EXHIBIT 10.14
STOCK PURCHASE AGREEMENT
BY AND AMONG
PREMIER APPRAISALS, INC.
("Buyer")
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and
▇▇▇▇▇ ▇▇▇▇▇▇
("Shareholders") and
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, INC. ("KRI"),
dba Hacienda Property Valuation
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS..............................................................1
SECTION 2. SALE AND TRANSFER OF SHARES; CLOSING....................................7
2.1. SHARES ..................................................................7
2.2. PURCHASE PRICE.............................................................8
2.3. CLOSING ..................................................................8
2.4. CLOSING OBLIGATIONS........................................................8
2.5. CONSIDERATION ADJUSTMENT...................................................9
2.6. ADJUSTMENT PROCEDURE......................................................10
2.7. BOARD OF DIRECTORS........................................................11
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.........................11
3.1. ORGANIZATION AND GOOD STANDING............................................11
3.2. AUTHORITY; NO CONFLICT....................................................12
3.3. CAPITALIZATION............................................................13
3.4. FINANCIAL STATEMENTS......................................................13
3.5. BOOKS AND RECORDS.........................................................14
3.6. TITLE TO PROPERTIES; ENCUMBRANCES.........................................14
3.7. CONDITION AND SUFFICIENCY OF EQUIPMENT....................................14
3.8. ACCOUNTS RECEIVABLE.......................................................14
3.9. [Intentionally omitted]...................................................15
3.10. NO UNDISCLOSED LIABILITIES................................................15
3.11. TAXES .................................................................15
3.12. NO MATERIAL ADVERSE CHANGE................................................16
3.13. EMPLOYEE BENEFITS.........................................................16
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS...........22
3.15. LEGAL PROCEEDINGS; ORDERS.................................................23
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS.....................................25
3.17. CONTRACTS; NO DEFAULTS....................................................26
3.18. INSURANCE.................................................................28
3.19. ENVIRONMENTAL MATTERS.....................................................28
3.20. EMPLOYEES.................................................................28
3.21. LABOR RELATIONS; COMPLIANCE...............................................29
3.22. INTELLECTUAL PROPERTY.....................................................29
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3.23. DISCLOSURE................................................................31
3.24. RELATIONSHIPS WITH RELATED PERSONS........................................32
3.25. BROKERS OR FINDERS........................................................32
3.26. INVESTMENT INTENT.........................................................32
3.27. BANK ACCOUNTS.............................................................32
3.28. CUSTOMERS.................................................................32
3.29. IMPROPER AND OTHER PAYMENTS...............................................33
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.................................33
4.1. CORPORATE STANDING........................................................33
4.2. AUTHORITY; NO CONFLICT....................................................33
4.3. CAPITALIZATION............................................................34
4.4. FINANCIAL STATEMENTS......................................................34
4.5. NO CONFLICT...............................................................35
4.6. COMPLIANCE................................................................35
4.7. SUBSIDIARIES..............................................................35
4.8. CONSENTS .................................................................35
4.9. INDEBTEDNESS FOR BORROWED MONEY; NO UNDISCLOSED LIABILITIES...............35
4.10. TITLE TO PROPERTY AND ASSETS; LEASES......................................36
4.11. LEGAL PROCEEDINGS.........................................................36
4.12. ENVIRONMENTAL MATTERS.....................................................36
4.13. LICENSES AND PERMITS; COMPLIANCE WITH LAWS................................36
4.14. EMPLOYEE BENEFIT PLANS....................................................36
4.15. LABOR RELATIONS...........................................................37
4.16. INSURANCE.................................................................37
4.17. TAX MATTERS...............................................................37
4.18. PATENTS AND TRADEMARKS....................................................38
4.19. RELATED-PARTY TRANSACTIONS................................................38
4.20. SOFTWARE PRODUCTS.........................................................39
4.21. [Intentionally Omitted]...................................................39
4.22. MATERIAL FACTS............................................................39
4.23. INVESTMENT INTENT.........................................................39
4.24. CERTAIN PROCEEDINGS.......................................................39
4.25. BROKERS OR FINDERS........................................................39
SECTION 5. COVENANTS OF SHAREHOLDERS PRIOR TO CLOSING DATE.........................39
5.1. ACCESS AND INVESTIGATION..................................................39
5.2. OPERATION OF THE BUSINESSES OF KRI........................................40
5.3. NEGATIVE COVENANT.........................................................40
5.4. REQUIRED APPROVALS........................................................40
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5.5. NOTIFICATION..............................................................40
5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS................................41
5.7. NO NEGOTIATION............................................................41
5.8. BEST EFFORTS..............................................................41
SECTION 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE................................41
6.1. BEST EFFORTS..............................................................41
SECTION 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.....................41
7.1. ACCURACY OF REPRESENTATIONS...............................................41
7.2. SHAREHOLDERS' PERFORMANCE.................................................42
7.3. CONSENTS .................................................................42
7.4. ADDITIONAL DOCUMENTS......................................................42
7.5. NO PROCEEDINGS............................................................42
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS.......................42
7.7. NO PROHIBITION............................................................43
7.8. EQUITY FINANCING..........................................................43
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE...............43
8.1. ACCURACY OF REPRESENTATIONS...............................................43
8.2. BUYER'S PERFORMANCE.......................................................43
8.3. CONSENTS .................................................................43
8.4. ADDITIONAL DOCUMENTS......................................................43
8.5. NO INJUNCTION.............................................................44
SECTION 9. TERMINATION.............................................................44
9.1. TERMINATION EVENTS........................................................44
9.2. EFFECT OF TERMINATION.....................................................44
SECTION 10. INDEMNIFICATION; REMEDIES..............................................45
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE..............45
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS....................45
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER...........................46
10.4. LIMITATIONS ON INDEMNIFICATION............................................46
10.5. PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.......................46
10.6. PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.............................47
SECTION 11. GENERAL PROVISIONS.....................................................47
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11.1. EXPENSES; TERMINATION FEE.................................................47
11.2. PUBLIC ANNOUNCEMENTS......................................................48
11.3. CONFIDENTIALITY...........................................................48
11.4. NOTICES .................................................................48
11.5. JURISDICTION; SERVICE OF PROCESS..........................................50
11.6. FURTHER ASSURANCES........................................................50
11.7. WAIVER .................................................................50
11.8. ENTIRE AGREEMENT AND MODIFICATION.........................................50
11.9. DISCLOSURE LETTER.........................................................51
11.10. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS........................51
11.11. SEVERABILITY..............................................................51
11.12. SECTION HEADINGS, CONSTRUCTION............................................51
11.13. TIME OF ESSENCE...........................................................51
11.14. GOVERNING LAW.............................................................51
11.15. COUNTERPARTS..............................................................52
SECTION 12. NON-COMPETITION.......................................................52
12.1. NON-COMPETITION AGREEMENT.................................................52
12.2. SPECIFIC PERFORMANCE......................................................53
12.3. SEVERABILITY..............................................................53
12.4. NO LIMITATION OF OTHER PROVISIONS.........................................53
SECTION 13. MISCELLANEOUS SHAREHOLDERS' PROVISIONS................................53
13.1. E&O TAIL COVERAGE.........................................................53
13.2. INDEMNITY FOR PERSONAL LIABILITY ON OFFICE LEASES.........................53
Exhibits
2.4(a)(ii) Shareholders' Releases
2.4(a)(iii) Employment Agreements
2.4(a)(iv) Employee Agreement Regarding Property Rights, Non-Solicitation and
Confidentiality
2.4(a)(vii) Amended and Restated Premier Appraisals Shareholders' Agreement
2.4(b) Custodial Agreement
7.4(a) Strategic Law Partners Opinion
8.4(a) ▇▇▇▇▇, Tarrant & ▇▇▇▇▇ Opinion
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is made and
entered into as of June 18, 1998, by and among (i) PREMIER APPRAISALS, INC., a
Georgia corporation ("Buyer"), (ii) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively the "Shareholders") and (iii) ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, INC., a California corporation ("KRI").
RECITALS
Shareholders desire to sell, and Buyer desires to purchase,
all of the issued and outstanding shares (the "Shares") of capital stock of KRI,
for the consideration and on the terms set forth in this Agreement.
AGREEMENT
In consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Accountants" -- as defined in Section 2.6(a).
"Applicable Contract" -- any Contract (a) under which KRI has
or may acquire any rights, (b) under which KRI has or may become subject to any
obligation or liability, or (c) by which KRI or any of the assets owned or used
by it is or may become bound, excluding any lease or sublease of real property.
"Balance Sheet" -- as defined in Section 3.4.
"Best Efforts" -- the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved as expeditiously as possible.
"Breach" -- a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been (a) any inaccuracy in or breach of, or any failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision, or (b) any claim (by any Person) or other occurrence or circumstance
that is or was inconsistent with such representation, warranty,
covenant, obligation, or other provision, and the term "Breach" means any such
inaccuracy, breach, failure, claim, occurrence, or circumstance.
"Buyer" -- as defined in the first paragraph of this
Agreement.
"Buyer's Closing Documents" -- as defined in Section 4.2(a).
"Cash Consideration" -- as defined in Section 2.2.
"Cash Consideration Adjustment" -- as defined in Section
2.5(a).
"Closing" -- as defined in Section 2.3.
"Closing Date" -- the date and time as of which the Closing
actually takes place.
"Computer Software" -- as defined in Section 4.20.
"Consent" -- any approval, consent, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions
contemplated by this Agreement, including:
a. the execution, delivery, and performance of the Employment
Agreements, the Nondisclosure Agreements, the Premier Appraisals, Inc.
Amended and Restated Sharehold ers' Agreement, the Custodial Agreement
and the Shareholders' Releases; and
b. the performance by Buyer and Shareholders of their
respective covenants and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Copyright(s)" -- as defined in Section 3.22(a)(iii).
"Damages" -- as defined in Section 10.2.
"Disclosure Letter" -- the disclosure letter delivered by
Shareholders to Buyer concurrently with the execution and delivery of this
Agreement.
"Employment Agreements" -- as defined in Section 2.4(a)(iii).
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"Encumbrance" -- any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership.
"Environmental Laws" -- any Legal Requirement that relates to
the environment or occupational health and safety:
"ERISA" -- the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"GAAP" -- generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"Governmental Authorization" -- any approval, consent,
license, permit, waiver, or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body" -- any:
a. nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
b. federal, state, local, municipal, foreign, or other
government;
c. governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
d. multi-national organization or body; or
e. body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"Indemnified Persons" -- as defined in Section 10.2.
"Intellectual Property Assets" -- as defined in Section
3.22(a).
"Interim Balance Sheet" -- as defined in Section 3.4.
"IRC" -- the Internal Revenue Code of 1986 or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
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"IRS" -- the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"June 14, 1998 Balance Sheet" -- as defined in Section 2.6(a).
"Knowledge" -- an individual will be deemed to have
"Knowledge" of a particular fact or other matter if:
a. such individual is actually aware of such fact or other
matter; or
b. a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"KRI" -- as defined in the first paragraph of this Agreement.
"Legal Requirement" -- any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Marks" -- as defined in Section 3.22(a)(i).
"1998 Financial Statements" -- as defined in Section 2.6(b).
"Nondisclosure Agreements" -- as defined in Section
2.4(a)(iv).
"Order" -- any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmen tal Body or by any arbitrator.
"Ordinary Course of Business" -- an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
a. such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
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b. such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
c. such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Organizational Documents" -- (a) the articles or certificate
of incorporation and the bylaws of a corporation; and (b) any amendment to any
of the foregoing.
