provisions of this Agreement and
its binding effect upon any interest, community or otherwise, she has in the
Assets, and by such execution she consents to the sale of the Assets on the
terms described herein.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
-36-
Schedules
---------
2.1(a) - Equipment
2.1(b) - Contracts
2.1(c) - Books and Records
2.1(e) - Intellectual Property
2.1(g) - General Intangibles
2.1(j) - Inventory
2.2 - Excluded Assets
2.7 - Allocation of Purchase Price
3.3(A) - Consents and Approvals
3.3(B) - Breaches or Defaults
3.5 - Exceptions to Title
3.6 - Leased Personal Property
3.12 - Real Property
3.13 - Insurance Policies
3.14 - Banking
3.16(A) - Employees
3.16(B) - Independent Contractors
3.17 - Employee Benefit Plans
3.18 - Employment Agreement
3.19 - Liabilities
3.20 - Litigation
3.24 - Certain Changes or Events
3.25 - Customers
4.4 - Parent Capitalization
Exhibits
--------
A - Seller Employment Agreement
B - Registration Rights Agreement
C - ▇▇▇▇ of Sale
D - Investor Representation Letter
E - Stock Pledge Agreement
F-1 - Legal Opinion
F-2 - Legal Opinion
-37-