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EXHIBIT 2.12
STOCK PURCHASE AGREEMENT
BY AND AMONG
GENERAL ROOFING SERVICES, INC.,
C.E.I. ROOFING, INC.
AND
ALL OF THE STOCKHOLDERS
OF
C.E.I. ROOFING, INC.
----------------------------
MAY 13, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I - SALE AND PURCHASE OF SHARES...........................................................................1
1.01 Sale and Purchase of Company Common Stock................................................................1
1.02 Purchase Price...........................................................................................2
1.03 Delivery of Purchase Price...............................................................................2
1.04 Purchase Price Adjustment................................................................................3
1.05 Excluded Assets and Distribution of Assets...............................................................4
1.06 Stockholders' Representative.............................................................................4
ARTICLE II - CLOSING..............................................................................................5
2.01 Closing..................................................................................................5
2.02 Deliveries by Stockholders to GRS........................................................................5
2.03 Deliveries by GRS........................................................................................6
2.04 Termination in Absence of Closing........................................................................6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS..................................7
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER...................................................7
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF GRS.................................................................7
ARTICLE VI - OBLIGATIONS PRIOR TO CLOSING.........................................................................7
6.01 GRS' Access to Information and Assets....................................................................7
6.02 Company's Conduct of Business and Operations.............................................................7
6.03 General Restrictions.....................................................................................8
6.04 Notice Regarding Changes.................................................................................9
6.05 Consents and Best Efforts................................................................................9
6.06 Casualty Loss...........................................................................................10
6.07 Employee Matters........................................................................................10
6.08 No Solicitation.........................................................................................10
6.09 Employment Agreements...................................................................................10
6.10 Lock-Up Agreement.......................................................................................10
ARTICLE VII - CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS...................................................11
7.01 Conditions to Obligations of All Parties................................................................11
7.02 Conditions to Obligations of Stockholders...............................................................11
7.03 Conditions to Obligations of GRS........................................................................12
ARTICLE VIII - SURVIVAL..........................................................................................13
8.01 Survival of Representations and Warranties of the Company and the Stockholders..........................13
ARTICLE IX - INDEMNIFICATION.....................................................................................14
9.01 Obligation of the Stockholders to Indemnify.............................................................14
9.02 Obligation of GRS to Indemnify..........................................................................14
9.03 Notice and Opportunity to Defend........................................................................14
9.04 Limitations on Indemnification..........................................................................15
9.05 Set-Off Rights..........................................................................................16
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TABLE OF CONTENTS
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ARTICLE X - POST-CLOSING OBLIGATIONS.............................................................................17
10.01 Further Assurances......................................................................................17
10.02 Publicity...............................................................................................17
10.03 Access to Records.......................................................................................17
ARTICLE XI - MISCELLANEOUS.......................................................................................17
11.01 Brokers.................................................................................................17
11.02 Costs and Expenses......................................................................................17
11.03 Notices.................................................................................................17
11.04 Governing Law...........................................................................................18
11.05 Representations and Warranties..........................................................................19
11.06 Entire Agreement, Amendments and Waivers................................................................19
11.07 Binding Effect and Assignment...........................................................................19
11.08 Remedies................................................................................................19
11.09 Exhibits and Schedules..................................................................................19
11.10 Multiple Counterparts...................................................................................19
11.11 References..............................................................................................19
11.12 Survival................................................................................................19
11.13 Attorneys' Fees.........................................................................................20
ARTICLE XII - DEFINITIONS........................................................................................20
12.01 Affiliate...............................................................................................20
12.02 Collateral Agreements...................................................................................20
12.03 Company Assets..........................................................................................20
12.04 Contract Retention......................................................................................20
12.05 Current Assets..........................................................................................20
12.06 Current Liabilities.....................................................................................20
12.07 Damages.................................................................................................21
12.08 Environmental Law.......................................................................................21
12.08 GAAP....................................................................................................21
12.10 Governmental Authorities................................................................................21
12.11 Hazardous Substances....................................................................................21
12.12 Knowledge...............................................................................................21
12.13 Legal Requirements......................................................................................21
12.14 Permits.................................................................................................21
12.15 Properties..............................................................................................21
12.16 Proportionate Share.....................................................................................22
12.17 Regulations.............................................................................................22
12.18 Taxes...................................................................................................22
12.19 Tax Returns.............................................................................................22
12.20 Used....................................................................................................22
12.21 Deferred Income Taxes...................................................................................22
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LIST OF EXHIBITS
Exhibit A - Stockholders
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit D - Representations and Warranties of the Company and the Stockholders
Exhibit E - Representations and Warranties of each Stockholder
Exhibit F - Representations and Warranties of GRS
Exhibit G - Employment Agreement for ▇▇▇▇ Reader
Exhibit H - Employment Agreement for ▇▇▇▇▇▇ ▇▇▇▇
Exhibit I - Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Exhibit J - Opinion of Williams, Williams, Ruby & ▇▇▇▇▇▇▇▇, P.C.
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of May 13, 1998, by and among (i) General Roofing Services, Inc.
a Florida corporation (the "Buyer" or "GRS"),(ii) C.E.I. Roofing, Inc., a Texas
corporation (the "Company"), and (iii) all of the stockholders of the Company
(the "Stockholders").
PRELIMINARY STATEMENTS:
A. The Board of Directors of GRS and the Stockholders deem it advisable
for their welfare and best interests that the Stockholders sell and GRS
purchase all of the issued and outstanding capital stock of the
Company, consisting of 133,166 shares (the "Shares") of common stock,
par value $1.00 per share ("Company Common Stock), upon the terms and
subject to the conditions hereinafter set forth.
B. Concurrently with the purchase and sale of the Shares hereby, and as
part of an overall plan, GRS is acquiring the issued and outstanding
capital stock of additional commercial roofing companies (the "Founding
Companies") throughout the United States, and such transactions are
intended to conform to, and are being made, in connection with a
Section 351 Plan of Exchange within the meaning of the Internal Revenue
Code.
C. Capitalized terms used herein which have not been defined prior to such
use shall have the respective meanings given such terms in Article XII
hereof.
AGREEMENT
In consideration of the premises, the mutual covenants and agreements
contained herein and the benefits to accrue to the parties hereto, and subject
to the satisfaction or waiver of the conditions contained herein, the parties
hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.01. Sale and Purchase of Company Common Stock.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing referred to in Section 2.01 hereof, each Stockholder
shall sell, transfer, convey and deliver to GRS, and GRS shall purchase, acquire
and accept from each Stockholder, the number of shares of Company Common Stock
set forth opposite the name of each such Stockholder on Exhibit A hereto under
the heading "Number of Shares of Company Common Stock Purchased", constituting
all of the issued and outstanding shares of Company Common Stock. The sale and
purchase of the Company Common Stock pursuant to this Agreement is sometimes
hereinafter referred to as the "Stock Purchase."
(b) To effect the transfers contemplated by Section 1.01(a),
at the Closing, each Stockholder shall deliver, or cause to be delivered, to the
Stockholders' Representative (as defined and provided for in Section 1.06
hereof), for redelivery to GRS, stock certificates representing the Company
Common Stock being sold by such Stockholder hereunder, together with stock
powers duly executed in blank or otherwise in proper form acceptable to GRS for
transfer to GRS on the books of the Company, against payment therefor in
accordance with Section 1.03 hereof.
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Section 1.02 Purchase Price.
(a) Purchase Price.
The purchase price for the issued and outstanding
shares of Company Common Stock to be purchased by GRS hereunder (the "Purchase
Price") shall be an aggregate amount equal to $7,088,529. The Purchase Price
shall be subject to adjustment as provided in this Agreement and shall be
allocated among the Stockholders in accordance with their respective ownership
interests as set forth on Exhibit A hereof. The Purchase Price, as so adjusted,
shall be delivered to the Stockholders in accordance with their respective
Proportionate Share and to the Escrow Agent (as defined in Section 1.03(b)
hereof), subject to and in accordance with Section 1.03 hereof. The amount of
the Purchase Price allocated to each outstanding share of Company Common Stock
is hereinafter referred to as the "Stock Purchase Payment."
(b) The Purchase Price shall be reduced dollar-for-dollar (the "Purchase Price
Adjustment") to the extent that the Net Book Value of the Company as shown on
the Closing Date Unaudited Balance Sheet referred to in Section 1.02(c), below
(the "Closing Net Book Value"), is less than $1,722,729 (the "Target Net Book
Value") (such adjustment is referred to herein as the "Net Book Value
Adjustment"); provided, that the Net Book Value as determined pursuant to the
Closing Date Unaudited Balance Sheet shall not be less than $807,438 (the
"Minimum Net Book Value"). For purposes of this Agreement, Net Book Value shall
mean the excess of the Company's total assets over the Company's total
liabilities, determined in accordance with GAAP.
(c) The Stockholders shall cause to be prepared and delivered
to GRS within fifteen days prior to the Closing Date (i) an unaudited
consolidated balance sheet of the Company forecasted as of the Closing Date (the
"Closing Date Unaudited Balance Sheet"), (ii) a calculation of the Purchase
Price Adjustment, if any, determined pursuant to Section 1.02(b) above, and
(iii) a certificate executed by the Company's Chief Financial Officer (or
another duly authorized officer of the Company) to the effect that the Closing
Date Unaudited Balance Sheet has been prepared from the books and records of the
Company and in a manner consistent with the preparation of the Company Financial
Statements (as defined in Section 3.06 hereof), except that Deferred income
Taxes have been reflected in the same manner as if the Company was a "C"
corporation.
Section 1.03 Delivery of Purchase Price. At the Closing, the Purchase
Price, as adjusted, shall be paid upon the surrender pursuant to Section 1.01(b)
hereof of a certificate or certificates representing all of the issued and
outstanding shares of Company Common Stock, as follows:
(a) An aggregate of the sum of (i) $3,189,838, representing
forty-five percent (45%) of the Purchase Price, minus (ii) the amount of the
Purchase Price Adjustment, if any, shall be paid directly to the holders thereof
by wire transfer in New York Clearing House Funds in accordance with Exhibit A
hereto.
(b) An aggregate of $3,898,691 shall be paid by the delivery
to (A) an escrow agent (the "Escrow Agent") selected by GRS and reasonably
acceptable to the Stockholders, on behalf of the Stockholders, of such number of
shares of the GRS' common stock, par value $.01 per share ("GRS Common Stock"),
as shall have a value equal to $1,417,706, representing twenty percent (20%) of
the Purchase Price (the "Escrow Fund"), based upon the public offering price of
the GRS Common Stock to be sold in its initial public offering (the "Offering")
and (B) to the Stockholders in accordance with Exhibit A hereto, of such number
of shares of GRS Common Stock as shall have a value equal to $2,480,985 based
upon the public offering price of the GRS Common Stock to be sold in the
Offering. The shares of GRS Common Stock to be so held in escrow shall be held
by the Escrow Agent for a period of one year following the Closing in accordance
with the terms of an Escrow Agreement in the form of Exhibit B hereto (the
"Escrow Agreement"), and shall thereafter be restricted from transfer for an
additional one-year period
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in accordance with the terms, and subject to the conditions, of a Lock-Up
Agreement in the form of Exhibit C hereto (the "Lock-Up Agreement"). The
Stockholders shall receive cash in lieu of fractional shares.
(c) Each certificate evidencing shares of GRS Common Stock
issued in connection with the Stock Purchase shall bear the following
restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933
ACT"), NOR UNDER ANY STATE SECURITIES LAWS AND SHALL NOT BE
TRANSFERRED, SOLD, ASSIGNED OR HYPOTHECATED UNTIL EITHER (I) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED
EFFECTIVE UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
LAWS OR (II) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR OTHER COUNSEL TO THE HOLDER OF SUCH SHARES, WHICH
OPINION IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH SECURITIES MAY BE TRANSFERRED, SOLD, ASSIGNED OR
HYPOTHECATED WITHOUT REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS.
Section 1.04 Purchase Price Adjustment.
(a) Notification of Purchase Price Adjustment. Upon the
calculation of the Purchase Price Adjustment pursuant to Section 1.02(b) hereof,
if any, and within 10 days prior to the Closing, GRS shall notify the
Stockholders in writing of its determination of the Purchase Price Adjustment,
if any, and the cash portion of the Purchase Price to be paid to the
Stockholders on the Closing Date (the "Purchase Price Notice"), subject to
Section 1.04(b) below.
(b) Procedures for Resolving Disputes with Respect to the
Purchase Price Adjustment. The following clauses (i) and (ii) set forth the
procedures for resolving disputes among the parties with respect to the
determination of the Purchase Price Adjustment, if any:
(i) Within five (5) business days after delivery by
GRS to the Stockholders of a Purchase Price Notice, the Stockholders may deliver
to GRS a written notice advising GRS either that the Stockholders (A) agree with
the calculation of the Purchase Price Adjustment, or (B) believe that one or
more adjustments are required. If the Stockholders shall concur with the
calculation of the Purchase Price Adjustment, if any, or if the Stockholders
shall not object thereto in a written notice delivered to GRS within five (5)
business days after the Stockholders' receipt of the Purchase Price Notice, the
Purchase Price as set forth in the Purchase Price Notice, if any, shall become
final and shall not be subject to further review, challenge or adjustment absent
fraud.