"Patent(s)" -- as defined in Section 3.22(a)(ii).
"Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"Pre-Tax Financial Income" -- earnings before taxes as
calculated in accordance with GAAP.
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Proprietary Rights Agreement" -- shall have the meaning set
forth in Section 3.20(b).
"Related Person" -- with respect to a particular individual:
a. each other member of such individual's Family;
b. any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
c. any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
d. any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
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a. any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
b. any Person that holds a Material Interest in such specified
Person;
c. each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
d. any Person in which such specified Person holds a Material
Interest;
e. any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
f. any Related Person of any individual described in clause
(b) or (c).
For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse and former
spouses, (iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of the outstanding
equity securities or equity interests in a Person.
"Representative" -- with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Securities Act" -- the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Section"--as defined in Section 11.12.
"Shareholders" -- as defined in the first paragraph of this
Agreement.
"Shareholders' Agreement" -- as defined in Section
2.4(a)(vii).
"Shareholders' Closing Documents" -- as defined in Section
3.2(a).
"Shareholders' Releases" -- as defined in Section 2.4(a)(ii).
"Shares" -- as defined in the recitals of this Agreement.
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"Stock Consideration" -- as defined in Section 2.2.
"Stock Consideration Adjustment"--as defined in Section
2.5(b).
"Custodial Agreement" -- as defined in Section 2.4(b).
"Stockholders' Equity" -- the residual interest in the assets
of a company that remains after deducting its liabilities, in accordance with
GAAP.
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the KRI.
"Taxes" -- all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, severance, license, payroll, environmental, capital stock,
disability, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Body, and such term
shall include any interest, penalties or additions to tax attributable thereto.
"Tax Return" -- any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"Tax Statute of Limitations Date" -- the close of business on
the 90th day after the expiration of the applicable statute of limitations with
respect to Taxes, including any extensions thereof.
"Tax Warranty" -- a representation or warranty in Section 3.11
or 3.13.
"Threatened" -- a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a claim, Proceeding,
dispute, action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
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"Title and Authorization Warranty" -- a representation or
warranty in Sections 3.1, 3.2, 3.3, 3.6, 4.1 and 4.2.
"Trade Secret(s)" -- as defined in Section 3.22(a)(v).
SECTION 2. SALE AND TRANSFER OF SHARES; CLOSING
2.1. SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, Shareholders will sell and transfer the Shares to Buyer, and Buyer
will purchase the Shares from Shareholders.
2.2. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be: (i) Three Million Dollars ($3,000,000) payable in cash (the
"Cash Consideration"); provided that such Cash Consideration shall be subject to
adjustment as set forth in Section 2.5(a) below; and (ii) 750,000 shares of the
common stock of Buyer (the "Stock Consideration"); provided that the amount of
such Stock Consideration shall be subject to adjustment as set forth in Section
2.5(b) below.
2.3. CLOSING. The purchase and sale (the "Closing") provided for in
this Agreement will take place at the offices of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ in
Louisville, Kentucky, at 10:00 a.m. (local time) on June 18, 1998 or at such
other time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.3 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.4. CLOSING OBLIGATIONS. At the Closing:
2.4.(a) Shareholders will deliver to Buyer:
2.4.(a)(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers), for transfer to Buyer;
2.4.(a)(ii) releases in the form of Exhibit 2.4(a)(ii)
executed by Shareholders (collectively, "Shareholders' Releases");
2.4.(a)(iii) employment agreements in the form of Exhibit
2.4(a)(iii), executed by the applicable Shareholders (collectively,
"Employment Agreements");
2.4.(a)(iv) employee agreement regarding property rights,
non-solicitation and confidentiality in the form of Exhibit 2.4(a)(iv),
executed by employees of KRI specified by Buyer (collectively, the
"Nondisclosure Agreements");
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2.4.(a)(v) resignations of all of the directors and officers
of KRI effective as of the Closing;
2.4.(a)(vi) a certificate executed by Shareholders
representing and warranting to Buyer that each of Shareholders'
representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all
respects as of the Closing Date as if made on the Closing Date; and
2.4.(a)(vii) the Premier Appraisals, Inc. Amended and Restated
Shareholders' Agreement, executed by the Shareholders substantially in
the form attached hereto as Exhibit 2.4(a)(vii) (the "Shareholders'
Agreement).
2.4.(b) Buyer and Shareholders will enter into a Custodial
Agreement substantially in the form of Exhibit 2.4(b) attached hereto (the
"Custodial Agreement") to secure Shareholders' obligations with respect to the
consideration adjustment under Section 2.5(b) together with the appropriate
stock certificates representing the Shares and stock powers duly executed in
blank.
2.4.(c) Buyer will deliver to Shareholders:
2.4.(c)(i) Three Million Dollars ($3,000,000) by wire transfer
to accounts specified by Shareholders;
2.4.(c)(ii) a certificate executed by Buyer to the effect that
each of Buyer's representations and warranties in this Agreement was
accurate in all respects as of the date of this Agreement and is
accurate in all respects as of the Closing Date as if made on the
Closing Date;
2.4.(c)(iii) the Nondisclosure Agreements, executed by KRI;
2.4.(c)(iv) the Employment Agreements, executed by KRI; and
2.4.(c)(v) the Shareholders' Agreement, executed by Buyer.
2.5. CONSIDERATION ADJUSTMENT.
2.5.(a) The Cash Consideration is based upon KRI having, as of
June 14, 1998, $165,033 in cash on hand and total Stockholders' Equity of
$971,186. The Cash Consideration shall be adjusted as follows: (i) if, as set
forth on the June 14, 1998 Balance Sheet, (i) KRI's cash on hand is less than
$165,033, the Cash Consideration shall be decreased on a dollar for dollar basis
by the amount that the cash on hand set forth on the June 14, 1998 Balance Sheet
is less than $165,033; (ii) if on the June 14, 1998 Balance Sheet, KRI's cash on
hand exceeds $165,033, the Cash Consid eration shall be increased by 50% of the
amount that the cash on hand set forth on the June 14, 1998 Balance Sheet is in
excess of
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$165,033; (iii) in addition to the foregoing, if, on the June 14, 1998 Balance
Sheet, KRI's Stockholders' Equity is less than $971,186, the Cash Consideration
shall be decreased on a dollar for dollar basis by the amount the Stockholders'
Equity indicated on the June 14, 1998 Balance Sheet is less than $971,186 (the
"Cash Consideration Adjustment").
2.5.(b) The Stock Consideration is based upon KRI's Pre-Tax
Financial Income in calendar year 1998 being at least One Million Dollars
($1,000,000). As soon as practical after December 31, 1998, KRI's certified
public accountants shall prepare the 1998 Financial Statements (as defined
below) in accordance with GAAP and determine KRI's Pre-Tax Financial Income for
calendar year 1998; provided, however, that an amount equal to $83,000 shall be
added to such 1998 Pre-Tax Financial Income for purposes of determining any
adjustment to the Stock Consideration in accordance with this Section 2.5(b).
The Stock Consideration shall be adjusted as follows: (i) if as set forth on the
1998 Financial Statements, the 1998 Pre-Tax Financial Income of KRI is equal to
or less than $250,000, the Stock Consideration shall be reduced to zero (0)
shares of Buyer's common stock; (ii) if, as set forth on the 1998 Financial
Statements, the 1998 Pre-Tax Financial Income of KRI is in excess of $250,000
the Stock Consideration shall be equal to one share of Buyer common stock for
each dollar the Pre-Tax Financial Income of KRI exceeds $250,000, up to a limit
of 750,000 shares of the common stock of Buyer (the "Stock Consideration
Adjustment"). For example, if the Pre-Tax Financial Income of KRI in 1998 is
$800,000, the Stock Consideration, as adjusted, would be 550,000 shares of the
common stock of Buyer.
2.6. ADJUSTMENT PROCEDURE.
2.6.(a) Within thirty (30) days after the Closing, Buyer will
cause KRI's certified public accountants to prepare a balance sheet ("June 14,
1998 Balance Sheet") of KRI as of June 14, 1998, including a computation of
Stockholders' Equity and cash on hand as of June 14, 1998. Buyer shall deliver
to Shareholders the June 14, 1998 Balance Sheet within such thirty (30) day
period. If, within thirty (30) days following delivery of the June 14, 1998
Balance Sheet, Shareholders have not given Buyer notice of any objection to the
June 14, 1998 Balance Sheet, then the Stockholders' Equity and cash on hand
reflected in the June 14, 1998 Balance Sheet will be used in computing the Cash
Consideration Adjustment, if any. If Shareholders give such notice of objection,
then the issues in dispute will be submitted to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., certified
public accountants (the "Accountants"), for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such workpapers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
or its Subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (ii)
the determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties; and
(iii) Buyer and Shareholders will each bear 50% of the fees of the Accountants
for such determination. On the tenth business day following the final
determination of the Cash Consideration Adjustment, if the total Cash
Consideration should be greater than $3,000,000 in accordance with Section 2.5
as determined by the Accountants, Buyer will pay the difference to Shareholders,
and if the total Cash Consideration should be
10
less than $3,000,000 in accordance with Section 2.5 as determined by the
Accountants, Shareholders will pay the difference to Buyer. Payments must be
made in immediately available funds. Payments to Shareholders must be made in
the manner specified in Section 2.4(c)(i). Payments to Buyer must be made by
wire transfer to such bank account as Buyer will specify. Notwithstanding the
foregoing, the June 14, 1998 Balance Sheet and the Cash Consider ation
Adjustment, if any, shall be further subject to year end adjustments based on
the 1998 Financial Statements. If there are any such year end adjustments
affecting the June 14, 1998 Balance Sheet and Cash Consideration Adjustment, if
any, and the parties are not in agreement on the amount of the adjustment to the
Cash Considerations Adjustment, if any, then such dispute shall be submitted to
the Accountants for binding and conclusive resolution as contemplated by Section
2.6(b).
2.6.(b) As soon as practical after December 31, 1998, but in no
event later than April 1, 1999 Buyer shall cause KRI's certified public
accountants to prepare annual audited financial statements for KRI (the "1998
Financial Statements"). As soon as the 1998 Financial Statements are completed,
Buyer will deliver copies to each of Shareholders. If within thirty (30) days
following delivery of the 1998 Financial Statements, Shareholders have not given
Buyer notice of any objection to the 1998 Financial Statements (such notice must
contain a statement of the basis of Shareholders' objection), then the Pre-Tax
Financial Income reflected in the 1998 Financial Statements will be used in
computing the Stock Consideration Adjustment pursuant to the formula set forth
in Section 2.5(b) above. If Shareholders give such notice of objection, then the
issues in dispute will be submitted to the Accountants, for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party will furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to present to the Accountants
any material relating to the determination and to discuss the determination with
the Accountants; (ii) the determination by the Accountants, as set forth in a
notice delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (iii) Buyer and Shareholders will each bear 50%
of the fees of the Accountants for such determination. On the tenth business day
following the final determination of the amount of the Stock Consideration
adjustment, Buyer shall deliver the appropriate number of shares of the common
stock of Buyer held by it under the terms of the Custodial Agreement to the
Shareholders, and any remaining shares shall be returned to Buyer and thereby
become authorized but unissued shares of common stock of Buyer.
2.7. BOARD OF DIRECTORS. For the period beginning as of the Closing
Date and ending on the earlier of (i) the two (2) year anniversary of the
Closing Date or (ii) the date of an initial public offering of the capital stock
of Buyer and for so long as ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ remains a full time employee of
Buyer or a Subsidiary of Buyer and owns at least 80% of the shares of common
stock of Buyer received in the transactions contemplated by this Agreement, as
adjusted, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ may designate two (2) individual Persons to serve on
Buyer's board of directors and the Buyer shall use its Best Efforts to cause
such directors to be elected or approved and to serve as directors of Buyer
during such period. Thereafter, and for so long as ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ remains a
full time employee of Buyer or a
11
Subsidiary of Buyer and he owns at least 80% of the shares of common stock of
Buyer received in the transactions contemplated by this Agreement, as adjusted,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ may designate one (1) individual Person to serve on the
Buyer's board of direc tors and Buyer shall use its Best Efforts to cause such
Person to be elected or appointed and to serve in such capacity during such
period.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders and KRI, jointly and severally, represent and warrant to
Buyer that the statements contained in this Section 3 are correct and complete:
3.1. ORGANIZATION AND GOOD STANDING.
3.1.(a) The Disclosure Letter contains a complete and accurate
list for KRI of its name, its jurisdiction of incorporation, other jurisdictions
in which it is authorized to do business, and its capitalization (including the
identity of each stockholder and the number of shares held by each). KRI is a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under Applicable Contracts. The ownership or use of the properties
owned or used by KRI, or the nature of the activities conducted by it, do not
require qualification in any jurisdiction other than its jurisdiction of
incorporation.
3.1.(b) Shareholders have delivered to Buyer copies of the
Organizational Documents of KRI, as currently in effect.
3.2. AUTHORITY; NO CONFLICT.
3.2.(a) This Agreement constitutes the legal, valid, and binding
obligation of Shareholders, enforceable against Shareholders in accordance with
its terms. Upon the execution and delivery by Shareholders of this Agreement,
the Employment Agreements, the Shareholders' Releases, the Shareholders'
Agreement, and the Custodial Agreement (collectively, the "Sharehold ers'
Closing Documents"), the Shareholders' Closing Documents will constitute the
legal, valid, and binding obligations of Shareholders, enforceable against
Shareholders in accordance with their respective terms. Shareholders have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and the Shareholders' Closing Documents and to perform
their obligations under this Agreement and the Shareholders' Closing Documents.
3.2.(b) Except as set forth in the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
12
3.2.(b)(i) contravene, conflict with, or result in a violation
of (A) any provision of the Organizational Documents of KRI, or (B) any
resolution adopted by the board of directors or the stockholders of
KRI;
3.2.(b)(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person the right
to challenge any of the Contemplated Transac tions or to exercise any
remedy or obtain any relief under, any Legal Requirement or any Order
to which KRI or any Shareholder, or any of the assets owned or used by
KRI, may be subject;
3.2.(b)(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
KRI or that otherwise relates to the business of, or any of the assets
owned or used by, KRI;
3.2.(b)(iv) cause Buyer or KRI to become subject to, or to
become liable for the payment of, any Tax;
3.2.(c) [intentionally omitted]
3.2.(c)(i) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
3.2.(c)(ii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or used by
KRI.
Except as set forth in the Disclosure Letter, none of Shareholders
nor KRI is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3. CAPITALIZATION. The authorized equity securities of KRI consist of
2,000,000 shares of common stock, without par value per share, of which
1,000,000 shares are issued and outstanding and constitute the Shares.
Shareholders are and will be on the Closing Date the record and beneficial
owners and holders of the Shares, free and clear of all Encumbrances. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ owns 500,000 of the Shares, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ owns 316,667 of the Shares,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ owns 100,000 of the Shares and ▇▇▇▇▇ ▇▇▇▇▇▇ owns 83,333 of the
Shares. Except as set forth in the Disclosure Letter, no legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of KRI. All of the outstanding equity securities of KRI have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in the Disclosure Letter and other than this Agreement,
there are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of KRI. None of the outstanding equity securities
or other securities of KRI was issued in violation of the
13
Securities Act or any other Legal Requirement. KRI does not own, or have any
Contract to acquire, any equity securities or other securities of any Person or
any direct or indirect equity or ownership interest in any other business.
3.4. FINANCIAL STATEMENTS. Shareholders have delivered to Buyer: (a)
balance sheets of KRI as at December 31 in each of the years 1995 through 1996,
and the related statements of income, changes in Stockholders' Equity, and cash
flow for each of the fiscal years then ended, together with the report thereon
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, CPA, independent certified public accountant, (b) a balance
sheet of KRI as at December 31, 1997 (including the notes thereto, the "Balance
Sheet"), and the related statements of income, changes in Stockholders' Equity,
and cash flow for the fiscal year then ended, together with the report thereon
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, CPA, independent certified public accountant, and (c) balance
sheet of KRI as at May 31, 1998 (the "Interim Balance Sheet") and the related
statements of income, changes in Stockholders' Equity, and cash flow for the
five (5) months then ended, including in each case the notes thereto. Such
financial statements and notes fairly present the financial condition and the
results of operations, changes in Stockholders' Equity, and cash flow of KRI as
at the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP; the financial statements referred to in
this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person other than KRI are required by GAAP to be included in the financial
statements of KRI.
3.5. BOOKS AND RECORDS. The originals or complete and correct copies of
the books of account, minute books, stock record books, and other records of KRI
have been delivered to Buyer. At the Closing, all of those books and records
will be in the possession of KRI.
3.6. TITLE TO PROPERTIES; ENCUMBRANCES. The Disclosure Letter contains
a complete and accurate list of all real property leaseholds owned by KRI. KRI
does not now and never has owned any real property. Shareholders have delivered
to Buyer correct and complete copies of all leases by which KRI acquired such
leasehold interests, including any amendments or addenda thereto and copies of
all title insurance policies, opinions, abstracts, and surveys in the possession
of Shareholders or KRI, if any, and relating to such leasehold interests. KRI
has good and valid leasehold title in all real property (including all
buildings, improvements and fixtures thereon) used in the operation of KRI's
business. Except for the liens (if any) set forth in the Disclosure Letter,
there are no liens on any leasehold interest of KRI. All real property leases
are valid and binding on the parties thereto or there exists no default
thereunder by any party thereto.
3.7. CONDITION AND SUFFICIENCY OF EQUIPMENT. The Disclosure Letter
provides a complete listing of the material equipment of KRI. The equipment of
KRI is in good operating condition and repair, ordinary wear and tear excepted,
and is adequate for the uses to which it is being put, and none of such
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The equipment
of KRI is sufficient for the conduct of KRI's business immediately after the
Closing in substantially the same manner as conducted prior to the Closing. All
14
computer hardware and software and related materials used by KRI in its business
(herein collectively referred to as the "Computer System") are in good working
order and condition, KRI has not experienced any significant defects in design,
workmanship or material of the Computer System, and the Computer System has the
performance capabilities, characteristics and functions necessary to conduct the
business and operations of KRI. To the knowledge of Shareholders and KRI, the
Computer System is capable of processing, providing and/or receiving date data
within and between the twentieth and the twenty-first centuries. The use of the
Computer System by KRI (including any software modifications) (i) has not
violated or infringed upon the rights of any third parties and (ii) has not
resulted in the termination of any maintenance, service or support agreement
relating to any part of the Computer System or any reduction in the services
provided to KRI, warranties available to KRI or rights of KRI thereunder.
3.8. ACCOUNTS RECEIVABLE. All accounts receivable of KRI that are
reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting
records of KRI as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of KRI
as of the Closing Date (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off or discount, within ninety (90)
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. The Disclosure Letter contains a complete and accurate list of all
Accounts Receivable as of the date of the Interim Balance Sheet, which list sets
forth the aging of such Accounts Receivable.
3.9. [Intentionally omitted]
3.10. NO UNDISCLOSED LIABILITIES. Except as set forth in the Disclosure
Letter, KRI has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.11. TAXES.
3.11.(a) KRI has filed or caused to be filed all Tax Returns that
are or were required to be filed by or with respect to KRI, either separately or
as a member of a group of corporations, pursuant to applicable Legal
Requirements. Shareholders have delivered to Buyer copies of, and
15
attached to the Disclosure Letter are all such Tax Returns filed since December
31, 1995. KRI has paid, or made provision for the payment of, all Taxes that
have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Shareholders or KRI, except such Taxes,
if any, as are listed in the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
3.11.(b) The United States federal and state income Tax Returns of
KRI subject to such Taxes have never been audited by the IRS or relevant state
tax authorities. No Shareholder or KRI has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of KRI or for which KRI may be liable.
3.11.(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of KRI are adequate (determined in accordance with GAAP)
and are at least equal to KRI's liability for Taxes. There exists no proposed
tax assessment against KRI except as disclosed in the Balance Sheet or in the
Disclosure Letter. No consent to the application of Section 341(f)(2) of the IRC
has been filed with respect to any property or assets held, acquired, or to be
acquired by KRI. All Taxes that KRI is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or other Person.
3.11.(d) All Tax Returns filed by (or that include on a
consolidated basis) KRI are true, correct, and complete. There is no tax sharing
agreement that will require any payment by KRI after the date of this Agreement.
3.12. NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any material adverse change in the business, operations,
properties, prospects, assets, or condition of KRI, and no event has occurred or
circumstance exists that may result in such a material adverse change.
3.13. EMPLOYEE BENEFITS.
3.13.(a) As used in this Section 3.13, the following terms have
the meanings set forth below.
"KRI Other Benefit Obligation" means an Other Benefit
Obligation owed, adopted, or followed by KRI or an ERISA Affiliate of KRI.
"KRI Plan" means all Plans of which KRI or an ERISA Affiliate
of KRI is or was a Plan Sponsor, or to which KRI or an ERISA Affiliate of KRI
otherwise contributes or has contributed, or in which KRI or an ERISA Affiliate
of KRI otherwise participates or has participated. All references to Plans are
to KRI Plans unless the context requires otherwise.
16
"KRI VEBA" means a VEBA whose members include employees of KRI
or any ERISA Affiliate of KRI.
"ERISA Affiliate" means, with respect to KRI, any other person
that, together with KRI, would be treated as a single employer under IRC Section
414.
"Multi-Employer Plan" has the meaning given in ERISA Section
3(37)(A).
"Other Benefit Obligations" means all obligations,
arrangements, or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees, or agents, other than obligations,
arrangements, and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies, and
fringe benefits within the meaning of Section 132 of the Code.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" has the meaning given in ERISA Section 3(2)(A).
"Plan" has the meaning given in ERISA Section 3(3).
"Plan Sponsor" has the meaning given in ERISA Section
3(16)(B).
"Qualified Plan" means any Plan that meets or purports to meet
the requirements of IRC Section 401(a).
"Title IV Plans" means all Pension Plans that are subject to
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"VEBA" means a voluntary employees' beneficiary association
under IRC Section 501(c)(9).
"Welfare Plan" has the meaning given in ERISA Section 3(1).
3.13.(b) 3.13.(b)(i) The Disclosure Letter contains a complete and
accurate list of all KRI Plans, KRI Other Benefit Obligations, and KRI VEBAs,
and identifies as such all KRI Plans that are (A) defined benefit Pension Plans,
(B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
3.13.(b)(ii) The Disclosure Letter contains a complete and
accurate list of (A) all ERISA Affiliates of KRI, and (B) all Plans of
which any such ERISA Affiliate is or was a Plan Sponsor, in which any
such ERISA Affiliate participates or has participated, or to which any
such ERISA Affiliate contributes or has contributed.
17
3.13.(b)(iii) The Disclosure Letter sets forth, for each
Multi-Employer Plan, as of its last valuation date, the amount of
potential withdrawal liability of KRI and KRI's other ERISA Affiliates,
calculated according to information made available pursuant to ERISA
Section 4221(e).