(ii) In the event that GRS timely submits the
Purchase Price Notice and the Stockholders timely object to the proposed
Purchase Price Adjustment, and the Stockholders and GRS are unable to resolve
the disagreements with respect to the proposed Purchase Price Adjustment prior
to the Closing, then such disagreements shall be referred to a recognized firm
of independent certified public accountants experienced in auditing roofing or
construction companies and selected by mutual agreement of Stockholders and GRS
(the "Settlement Accountants"), and the determination of the Purchase Price
Adjustment, if any, by the Settlement Accountants shall be final and shall not
be subject to further review, challenge or adjustment absent fraud. In the event
that Stockholders and GRS cannot agree on the selection of Settlement
Accountants, the Settlement Accountants shall be selected by lottery from among
recognized firms of independent certified public accountants, with preference
being given to the "Big Six" accounting firms (except for Deloitte & Touche
LLP), until one such firm is willing to compute the Purchase Price Adjustment,
if any. The Settlement Accountants shall use their best efforts to reach a
determination
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not more than five (5) days after such referral. The costs and expenses of the
services of the Settlement Accountants shall be paid equally by the Company and
GRS. Pending the final determination by the Settlement Accountants of the
Purchase Price Adjustment, if any, (the "Final Determination") the difference
between the determination by the Stockholders and GRS of the Purchase Price
Adjustment, if any, shall be withheld from the cash portion of the Purchase
Price to be delivered pursuant to Section 1.03 (a) and shall be paid in
accordance with and upon the Final Determination. Any such dispute shall not
delay the Closing.
(c) After the final determination of the Purchase Price
pursuant to Sections 1.04(b)(i) or (ii) above, as applicable, the amount of the
adjustment determined pursuant thereto shall be deducted from the cash portion
of the Purchase Price and allocated among the Stockholders in accordance with
their respective Proportionate Share.
Section 1.05 Excluded Assets and Distribution of Assets.
(a) Prior to the Closing, the Company shall be permitted to
distribute to the Stockholders as a dividend those tangible assets (the
"Excluded Assets") which GRS and the Stockholders have agreed in writing are not
required by the Company in the conduct of its operations and which are listed in
Schedule 1.05 hereto.
(b) The Stockholders may authorize and the Company may make or
authorize distributions prior to the Closing in order to reduce the Company's
Closing Net Book Value to the Target Net Book Value, but in no event shall such
distributions be made to the extent that the Closing Net Book Value would be
less then the Minimum Net Book Value.
Section 1.06 Stockholders' Representative. .
(a) As used in this Agreement, the "Stockholders'
Representative" shall mean ▇▇▇▇▇▇ ▇▇▇▇ or any person appointed as a successor
Stockholders' Representative pursuant to Section 1.06(b) hereof.
(b) During the period ending upon the date when all
obligations under this Agreement have been discharged (including all
indemnification obligations hereunder and all obligations under the Escrow
Agreement), the Stockholders who, immediately prior to the Closing, held Company
Common Stock representing an aggregate number of shares of Company Common Stock
which exceeded 50% of the amount of such Company Common Stock outstanding
immediately prior to such time (a "Majority"), may, from time to time upon
written notice to the Stockholders' Representative and GRS, remove the
Stockholders' Representative or appoint a new Stockholders' Representative to
fill any vacancy created by the death, incapacitation, resignation or removal of
the Stockholders' Representative. Furthermore, if the Stockholders'
Representative dies, becomes incapacitated, resigns or is removed by a Majority,
the Majority shall appoint a successor Stockholders' Representative to fill the
vacancy so created. If the Majority is required to but has not appointed a
successor Stockholders' Representative within 20 business days from a request by
GRS to appoint a successor Stockholders' Representative, GRS shall have the
right to appoint a Stockholders' Representative to fill any vacancy so created,
and shall advise all those who were holders of Company Common Stock immediately
prior to the Closing of such appointment by written notice. A copy of any
appointment by the Majority of any successor Stockholders' Representative shall
be provided to GRS promptly after it shall have been effected.
(c) The Stockholders' Representative shall be authorized to
take any action and to make and deliver any certificate, notice, consent or
instrument required or permitted to be made or delivered under this Agreement or
under the documents referred to in this Agreement (an "Instrument") which the
Stockholders' Representative determines to be necessary, appropriate or
desirable, and, in
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connection therewith, to hire or retain, at the sole expense of the
Stockholders, such counsel, investment bankers, accountants, representatives and
other professional advisors as he determines in his sole and absolute discretion
to be necessary, advisable or appropriate in order to carry out and perform his
rights and obligations hereunder. The Stockholders hereby grant the
Stockholders' Representative the right and power to execute the Escrow Agreement
on their behalf with such changes or amendments thereto as the Stockholders'
Representative shall determine to be necessary or desirable in his sole and
absolute discretion. Any party receiving an Instrument from the Stockholders'
Representative shall have the right to rely in good faith upon such Instrument,
and to act in accordance with the Instrument without independent investigation.
(d) GRS shall have no liability to any Stockholder or
otherwise arising out of the acts or omissions of the Stockholders'
Representative or any disputes among the Stockholders or with the Stockholders'
Representative. GRS may rely entirely on its dealings with, and notices to and
from, the Stockholders' Representative to satisfy any obligations it might have
to the Stockholders under this Agreement, any agreement referred to herein or
otherwise.
(e) The Stockholders shall indemnify, defend and hold harmless
the Stockholders' Representative from and against any and all claims, demands,
actions, suits, causes of action, damages, costs and expenses (including,
without limitation, attorneys' fees) (collectively, "Claims") which are
hereafter made, sustained or brought against the Stockholders' Representative by
any person arising out of the acts or omissions of the Stockholders'
Representative or any disputes among the Stockholders, unless such Claims
allegedly occurred as a result of the willful misconduct or negligence by the
Stockholders' Representative.
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the satisfaction or waiver of the
conditions stated in Article VII hereof, the closing of the transactions
contemplated hereby (the "Closing") shall be held at 10:00 a.m., Miami time, on
the closing date of the Offering, estimated to be July 15, 1998 or, if the
conditions set forth in Sections 7.01 through 7.03 have not been satisfied or
waived on such date, no later than seven (7) days after all such conditions
shall have been satisfied or waived, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another date or place
is agreed to in writing by the parties hereto. The date upon which the Closing
occurs is hereinafter referred to as the "Closing Date." The Closing shall be
deemed completed as of 11:59 p.m. Miami time on the Closing Date.
Section 2.02 Deliveries by Stockholders to GRS. At or prior to the
Closing, the Stockholders shall deliver to GRS:
(i) certificates representing all of the issued
and outstanding shares of Company Common
Stock in proper form for transfer to GRS;
(ii) the resignations of all members of the board
directors of the Company as set forth in
Section 7.03(l);
(iii) the stock books, stock ledgers, minute books
and corporate seals of the Company;
(iv) a certificate executed by the Company to the
effect that the conditions set forth in
Sections 7.03(b) through 7.03(i), have been
satisfied;
(v) the opinion of counsel set forth in Section
7.03(f);
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(vi) the executed Collateral Agreements; and
(vii) evidence of the consents required pursuant
to Section 7.03(n).
Section 2.03 Deliveries by GRS. At or prior to the Closing, GRS shall
deliver to the Stockholders:
(i) by wire transfer in immediately available
funds to the Stockholders the payment
described in Section 1.03(a) as being
required to be paid by GRS at Closing;
(ii) by delivery to the Stockholders the shares
of GRS Common Stock described in Section
1.03(b) as being required to be delivered by
GRS to the Stockholders at Closing;
(iii) by delivery to the Escrow Agent the shares
of GRS Common Stock described in Section
1.03(b) as being required to be delivered by
GRS to the Escrow Agent at Closing;
(iv) a certified copy of all necessary corporate
action on behalf of GRS approving its
execution, delivery and performance of this
Agreement and the Collateral Agreements to
which it is a party pursuant to Section
7.02(a);
(v) a certificate executed by an authorized
officer of GRS to the effect that the
conditions set forth in Sections 7.02(b) and
7.02(c) have been satisfied;
(vi) the opinion of counsel set forth in Section
7.02(d);
(vii) the executed Collateral Agreements to which
it is a party; and
(viii) evidence that: (a) the Stockholders have
been released from all personal guarantees
relating to any obligations of the Company,
including but not limited to, any bank
loans, lines of credit, and/or performance
bonds (the "Personal Guarantees and
Obligations") and (b) GRS shall indemnify
and hold harmless the Stockholders from and
against any personal liability or
obligations relating to or arising out of
any Personal Guarantees or Obligations.
Section 2.04 Termination in Absence of Closing. If by the close of
business on September 30, 1998 (the "Termination Date"), the Closing has not
occurred, then any party hereto may thereafter terminate this Agreement by
written notice to such effect, to the other parties hereto, without liability of
or to any party to this Agreement or any shareholder, director, officer,
employee or representatives of such party unless the reason for Closing having
not occurred is (i) such party's willful breach of the provisions of this
Agreement, or (ii) if all of the conditions to such party's obligations set
forth in Article VII have been satisfied or waived in writing by the date
scheduled for the Closing pursuant to Section 2.01, the failure of such party to
perform its obligations under this Article II on such date; provided, however,
that any termination pursuant to this Section 2.04 shall not relieve any party
hereto who was responsible for Closing having not occurred as described in
clauses (i) or (ii) above of any liability for (x) such party's willful breach
of the provisions of this Agreement, or (y) if all of the conditions to such
party's obligations set forth in Article VII have been satisfied or waived in
writing by the date scheduled for the Closing pursuant to Section 2.01, the
failure of such party to perform its obligations under this Article II on such
date. Notwithstanding the foregoing, the Stockholders expressly acknowledge and
agree that market and
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economic conditions are impossible to predict, and although GRS intends to
proceed with the Offering in an expeditious manner at this time, GRS shall not
be liable to the Stockholders or the Company if the Closing has not occurred
because the Offering has not been consummated prior to the Termination Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS as to the matters set forth on Exhibit D hereto, the full text of
which is incorporated herein by reference as if set forth fully herein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as to the matters set
forth on Exhibit E hereto, the full text of which is incorporated herein by
reference as if set forth fully herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Stockholders as to the matters set
forth on Exhibit F hereto, the full text of which is incorporated herein by
reference as if set forth fully herein.
ARTICLE VI
OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
Section 6.01 GRS' Access to Information and Assets. The Stockholders
shall permit GRS and its authorized employees, agents, accountants, legal
counsel and other representatives, at GRS' own expense, to have access to the
books, records, employees, counsel, accountants, and other representatives of
the Company at all times reasonably requested by GRS for the purpose of
conducting an investigation ("GRS' Due Diligence Investigation") of the
Company's financial condition, corporate status, operations, business and
Properties. The Stockholders shall make available to GRS for examination and
reproduction, at GRS' own expense, all documents and data of every kind and
character relating to the Company in possession or control of, or subject to
reasonable access by, the Stockholders or the Company, including, without
limitation, all files, records, data and information relating to the Company
Assets (whether stored in paper, magnetic or other storage media) and all
agreements, instruments, contracts, assignments, certificates, orders, and
amendments thereto. Also, the Company shall allow GRS, at GRS' own expense,
access to, and the right to inspect, the Company Assets.
Section 6.02 Company's Conduct of Business and Operations. The
Stockholders shall keep GRS advised as to all material operations and proposed
material operations relating to the Company or the Company Assets. Except for
distributions permitted pursuant to Sections 1.05 and 3.02, the Company shall
(a) conduct its business in the ordinary course, (b) use its best efforts to
keep available to the Company the services of present employees, (c) maintain
and operate Company Assets in a good and
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workmanlike manner, (d) pay or cause to be paid all costs and expenses
(including but not limited to insurance premiums) incurred in connection
therewith in a timely manner, (e) use reasonable efforts to keep all Company
Contracts listed or required to be listed on Schedule 3.12 in full force and
effect, (f) comply with all of the covenants contained in all such Company
Contracts, (g) maintain in force until the Closing Date insurance policies
(subject to the provisions of Section 6.06) equivalent to those in effect on the
date hereof, and (h) comply in all material respects with all applicable Legal
Requirements. Except as otherwise contemplated in this Agreement, the
Stockholders shall use their best efforts to preserve the present relationships
of the Company with persons having significant business relations therewith.