3.13.(b)(iv) The Disclosure Letter sets forth a calculation of
the liability of KRI for post-retirement benefits other than pensions,
made in accordance with Financial Accounting Statement 106 of the
Financial Accounting Standards Board, regardless of whether KRI is
required by this Statement to disclose such information.
3.13.(b)(v) The Disclosure Letter sets forth the financial
cost of all obligations owed under any KRI Plan or KRI Other Benefit
Obligation that is not subject to the disclosure and reporting
requirements of ERISA.
3.13.(c) Shareholders have delivered to Buyer, or will deliver to
Buyer within ten (10) days of the date of this Agreement:
3.13.(c)(i) all documents that set forth the terms of each KRI
Plan, KRI Other Benefit Obligation, or KRI VEBA and of any related
trust, including (A) all plan descriptions and summary plan
descriptions of KRI Plans for which Shareholders or KRI are required to
prepare, file, and distribute plan descriptions and summary plan
descriptions, and (B) all summaries and descriptions furnished to
participants and beneficiaries regarding KRI Plans, KRI Other Benefit
Obligations, and KRI VEBAs for which a plan description or summary plan
description is not required;
3.13.(c)(ii) all personnel, payroll, and employment manuals
and policies;
3.13.(c)(iii) all collective bargaining agreements pursuant to
which contributions have been made or obligations incurred (including
both pension and welfare benefits) by KRI and the ERISA Affiliates of
KRI, and all collective bargaining agreements pursuant to which
contributions are being made or obligations are owed by such entities;
3.13.(c)(iv) a written description of any KRI Plan or KRI
Other Benefit Obligation that is not otherwise in writing;
3.13.(c)(v) all registration statements filed with respect to
any KRI Plan;
3.13.(c)(vi) all insurance policies purchased by or to provide
benefits under any KRI Plan;
3.13.(c)(vii) all contracts with third party administrators,
actuaries, investment managers, consultants, and other independent
contractors that relate to any KRI Plan, KRI Other Benefit Obligation,
or KRI VEBA;
18
3.13.(c)(viii) all reports submitted within the four years
preceding the date of this Agreement by third party administrators,
actuaries, investment managers, consultants, or other independent
contractors with respect to any KRI Plan, KRI Other Benefit Obligation,
or KRI VEBA;
3.13.(c)(ix) all notifications to employees of their rights
under ERISA SECTION 601 et seq. and IRC Section 4980B;
3.13.(c)(x) the Form 5500 filed in each of the most recent
three (3) plan years with respect to each KRI Plan, including all
schedules thereto and the opinions of indepen dent accountants;
3.13.(c)(xi) all notices that were given by KRI or any ERISA
Affiliate of KRI or any KRI Plan to the IRS, the PBGC, or any
participant or beneficiary, pursuant to statute, within the four years
preceding the date of this Agreement, including notices that are
expressly mentioned elsewhere in this Section 3.13;
3.13.(c)(xii) all notices that were given by the IRS, the
PBGC, or the Department of Labor to KRI, any ERISA Affiliate of KRI, or
any KRI Plan within the four years preceding the date of this
Agreement;
3.13.(c)(xiii) with respect to Qualified Plans and VEBAs, the
most recent determination letter for each Plan of KRI that is a
Qualified Plan; and
3.13.(c)(xiv) with respect to Title IV Plans, the Form
PBGC-1 filed for each of the three (3) most recent plan years.
3.13.(d) Except as set forth in the Disclosure Letter:
3.13.(d)(i) KRI has performed all of its respective
obligations under all KRI Plans, KRI Other Benefit Obligations, and KRI
VEBAs. KRI has made appropriate entries in its financial records and
statements for all obligations and liabilities under such Plans, VEBAs,
and Obligations that have accrued but are not due.
3.13.(d)(ii) No statement, either written or oral, has been
made by KRI to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other Benefit
Obligation and that could have an adverse economic consequence to KRI
or to Buyer.
3.13.(d)(iii) KRI, with respect to all KRI Plans, KRI Other
Benefits Obligations, and KRI VEBAs, is, and each KRI Plan, KRI Other
Benefit Obligation, and KRI VEBA is, in full
19
compliance with ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.13, and
with any applicable collective bargaining agreement.
3.13.(d)(iii).1 No transaction prohibited by ERISA
Section 406 and no "prohibited transaction" under IRC Section
4975(c) have occurred with respect to any KRI Plan.
3.13.(d)(iii).2 No Shareholder or KRI has any liability
to the IRS with respect to any Plan, including any liability
imposed by Chapter 43 of the IRC.
3.13.(d)(iii).3 No Shareholder or KRI has any liability
to the PBGC with respect to any Plan or has any liability
under ERISA Section 502 or Section 4071.
3.13.(d)(iii).4 All filings required by ERISA and the IRC
as to each Plan have been timely filed, and all notices and
disclosures to participants required by either ERISA or the
IRC have been timely provided.
3.13.(d)(iii).5 All contributions and payments made or
accrued with respect to all KRI Plans, KRI Other Benefit
Obligations, and KRI VEBAs are deductible under IRC Section
162 or Section 404. No amount, or any asset of any KRI Plan or
KRI VEBA, is subject to tax as unrelated business taxable
income.
3.13.(d)(iv) Each KRI Plan can be terminated within thirty
(30) days, without payment of any additional contribution or amount and
without the vesting or acceleration of any benefits promised by such
Plan.
3.13.(d)(v) Since January 1, 1997, there has been no
establishment or amendment of any KRI Plan, KRI VEBA, or KRI Other
Benefit Obligation.
3.13.(d)(vi) No event has occurred or circumstance exists that
would reasonably be expected to result in a material increase in
premium costs of KRI Plans and KRI Other Benefit Obligations that are
insured, or a material increase in benefit costs of such Plans and
Obligations that are self-insured.
3.13.(d)(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving, any KRI Plan, KRI Other Benefit Obligation, or KRI VEBA is
pending or, to Shareholders' Knowledge, is Threatened.
3.13.(d)(viii) [intentionally omitted]
3.13.(d)(ix) Each Qualified Plan of KRI is qualified in form
and operation under IRC Section 401(a); each trust for each such Plan
is exempt from federal income tax under IRC Section 501(a).
20
Each KRI VEBA is exempt from federal income tax. No event has occurred
or circumstance exists that would reasonably be expected to give rise
to disqualification or loss of tax-exempt status of any such Plan or
trust.
3.13.(d)(x) KRI and each ERISA Affiliate of KRI has met the
minimum funding standard, and has made all contributions required,
under ERISA Section 302 and IRC Section 402.
3.13.(d)(xi) No KRI Plan is subject to Title IV of ERISA.
3.13.(d)(xii) KRI has paid all amounts due to the PBGC
pursuant to ERISA Section 4007.
3.13.(d)(xiii) Neither KRI nor any ERISA Affiliate of KRI has
ceased operations at any facility or has withdrawn from any Title IV
Plan in a manner that would subject to any entity or Shareholders to
liability under ERISA Section 4062(e), Section 4063, or Section 4064.
3.13.(d)(xiv) Neither KRI nor any ERISA Affiliate of KRI has
filed a notice of intent to terminate any Plan or has adopted any
amendment to treat a Plan as terminated. The PBGC has not instituted
proceedings to treat any KRI Plan as terminated. No event has occurred
or circumstance exists that may constitute grounds under ERISA Section
4042 for the termination of, or the appointment of a trustee to
administer, any KRI Plan.
3.13.(d)(xv) No amendment has been made, or is reasonably
expected to be made, to any Plan that has required or could require the
provision of security under ERISA Section 307 or IRC Section
401(a)(29).
3.13.(d)(xvi) No accumulated funding deficiency, whether or
not waived, exists with respect to any KRI Plan; no event has occurred
or circumstance exists that may result in an accumulated funding
deficiency as of the last day of the current plan year of any such
Plan.
3.13.(d)(xvii) The actuarial report for each Pension Plan of
KRI and each ERISA Affiliate of KRI fairly presents the financial
condition and the results of operations of each such Plan in accordance
with GAAP.
3.13.(d)(xviii) Since the last valuation date for each Pension
Plan of KRI and each ERISA Affiliate of KRI, no event has occurred or
circumstance exists that would reasonably be expected to increase the
amount of benefits under any such Plan or that would cause the excess
of Plan assets over benefit liabilities (as defined in ERISA Section
4001) to decrease, or the amount by which benefit liabilities exceed
assets to increase.
3.13.(d)(xix) No reportable event (as defined in ERISA Section
4043 and in regulations issued thereunder) has occurred.
21
3.13.(d)(xx) No Shareholder or KRI has Knowledge of any facts
or circumstanc es that may give rise to any liability of any
Shareholder, KRI, or Buyer to the PBGC under Title IV of ERISA.
3.13.(d)(xxi) Neither KRI nor any ERISA Affiliate of KRI has
ever established, maintained, or contributed to or otherwise
participated in, or had an obligation to maintain, contribute to, or
otherwise participate in, any Multi-Employer Plan.
3.13.(d)(xxii) Neither KRI nor any ERISA Affiliate of KRI has
withdrawn from any Multi-Employer Plan with respect to which there is
any outstanding liability as of the date of this Agreement. No event
has occurred or circumstance exists that presents a risk of the
occurrence of any withdrawal from, or the participation, termination,
reorganization, or insolvency of, any Multi-Employer Plan that could
result in any liability of either KRI or Buyer to a Multi-Employer
Plan.
3.13.(d)(xxiii) Neither KRI nor any ERISA Affiliate of KRI has
received notice from any Multi-Employer Plan that it is in
reorganization or is insolvent, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of any
excise tax, or that such Plan intends to terminate or has terminated.
3.13.(d)(xxiv) No Multi-Employer Plan to which KRI or any
ERISA Affiliate of KRI contributes or has contributed is a party to any
pending merger or asset or liability transfer or is subject to any
proceeding brought by the PBGC.
3.13.(d)(xxv) Except to the extent required under ERISA
SECTION 601 et seq. and IRC SECTION 4980B, KRI does not provide health
or welfare benefits for any retired or former employee nor is KRI
obligated to provide health or welfare benefits to any active employee
following such employee's retirement or other termination of service.
3.13.(d)(xxvi) KRI has the right to modify and terminate
benefits to retirees (other than pensions) with respect to both retired
and active employees.
3.13.(d)(xxvii) Shareholders and KRI have complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
3.13.(d)(xxviii) No payment that is owed or may become due to
any director, officer, employee, or agent of KRI will be non-deductible
to KRI or subject to tax under IRC Section 280G or Section 4999; nor
will KRI be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such
person.
22
3.13.(d)(xxix) The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration
of any benefit.
3.14. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
3.14.(a) Except as set forth in the Disclosure Letter:
3.14.(a)(i) KRI is, and at all times since December 31, 1996
has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
3.14.(a)(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result
in a violation by KRI of, or a failure on the part of KRI to comply
with, any Legal Requirement, or (B) may give rise to any obligation on
the part of KRI to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
3.14.(a)(iii) KRI has not received, at any time since December
31, 1996, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or failure to
comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of KRI to undertake, or
to bear all or any portion of the cost of, any remedial action of any
nature.
3.14.(b) The Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by KRI or that otherwise
relates to the business of, or to any of the assets owned or used by, KRI,
including without limitation the appraiser license held by certain employees of
KRI. Each Governmental Authorization listed or required to be listed in the
Disclosure Letter is valid and in full force and effect. Except as set forth in
the Disclosure Letter:
3.14.(b)(i) KRI and the applicable appraiser employee of KRI
is, and at all times since December 31, 1996 has been, in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in the Disclosure
Letter including with respect to each employee appraiser holding an
appraiser's license the Uniform Standards Professional Appraisal
Practice;
3.14.(b)(ii) no event has occurred or circumstance exists that
may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in the Disclosure Letter, or (B) result directly
or indirectly in the revocation, withdrawal,
23
suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in the
Disclosure Letter;
3.14.(b)(iii) Neither KRI nor any appraiser employee has
received, at any time since December 31, 1996, any notice or other
communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental
Authorization; and
3.14.(b)(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or required to be
listed in the Disclosure Letter have been duly filed with the
appropriate Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations have been
duly made with the appropriate Governmental Bodies.
The Governmental Authorizations listed in the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit KRI to lawfully conduct and operate its business in the manner it
currently conducts and operates such business and to permit KRI to own and use
its assets in the manner in which it currently owns and uses such assets.
3.15. LEGAL PROCEEDINGS; ORDERS.
3.15.(a) Except as set forth in the Disclosure Letter, there is no
pending Proceeding:
3.15.(a)(i) that has been commenced by or against KRI or that
otherwise relates to or may affect the business of, or any of the
assets owned or used by, KRI; or
3.15.(a)(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with,
any of the Contemplated Transactions.
To the Knowledge of Shareholders and KRI, (1) no such
Proceeding has been Threatened, and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the commencement of any
such Proceeding. Shareholders have delivered to Buyer's counsel copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in the Disclosure Letter. The Proceedings listed in the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of KRI.
3.15.(b) Except as set forth in the Disclosure Letter:
24
3.15.(b)(i) there is no Order to which KRI, or any of the
assets owned or used by KRI, is subject;
3.15.(b)(ii) no Shareholder is subject to any Order that
relates to the business of, or any of the assets owned or used by, KRI;
and
3.15.(b)(iii) no officer, director, agent, or employee of KRI
is subject to any Order that prohibits such officer, director, agent,
or employee from engaging in or continuing any conduct, activity, or
practice relating to the business of KRI.
3.15.(c) Except as set forth in the Disclosure Letter:
3.15.(c)(i) KRI is, and at all times since December 31, 1996
has been, in full compliance with all of the terms and requirements of
each Order to which it, or any of the assets owned or used by it, is or
has been subject;
3.15.(c)(ii) no event has occurred or circumstance exists that
may constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which KRI, or any of the assets owned or used by KRI, is
subject; and
3.15.(c)(iii) KRI has not received, at any time since December
31, 1996, any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply
with, any term or requirement of any Order to which KRI, or any of the
assets owned or used by KRI, is or has been subject.
3.16. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in the
Disclosure Letter, since the date of the Balance Sheet, KRI has conducted its
business only in the Ordinary Course of Business and there has not been any:
3.16.(a) change in KRI's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of KRI;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
KRI of any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of capital stock;
3.16.(b) amendment to the Organizational Documents of KRI;
25
3.16.(c) payment or increase by KRI of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
3.16.(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
KRI;
3.16.(e) damage to or destruction or loss of any asset or property
of KRI, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of KRI,
taken as a whole;
3.16.(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to KRI of at least $5,000;
3.16.(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of KRI
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of KRI, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
3.16.(h) cancellation or waiver of any claims or rights with a
value to KRI in excess of $5,000;
3.16.(i) material change in the accounting methods used by KRI; or
3.16.(j) agreement, whether oral or written, by KRI to do any of
the foregoing.
3.17. CONTRACTS; NO DEFAULTS.
3.17.(a) The Disclosure Letter contains a complete and accurate
list, and Shareholders have delivered to Buyer true and complete copies, of:
3.17.(a)(i) each Applicable Contract that involves performance
of services or delivery of goods or materials by KRI of an amount or
value in excess of $1,000;
3.17.(a)(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to KRI of an
amount or value in excess of $1,000;
3.17.(a)(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves expenditures
or receipts of KRI in excess of $1,000;
26
3.17.(a)(iv) each lease (other than real property leases or
subleases), rental or occupancy agreement, license, installment and
conditional sale agreement, and other Applicable Contract affecting the
ownership of, leasing of, title to, use of, or any leasehold or other
interest in, any real or personal property, including, without
limitation, automobiles (except personal property leases and
installment and conditional sales agreements having a value per item or
aggregate payments of less than $1,000 and with terms of less than one
year);
3.17.(a)(v) each licensing agreement or other Applicable
Contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or
the non-disclosure of any of the Intellectual Property Assets;
3.17.(a)(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee
representative of a group of employees;
3.17.(a)(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits,
losses, costs, or liabilities by KRI with any other Person;
3.17.(a)(viii) each Applicable Contract containing covenants
that in any way purport to restrict the business activity of KRI or any
Affiliate of KRI or limit the freedom of KRI or any Affiliate of KRI to
engage in any line of business or to compete with any Person;
3.17.(a)(ix) each Applicable Contract providing for payments
to or by any Person based on sales, purchases, or profits, other than
direct payments for goods;
3.17.(a)(x) each power of attorney that is currently effective
and outstanding;
3.17.(a)(xi) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides for an
express undertaking by KRI to be responsible for consequential damages;
3.17.(a)(xii) each Applicable Contract for capital
expenditures in excess of $1,000;
3.17.(a)(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by
KRI other than in the Ordinary Course of Business; and
3.17.(a)(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
3.17.(b) Except as set forth in the Disclosure Letter:
27
3.17.(b)(i) neither Shareholder (and no Related Person of
either Shareholder) has or may acquire any rights under, and neither
Shareholder has or may become subject to any obligation or liability
under, any Contract that relates to the business of, or any of the
assets owned or used by KRI; and
3.17.(b)(ii) no officer, director, agent, employee,
consultant, or contractor of KRI is bound by any Contract that purports
to limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of KRI, or (B) assign to
KRI or to any other Person any rights to any invention, improvement, or
discovery.
3.17.(c) Except as set forth in the Disclosure Letter, each
Contract identified or required to be identified in the Disclosure Letter is in
full force and effect and is valid and enforceable in accordance with its terms.
3.17.(d) Except as set forth in the Disclosure Letter:
3.17.(d)(i) KRI is, and at all times since December 31, 1996
has been, in full compliance with all applicable terms and requirements
of each Applicable Contract;
3.17.(d)(ii) each other Person that has or had any obligation
or liability under any Applicable Contract, and at all times since
December 31, 1996 has been, in full compliance with all applicable
terms and requirements of such Applicable Contract;
3.17.(d)(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of, or give KRI or any other
Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; and
3.17.(d)(iv) KRI has not given to or received from any other
Person, at any time since December 31, 1996, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any
Applicable Contract.
3.17.(e) Except as set forth in the Disclosure Letter, there are
no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to KRI under current or
completed Applicable Contracts with any Person and no such Person has made
written demand for such renegotiation.
3.17.(f) Any Contracts relating to the sale, design, manufacture,
or provision of products or services by KRI has been
28
entered into in the Ordinary Course of Business and has been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Legal Requirement.
3.18. INSURANCE. The Disclosure Letter contains a complete and accurate
list, and Shareholders have delivered to Buyer true and correct copies of all
policies of insurance currently in effect to which KRI is a party. KRI currently
maintains in full force and effect all insurance policies reasonably necessary
for the conduct of KRI's business or the ownership of KRI's equipment. KRI is
not in default of any provisions of its insurance policies, has paid all
premiums due thereunder and has not failed to present any notice or material
claim thereunder in a timely fashion. The Disclosure Letter sets forth a
complete and accurate list of any claims made under any such insurance policies.
3.19. ENVIRONMENTAL MATTERS. Except as set forth in the Disclosure
Letter:
3.19.(a) KRI is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. No material expenditures are required to be made by the KRI
in order to comply with any Environmental Laws.
3.20. EMPLOYEES.
3.20.(a) The Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of KRI,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable; and service credited for
purposes of vesting and eligibility to participate under KRI's pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
3.20.(b) No employee or director of KRI is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of KRI, or (ii) the ability of KRI to conduct its business,
including any proprietary rights agreement with Shareholders or KRI by any such
employee or director. To Shareholders' Knowledge, no director, officer, or other
key employee of KRI intends to terminate his employment with KRI.
3.20.(c) The Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of KRI, or their dependents, receiving benefits or scheduled to receive benefits
in the future: name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
29
3.21. LABOR RELATIONS; COMPLIANCE. KRI has not been or is not a party
to any collective bargaining or other labor Contract. There has not been, there
is not presently pending or existing, and there is not Threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
any Proceeding against or affecting KRI relating to the alleged violation of any
Legal Requirement pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Body, organiza tional activity, or other labor or employment
dispute against or affecting KRI or its premises, or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by KRI, and no such action
is contemplated by KRI. KRI has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. KRI is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22. INTELLECTUAL PROPERTY.
3.22.(a) Intellectual Property Assets -- The term "Intellectual
Property Assets" includes the following:
3.22.(a)(i) the name "▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇", all fictional
business names, including without limitation, "Hacienda Property
Valuation", ["Hacienda Appraisal Review" and California Residential,"]
trading names, registered and unregistered trademarks, service marks,
and applications (collectively, "Marks");
3.22.(a)(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively, "Patents");
3.22.(a)(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
3.22.(a)(iv) [intentionally omitted]; and
3.22.(a)(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively,
"Trade Secrets"); owned, used, or licensed by KRI as licensee or
licensor.
3.22.(b) Agreements -- The Disclosure Letter contains a complete
and accurate list of all Contracts relating to the Intellectual Property Assets
to which KRI is a party or by which KRI is bound, except for any license implied
by the sale of a product and perpetual, paid-up licenses for
30
commonly available software programs with a value of less than $1,000 under
which KRI is the licensee. There are no outstanding and, to Shareholders'
Knowledge, no Threatened disputes or disagreements with respect to any such
agreement.
3.22.(c) Know-How Necessary for the Business
3.22.(c)(i) The Intellectual Property Assets are all those
necessary for the operation of KRI's business as it is currently
conducted. KRI is the owner of all right, title, and interest in and to
each of the Intellectual Property Assets, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third party all
of the Intellectual Property Assets.
3.22.(c)(ii) Except as set forth in the Disclosure Letter, all
former and current employees of KRI have executed written Contracts
with KRI that assign to KRI all rights to any inventions, improvements,
discoveries, or information relating to the business of KRI. No
employee of KRI has entered into any Contract that restricts or limits
in any way the scope or type of work in which the employee may be
engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than KRI.
3.22.(d) KRI has no Patents.
3.22.(e) Trademarks
3.22.(e)(i) The Disclosure Letter contains a complete and
accurate list and summary description of all Marks. KRI is the owner of
all right, title, and interest in and to each of the Marks, free and
clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims.
3.22.(e)(ii) [intentionally omitted].
3.22.(e)(iii) [intentionally omitted].
3.22.(e)(iv) To Shareholders' Knowledge, there is no
potentially interfering trademark or trademark application of any third
party.
3.22.(e)(v) No ▇▇▇▇ is infringed or, to Shareholders'
Knowledge, has been challenged or threatened in any way. To
Shareholder's Knowledge, none of the Marks used by KRI infringes or is
alleged to infringe any trade name, trademark, or service ▇▇▇▇ of any
third party.
31
3.22.(f) Copyrights.