Section 6.03 General Restrictions. Except as otherwise expressly
permitted in this Agreement, without the prior written consent of GRS, the
Company shall not:
(i) (A) except as permitted by Sections 1.05 and
3.02 hereof, declare, set aside or pay any dividends on, or make any
other distribution (whether in cash, stock or property) in respect of,
any of its capital stock, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in view of or in substitution for shares of
its capital stock, or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) except as disclosed on Schedule 6.03 (ii),
issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities;
(iii) amend its Articles of Incorporation or By-laws
(or similar organizational documents);
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business of any corporation,
partnership, joint venture, association or other business organization
or division thereof or (B) any assets that are material, individually
or in the aggregate, to the Company, except purchases of assets in the
ordinary course of business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or otherwise dispose of, or agree to sell, transfer, lease,
mortgage, encumber or otherwise dispose of, any Properties except (A)
in the ordinary course of business consistent with past practice, or
(B) pursuant to any Company Contract or except as permitted by Sections
1.05 and 3.02 hereof;
(vi) except as permitted by Section 1.05 hereof, (A)
incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company,
guarantee any debt securities of another person, enter into any "keep
well" or other agreements to maintain any financial statement condition
of another person or enter into any arrangement having the economic
effect of the foregoing, except for borrowings incurred in the ordinary
course of business consistent with past practice, or (B) make any
loans, advances or capital contributions to, or investments in, any
other person;
(vii) make or agree to make any new capital
expenditure or expenditures which, individually is in excess of $25,000
or, in the aggregate, are in excess of $50,000 (other than those
required pursuant to currently outstanding Company Contracts or in the
ordinary course of business consistent with past practice);
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(viii) make any material tax election or settle or
compromise any material tax liability;
(ix) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the Company
Financial Statements (or the notes thereto) or incurred in the ordinary
course of business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company
is a party;
(x) except in the ordinary course of business
consistent with past practice, modify, amend or terminate any Company
Contract;
(xi) except in the ordinary course of business
consistent with past practice, enter into any contracts, agreements,
arrangements or understandings relating to performance by third parties
of the Company's services;
(xii) except as required to comply with applicable
law (A) adopt, enter into, terminate or amend any benefit plan or other
arrangement for the benefit or welfare of any director, officer or
current or former employee, (B) increase in any manner the compensation
or fringe benefits of, or pay any bonus to, any director, officer or
employee (except in a manner consistent with past practice), (C) pay
any benefit not provided for under any benefit plan, (D) grant any
awards under any bonus, incentive, performance or other compensation
plan or arrangement or benefit plan (including the grant of stock
options, stock appreciation rights, stock based or stock related
awards, performance units or restricted stock, or the removal of
existing restrictions in any benefit plans or agreement or awards made
thereunder) or (E) take any action to fund or in any other way secure
the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan;
(xiii) make any change in any method of accounting or
accounting practice or policy other than those required by GAAP; or
(xiv) authorize any of, or commit or agree to take
any of, the foregoing actions.
Section 6.04 Notice Regarding Changes. The Stockholders shall promptly
inform GRS in writing of any change in facts and circumstances that could render
any of the representations, warranties or covenants made herein by the Company
or the Stockholders inaccurate or misleading if such representations and
warranties had been made upon the occurrence of the fact or circumstance in
question. GRS shall promptly inform the Stockholders in writing of any change in
facts and circumstances that could render any of the representations and
warranties made herein by it inaccurate or misleading if such representations
and warranties had been made upon the occurrence of the fact or circumstance in
question.
Section 6.05 Consents and Best Efforts. Each of the parties hereto
shall use all commercially reasonable good faith efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations, and consult and fully
cooperate with and provide reasonable assistance to each other party and their
respective representatives in order to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
hereafter, including without limitation, (i) using all commercially reasonable
good faith efforts to make all filings, applications, notifications, reports,
submissions and registrations with, and to obtain all consents, approvals,
authorizations or permits of, governmental entities or other persons or entities
as are necessary for the consummation of the transactions contemplated by this
Agreement, and (ii) taking such
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actions and doing such things as any other party hereto may reasonably request
in order to cause any of the conditions to such other party's obligation to
consummate the transactions contemplated hereby as specified in Article VII of
this Agreement to be fully satisfied.
Section 6.06 Casualty Loss. If, between the date of this Agreement and
the Closing, any of the Properties of the Company shall be destroyed or damaged
in whole or in part by fire, earthquake, flood, other casualty or any other
cause which materially affects the ability of the Company to conduct its
business (a "Casualty Loss"), then the Stockholders may, if requested by GRS,
(i) cause the Company to cause such Properties to be repaired or replaced prior
to the Closing with Property of substantially the same condition and function,
(ii) cause the Company to deposit in a separate account an amount sufficient to
cause such Property to be so repaired or replaced, or (iii) enter into
contractual arrangements with the Company satisfactory to GRS so that the
Company will have at the Closing the same economic value as if such casualty had
not occurred.
Section 6.07 Employee Matters. The Stockholders shall take (or cause
the Company to take) all actions necessary or appropriate to cause each plan or
benefit program or agreement in effect on the date of this Agreement to remain
in full force and effect until the Closing Date; provided, however, that, to the
extent requested in writing by GRS at least ten (10) days prior to the Closing
Date, the Stockholders shall cause the Company to cease to sponsor, maintain or
contribute to any plan or benefit program or agreement specified by GRS in such
written request.
Section 6.08 No Solicitation. The Stockholders and the Company and its
officers, directors, employees, representatives and agents shall immediately
cease any discussions or negotiations with any parties that may be ongoing with
respect to a Third Party Acquisition Proposal (as defined below). Neither the
Company nor any of the Stockholders shall, nor shall they permit any of their
Affiliates to, nor shall they authorize or permit any of their officers,
directors or employees or any investment banker, attorney or other advisor or
representatives retained by them or any of their Affiliates to, (i) solicit,
initiate or knowingly encourage the submission of, any Third Party Acquisition
Proposal, or (ii) participate in any discussions or negotiations regarding, or
furnish to any person any non-public information with respect to, or take any
other action knowingly to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Third Party
Acquisition Proposal. For purposes of this Agreement, "Third Party Acquisition
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of all or a portion or more of the
assets of the Company or all or a portion of any class of equity securities of
the Company or any offer to acquire or purchase that if consummated would result
in any person beneficially owning all or a portion of any class of equity
securities of the Company, or any merger, consolidation, business combination,
sale of assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or delay, or dilute
materially the benefits to GRS of the transactions contemplated hereby.
Section 6.09 Employment Agreement. On or before the Closing, ▇▇▇▇
Reader and ▇▇▇▇▇▇ ▇▇▇▇ shall each have entered into an employment agreement in
the form of Exhibits G and H (the "Employment Agreements"), which shall include,
non-competition provisions, to take effect on and after the Closing Date.
Section 6.10 Lock-Up Agreement. On or before the Closing, the
Stockholders shall have entered into the Lock-Up Agreement.
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ARTICLE VII
CONDITIONS TO STOCKHOLDERS' AND GRS' OBLIGATIONS
Section 7.01 Conditions to Obligations of All Parties. The respective
obligations of each party to carry out the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) All filings with all Governmental Authorities required to
be made in connection with the transactions contemplated hereby shall have been
made, and all orders, permits, waivers, authorizations, exemptions, and
approvals of such entities required to be in effect on the date of the Closing
in connection with the transactions contemplated hereby shall have been issued,
and all such orders, permits, waivers, authorizations, exemptions or approvals
shall be in full force and effect on the date of the Closing; provided, however,
that no provision of this Agreement shall be construed as requiring any party to
accept, in connection with obtaining any other requisite approval, clearance or
assurance of non-opposition, avoiding any challenge, or negotiating settlement,
any condition that would materially change or restrict the manner in which the
Company or GRS conducts or proposes to conduct its business, and no transfers of
licenses shall occur prior to the Closing.
(b) None of the parties hereto shall be subject to any
statute, rule, regulation, decree, ruling, injunction or other order issued by
any Governmental Authorities of competent jurisdiction (collectively, an
"Injunction") which prohibits, restrains, enjoins or restricts the consummation
of the transactions contemplated by this Agreement.
Section 7.02 Conditions to Obligations of Stockholders. The obligations
of the Stockholders to carry out the transactions contemplated by this Agreement
are subject, at the option of the Stockholders, to the satisfaction, or waiver
by Stockholders, of the following conditions:
(a) GRS shall have furnished the Stockholders with a certified
copy of all necessary corporate action on its behalf approving its execution,
delivery and performance of this Agreement and each of the Collateral
Agreements.
(b) All representations and warranties of GRS contained in
this Agreement qualified by materiality shall be true and correct in all
respects at Closing and all other representations and warranties of GRS
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, as if such representations and warranties were made at
and as of the Closing, except for changes contemplated by the terms of this
Agreement except as and to the extent that the facts and conditions upon which
such representations and warranties are based are expressly required or
permitted to be changed by the terms thereof, and GRS shall have performed and
satisfied in all material respects all covenants and agreements required by this
Agreement to be performed and satisfied by GRS at or prior to the Closing;
provided, however, that no Stockholder shall be entitled to refuse to consummate
the transaction in reliance upon its own breach or failure to perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of the
Stockholders or the Company) shall be pending or threatened before any
Governmental Authority seeking to restrain the Stockholders from effectuating
the Stock Purchase or prohibit the Closing or seeking Damages against the
Stockholders or the Company as a result of the consummation of the transactions
contemplated by this Agreement.
(d) The Company shall have received the opinion of ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to GRS, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Company, as to the matters set forth on Exhibit
I. In rendering such opinion, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ may rely as to factual matters on
certificates of officers and directors of GRS and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to the Company.
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(e) GRS shall have executed the Escrow Agreement.
(f) GRS shall have executed and delivered to Stockholders and
the Company the documents referred to in Section 2.03 hereof.
(g) The Offering shall have been consummated on or before the
Termination Date.
(h) GRS shall have furnished the Stockholders and the Company
with an Opinion Letter from Deloite & Touche which provides that the
consummation of the transactions described in this Agreement will qualify as a
Section 351 Plan of Exchange within the meaning of the Internal Revenue Code.
Section 7.03 Conditions to Obligations of GRS. . The
obligations of GRS to carry out the transactions contemplated by this Agreement
are subject, at the option of GRS, to the satisfaction, or waiver by GRS, of the
following conditions:
(a) All of the Company Common Stock shall have been tendered
to GRS.
(b) All representations and warranties of Stockholders and the
Company contained in this Agreement qualified by materiality shall be true and
correct in all respects at Closing and all other representations and warranties
of the Stockholders and the Company contained in this Agreement shall be true
and correct in all material respects at and as of the Closing as if such
representations and warranties were made at and as of the Closing, except for
changes contemplated by the terms of this Agreement except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms thereof,
and the Stockholders and the Company shall have performed and satisfied in all
material respects all agreements and covenants required by this Agreement to be
performed and satisfied by Stockholders and the Company at or prior to the
Closing; provided, however, that GRS shall not be entitled to refuse to
consummate the transaction in reliance upon its own breach or failure to
perform.
(c) As of the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by or on behalf of GRS) shall be
pending or threatened before any court or governmental agency seeking to
restrain GRS or prohibit the Closing or seeking Damages against GRS, the
Stockholders, the Company or its Properties as a result of the consummation of
the transactions contemplated by this Agreement.
(d) All notices required to be given in connection with the
transactions contemplated by this Agreement shall have been duly and timely
given, and there shall not be any preferential purchase rights or consent
requirements with respect to the transactions contemplated by this Agreement
that have not expired or been waived.
(e) Except for matters disclosed in the Schedules hereto, from
the date hereof up to and including the Closing there shall not have been:
(i) any change in the business, operations,
prospects or financial condition of the Company that had or would reasonably be
likely to have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company; and
(ii) any damage, destruction or loss to the Company
(whether or not covered by insurance) that had or would reasonably be likely to
have a material adverse effect on the business, operations, prospects,
Properties, securities or financial condition of the Company.
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(f) GRS shall have received the opinion of Williams, Williams,
Ruby & ▇▇▇▇▇▇▇▇, P.C., ("Sellers' Counsel") counsel to the Company and the
Stockholders, dated as of the Closing Date, in form and substance reasonably
satisfactory to GRS, as to the matters set forth on Exhibit J. In rendering such
opinion, Sellers' Counsel may rely as to factual matters on certificates of
officers, directors and shareholders of the Company and on certificates of
governmental officials, and as to legal matters on opinions of other counsel
reasonably acceptable to GRS.
(g) GRS shall have received the Company Financial Statements.
(h) The Net Book Value of the Company as determined by
reference to the Closing Unaudited Balance Sheet shall be equal to or greater
than the Minimum Net Book Value.
(i) The Modified Working Capital of the Company as determined
by reference to the Closing Date Unaudited Balance Sheet shall not be less than
$488,858. For purposes of this Agreement, Modified Working Capital shall mean
the Company's (i) Current Assets less (ii) its Current Liabilities and long-term
indebtedness, determined in accordance with GAAP.
(j) The Stockholders shall have executed and delivered to GRS
the Escrow Agreement.
(k) GRS shall have received the executed Employment Agreements
for ▇▇▇▇ Reader and ▇▇▇▇▇▇ ▇▇▇▇.
(l) GRS shall have received the resignation of all of the
members of the board of directors of the Company effective as of the Closing
Date.
(m) All proceedings to be taken by Stockholders and the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to GRS
and its counsel, and GRS and said counsel shall have received all such
counterpart originals or certified or other copies of such documents as it or
they may reasonably request.
(n) GRS shall have received written evidence, in form and
substance satisfactory to GRS, of the consent to the transactions contemplated
by this Agreement of all governmental, quasi-governmental and private third
parties (including, without limitation, persons or other entities leasing real
or personal property to the Company), except where the failure to have obtained
any such consent would not have an adverse effect on the Company or GRS
following the Closing.
(o) GRS shall be satisfied in its sole and absolute discretion
with GRS' Due Diligence Investigation of the Company and shall have notified the
Company in writing on or before July 1, 1998 that it has waived this condition
precedent.
(p) GRS shall have determined, in its reasonable discretion,
that all agreements between the Company and the Stockholders shall be on terms
as favorable to the Company as the Company could have obtained pursuant to
agreements with unaffiliated third parties.
(q) The Offering shall have been consummated on or before the
Termination Date.
ARTICLE VIII
SURVIVAL
Section 8.01. Survival of Representations and Warranties of the Company
and the Stockholders. Notwithstanding any right of any party hereto fully to
investigate the affairs of any other
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party hereto and notwithstanding any knowledge of facts determined or
determinable by any party hereto pursuant to such investigation or right of
investigation, each of GRS, on the one hand, and the Company and the
Stockholders, on the other hand, has the right to rely fully upon the
representations, warranties, covenants and agreements of GRS or the Company and
the Stockholders, as the case may be, contained in this Agreement, or in any
certificate delivered pursuant to any of the foregoing; provided, that no party
hereto shall be entitled to rely on any representation or warranty made by any
other party hereto herein to the extent that such party has actual knowledge,
and the other party or parties (or any of them) are not aware, that such
representation or warranty is untrue or incorrect in any material respect. All
such representations, warranties, covenants and agreements shall survive the
execution and delivery of this Agreement and the Closing hereunder, and, except
as otherwise specifically provided in this Agreement and, except for all
representations and warranties of the Stockholders contained in Article IV and
except with respect to the Basket Exclusions (as defined in Section 9.04), shall
thereafter terminate and expire on the first anniversary of the Closing Date.
The Basket Exclusions shall survive the Closing indefinitely, other than Section
3.28, which shall survive for the applicable statute of limitation.
ARTICLE IX
INDEMNIFICATION
Section 9.01 Obligation of the Stockholders to Indemnify. Subject to
the limitations contained in Article VIII and Article IX hereof, the
Stockholders, jointly and severally, agree to indemnify, defend and hold
harmless GRS (and its Affiliates, successors and assigns and their respective
officers and directors) from and against all losses, liabilities, damages,
deficiencies, costs or expenses (including interest, penalties and reasonable
attorneys' fees and disbursements, but offset by any proceeds from insurance and
taking into account the present value of any tax savings to GRS or the Company
resulting from such losses, liabilities, damages, deficiencies, costs or
expenses) ("Losses") based upon, arising out of or otherwise in respect of (i)
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company or the Stockholders contained in this Agreement, (ii)
liabilities for Taxes incurred by the Company with respect to actions prior to
the Closing Date and (iii) any liability arising out of any subsequent
adjustment by any tax authorities with respect to items attributable to periods
prior to the Closing Date.
Section 9.02 Obligation of GRS to Indemnify. GRS agrees to indemnify,
defend and hold harmless the Company and the Stockholders from and against any
Losses based upon, arising out of or otherwise in respect of any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of GRS
contained in this Agreement.
Section 9.03 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by
any party hereto (the "Indemnitee") of notice of any demand, claim or
circumstances which, with the lapse of time, would or might give rise to a claim
or the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party
(or parties) obligated to provide indemnification pursuant to Section 9.01 or
9.02 (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) days (or sooner, if the nature
of the Asserted Liability so requires) notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such
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Asserted Liability. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the objection of the other, provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Party chooses to defend the claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense.
(c) Disputes with Customers or Suppliers. Anything in Section
9.03(b) to the contrary notwithstanding, in the case of any Asserted Liability
by any supplier, distributor, sales agent or customer of the Company with
respect to the business conducted by the Company prior to the Closing in
connection with which GRS may make a claim against the Stockholders for
indemnification pursuant to Section 9.01, GRS shall give a Claims Notice with
respect thereto but, unless GRS and the Indemnifying Party otherwise agree, the
Stockholders shall have the exclusive right at its option to defend, at their
own expense, any such matter, subject to the duty of the Stockholders to consult
with GRS and its attorneys in connection with such defense and provided that no
such matter shall be compromised or settled by the Stockholders without the
prior consent of GRS, which consent shall not be unreasonably withheld. GRS
shall have the right to recommend in good faith to the Stockholders proposals to
compromise or settle claims brought by a supplier, distributor or customer, and
the Stockholders agree to present such proposed compromises or settlements to
such supplier, distributor or customer. All amounts required to be paid in
connection with any such Asserted Liability pursuant to the determination of any
court, governmental or regulatory body or arbitrator, and all amounts required
to be paid in connection with any such compromise or settlement consented to by
GRS, shall be borne and paid by the Stockholders. The parties agree to cooperate
fully with one another in the defense, compromise or settlement of any Asserted
Liability.
Section 9.04 Limitations on Indemnification. The indemnification
provided for in Sections 9.01 and 9.02 shall be subject to the following
limitations:
(i) The Stockholders shall not be obligated to pay
any amounts for indemnification under this Article IX arising out of any Losses
based upon, arising out of or otherwise in respect of any inaccuracy or breach
disclosed in writing to GRS and specifically waived in writing by GRS prior to
the Closing.
(ii) Neither GRS, the Company nor the Stockholders
shall be obligated to pay any amounts for indemnification under this Article IX,
except those based upon, arising out of or otherwise in respect of Sections
3.02, 3.21, 3.28, 5.22, 5.29, 9.01 (ii) and (iii), 11.01 and 11.02 and Article
IV hereof (the "Basket Exclusions"), until the aggregate indemnification
payments, exclusive of the Basket Exclusions, equals one percent (1%) of the
Purchase Price (the "Basket Amount"), whereupon GRS, or the Company and
Stockholders, as the case may be, shall be obligated to pay any indemnification
payments, including the Basket Amount, in full. It is expressly understood that
the Basket Amount shall serve as a "trigger" for indemnification and not as a
"deductible" (for example, if the indemnity claims for which GRS or the
Stockholders would, but for the provisions of this subparagraph (ii), be liable
is in the aggregate amount of $100,000, and 1% of the Purchase Price is $70,000,
the Stockholders would then be liable for the entire $100,000 and not just
$30,000). This Section 9.04(ii) will not apply to any breach of any
representations and warranties of which any party had actual Knowledge at any
time prior to the date on which such representation and warranty is made or any
intentional breach by any party of any covenant or obligation, and GRS or the
Stockholders, as the case may be, will be jointly and severally liable for all
damages with respect to such breaches.
(iii) GRS, the Company and Stockholders shall be
obligated to pay the Basket Exclusions without regard to the individual or
aggregate amounts thereof and without regard to
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whether the aggregate amount of all other indemnification payments shall have
exceeded, in the aggregate, the Basket Amount.
(iv) Notwithstanding anything to the contrary in this
Agreement, except with respect to any breach of the representations and
warranties set forth in Article IV hereof, neither GRS nor the Stockholders and
the Company shall have any obligation to indemnify the other parties for any
breach of any representation, warranty or covenant under this Agreement for any
amount of Losses in excess of the amount of the Escrow Fund.
(v) After the Closing, the indemnification rights
set forth in this Article IX shall be each party's sole and exclusive remedy
against the other party for any breach of any representation, warranty or
covenant contained in this Agreement. Notwithstanding the foregoing, nothing
herein shall prevent any party from bringing an action based upon allegations of
fraud in connection with this Agreement. In the event an action based on
allegations of fraud is brought, the prevailing party's attorneys' fees and
costs shall be paid by the nonprevailing party.
(vi) GRS shall be deemed to have suffered Losses with
respect to accounts receivable reflected on the Closing Date Unaudited Balance
Sheet only if and to the extent that such accounts receivable, except for
Contract Retention, remain uncollected 180 days from the Closing Date. Contract
Retention will be considered uncollectible, and be deemed a Loss, if it remains
uncollected 350 days from the Closing Date. Because the Purchase Price is
predicated upon the Company's adjusted earnings before interest and taxes
("EBIT"), GRS shall be deemed to have suffered Losses in an amount equal to the
amount of such accounts receivable and Contract Retention which have not been
collected within the time periods specified above. Any Losses claimed on such
accounts receivable or Contract Retention will be credited back to the Escrow
Fund based on the foregoing formula to the extent such accounts receivable or
Contract Retention are recovered within the period of the Escrow Agreement. To
the extent that GRS suffers Losses from the failure to collect accounts
receivable of the Company or Contract Retention and such Losses result in a
set-off from the Escrow Fund, the related accounts receivable or Contract
Retention shall be assigned to the Stockholders following, and to the extent of,
such set-off.
Section 9.05 Set-Off Rights.
(a) Each Stockholder specifically agrees that, subject to
Section 9.04 and, paragraphs (b) and (c) of this Section 9.05, any claims for
indemnification by GRS against the Stockholders (or any of them) hereunder shall
be satisfied first against the Escrow Fund pursuant to the Escrow Agreement.
(b) GRS shall give Stockholders not less than fifteen (15)
days' notice (the "GRS Notice") of its intention to deduct or set-off any
amounts pursuant to this Section 9.05, including in such notice a description of
GRS' indemnification claim. If none of the Stockholders object in writing to
such deduction or set-off at least two business days prior to the date of the
proposed set-off set forth in the GRS Notice (the "Set-Off Date"), then such
proposed deduction or set-off shall become effective on such date and shall not
be subject to further review, challenge or adjustment absent fraud.
(c) If any of the Stockholders timely object in writing to the
set-off proposed in the GRS Notice, and if GRS and the objecting Stockholder(s)
are unable to resolve such dispute on or prior to the Set-Off Date, then (i) the
proposed deduction or set-off shall be effective only as to undisputed amounts,
and (ii) any undisputed amounts shall be retained in escrow to be held and
disbursed by the Escrow Agent in accordance with the terms of the Escrow
Agreement. In the event that a dispute among the parties arises pursuant to this
Section 9.05(c), the party who is later determined to have been in error in
attempting to enforce or dispute the payment or set-off shall (i) pay the
reasonable legal and accounting fees, costs and expenses incurred by the
prevailing party in presenting, arguing and resolving such dispute and (ii) pay
to the party to which such payment or set-off is determined to be payable an
amount
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sufficient to equal a return at the rate of ten percent (10%) per annum on the
disputed amount from the date payment of such amount was originally due through
the date payment is actually made.
ARTICLE X
POST-CLOSING OBLIGATIONS
Section 10.01 Further Assurances. Following the Closing, each of the
Company, the Stockholders and GRS shall execute and deliver such documents, and
take such other action, as shall be reasonably requested by any other party
hereto to carry out the transactions contemplated by this Agreement.
Section 10.02 Publicity. None of the parties hereto shall issue or
make, or cause to have issued or made, any public release or announcement
concerning this Agreement or the transactions contemplated hereby, without the
advance approval in writing of the form and substance thereof by each of the
other parties, and the parties shall endeavor jointly to agree on the text of
any announcement or circular so approved or required.
Section 10.03 Access to Records. From and after the Closing, (i) each
of the Stockholders shall (A) permit GRS and its authorized employees, agents,
accountants, legal counsel and other representatives to have access to the
books, records, files, agreements and other information in the possession of the
Stockholders or their respective Affiliates, and (B) use his or her best efforts
to permit GRS and its authorized employees, agents, accountants, legal counsel
and other representatives to have access to the employees, counsel, accountants
and other representatives of the Stockholders and their respective Affiliates,
in each case, to the extent and at all times reasonably requested by GRS for the
purpose of investigating or defending any claim made against the Stockholders or
the Company in connection with periods ending on or before the Closing Date and
(ii) GRS shall use its best efforts to permit the Stockholders and their
respective authorized employees, agents, accountants, legal counsel and other
representatives to have access to the employees, counsel, accountants and other
representatives of GRS, the Company and their Affiliates, in each case, to the
extent and at all times reasonably requested by the Stockholders, or any of
them, for the purpose of investigating or defending any claim made against the
Stockholders in connection with Article IX.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Brokers. Regardless of whether the Closing shall occur,
(i) each Stockholder shall jointly and severally indemnify and hold harmless GRS
and the Company from and against any and all liability for any brokers or
finders' fees arising with respect to brokers or finders retained or engaged by
the Company or any of the Stockholders in respect of the transactions
contemplated by this Agreement, and (ii) GRS shall indemnify and hold harmless
the Stockholders from and against any and all liability for any brokers' or
finders' fees arising with respect to brokers or finders retained or engaged by
GRS in respect of the transactions contemplated by this Agreement.
Section 11.02 Costs and Expenses. Each of the parties to this Agreement
shall bear its own expenses incurred in connection with the negotiation,
preparation, execution and closing of this Agreement and the transactions
contemplated hereby; provided, that GRS shall pay the costs and expenses of
preparing the Company Financial Statements.