3.22.(f)(i) The Disclosure Letter contains a complete and
accurate list and summary description of all Copyrights. KRI is the
owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
3.22.(f)(ii) No Copyright is infringed or, to Shareholders'
Knowledge, has been challenged or threatened in any way. None of the
subject matter of any of the Copyrights infringes or is alleged to
infringe any copyright of any third party or is a derivative work based
on the work of a third party.
3.22.(g) Trade Secrets
3.22.(g)(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it and to
allow its full and proper use without reliance on the knowledge or
memory of any individual.
3.22.(g)(ii) Shareholders and KRI have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their
Trade Secrets.
3.22.(g)(iii) KRI has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to
Shareholders' Knowledge, have not been used, divulged, or appropriated
either for the benefit of any Person (other than KRI) or to the
detriment of KRI. No Trade Secret is subject to any adverse claim or
has been challenged or threatened in any way.
3.23. DISCLOSURE.
3.23.(a) No representation or warranty of Shareholders in this
Agreement and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
3.23.(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
3.23.(c) There is no fact known to any Shareholder that has
specific application to either Shareholder or KRI (other than general economic
or industry conditions) and that materially adversely affects the assets,
business, prospects, financial condition, or results of operations of KRI that
has not been set forth in this Agreement or the Disclosure Letter.
32
3.24. RELATIONSHIPS WITH RELATED PERSONS. No Shareholder or any Related
Person of Shareholders or of KRI has, or since December 31, 1996 has had, any
interest in any property (whether real, personal, or mixed and whether tangible
or intangible), used in or pertaining to KRI's business. Except as set forth in
the Disclosure Letter, no Shareholder or any Related Person of Shareholders or
KRI is, or since December 31, 1996 has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with KRI, or (ii) engaged in competition with KRI with respect to
any line of the products or services of KRI (a "Competing Business") in any
market presently served by KRI except for less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market. Except as set forth
in the Disclosure Letter, no Shareholder or any Related Person of Shareholders
or KRI is a party to any Contract with, or has any claim or right against, KRI.
3.25. BROKERS OR FINDERS. Except with respect to the services of ▇▇▇▇
▇▇▇▇▇▇, Shareholders, KRI and their agents have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.26. INVESTMENT INTENT. Shareholders are acquiring the shares of
Buyer's common stock constituting the Stock Consideration for their own account
and not with a view to the distribu tion of such shares within the meaning of
Section 2(11) of the Securities Act.
3.27. BANK ACCOUNTS. Section 3.27 of the Disclosure Letter sets forth a
complete and accurate list of each bank or financial institution in which KRI
has an account or safe deposit box (giving the address and account numbers) and
the names of the persons authorized to draw thereon or to have access thereto.
3.28. CUSTOMERS.
3.28.(a) The Disclosure Letter sets forth an accurate and complete
list of the twenty (20) largest customers of the Company, in terms of revenue
during each of the 1996 and 1997 calendar years and the portion of 1998 prior to
the date of this Agreement (collectively, the "Major Customers"), showing the
total revenue received in each such period from each such customer;
3.28.(b) Except as set forth in the Disclosure Letter, since June
1, 1996 there has not been any adverse change in the business relationship, and
there has been no material dispute, between KRI and any Major Customer.
3.28.(c) Except as set forth in the Disclosure Letter, neither KRI
nor any Shareholder has Knowledge of a Major Customer's intention to discontinue
or substantially reduce doing business with KRI after the Closing nor has any
such elimination or diminution in business been Threatened.
33
3.29. IMPROPER AND OTHER PAYMENTS. Except as set forth on the
Disclosure Letter, (a) neither KRI, nor any Shareholder, director, officer,
employee, agent or representative of KRI nor any Person acting on behalf of any
of them, has made, paid or received any bribes, kickbacks or other similar
payments to or from any Person, whether lawful or unlawful, (b) no contributions
have been made by KRI, directly or indirectly, to a domestic or foreign
political party or candidate, (c) no improper foreign payment (as defined in the
Foreign Corrupt Practices Act) has been made and (d) the internal accounting
controls of the Company are adequate to detect any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the disclosure letter dated the date hereof
delivered to each Shareholder (the "Buyer's Disclosure Letter"), Buyer
represents and warrants to Shareholders as follows:
4.1. CORPORATE STANDING. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of Georgia. Buyer has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and as presently proposed to be
conducted, to execute, deliver and perform this Agreement and any other
agreement to which Buyer is a party, the execution and delivery of which is
contemplated hereby. Buyer is duly qualified and is authorized to transact
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure so to qualify would have a material adverse effect on its
business, properties, prospects, or financial condition. Every jurisdiction
where the Buyer is qualified as a foreign corporation to transact business is
listed in the Buyer's Disclosure Letter.
4.2. AUTHORITY; NO CONFLICT.
4.2.(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Buyer has the absolute and unrestricted right, power, and authority to execute
and deliver this Agreement, the Shareholders' Agreement and the Custodial
Agreement (the "Buyer's Closing Documents") and to perform its obligations under
this Agreement and the Buyer's Closing Documents.
4.2.(b) Except as set forth in Buyer's Disclosure Letter, neither
the execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
4.2.(b)(i) any provision of Buyer's Organizational Documents;
4.2.(b)(ii) any resolution adopted by the board of directors
or the stockholders of Buyer;
34
4.2.(b)(iii) any Legal Requirement or Order to which Buyer may
be subject; or
4.2.(b)(iv) any Contract to which Buyer is a party or by which
Buyer may be bound.
Except as set forth in Buyer's Disclosure Letter, Buyer is not
and will not be required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3. CAPITALIZATION. As of June 12, 1998, the authorized equity
securities of the Buyer consist of [i] 6,000,000 shares of Class A Common Stock,
par value $.01 per share, of which 3,298,759 shares are issued and outstanding,
[ii] 500,000 shares of Class B Common Stock, par value $.01 per share, or which
59,573 shares are issued and outstanding, [iii] 2,500,000 shares of Preferred
Stock, no par value per share, of which no shares are issued and outstanding,
and [iv] 420,000 shares of Class A Convertible Preferred Stock, no par value per
share, of which 420,000 shares are issued and outstanding. As of June 12, 1998,
the outstanding shares of capital stock of the Buyer are owned by the
stockholders and in the amounts specified in Buyer's Disclosure Letter. Upon
consummation of Buyer's equity offering, the authorized equity securities of
Buyer and the outstanding shares of capital stock of Buyer are owned by the
stockholders and in the amounts specified in Buyer's Disclosure Letter. Except
as set forth in the Buyer's Disclosure Letter, no legend or other reference to
any purported Encumbrance appears upon any certificate representing equity
securities of Buyer. All of the outstanding equity securities of Buyer have been
duly autho rized and validly issued and are fully paid and nonassessable. Other
than this Agreement and except as set forth in the Buyer's Disclosure Letter,
there are no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of Buyer. None of the outstanding equity
securities or other securities of Buyer was issued in violation of the
Securities Act or any other Legal Requirement. Buyer does not own, or have any
Contract to acquire, any equity securities or other securities of any Person or
any direct or indirect equity or ownership interest in any other business.
4.4. FINANCIAL STATEMENTS. Buyer has delivered to Shareholders: (a)
balance sheets of Buyer as at December 31 in each of the years 1995 through
1996, and the related state ments of income, changes in Stockholders' Equity,
and cash flow for each of the fiscal years then ended, together with the report
thereon of Ernst & Young, independent certified public accountants for 1995 and
Coopers & ▇▇▇▇▇▇▇, independent certified public accountants for 1996, (b) a
balance sheet of Buyer as at December 31, 1997 (including the notes thereto),
and the related statements of income, changes in Stockholders' Equity, and cash
flow for the fiscal year then ended, together with the report thereon of Coopers
& ▇▇▇▇▇▇▇, independent certified public accountants, and (c) an unaudited
consolidated balance sheet of Buyer as at April 30, 1998 and the related
unaudited consolidated statements of income, changes in Stockholders' Equity,
and cash flow for the four (4) months then ended, including in each case the
notes thereto. Such financial statements and notes fairly present the financial
condition and the results of operations, changes in Stockholders' Equity, and
cash flow of Buyer as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP; the financial
statements referred to in this Section 4.4 reflect the consistent application of
such accounting principles throughout the periods
35
involved. No financial statements of any Person other than Buyer are required by
GAAP to be included in the consolidated financial statements of Buyer.
4.5. NO CONFLICT. The execution and delivery of this Agreement and any
ancillary agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, or the creation of a
lien, pledge, security interest, charge or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") pursuant to, any provision of the
Buyer's Articles of Incorporation or Bylaws, or result in any Violation of any
material lease, agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer, or Buyer's properties or assets.
4.6. COMPLIANCE. Buyer is not in violation or default of any provision
of its Articles of Incorporation or Bylaws or in any respect of any provision of
any material contract or other items listed in the Buyer's Disclosure Letter.
4.7. SUBSIDIARIES. Except for the Contemplated Transactions under this
Agreement, Buyer does not own or control, directly or indirectly, any interest
in any other corporation, partnership, limited liability company, association or
other business entity. Buyer is not a participant in any joint venture,
partnership or similar arrangement.
4.8. CONSENTS. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or other third party is required by or
with respect to Buyer in connection with the execution and delivery of this
Agreement, or the consummation by Buyer of the transactions contemplated hereby,
which has not already been obtained, except for such filings as may be required
under applicable state securities laws which will be timely filed within the
applicable periods therefor.
4.9. INDEBTEDNESS FOR BORROWED MONEY; NO UNDISCLOSED LIABILITIES.
Except as and to the extent reflected and adequately reserved against in the
Buyer's financial statements, as of the Closing Date, Buyer has no direct or
indirect indebtedness for borrowed money, indebtedness by way of lease-purchase
arrangements, guarantees, undertakings, chattel mortgages or other security
arrangements with any bank, financial institution or other third party, and
Buyer will not have any liability or obligation whatsoever, whether accrued,
absolute, contingent or otherwise.
36
4.10. TITLE TO PROPERTY AND ASSETS; LEASES.
4.10.(a) Buyer is not bound or committed to make any capital
improvement or expenditure with respect to its owned or leased personal
property.
4.10.(b) Buyer owns no real property in fee simple. Buyer has
good, valid and marketable title to all the personal and mixed, tangible and
intangible properties and assets which it purports to own, free and clear of all
liens, restrictions, claims, charges, security interests, easements or other
encumbrances of any nature whatsoever, except for liens for current taxes not
yet due and payable. With respect to the property and assets that it leases,
Buyer is in compliance with such leases and, to Buyer's knowledge, holds a valid
leasehold interest free and clear of any liens, claims and encumbrances. All
properties and assets of Buyer are in the possession or control of Buyer, and no
other person is entitled to possession of any such properties and assets.
4.11. LEGAL PROCEEDINGS. Except as set forth in Buyer's Disclosure
Letter or which are not material to Buyer, there are no claims of any kind or
any actions, suits, proceedings, arbitrations or investigations pending or, to
Buyer's knowledge, threatened against or affecting Buyer or against any asset,
interest or right of Buyer or which questions the validity of the transactions
contemplated by this Agreement and Buyer knows of no facts which may constitute
a basis therefor.
4.12. ENVIRONMENTAL MATTERS. Buyer is not in violation of any
applicable Environmental Laws, and, as of the date hereof no material
expenditures are required to be made by Buyer in order to comply with any of the
Environmental Laws.
4.13. LICENSES AND PERMITS; COMPLIANCE WITH LAWS. Except as set forth
in the Buyer's Disclosure Letter, Buyer holds all franchises, permits, licenses,
variances, exemptions, orders and approvals of all governmental entities which
are material to the operation of Buyer's business and is in compliance with the
terms thereof. Buyer has complied with and is not in any default under (and has
not been charged with or received notice with respect to, nor is threatened with
or under investigation with respect to, any charge concerning any violation of
any provision of) any federal, state or local law, regulation, ordinance, rule
or order (whether executive, judicial, legislative or administrative) or any
order, writ, injunction or decree of any court, agency or instrumentality and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failures to comply.
4.14. EMPLOYEE BENEFIT PLANS. Except as set forth in the Buyer's
Disclosure Letter, Buyer has no employee benefit plans including any profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of Buyer (collectively "Benefit Plans"), or any
employment, consulting, severance, termination or indemnification agreement,
arrangement or understanding between Buyer and any officer, director or employee
of Buyer. Each Benefit Plan has been administered in all material respects in
accordance with its terms and all applicable laws.
37
4.15. LABOR RELATIONS.
4.15.(a) Buyer is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational safety and health;
4.15.(b) There is no unfair labor practice charge or complaint or
any other matter against or involving Buyer pending or, to Buyer's knowledge,
threatened before the National Labor Relations Board or any court of law;
4.15.(c) There is no labor strike, dispute, slowdown or stoppage
actually pending or, to Buyer's knowledge, threatened against Buyer;
4.15.(d) Buyer is not a party to or bound by any collective
bargaining agreement or any similar labor union arrangement;
4.15.(e) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, color, religion, national origin,
sexual preference, disability, handicap or veteran status) pending or, to
Buyer's knowledge, threatened, before the Equal Employment Opportunity
Commission or any federal, state or local agency or court against Buyer. There
have been no governmental audits of the equal employment opportunity practices
of Buyer and, to Buyer's knowl edge, no basis for any such claim exists; and
4.16. INSURANCE. Buyer's Disclosure Letter sets forth a list of all
insurance policies, including property, casualty, liability and other insurance
maintained with respect to the assets and business of Buyer ("Buyer Insurance").
Buyer is not liable for any material retroactive premium adjustments with
respect to any of its insurance policies or bonds. All such policies and bonds
are legal, valid and enforceable and in full force and effect and Buyer is not
in breach or default (including with respect to the payment of premiums or the
giving of notices) and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy received any notice of premium
increases or cancellations with respect to any of such policies and bonds. Buyer
believes the amount and type of Buyer Insurance coverage is adequate for Buyer's
business and is consistent with good business practice.
4.17. TAX MATTERS. Buyer has timely filed or caused to be filed all
federal, state, foreign and local income, franchise, gross receipts, payroll,
sales, use, withholding, occupancy, excise, real and personal property,
employment and other tax returns, tax information returns and reports ("Tax
Returns") required to be filed and all such Tax Returns were correct and
complete in all respects. Buyer has paid, or made adequate provisions for the
payment of, all taxes, duties or assessments of any nature whatsoever, interest
payments, penalties and additions (whether or not reflected in the returns as
filed) due and payable (and/or properly accruable for all periods ending on or
before the date of this Agreement) to any city,
▇▇
▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ or any other taxing authority.
There are no security interests on any of the assets of Buyer that arise in
connection with any failure (or alleged failure) to pay any tax. Buyer has
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. No deficiencies for any taxes have
been proposed, asserted or assessed against Buyer that are not adequately
reserved for.
4.18. PATENTS AND TRADEMARKS. Buyer owns or possesses sufficient legal
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted without any
conflict with, or infringement of the rights of, others. Buyer's Disclosure
Letter sets forth a complete list of the Buyer's copyrights and trademarks.
Except for agreements with its own employees or consultants and standard
end-user license agreements, if any, there are no outstanding options, licenses,
or agreements of any kind relating to the foregoing, nor is the Buyer bound by
or a party to any options, licenses, or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, and proprietary rights and processes of any other person
or entity. Buyer has not received any communications alleging that Buyer has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets, or
other proprietary rights or processes of any other person or entity. Buyer is
not aware that any of its employees is obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or
subject to any judgment, decree, or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote the
interests of Buyer or that would conflict with Buyer's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of Buyer's business by the employees of Buyer, nor the conduct of
Buyer's business as proposed, will, to Buyer's knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant, or instrument under which any of such
employees is now obligated. Buyer does not believe it is or will be necessary to
use any inventions of any of its employees (or persons it currently intends to
hire) made prior to their employment by Buyer. Each independent contractor,
employee and/or officer of Buyer who or which has contributed to the development
of the Computer Software has executed proprietary information/confidentiality
agreements.
4.19. RELATED-PARTY TRANSACTIONS. Except as set forth in Buyer's
Disclosure Letter, no employee, officer, or director of Buyer, or member of his
or her immediate family is indebted to Buyer, nor is Buyer indebted (or
committed to make loans or extend or guarantee credit) to any of them. To
Buyer's knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which Buyer is affiliated or with which
Buyer has a business relationship, or any firm or corporation that competes with
Buyer, except that employees, officers, or directors of Buyer, and members of
their immediate families may own stock in publicly traded companies that may
compete with Buyer. Except as set forth in Buyer's Disclosure Letter, no
employee, officer or director of Buyer, or, to Buyer's knowledge, any member of
their immediate families is, directly or indirectly, interested in any material
39
contract with Buyer. For purposes of this Agreement, Buyer shall be deemed to
have knowledge of a fact, event, condition, matter or situation if any of
Buyer's officers or directors are consciously aware of such fact, event,
condition, matter or situation, as appropriate.
4.20. SOFTWARE PRODUCTS. Buyer has received no customer complaints
concerning alleged defects in its computer appraisal software products,
including, without limitation, ValuExpress (collectively, the "Computer
Software") that, if true, would materially adversely affect the operations or
financial condition of Buyer.
4.21. [Intentionally Omitted].
4.22. MATERIAL FACTS. Buyer has provided each Shareholder with all the
information reasonably available to it that such Shareholder has requested for
deciding whether to acquire the shares needed. This Agreement and the documents
or written statements furnished by Buyer to Shareholders in connection with the
transactions contemplated hereby do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
4.23. INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
4.24. CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.25. BROKERS OR FINDERS. Buyer and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
SECTION 5. COVENANTS OF SHAREHOLDERS PRIOR TO CLOSING DATE
5.1. ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Shareholders will, and will cause KRI and its Representatives
to, (a) afford Buyer and its Representatives (collectively, "Buyer's Advisors")
full and free access to KRI's personnel, properties contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyers's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may reasonably request, and (c) furnish Buyer and
Buyers's Advisors with such additional financial, operating, and other data and
information as Buyer may reasonably request. Buyer will (a) afford Shareholders
and their Representatives (collectively, "Shareholders' Advisors") full and free
access to Buyer's personnel,
40
properties, contracts, books and records, and other documents and data and (b)
furnish Shareholders and Shareholder's Advisors with copies of all such
contracts, books and records, and other existing documents and data as
Shareholders may reasonably request, and (c) furnish Shareholders and
Shareholders Advisors with such additional financial, operating, and other data
and information as Shareholders may reasonably request.
5.2. OPERATION OF THE BUSINESSES OF KRI. Between the date of this
Agreement and the Closing Date, Shareholders will, and will cause KRI to:
5.2.(a) conduct the business of KRI only in the Ordinary Course of
Business;
5.2.(b) use their Best Efforts to preserve intact the current
business organization of KRI, keep available the services of the current
officers, employees, and agents of KRI, and maintain the relations and good will
with suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with KRI;
5.2.(c) confer with Buyer concerning operational matters of a
material nature; and
5.2.(d) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of KRI.
5.3. NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Shareholders
will not, and will cause KRI not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4. REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Shareholders will, and will cause KRI to, make all filings
required by Legal Require ments to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Shareholders will, and will cause KRI to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents identified in Schedule 4.2.
5.5. NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Shareholder will promptly notify Buyer in writing if such Shareholder
or KRI becomes aware of any fact or condition that causes or constitutes a
Breach of any of Shareholders' representations and warranties as of the date of
this Agreement, or if such Shareholder or KRI becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation
41
or warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, Shareholders will promptly deliver
to Buyer a supplement to the Disclosure Letter specifying such change. During
the same period, each Shareholder will promptly notify Buyer of the occurrence
of any Breach of any covenant of Shareholders in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6. PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Shareholders will cause all indebtedness owed to KRI
by any Shareholder or any Related Person of either Shareholder to be paid in
full prior to Closing.
5.7. NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Shareholders will not, and will cause KRI and
each of its Representatives not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the
Ordinary Course of Business) of KRI, or any of the capital stock of KRI, or any
merger, consolidation, business combination, or similar transaction involving
KRI.
5.8. BEST EFFORTS. Between the date of this Agreement and the Closing
Date, KRI and Shareholders will use their Best Efforts to cause the conditions
in Sections 7 and 8 to be satisfied.
SECTION 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1. BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied.
SECTION 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1. ACCURACY OF REPRESENTATIONS.
7.1.(a) Each of the representations and warranties of Shareholders
and KRI in this Agreement must have been accurate in all material respects as of
the date of this Agreement, and must be
42
accurate in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure Letter.
7.2. SHAREHOLDERS' PERFORMANCE.
Each of the covenants and obligations that Shareholders are
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing, must have been duly performed and complied with in all material
respects.
7.3. CONSENTS. Each of the Consents identified in the Disclosure
Letter, and each Consent identified in Buyer's Disclosure Letter, must have been
obtained and must be in full force and effect.
7.4. ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
7.4.(a) an opinion of Strategic Law Partners, KRI's and
Shareholders' counsel, dated the Closing Date, in the form of Exhibit 7.4(a);
7.4.(b) estoppel certificates executed on behalf of lessors and
sublessors to any real estate leases constituting Applicable Contracts dated as
of a date not more than five (5) days prior to the Closing Date.
7.4.(c) the documents required to be delivered by Shareholders and
KRI pursuant to Section 2.4; and
7.4.(d) such other documents as Buyer may reasonably request for
the purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Shareholders'
representations and warranties, (iii) evidencing the performance by each
Shareholder of, or the compliance by each Shareholder with, any covenant or
obligation required to be performed or complied with by such Shareholder, (iv)
evidencing the satisfaction of any condition referred to in this Section 7, or
(v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5. NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceed ing (a) involving any challenge to, or
seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6. NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must
not have been made or Threatened by any Person any claim asserting that such
Person (a) is the
43
holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or ownership
interest in, KRI, or (b) is entitled to all or any portion of the Purchase Price
payable for the Shares.
7.7. NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
7.8. EQUITY FINANCING. Buyer shall have consummated an offering of its
common shares, with net proceeds to the Buyer of at least $4.6 million and
otherwise on terms and conditions, satisfactory to Buyer.
SECTION 8. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATION TO CLOSE
Shareholders' obligation to sell the Shares and to take the other
actions required to be taken by Shareholders at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Shareholders, in whole or in part):
8.1. ACCURACY OF REPRESENTATIONS. Each of Buyer's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date.
8.2. BUYER'S PERFORMANCE.
8.2.(a) Each of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been performed and complied with in all
material respects.
8.2.(b) Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.4 and must have
made the cash payments required to be made by Buyer pursuant to
Sections 2.4(c)(i).
8.3. CONSENTS. Each of the Consents identified in the Buyer's
Disclosure Letter must have been obtained and must be in full force and effect.