Section 11.03 Notices. Any notice, request, instruction, correspondence
or other document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing
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and delivered personally or mailed by registered or certified mail, postage
prepaid and return receipt requested, or by telecopier, as follows:
GRS: General Roofing Services, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE STOCKHOLDERS: _______________
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
Williams, Williams, Ruby & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇, Jr.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Each of the above addresses for notice purposes may be changed by providing
appropriate notice hereunder. Notice given by personal delivery or registered
mail shall be effective upon actual receipt. Notice given by telecopier shall be
effective upon actual receipt if received during the recipient's normal business
hours, or at the beginning of the recipient's next normal business day after
receipt if not received during the recipient's normal business hours. All
Notices by telecopier shall be confirmed by the sender thereof promptly after
transmission in writing by registered mail or personal delivery. Anything to the
contrary contained herein notwithstanding, Notices to any party hereto shall not
be deemed effective with respect to such party until such Notice would, but for
this sentence, be effective both as to such party and as to all other persons to
whom copies are provided above to be given.
Section 11.04 Governing Law. The provisions of this Agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Florida (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of the Circuit Court
located in Broward County, Florida, in any action or proceeding arising out of
or relating to this Agreement or any of the Collateral Agreements, and each
party hereby irrevocably agrees that all claims in respect of any such action or
proceeding must be brought and/or defended in such court; provided, however,
that matters which are under the exclusive jurisdiction of the Federal courts
shall be brought in the Federal District Court for the Southern District of
Florida. Each party hereto consents to service of process by any means
authorized by the applicable law of the forum in any action brought under or
arising out of this Agreement or any of the Collateral Agreements, and each
party irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
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Section 11.05 Representations and Warranties. Each of the
representations and warranties of each of the parties to this Agreement shall be
deemed to have been made at the date hereof and at and as of the Closing Date.
Section 11.06 Entire Agreement, Amendments and Waivers. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein or contemplated
hereby. No supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (regardless of whether similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided.
Section 11.07 Binding Effect and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party. Nothing in this Agreement, express or implied, is intended to confer upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns, any rights, benefits or obligations hereunder.
Section 11.08 Remedies. The rights and remedies provided by this
Agreement are cumulative, and the use of any one right or remedy by any party
hereto shall not preclude or constitute a waiver of its right to use any or all
other remedies. Such rights and remedies are given in addition to any other
rights and remedies a party may have by law, statute, or otherwise.
Section 11.09 Exhibits and Schedules. The exhibits and schedules
referred to herein are attached hereto and incorporated herein by this
reference. Disclosure of a specific item in any one schedule shall be deemed
restricted only to the Section to which such disclosure specifically relates
except where (i) there is an explicit cross-reference to another Schedule, and
(ii) GRS could reasonably be expected to ascertain the scope of the modification
to a representation intended by such cross-reference.
Section 11.10 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.11 References. Whenever required by the context, and as used
in this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
References to monetary amounts and specific named statutes are intended to be
and shall be construed as references to United States dollars and statutes of
the United States of the stated name, respectively, unless the context otherwise
requires.
Section 11.12 Survival. Any provision of this Agreement which
contemplates performance or the existence of obligations after the Closing Date,
and any and all representations and warranties set forth in this Agreement,
shall not be deemed to be merged into or waived by the execution and delivery of
the instruments executed at the Closing, but shall expressly survive Closing for
the time period set forth in Section 8.01 hereof and shall be binding upon the
party or parties obligated thereby in accordance with the terms of this
Agreement, subject to any limitations expressly set forth in this Agreement.
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Section 11.13 Attorneys' Fees. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
ARTICLE XII
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to such terms in this Article XII, unless otherwise defined in
this Agreement.
Section 12.01 Affiliate. The term "Affiliate" shall mean, with respect
to any person, any other person controlling, controlled by or under common
control with such person. The term "Control" as used in the preceding sentence
means, with respect to a corporation, the right to exercise, directly or
indirectly, more than fifty percent (50%) of the voting rights attributable to
the shares of the controlled corporation and, with respect to any person other
than a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person.
Section 12.02 Collateral Agreements. The term "Collateral Agreements"
shall mean any or all of the following agreements, the forms of which are
attached hereto as exhibits to this Agreement:
Exhibit B - Escrow Agreement
Exhibit C - Lock-Up Agreement
Exhibit G - Employment Agreement for ▇▇▇▇ Reader
Exhibit H - Employment Agreement for ▇▇▇▇▇▇ ▇▇▇▇
and any and all other agreements, instruments or documents required or expressly
provided under this Agreement to be executed and delivered in connection with
the transactions contemplated by this Agreement.
Section 12.03 Company Assets. The term "Company Assets" shall mean,
with respect to the Company, all of the Properties, Company Contracts, and
Permits, that were Used by the Company as of the Balance Sheet Date and those
Used by the Company at any time after that date until the Closing Date.
Section 12.04 Contract Retention. The term "Contract
Retention" shall mean any amounts withheld by customers from contract progress
billing until final and satisfactory contract completion as determined by such
customers.
Section 12.05 Current Assets. The term "Current Assets" shall mean,
with respect to the Company, cash and other assets that are expected to be
converted into cash, sold or exchanged within one year from the Closing Date,
including marketable securities, receivables, inventory and current prepayments.
Section 12.06 Current Liabilities. The term "Current Liabilities" shall
mean, with respect to the Company, all obligations of the Company that are
required by their terms to be repaid within one year from the Closing Date.
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Section 12.07 Damages. The term "Damages" shall mean any and all
damages, liabilities, obligations, penalties, fines, judgments, claims,
deficiencies, losses, costs, expenses and assessments (including without
limitation income and other Taxes, interest, penalties and attorneys' and
accountants' fees and disbursements).
Section 12.08 Environmental Law. "Environmental Law" shall mean any
governmental statute, law, ordinance, code, rule, regulation, order or decree
relating to or imposing liability or standards of conduct as may now be in
effect regarding any air emission, water discharge or use, storage, handling,
generation or disposal of any Hazardous Substances, including, without
limitation, the following, and all regulations promulgated thereunder or in
connection therewith: the Comprehensive Environmental Response, Compensation,
and Liability Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the Used Oil Recycling
Act, the Occupational Safety and Health Act, the Federal Safe Drinking Water
Act, the Federal Water Pollution Control Act, the Oil Pollution Act, the
Emergency Planning and Community Right-to-Know Act, and all other federal,
state, tribal and local laws, rules and regulations relating to protection of
human health and the environment, reclamation of land, wetlands and waterways or
relating to the use, storage, emissions, discharge, clean-up or release of
Hazardous Substances on or into the work-place or the environment (including,
without limitation, ambient air, oceans, waterways, wetlands, surface water,
ground water (tributary and nontributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of contaminants, as all of the
foregoing may be amended, supplemented and reauthorized from time to time.
Section 12.09 GAAP. The term "GAAP" shall mean generally accepted
accounting principles applied on a basis consistent with past practices (except
for the omission of footnotes in any interim financial statements).
Section 12.10 Governmental Authorities. The term "Governmental
Authorities" shall mean any nation or country (including but not limited to the
United States) and any commonwealth, territory or possession thereof and any
political subdivision of any of the foregoing, including but not limited to
courts, departments, commissions, boards, bureaus, agencies, ministries or other
instrumentalities.
Section 12.11 Hazardous Substances. "Hazardous Substances" shall mean
industrial, toxic or hazardous substances or wastes or other pollutants,
contaminants, petroleum products, asbestos, polychlorinated biphenyls ("PCBs")
or chemicals, all as defined and regulated under Environmental Law.
Section 12.12 Knowledge. The term "Knowledge" shall mean the actual
knowledge of a party or, in the case of the Company or GRS, any of their
respective directors or executive officers who are stockholders with respect to
the representation being made, and such knowledge of any such persons as
reasonably should have obtained upon due investigation and inquiry into the
representation being made.
Section 12.13 Legal Requirements. The term "Legal Requirements", when
described as being applicable to any person, shall mean any and all laws
(statutory, judicial or otherwise), ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any contracts with,
any Governmental Authority, in each case as and to the extent applicable to such
person or such person's business, operations or Properties.
Section 12.14 Permits. The term "Permits" shall mean any and all
permits or orders under any Legal Requirement or otherwise granted by any
Governmental Authority.
Section 12.15 Properties. The term "Properties" shall mean any and all
properties and assets (real, personal or mixed, tangible or intangible).
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Section 12.16 Proportionate Share. The term "Proportionate Share" shall
mean each Stockholder's respective percentage ownership interest in the Company
as set forth on Exhibit A.
Section 12.17 Regulations. The term "Regulations" shall mean any and
all regulations promulgated by the Department of the Treasury pursuant to the
Code.
Section 12.18 Taxes. The term "Taxes" means any federal, states, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code ss.59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
Section 12.19 Tax Returns. The term "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 12.20 Used. The term "Used" shall mean, with respect to the
Properties, Company Contracts or Permits of the Company, those owned, leased,
licensed or otherwise held by the Company which were acquired for use or held
for use by the Company in connection with the Company's business and operations,
whether or not reflected on the Company's books of account.
Section 12.21 Deferred Income Taxes. The term "Deferred Income Taxes"
shall mean the deferred tax assets and liabilities required to be recorded under
GAAP to reflect the tax effect of temporary differences between the financial
statements carrying values and the tax bases of assets and liabilities.
EXECUTED as of the date first written above.
GENERAL ROOFING SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
C.E.I. ROOFING, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇. Reader
-----------------------------------
▇▇▇▇▇▇▇ ▇. Reader
/s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
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EXHIBIT A
Number of Shares of Company
Name Common Stock Purchased Percentage (%) of Ownership
---- --------------------------- ---------------------------
▇▇▇▇▇▇▇ ▇. Reader 56,582 42.50%
▇▇▇▇ ▇. ▇▇▇▇ 38,292 28.75%
▇▇▇▇▇▇ ▇. ▇▇▇▇ 38,292 28.75%
Total 133,166 100%
======= =====
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EXHIBIT D
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders, jointly and severally, represent and
warrant to GRS that:
Section 3.01 Corporate Existence and Qualification: Corporate Documents
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of Texas, and is not required to be
qualified to do business as a foreign corporation in any other jurisdiction
where the failure to so qualify would have a material adverse effect on the
Company. The Company has all required corporate power and authority to own its
Properties and to carry on its business as presently conducted. The Articles of
Incorporation and By-laws of the Company, copies of which are attached as
Schedule 3.01(a), are complete and reflect all amendments thereto through the
date hereof.
(b) The stock and minute books of the Company that have been
made available to GRS for review contain a complete and accurate record of all
stockholders of the Company and all material actions of the stockholders and
directors (and any committees thereof) taken at meetings of stockholders or
directors of the Company.
(c) The Company does not have any subsidiaries, participate in
any partnership or joint venture, or own any outstanding capital stock of any
other corporation.
Section 3.02 Capitalization and Ownership.
As of the date of this Agreement, the entire authorized
capital stock of the Company consists of 10,000 shares of Voting and 150,000
shares of Non-Voting Company Common Stock. The issued and outstanding shares of
Company Common Stock are owned of record and beneficially by the Stockholders
shown on Exhibit A hereof. All of the presently outstanding shares of capital
stock of the Company have been validly authorized and issued and are fully paid
and nonassessable. The Company has not issued any other shares of its capital
stock and there are no outstanding options, warrants, subscriptions or other
rights or obligations to purchase or acquire any of such shares, nor any
outstanding securities convertible into or exchangeable for such shares, except
as set forth on Schedule 3.02. Except as contemplated under this Agreement,
there are no agreements to which the Company is a party regarding the issuance,
registration, voting or transfer of its outstanding shares of its capital stock.
Except for possible dividends to be issued in connection with the Excluded
Assets as described in Section 1.05 and dividends related to the payment of the
Stockholders' tax liabilities with respect to earnings of the Company up to the
Closing Date, each and all of which shall be subject to the prior written
approval of GRS, no dividends are accrued but unpaid on any capital stock of the
Company.
Section 3.03 No Preemptive Rights; Registration Rights. There are no
preemptive rights affecting the issuance or sale of the Company Common Stock.
Section 3.04 No Company Defaults or Consents. Except as otherwise set
forth in Schedule 3.04 attached hereto, neither the execution and delivery of
this Agreement nor the carrying out of the transactions contemplated hereby
will:
(i) violate or conflict with any of the terms,
conditions or provisions of the Articles of Incorporation or bylaws of the
Company;
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(ii) violate any Legal Requirements applicable to
the Company;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any Company Contract or
Permit applicable to the Company;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of the Company;
or
(v) require any of the Stockholders or the Company
to obtain or make any waiver, consent, action, approval or authorization of, or
registration, declaration, notice or filing with, any private non-governmental
third party or any Governmental Authority. Any and all consents required to be
obtained by the Company as set forth in Schedule 3.04 shall be obtained and
copies thereof delivered to GRS upon execution of this Agreement.
Section 3.05 No Proceedings. Except as set forth on Schedule 3.05, no
suit, action or other proceeding is pending or, to the Knowledge of the Company
or the Stockholders, threatened before any Governmental Authority seeking to
restrain any of the Stockholders or prohibit their entry into this Agreement or
prohibit the Closing, or seeking damages against the Company or its Properties,
as a result of the consummation of the transactions contemplated by this
Agreement.
Section 3.06 Financial Statements. Attached as Schedule 3.06 are true
and correct copies of the Company's (i) Closing Date Unaudited Balance Sheet,
(ii) unaudited balance sheets as of March 31, 1998 (the "Interim Company Balance
Sheet") and the related statements of income and stockholders' equity for the
three months ended March 31, 1998 (the "Interim Company Financial Statements"),
as well as (iii) the Company's balance sheet and statements of income,
stockholders' equity and cash flow as of and for each of the three fiscal years
ended December 31, 1997 (the "Company Financial Statements"). The Company
Financial Statements (i) have been prepared from the books and records of the
Company, (ii) present fairly the financial condition of the Company and its
results of operations as at and for the respective periods then ended, and (iii)
have been prepared in accordance with GAAP.
Section 3.07 Liabilities and Obligations. Except as set forth in
Schedule 3.07, the Company Financial Statements reflect all liabilities of the
Company as determined in accordance with generally accepted accounting
principles arising out of transactions effected or events occurring on or prior
to the date of the Interim Company Balance Sheet, except for liabilities not
exceeding $10,000 in the aggregate. All reserves shown in the Company Financial
Statements are appropriate and reasonable to provide for losses thereby
contemplated. Except as set forth in the Company Financial Statements (including
the Notes thereto), the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity.
Section 3.08 Accounts Receivable. Except as otherwise set forth in
Schedule 3.08, the accounts receivable reflected on the Interim Company Balance
Sheet and all accounts receivable arising between the date of the Interim
Company Balance Sheet (the "Interim Company Balance Sheet Date") and the date
hereof, arose from bona fide transactions in the ordinary course of business,
and the goods and services involved have been sold, delivered and performed to
the account of the obligors, and no further filings (with Governmental
Authorities, insurers or others) are required to be made, no further goods are
required to be provided and no further services are required to be rendered in
order to complete the sales and fully render the services and to entitle the
Company to collect the accounts receivable in full. No such account has been
assigned or pledged to any other person, firm or corporation, and, except only
to the extent fully reserved against as set forth in the Interim Company Balance
Sheet, no defense or setoff to any such account has been asserted by the account
obligor.
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Section 3.09 Employee Matters.
(a) Schedule 3.09(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of the Company,
regardless of compensation levels, and other employees who are currently
compensated at a rate in excess of $50,000 per year (including any reasonably
anticipated bonus) or who earned in excess of $50,000 during the Company's
fiscal year ended December 31, 1997 (collectively, the "Company Key Employees").
In addition, Schedule 3.09(a) contains a complete and accurate description of
(i) all increases in compensation of the Company Key Employees during the fiscal
years of the Company ending December 31, 1997 and 1996, respectively, and (ii)
any promised increases in compensation of the Company Key Employees that have
not yet been effected.
(b) Schedule 3.09(b) contains a complete and accurate list of
all Compensation Plans sponsored by the Company or to which the Company
contributes on behalf of its employees, other than Employee Benefit Plans listed
in Schedule 3.10. As used herein, "Compensation Plans" shall mean and include,
without limitation, plans, arrangements or practices that provide for severance
pay, deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options.
(c) Schedule 3.09(c) contains a complete and accurate list of
all Employment Agreements. As used in this Section 3.09(c) and in Section
3.09(e) hereof, "Employment Agreements" shall mean and include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements to which the Company is a party.
(d) The Company has provided GRS with a complete and accurate
list of all significant written employee policies and procedures of the Company.
(e) To the Knowledge of the Company, no unwritten material
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Compensation Plans, Employment Agreements or
employee policies and procedures.
(f) To the Knowledge of the Company, except as set forth in
Schedule 3.09(f), the Company (i) has been and is in material compliance with
all laws, rules, regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and hours, and (ii) is
not liable in any material amount for any arrears of wages or penalties for
failure to comply with any of the foregoing. The Company has not engaged in any
unfair labor practice or discriminated on the basis of race, color, religion,
sex, national origin, age or handicap in its employment conditions or practices.
To the Knowledge of the Company, there are no (i) material unfair labor practice
charges or complaints or racial, color, religious, sex, national origin, race or
handicap discrimination charges or complaints pending or threatened against the
Company before the National Labor Relations Board or any similar state or
foreign commission or agency or (ii) existing or threatened material labor
strikes, disputes, grievances, controversies or other labor troubles affecting
the Company.
(g) Except as set forth on Schedule 3.09(g), (i) the Company
has not ever been a party to any agreement with any union, labor organization or
collective bargaining unit, (ii) the employees of the Company have not been
represented by any union, labor organization or collective bargaining unit and
(iii) the employees of the Company have not threatened to organize or join a
union, labor organization or collective bargaining unit.
(h) Except as disclosed on Schedule 3.09(h), no Company Key
Employee has indicated his or her desire or intent to terminate employment with
the Company, and the Company has no present intent of terminating the employment
of any Company Key Employee.
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Section 3.10 Employee Benefit Matters.
(a) Schedule 3.10 contains a complete and accurate list of all
Employee Benefit Plans sponsored by the Company or to which the Company
contributes on behalf of its employees and all Employee Benefit Plans previously
sponsored or contributed to on behalf of its employees within the three years
preceding the date hereof. No unwritten amendment exists with respect to any
Employee Benefit Plan. For purposes of this Agreement an "Employee Benefit Plan"
means each employee benefit plan, as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Each Employee Benefit Plan has been administered and
maintained in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on the Company. No
Employee Benefit Plan is currently the subject of an audit, investigation,
enforcement action or other similar proceeding conducted by any state or federal
agency. No prohibited transactions (within the meaning of Section 4975 of the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code")) have occurred with respect to any Employee Benefit
Plan. No pending or, to the Knowledge of the Company, threatened, claims, suits
or other proceedings exist with respect to any Employee Benefit Plan other than
normal benefit claims filed by participants or beneficiaries.
(c) The Company has received a favorable determination letter
or ruling from the Internal Revenue Service for each Employee Benefit Plan
intended to be qualified within the meaning of Section 401 (a) of the Code
and/or tax exempt within the meaning of Section 501(a) of the Code, which letter
or ruling is current and covers all required amendments to each such Employee
Benefit Plan through the Closing Date. No proceedings exist or, to the Knowledge
of the Company, have been threatened that could result in the revocation of any
such favorable determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither the Company nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA. Neither
the Company nor any member of a Controlled Group is or ever has been obligated
to contribute to a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with the Company.
Section 3.11 Absence of Certain Changes. Except as set forth in
Schedule 3.11, from the Interim Company Balance Sheet Date to the date of this
Agreement, the Company has not:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of the Company, or any Stockholder, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
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(b) contracted for the purchase of any capital assets having a
cost in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
(c) incurred any indebtedness for borrowed money or issued or
sold any debt securities, except in the ordinary course of business consistent
with past practice;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its Properties or Company
Assets, except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any
Company Assets (whether or not covered by insurance) that has materially
adversely affected, or could materially adversely affect, its business;
(h) acquired or disposed of any Company Assets except in the
ordinary course of business consistent with past practice or as permitted by
Section 1.05 hereof;
(i) written up or written down the carrying value of any of
the Company Assets, except in the ordinary course of business consistent with
past practice;
(j) changed any accounting principles methods or practices
followed or changed the costing system or depreciation methods of accounting for
the Company Assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or
Company Assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business consistent with past practice;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights or paid any
dividends or made any distribution to the holders of the Company's capital
stock;
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(r) entered into any material agreement with any person or
group, or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
(s) entered into, adopted or amended any Employee Benefit
Plan; or
(t) entered into any agreement (written or oral) to do any of
the foregoing, except in the ordinary course of business consistent with past
practice.
Section 3.12 Commitments. (a) Except the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which the Company is a party (the "Company Contracts") set forth in Schedule
3.12, the Company has not entered into, nor is the capital stock, the assets or
the business of the Company bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business;
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest
in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission
agents, investment bankers, financial advisors, business brokers, public
relations or advertising agencies, accountants or attorneys, except with respect
to confidentiality agreements;
(ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee, except in the ordinary course of
business and excluding the real estate leases set forth on Schedule 3.15(c);
(x) agreement between the Company and any
Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of the Company;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
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(xv) any other contract or arrangement that
involves either an unperformed commitment in excess of $5,000 or that terminates
more than thirty (30) days after the date hereof, except in the ordinary course
of business;
(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 3.23 hereof; or
(xvii) any other agreement or commitment not made in
the ordinary course of business that is material to the business or financial
condition of the Company.
True, correct and complete copies of the written Company Contracts, and true,
correct and complete written descriptions of the oral Company Contracts, have
heretofore been delivered or made available to GRS in accordance with, and
subject to the limitations of, GRS' Due Diligence Investigation. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by the Company, and no material penalties
have been incurred nor are amendments pending, with respect to the Company
Contracts. The Company Contracts are in full force and effect and are valid and
enforceable obligations of the Company, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity). The Company has not received
notice of any material default with respect to any Company Contracts. For the
purposes of this Section 3.12(a), the term "material" shall mean a condition the
existence or breach of which could result in damage or loss to the Company
valued in excess of $5,000 individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, the Company has not
received notice of any plan or intention of any other party to any Company
Contract to exercise any right to cancel or terminate any Company Contract. The
Company does not currently contemplate, and has no reason to believe any person
or entity currently contemplates, any amendment or change to any Company
Contract. None of the customers, joint venture partners or suppliers of the
Company has refused, or communicated that it will or may refuse, to purchase or
supply goods or services, as the case may be, or has communicated that it will
or may substantially reduce the amounts of goods or services that it is willing
to purchase from, or sell to, the Company.
Section 3.13 Insurance. The Company has had in effect, and will
maintain through the Closing Date, comprehensive insurance coverage with respect
to all of its completed operations. The Company has previously made available to
GRS all insurance policies of the Company. All of such policies are valid and
enforceable against the Company, except as such enforceability may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 3.14 Patents, Trade-marks, Service Marks and Copyrights.
(a) Except for the trademarked logo "CEI", with double
underlining trades over and under the capitalized letters, which is owned by CEI
Industries, Inc., the Company owns all patents, trade-marks, service marks and
copyrights (collectively "Proprietary Rights"), if any, necessary to conduct its
business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in Schedule 3.14(a) is a
true and correct description of all Proprietary Rights.
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(b) The Company has the sole and exclusive right to use the
Proprietary Rights without infringing or violating the rights of any third
parties and, upon the consummation of the Stock Purchase, GRS will have the
right to use all Proprietary Rights without any obligation to pay any additional
amounts whatsoever. Use of the Proprietary Rights does not require the consent
of any other person and the Proprietary Rights are freely transferable. No claim
has been asserted by any person to the ownership of or right to use any
Proprietary Right or challenging or questioning the validity or effectiveness of
any license or agreement constituting a part of any Proprietary Right. Each of
the Proprietary Rights is valid and subsisting, has not been canceled, abandoned
or otherwise terminated and, if applicable, has been duly issued or filed.
Section 3.15 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by
the Company is set forth in Schedule 3.15(a).
(b) Except as disclosed on Schedule 3.15(b), the Company has
good and marketable title to the Company Assets, including, without limitation,
those reflected on the Interim Company Balance Sheet (other than those since
disposed of in the ordinary course of business), free and clear of all security
interests, liens, charges and other encumbrances, except for (i) liens for taxes
not yet due and payable or being contested in good faith in appropriate
proceedings, and (ii) encumbrances that are incidental to the conduct of its
businesses or ownership of property, not incurred in connection with the
borrowing of money or the obtaining of credit, and which do not in the aggregate
materially detract from the value of the assets affected or materially impair
their use by the Company. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair, normal wear and tear excepted, are adequate and
sufficient for the Company's business and conform in all material respects with
all applicable ordinances, regulations and laws relating to their use and
operation.
(c) A listing of all real property leases, their terms and
total lease payments is attached hereto as Schedule 3.15(c). The Company enjoys
peaceful and undisturbed possession under all real property leases under which
the Company is operating, and all such leases are valid and subsisting and none
of them is in default, except for those defaults which, individually or in the
aggregate, would not have a material adverse effect upon the Company.
Section 3.16 Compliance with Laws. The Company has all material
franchises, Permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its businesses as presently
conducted. The business and operations of the Company have been and are being
conducted in accordance in all material respects with all applicable laws, rules
and regulations, and the Company is not in violation of any judgment, law or
regulation except where any such violation would not have a material adverse
effect on the Company's results of operations, business, assets or financial
condition.
Section 3.17 Litigation: Default. Except as otherwise set forth in
Schedule 3.17, there are no claims, actions, suits, investigations or
proceedings against the Company pending or, to the Knowledge of the Company,
threatened in any court or before or by any Governmental Authority, or before
any arbitrator, that could reasonably be expected to have a material adverse
effect (whether covered by insurance or not) on the business, operations,
prospects, Properties, securities or financial condition of the Company. Except
as otherwise set forth in Schedule 3.17, the Company is not in default under,
and no condition exists (whether covered by insurance or not) that with or
without notice or lapse of time or both would (i) constitute a default under, or
breach or violation of, any Company Contract or any Legal Requirement or Permit
applicable to the Company, or (ii) accelerate or permit the acceleration of the
performance required under, or give any other party the right to terminate, any
Company Contract, other than defaults, breaches, violations or accelerations
that would not have a material adverse effect on the
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business, operations, prospects, Properties, securities or financial condition
(a "Material Adverse Effect") of the Company.