44
8.4. ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Shareholders:
8.4.(a) an opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, Buyer's counsel,
dated the Closing Date, in the form of Exhibit 8.4(a); and
8.4.(b) such other documents as Shareholders may reasonably
request for the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 7.4(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
8.5. NO INJUNCTION. There must not be in effect any Legal Requirement
or any injunction or other Order that (a) prohibits the sale of the Shares by
Shareholders to Buyer, and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
SECTION 9. TERMINATION
9.1. TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
9.1.(a) by either Buyer or Shareholders if a material Breach of
any provision of this Agreement has been committed by the other party and such
Breach has not been waived;
9.1.(b) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Shareholders, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Shareholders to comply with their obligations under this Agreement) and
Shareholders have not waived such condition on or before the Closing Date;
9.1.(c) by mutual consent of Buyer and Shareholders; or
9.1.(d) by either Buyer or Shareholders if the Closing has not
occurred (other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obliga tions under this Agreement) on or
before July 31, 1998, or such later date as the parties may agree upon.
45
9.2. EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
SECTION 10. INDEMNIFICATION; REMEDIES
10.1. SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(vi), and any other certificate or document
delivered pursuant to this Agreement will survive the Closing for a period of
three (3) years, except that Tax Warranties shall survive until the Tax Statute
of Limitations Date and Title and Authorization Warranties shall survive
forever; provided, however, any claims for fraud or intentional breach shall
survive indefinitely. The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2. INDEMNIFICATION AND PAYMENT OF DAMAGES BY SHAREHOLDERS.
Shareholders, jointly and severally, will indemnify and hold harmless Buyer,
KRI, and their respective Representatives, stockholders, controlling persons,
and affiliates (except Shareholders) (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
10.2.(a) any Breach of any representation or warranty made by
Shareholders in this Agreement or any other certificate or document delivered by
Shareholders pursuant to this Agreement;
46
10.2.(b) any Breach by KRI or any Shareholder of any covenant or
obligation of such Shareholder in this Agreement;
10.2.(c) [intentionally omitted]
10.2.(d) any claim by ▇▇▇▇ ▇▇▇▇▇▇ or by any other Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with any
of Shareholders or KRI (or any Person acting on their behalf) in connection with
any of the Contemplated Transactions; or
10.2.(e) the fees or other amounts owed to ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.,
Strategic Law Partners or other professional advisors rendered or alleged to
have been rendered to Shareholders or KRI in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
10.3. INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Shareholders, and will pay to Shareholders the
amount of any Damages arising, directly or indirectly, from or in connection
with:
10.3.(a) any Breach of any representation or warranty made by
Buyer in this Agreement or in any other certificate or document
delivered by Buyer pursuant to this Agreement;
10.3.(b) any Breach by Buyer of any covenant or obligation of
Buyer in this Agreement, or
10.3.(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or
any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
10.4. LIMITATIONS ON INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, no party shall have liability to another under
these indemnification provisions unless the Damages on a cumulative basis exceed
$50,000 after which time the indemnified party shall be entitled to recover all
Damages without regard to such $50,000 threshold amount; provided that this
Section 10.4 shall not apply to any intentional misrepresentation or fraud or
with respect to Section 10.2(d) and 10.2(e) or breach of Shareholders'
representations and warranties contained in Section 3.3. In addition, subject to
the foregoing proviso, a party's liability hereunder shall not exceed, in the
aggregate, $3,000,000.
47
10.5. PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
10.5.(a) Promptly after receipt by an indemnified party under
Section 10.2 or Section 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
10.5.(b) If any Proceeding referred to in Section 10.5(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten (10) days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the indemnified party.
10.5.(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnifica tion under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination
48
of a Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
10.5.(d) Shareholders and Buyer hereby consent to the
non-exclusive juris diction of any court in which a Proceeding is brought
against any Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on Shareholders or
Buyer, as applicable, with respect to such a claim anywhere in the world.
10.6. PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
SECTION 11. GENERAL PROVISIONS
11.1. EXPENSES; TERMINATION FEE. Except as otherwise expressly provided
in this Agreement, each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the Contemplated Transac tions, including all fees and
expenses of agents, representatives, counsel, and accountants; provided that
Shareholders will cause KRI not to incur any out-of-pocket expenses in
connection with this Agreement or the Contemplated Transactions, including,
without limitation, brokers', legal, accounting or other similar fees and
expenses. In the event of termination of this Agreement, the obligation of each
party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party. Moreover, if KRI or
any Shareholder deliberately breaches a representation or warranty or fails to
perform a covenant under this Agreement with intent to sell or to consider
selling all or part of the assets or stock of KRI to another Person (besides
Buyer), KRI and Shareholders, jointly and severally, shall pay to Buyer upon
demand a fee of $1,000,000, plus all out-of-pocket expenses of Buyer incurred in
connection with this Agreement and the Contemplated Transactions.
11.2. PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Unless consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Shareholders shall, and shall cause KRI to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Shareholders and Buyer will consult with each other concerning the means
by which KRI's employees, customers, and suppliers and others having dealings
with KRI will be informed of the Contemplated Transac tions, and Buyer will have
the right to be present for any such communication.
11.3. CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Shareholders will maintain in confidence, and will cause
the directors, officers, employees, agents, and
49
advisors of Buyer and KRI to maintain in confidence, any written, oral, or other
information obtained in confidence from another party or KRI in connection with
this Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by legal proceedings.
If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request and each party shall use its Best Efforts to
maintain the confidentiality of any trade secrets or other confidential
information obtained.
11.4. NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
SHAREHOLDERS: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Hacienda Property Valuation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Hacienda Property Valuation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Hacienda Property Valuation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Hacienda Property Valuation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
COMPANY: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Hacienda Property Valuation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Strategic Law Partners
Suite 3950
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer: Premier Appraisals, Inc.
▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇, Tarrant & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
11.5. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Georgia, County of Dekalb, or, if it has or can acquire jurisdiction, in the
United States District Court for the Northern District of Georgia, and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
51
11.6. FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.7. WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Term Sheet between Buyer and Shareholders dated APRIL 2, 1998)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
11.9. DISCLOSURE LETTER.
11.9.(a) The disclosures in the Disclosure Letter and the Buyer's
Disclosure Letter, and those in any Supplement thereto, must relate only to the
representations and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or warranty in this
Agreement.
11.9.(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Letter or the Buyer's
Disclosure Letter (other than an exception expressly set forth as such in the
Disclosure Letter or the Buyer's Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.10. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit
52
of the successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person other than
the parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns.
11.11. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforce able by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12. SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13. TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
11.14. GOVERNING LAW. This Agreement will be governed by the laws of
the State of Georgia without regard to conflicts of laws principles.
11.15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
SECTION 12. NON-COMPETITION
12.1. NON-COMPETITION AGREEMENT. Each of the Shareholders agrees that
from and after the Closing Date until the later of (i) five (5) years after the
Closing Date or (ii) two (2) years after the date his employment by KRI, Buyer
or another Subsidiary of Buyer terminates (the later of such dates being
referred to herein as the "ENDING DATE" and the period beginning the Closing
Date and ending on the Ending Date, being referred to herein as the
"NON-COMPETITION PERIOD"), neither he nor any of his Affiliates will, directly
or indirectly:
12.1.(a) except as an officer or employee of KRI, Buyer or other
Subsidiary of Buyer engage in, control, advise, manage, serve as a director,
officer or employee of, act as a
53
consultant to, receive any economic benefit from or exert any influence upon,
any business which conducts activities in the United States that are similar to
those conducted by KRI or Buyer;
12.1.(b) except in connection with any duties as an officer or
employee of KRI, Buyer, or other subsidiary of Buyer, solicit, divert or attempt
to solicit or divert any party who is, was or was solicited to become, a
customer or supplier of the Buyer at any time prior to the Closing Date;
12.1.(c) employ, solicit for employment or encourage to leave
their employment, any person who was during the one-year period prior to such
employment, solicitation or encouragement or is an officer or employee of KRI,
Buyer or other subsidiary of Buyer;
12.1.(d) avail himself of or invest in any business opportunity
which is related to the activities conducted by KRI or Buyer, and which came to
his attention prior to the Ending Date,
12.1.(e) disturb, or attempt to disturb, any business relationship
between any third party and KRI or Buyer; or
12.1.(f) make any statement to any third party, including the
press or media, likely to result in adverse publicity for KRI or Buyer.
For purposes of this Section, the term "directly or indirectly" shall include
acts or omissions as proprietor, partner, joint venturer, employer, salesman,
agent, employee, officer, director, lender or consultant of, or owner of any
interest in, any Person.
12.2. SPECIFIC PERFORMANCE. Each of the Shareholders recognizes and
affirms that in the event of breach by any of them of any of the provisions of
this Section, money damages would be inadequate and Buyer would have no adequate
remedy at law. Accordingly, each of the Shareholders agrees that Buyer shall
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and their obligations under this Section not only
by an action or actions for damages but also by an action or actions for
specific performance, injunction and/or other equitable relief in order to
enforce or prevent any violations (whether anticipatory, continuing or future of
the provisions of this Section (including the extension of the Non-Competition
Period by a period equal to (i) the length of the violation of this Section 12
plus (ii) the length of any court proceedings necessary to stop such violation).
In the event of a breach or violation by any of the Shareholders of any of the
provisions of this Section 12, the running of the Non-Competition Period (but
not of the Principals' obligations under this Section 12) shall be suspended
with respect to the Shareholders during the continuance of any actual breach or
violation. If a bond is required to be posted in order for Purchaser to secure
an injunction, the parties agree that said bond need not exceed the sum of
$1,000.
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12.3. SEVERABILITY. If at any time any of the provisions of this
Section 12 shall be determined to be invalid or unenforceable by reason of being
vague or unreasonable as to duration, area, scope of activity or otherwise, then
this Section 12 shall be considered divisible (with the other provisions to
remain in full force and effect) and the invalid or unenforceable provisions
shall become and be deemed to be immediately amended to include only such time,
area, scope of activity and other restrictions, as shall be determined to be
reasonable and enforceable by the court or other body having jurisdiction over
the matter, and the Shareholders expressly agree that this Agreement, as so
amended, shall be valid and binding as though any invalid or unenforceable
provision had not been included herein.
12.4. NO LIMITATION OF OTHER PROVISIONS. The provisions of this Section
12 shall be in addition to, and not in limitation of, any other provisions
contained in any other agreement restricting competition by any Shareholder.
SECTION 13. MISCELLANEOUS SHAREHOLDERS' PROVISIONS
13.1. E&O TAIL COVERAGE. Buyer shall provide for the benefit of each
Shareholder for a period of five (5) years after the Closing Date errors and
omissions "tail coverage" on a "claims made" basis for periods prior to the
Closing Date and otherwise on the same terms, conditions and coverages as
Buyer's regular E&O policy.
13.2. INDEMNITY FOR PERSONAL LIABILITY ON OFFICE LEASES. KRI shall
indemnify and hold ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and any other Shareholder harmless from any
liability, loss, cost or expense arising out of or relating to the office leases
set forth in the Disclosure Letter and in connection with any primary obligation
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or any other Shareholder or guarantee of KRI's performance
of any such lease by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or any other Shareholder.
13.3. WAIVER OF KRI SHAREHOLDERS' AGREEMENT. Each of KRI and the
Shareholders waive any rights it or he may have under the Shareholders Agreement
dated August 1, 1997 or similar agreement related to rights of first refusal or
otherwise and hereby terminate any such agreement effective as of and
simultaneously with the consummation of the transaction contemplated by this
Agreement.
[END OF TEXT]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
BUYER:
PREMIER APPRAISALS, INC.
By:
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Title:
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SHAREHOLDERS:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
KRI:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, INC.
By:
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Title:
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