Section 3.18 Environmental Matters.
(a) Except as listed in Schedule 3.18(a), to the Knowledge of
the Company, there are no PCBs, TCE, PCE, or asbestos containing materials
generated, used, treated, stored, maintained, disposed of, or otherwise
deposited in, or located on any premises at which the Company's business (the
"Company Business") is or was, or at which the business or, to the Knowledge of
the Company, its predecessors was, located which would have a Material Adverse
Effect on the Company.
(b) Except as described in Schedule 3.18(b), there are and
were no underground storage tanks used, stored, maintained, located on any
premises at which Company Business is or was, or, to knowledge of the Company,
at which the business of its predecessors was, located which would have a
Material Adverse Effect on the Company. With respect to underground storage
tanks, Schedule 3.18(b) sets forth the size, location, construction,
installation date, use and testing history of all underground storage tanks
(whether or not excluded from regulation under Environmental Law), including all
underground storage tanks in use, out of service, closed, abandoned,
decommissioned, or sold to a third party.
(c) Except as listed in Schedule 3.18(c), to the Knowledge of
the Company, there has been no "release" as defined in 42 U.S.C. 9601(22) or, to
the best knowledge of the Company, threat of a "release" of any Hazardous
Substance on, from or under any premises from which (i) the Company's operations
have been or are being conducted related to the Company Business. or (ii) to the
Knowledge of the Company, the operations of any predecessor of the Company which
would have a Material Adverse Effect on the Company.
(d) Except as listed in Schedule 3.18(d), the Company and its
predecessors have not received written notice alleging any potential liability
with respect to the contamination, investigation, or cleanup of any site at
which Hazardous Substances have been or have alleged to have been generated,
treated, stored, discharged, emitted or disposed of and, to the Knowledge of the
Company, there are no past or present events, facts, conditions or circumstances
which may interfere with or prevent material compliance by the Company with
Environmental Law, or with any order, decree, judgment, injunction, notice or
demand issued, entered, promulgated or approved thereunder, or which may give
rise to any liability under applicable law including, without limitation, any
Environmental Law, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of Hazardous Substances by the Company
or, to the Knowledge of the Company, by any predecessor of the Company, as a
result of any act or omission of the Company or predecessors related to the
Company Business.
(e) Except as disclosed in Schedule 3.18(e), all of the
Company's and, to the Knowledge of the Company, its predecessor's, Hazardous
Substances disposal and recycling practices related to the Company Business have
been accomplished in material compliance with all applicable Environmental Laws.
The Company's representation(s) with respect to this Section 3.18 shall
not be interpreted to imply that GRS has constructive knowledge regarding any
aspect of the Company Business with respect to environmental matters nor to
limit the scope of any of the Company's or any Stockholders' representations
under this Agreement. No such due diligence examination or related activities
of, or on behalf of, GRS however, shall constitute a waiver or relinquishment by
GRS of its right to rely upon the Company's or any Stockholders'
representations, warranties, covenants and agreements as made herein or pursuant
hereto, and no such disclosure shall constitute an assumption by GRS of any
conditions or liabilities, and such disclosure shall not relieve the Company or
any Stockholder of its duties and obligations hereunder.
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Section 3.19 Banks. Schedule 3.19 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which the Company has an account, credit line or safe deposit box or vault, (ii)
the names of all persons authorized to draw thereon or to have access to any
safe deposit box or vault, (iii) the purpose of each such account, safe deposit
box or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of the Company in matters
concerning any of its business or affairs. Except as otherwise set forth in
Schedule 3.19, no such proxies, powers of attorney or other like instruments are
irrevocable.
Section 3.20 Suppliers and Customers Sales. Schedule 3.20 sets forth
all the Company's material suppliers, together with the dollar amount of goods
purchased by the Company from each such supplier during the twelve month period
ended December 31, 1997 and the three month period ended March 31, 1998, as well
as each of the principal customers of the Company. Except as otherwise set forth
in Schedule 3.20, since December 31, 1997, there has been no material adverse
change in the business relationship of the Company with any supplier or customer
named in Schedule 3.20. No customer or supplier named in Schedule 3.20 has
terminated or materially altered, or notified the Company of any intention to
terminate or materially alter, its relationship with the Company, and the
Company has no reason to believe that any such customer or supplier will
terminate or materially alter its relationship with the Company or to materially
decrease its services or supplies to the Company or its direct or indirect usage
of the services of the Company. For purposes of Sections 3.20 and 3.23,
"material suppliers" refers to suppliers from whom the Company purchased five
percent (5%) or more of the total amount of the goods purchased by the Company
during the twelve month period ended December 31, 1997 and the three month
period ended March 31, 1998, and "principal customers" refers to customers who
accounted for 5% or more of the Company's total revenues during the twelve month
period ended December 31, 1997 and the three month period ended March 31, 1998.
Section 3.21 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by the
Company or any Stockholder.
Section 3.22 Disclosure; Due Diligence. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by the Company or the Stockholders to GRS or its counsel,
do not contain any untrue statement of material fact or omit any material fact
necessary in order to make the statements therein not misleading; provided,
however, certain materials provided to GRS contain projections and estimates of
future events, and such projections and estimates have been based upon certain
assumptions that management of the Company made in good faith and believed are
reasonable at the time such materials were prepared.
Section 3.23 Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.23, no director or executive officer of the Company or their
respective spouses or children, owns directly or indirectly, on an individual or
joint basis, any material interest in, or serves as an officer or director of,
any principal customer or material supplier which has a business relationship
with the Company or any organization that has a material contract or arrangement
with the Company.
Section 3.24 Investments in Competitors. Except as provided in Schedule
3.24, no director or executive officer of the Company owns directly or
indirectly any material interest or has any investment equal to 5% or more of
the outstanding voting securities in any corporation, business or other person
that is a direct competitor of the Company.
Section 3.25 Certain Payments. Neither the Company, nor any director,
officer or employee of the Company, has paid or caused to be paid, directly or
indirectly, in connection with the business of the Company: (a) to any
government or agency thereof or any agent of any supplier or customer any bribe,
kick-back or other similar payment; or (b) any material contribution to any
political party or candidate
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(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
Section 3.26 Government Inquiries. Except as set forth on Schedule
3.26, there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by the Company from, or any
material statement, report or other document filed by the Company with, the
federal government or any federal administrative agency (including but not
limited to, the Justice Department, Internal Revenue Service, Department of
Labor, Occupational Safety and Health Administration, Federal Trade Commission,
National Labor Relations Board, and Interstate Commerce Commission), any state
securities administrator or any local or state taxing authority.
Section 3.27 Other Transactions. Neither the Company nor any
Stockholder has entered into any agreements or arrangements and there are no
pending offers or discussions concerning or providing for the merger or
consolidation of the Company or all or any substantial portion of its assets,
the sale by the Company or any Stockholder of any securities of the Company or
any similar transaction affecting the Company or the Stockholders.
Section 3.28 Tax Matters.
(a) Except as set forth in Schedule 3.28 hereto:
(i) the Company has timely filed all federal income
Tax Returns, and all other material Tax Returns which it is required to file
under applicable laws and regulations;
(ii) all such Tax Returns are true and accurate in
all material respects;
(iii) has paid all Taxes due and owing by it (whether
or not such Taxes are required to be shown on a Tax Return) and has withheld and
paid over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party, except where the amounts of such unpaid Taxes or the amounts
that have not been withheld and paid over do not, in the aggregate, exceed
$25,000;
(iv) the accrual for Taxes on the Closing Date
Unaudited Balance Sheet is sufficient to pay in full all liabilities for Taxes
of the Company related to periods prior to the Closing;
(v) the federal income Tax Returns of the Company
have been filed through the date hereof, and, as of the date hereof, none of
such Tax Returns has been audited.
(vi) the Company has been a validly existing S
corporation within the meaning of Sections 1361 and 1362 of the Code at all
times since January 1, 1987, and will continue to be an S corporation up to and
including the date immediately preceding the Closing Date; and
(vii) the Company has disclosed in its federal income
tax returns, all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of IRC ss. 6662.
(b) To the Knowledge of the Company, no claim has been made by
a taxing authority in a jurisdiction where the Company does not file Tax Returns
that the Company is or may be subject to taxation by that jurisdiction.
(c) To the Knowledge of the Company:
(i) there are no foreign, federal, state or local
Tax audits or administrative or judicial proceedings pending or being conducted
with respect to the Company;
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(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by the Company from any foreign, federal, state or local taxing
authority; and
(iii) there are no material unresolved claims
concerning the Company's Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to the Company in connection with any Tax Returns
covering the Company, except where such waiver would not have a material adverse
effect on the Company.
(e) The Company has not executed or entered into a closing
agreement pursuant to IRC ss. 7121 or any predecessor provision thereof or any
similar provision of state, local or foreign law; nor has the Company agreed to
or is required to make any adjustments pursuant to IRC ss. 481(a) or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company. The Company has no knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
knowledge with respect to any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company.
(f) The Company has not made an election under IRC ss. 341(f).
(g) The Company is not liable for the Taxes of another person.
(h) The Company is not a party to any Tax sharing agreement.
(i) The Company has not made any payments nor is it obligated
to make payments nor is it a party to an agreement that could obligate it to
make any payments that would not be deductible under IRC ss. 280G.
(j) The Company shall prepare or cause to be prepared and file
or cause to be filed all federal and state income Tax Returns for the Company
for tax periods ending on or prior to the Closing Date which are filed after the
Closing Date. The Company shall permit GRS to review and comment on each such
Tax Return described in the preceding sentence prior to filing. To the extent
permitted by applicable law, the Stockholders shall include any income, gain,
loss, deduction or other tax items for such period on their individual income
Tax Returns in a manner consistent with the Schedule K-1s furnished by the
Company to the Stockholders for such periods.
(k) All transfer, documentary, sales, use, stamp, registration
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including New York City Transfer Tax, if
applicable, and any similar Tax imposed in other states and subdivisions), shall
be paid by the Stockholders when due, and the Stockholders will, at their
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes and fees, and, if required by applicable law, GRS will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
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EXHIBIT E
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder represents and warrants to GRS as follows:
Section 4.01 Title to the Shares. As of the Closing Date, such
Stockholder shall own beneficially and of record, free and clear of any lien,
option or other encumbrance, the shares of Company Common Stock set forth
opposite such Stockholders' name on Exhibit A hereof, and, upon consummation of
the Stock Purchase, GRS will acquire good and valid title thereto, free and
clear of any lien or other encumbrance.
Section 4.02 Authority to Execute and Perform Agreement. Such
Stockholder has the full legal right and power and all authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
such Stockholders' obligations hereunder. This Agreement has been duly executed
and delivered by such Stockholder and is a valid and binding obligation of such
Stockholder enforceable in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and except as the availability of equity remedies
may be limited by the application of general principles of equity (regardless of
whether such equitable principles are applied in a proceeding at law or in
equity). The execution and delivery by such Stockholder of this Agreement and
the performance by such Stockholder of this Agreement in accordance with its
terms and conditions will not (i) require the approval or consent of any
foreign, federal, state, county, local or other governmental or regulatory body
or the approval or consent of any other person; or (ii) conflict with or result
in any breach or violation of any of the terms and conditions of, or constitute
(or with notice or lapse of time or both constitute) a default under, any
statute, regulation, order, judgment or decree applicable to such Stockholder or
to the shares of Company Common Stock held by such Stockholder, or any
instrument, contract or other agreement to which such Stockholder is a party or
by or to which such Stockholder is or the shares of Company Common Stock held by
such Stockholder are bound or subject.
Section 4.03 No Stockholder Defaults or Consents. The execution and
delivery of this Agreement and the Collateral Agreements by such Stockholder and
the performance by such Stockholder who is a party thereto of his or her
obligations hereunder and thereunder will not violate any provision of law or
any judgment, award or decree or any indenture, agreement or other instrument to
which such Stockholder is a party, or by which such Stockholder or any
properties or assets of such Stockholder is bound or affected, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, security interest or encumbrance
of any nature whatsoever upon any of the properties or assets of such
Stockholder. Any and all consents required to be obtained by such Stockholder as
set forth in Schedule 4.03 shall be obtained and copies thereof delivered to GRS
upon execution of this Agreement.
Section 4.04 Investment Representations
(a) Such Stockholder is acquiring the shares of GRS Common
Stock to be issued to it pursuant to the Stock Purchase (the "GRS Shares") for
its own account and not on behalf of any other person; such Stockholder is aware
and acknowledges that the GRS Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered or sold unless the GRS Shares are registered under the Securities Act or
an exemption from the registration requirements of the Securities Act is
available;
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(b) Such Stockholder has been furnished all information that
it deems necessary to enable it to evaluate the merits and risks of an
investment in GRS; such Stockholder has had a reasonable opportunity to ask
questions of and receive answers from GRS concerning GRS and the GRS Shares, and
all such questions, if any, have been answered to the full satisfaction of such
Stockholder;
(c) No person or entity other than such Stockholder has (i)
any rights in and to the GRS Shares, which rights were obtained through or from
such Stockholder or (ii) any rights to acquire the GRS Shares, which rights were
obtained through or from such Stockholder;
(d) Such Stockholder has such knowledge and expertise in
financial and business matters (including knowledge and expertise in the roofing
industry) that it is capable of evaluating the merits and risks involved in an
investment in the GRS Shares: and such Stockholder is financially able to bear
the economic risk of the investment in the GRS Shares, including a total loss of
such investment;
(e) Such Stockholder represents that it has adequate means of
providing for its current needs and has no need for liquidity in its investment
in the GRS Shares; such Stockholder has no reason to anticipate any material
change in its financial condition for the foreseeable future;
(f) Such Stockholder is aware that the acquisition of the GRS
Shares is an investment involving a risk of loss and that there is no guarantee
that such Stockholder will realize any gain from this investment, and that such
Stockholder could lose the total amount of its investment;
(g) Such Stockholder understands that no United States federal
or state agency has made any finding of determination regarding the fairness of
the offering of the GRS Shares for investment, or any recommendation or
endorsement of the offering of the GRS Shares;
(h) Such Stockholder is acquiring the GRS Shares for
investment, with no present intention of dividing or allowing others to
participate in such investment or of reselling, or otherwise participating,
directly or indirectly, in a distribution of the GRS Shares, and shall not make
any sale, transfer or pledge thereof without registration under the Securities
Act and any applicable securities laws of any state or unless an exemption from
registration is available;
(i) Except as set forth herein, no representations or
warranties have been made to such Stockholder by GRS or any agent, employee or
Affiliate of GRS, and in entering into this transaction such Stockholder is not
relying upon any information, other than from the results of independent
investigation by such Stockholder;
(j) Such Stockholder understands that the GRS Shares are being
offered to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that GRS is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Stockholder set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Stockholder to acquire the GRS Shares; and
(k) Such Stockholder will not sell, assign or transfer any of
the GRS Shares except (i) pursuant to an effective registration statement under
the Securities Act, (ii) in a transaction which, in the opinion of the general
counsel of GRS, Sellers' Counsel or other counsel reasonably satisfactory to
GRS, is not required to be registered under the Securities Act.
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EXHIBIT F
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRS
GRS represents and warrants to the Company and the Stockholders that:
Section 5.01 Corporate Existence and Qualification: Corporate
Documents.
(a) GRS is a corporation duly organized, validly existing and
in good standing under the laws of Florida, and is not required to be qualified
to do business as a foreign corporation in any other jurisdiction where the
failure to so qualify would have a material adverse effect on GRS. GRS has all
required corporate power and authority to own its properties and to carry on its
business as presently conducted. The Articles of Incorporation and By-laws of
GRS, copies of which are attached as Schedule 5.01(a), are complete and reflect
all amendments thereto through the date hereof.
(b) The stock and minute books of GRS that have been made
available to the Stockholder for review contain a complete and accurate record
of all stockholders of GRS, and all material actions of the stockholders and
directors (and any committees thereof) of GRS.
(c) Except as set forth on Schedule 5.01(c), GRS does not have
any subsidiaries, participate in any partnership or joint venture, or own any
outstanding capital stock of any other corporation.
Section 5.02 Authority, Approval and Enforceability. This Agreement has
been duly executed and delivered by GRS and GRS has all requisite power and
legal authority to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered in connection
with the transactions provided for hereby, to consummate the transactions
contemplated hereby and by the Collateral Agreements, and to perform its
obligations hereunder and under the Collateral Agreements. This Agreement and
each Collateral Agreement to which GRS is a party constitutes, or upon execution
and delivery will constitute, the legal, valid and binding obligation of GRS,
enforceable in accordance with its terms, except as such enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 5.03 Capitalization and Ownership.
(a) As of the date of this Agreement, the entire authorized
capital stock of GRS consists of 100,000,000 shares of which 90,000,000 have
been designated as GRS Common Stock and 10,000,000 have been designated as
Preferred Stock. All of the presently outstanding shares of capital stock of GRS
have been validly authorized and issued and are fully paid and nonassessable.
Except as set forth on Schedule 5.03, GRS has not issued any other shares of its
capital stock and there are no outstanding options, warrants, subscriptions or
other rights or obligations to purchase or acquire any of such shares, nor any
outstanding securities convertible into or exchangeable for such shares. No
dividends are accrued but unpaid on any capital stock of GRS.
Section 5.04 No Preemptive Rights. There are no preemptive rights
affecting the issuance or sale of the capital stock of GRS.
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Section 5.05 No GRS Defaults or Consents. Except as otherwise set forth
in Schedule 5.05 attached hereto, neither the execution and delivery of this
Agreement nor the carrying out of the transactions contemplated hereby will:
(i) violate or conflict with any of the terms,
conditions or provisions of the articles of incorporation or bylaws of GRS;
(ii) violate any Legal Requirements applicable to
GRS;
(iii) violate, conflict with, result in a breach of,
constitute a default under (whether with or without notice or the lapse of time
or both), or accelerate or permit the acceleration of the performance required
by, or give any other party the right to terminate, any contract or Permit
applicable to GRS;
(iv) result in the creation of any lien, charge or
other encumbrance on the shares of capital stock or any Property of GRS; or
(v) require GRS to obtain or make any waiver,
consent, action, approval or authorization of, or registration, declaration,
notice or filing with, any private non-governmental third party or any
Governmental Authority. Any and all consents required to be obtained by GRS as
set forth in Schedule 5.05 shall be obtained and copies thereof delivered to the
Company and the Stockholders upon execution of this Agreement.
Section 5.06 No Proceedings. Except as set forth on Schedule 5.06, no
suit, action or other proceeding is pending or, to the Knowledge of GRS,
threatened before any Governmental Authority seeking to restrain GRS or prohibit
its entry into this Agreement or prohibit the Closing, or seeking damages
against GRS or its Properties, as a result of the consummation of the
transaction contemplated by this Agreement.
Section 5.07 [Reserved.]
Section 5.08 Liabilities and Obligations. Except as set forth in
Schedule 5.08, GRS' balance sheet at December 31, 1997 and 1996 (the "GRS
Balance Sheets") and the related statements of income, stockholders' equity and
cash flow for the fiscal years ended December 31, 1997, 1996 and 1995 (the "GRS
Financial Statements") reflect all liabilities of GRS as determined in
accordance with generally accepted accounting principles arising out of
transactions effected or events occurring on or prior to the date of the GRS
Balance Sheet, except for liabilities not exceeding $10,000 in the aggregate.
All reserves shown in the GRS Financial Statements are appropriate and
reasonable to provide for losses thereby contemplated. Except as set forth in
the GRS Financial Statements, GRS is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity.
Section 5.09 Accounts Receivable. Except as otherwise set forth in
Schedule 5.09, the accounts receivable reflected on the GRS Balance Sheet and
all accounts receivable arising between December 31, 1997 and the date hereof,
arose from bona fide transactions in the ordinary course of business, and the
goods and services involved have been sold, delivered and performed to the
account of the obligors, and no further filings (with Governmental Authorities,
insurers or others) are required to be made, no further goods are required to be
provided and no further services are required to be rendered in order to
complete the sales and fully render the services and to entitle GRS to collect
the accounts receivable in full. No such account has been assigned or pledged to
any other person, firm or corporation, and, except only to the extent fully
reserved against as set forth in the Interim GRS Balance Sheet, no defense or
setoff to any such account has been asserted by the account obligor.
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Section 5.10 Employee Matters.
(a) Schedule 5.10(a) contains a complete and accurate list of
the names, titles and compensation of all executive officers of GRS, regardless
of compensation levels, and other employees who are currently compensated at a
rate in excess of $50,000 per year (including any reasonably anticipated bonus)
or who earned in excess of $50,000 during GRS' fiscal year ended October 31,
1996 (collectively, the "GRS Key Employees"). In addition, Schedule 5.10(a)
contains a complete and accurate description of (i) all increases in
compensation of the GRS Key Employees during the fiscal years of GRS ending
October 31, 1997 and October 31, 1996, respectively, and (ii) any promised
increases in compensation of the GRS Key Employees of GRS that have not yet been
effected.
(b) Schedule 5.10(b) contains a complete and accurate list of
all Compensation Plans sponsored by GRS or to which GRS contributes on behalf of
its employees, other than Employee Benefit Plans listed in Schedule 5.11. As
used in this Section 5.10, "Compensation Plans" shall mean and include, without
limitation, plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options.
(c) Schedule 5.10(c) contains a complete and accurate list of
all Employment Agreements. As used in this Section 5.10(c) and in Section
5.10(e) hereof, "Employment Agreements" shall mean and include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements to which GRS is a party.
(d) GRS has provided the Company and the Stockholders with a
complete and accurate list of all significant written employee policies and
procedures.
(e) To the Knowledge of GRS, no unwritten material amendments
have been made, whether by oral communication, pattern of conduct or otherwise,
with respect to any Compensation Plans, Employment Agreements or employee
policies and procedures.
(f) To the Knowledge of GRS, except as set forth in Schedule
5.10(f), GRS (i) has been and is in material compliance with all laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, and (ii) is not liable in any
material amount for any arrears of wages or penalties for failure to comply with
any of the foregoing. GRS has not engaged in any unfair labor practice or
discriminated on the basis of race, color, religion, sex, national origin, age
or handicap in its employment conditions or practices. To the Knowledge of GRS,
there are no (i) material unfair labor practice charges or complaints or racial,
color, religious, sex, national origin, race or handicap discrimination charges
or complaints pending or threatened against GRS before the National Labor
Relations Board or any similar state or foreign commission or agency or (ii)
existing or threatened material labor strikes, disputes, grievances,
controversies or other labor troubles affecting GRS.
(g) GRS has not ever been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of GRS are
represented by any union, labor organization or collective bargaining unit. The
employees of GRS have not threatened to organize or join a union, labor
organization or collective bargaining unit.
(h) Except as disclosed on Schedule 5.10(h), no GRS Key
Employee has indicated his or her desire or intent to terminate employment with
GRS, and GRS has no present intent of terminating the employment of any GRS Key
Employee.
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Section 5.11 Employee Benefit Matters.
(a) Schedule 5.11 contains a complete and accurate list of all
Employee Benefit Plans sponsored by GRS or to which GRS contributes on behalf of
its employees and all Employee Benefit Plans previously sponsored or contributed
to on behalf of its employees within the three years preceding the date hereof.
No unwritten amendment exists with respect to any Employee Benefit Plan.
(b) Each Employee Benefit Plan has been administered and
maintained in compliance with all laws, rules and regulations, except for such
noncompliance that would not have a material adverse effect on GRS. No Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency. No
prohibited transactions (within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code")) have occurred with respect to any Employee Benefit Plan. No
pending or, to the Knowledge of GRS, threatened, claims, suits or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
(c) GRS has received a favorable determination letter or
ruling from the Internal Revenue Service for each Employee Benefit Plan intended
to be qualified within the meaning of Section 401 (a) of the Code and/or tax
exempt within the meaning of Section 501(a) of the Code, which letter or ruling
is current and covers all required amendments to each such Employee Benefit Plan
through the Closing Date. No proceedings exist or, to the Knowledge of GRS, have
been threatened that could result in the revocation of any such favorable
determination letter or ruling.
(d) No accumulated funding deficiency (within the meaning of
Section 412 of the Code), whether waived or unwaived, exists with respect to any
Employee Benefit Plan or any plan sponsored by any member of a "controlled
group" (as defined in Section 414(b) of the Code ("Controlled Group"). With
respect to each Employee Benefit Plan subject to Title IV of ERISA, the assets
of each such plan are at least equal in value to the present value of accrued
benefits determined on an ongoing basis as of the date hereof. With respect to
each Employee Benefit Plan described in Section 501(c)(9) of the Code, the
assets of each such plan are at least equal in value to the present value of
accrued benefits as of the date hereof. Neither GRS or any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA. GRS nor
any member of a Controlled Group is or ever has been obligated to contribute to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(e) No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(f) GRS has no obligation or commitment to provide medical,
dental or life insurance benefits to or on behalf of any of its employees who
may retire or any of its former employees who have retired from employment with
GRS.
Section 5.12 Absence of Certain Changes. Except as set forth in
Schedule 5.12, from the date of the GRS Balance Sheet to the date of this
Agreement, GRS has not:
(a) suffered any material adverse change, whether or not
caused by any deliberate act or omission of GRS or any stockholder of GRS, in
its condition (financial or otherwise), operations, assets, liabilities,
business or prospects;
(b) contracted for the purchase of any capital assets having a
cost in excess of $25,000 or paid any capital expenditures in excess of $25,000,
except in the ordinary course of business consistent with past practice;
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(c) incurred any indebtedness for borrowed money or issued or
sold any debt securities, except in the ordinary course of business consistent
with past practice;
(d) incurred or discharged any liabilities or obligations
except in the ordinary course of business consistent with past practice;
(e) paid any amount on any indebtedness prior to the due date,
forgiven or canceled any debts or claims or released or waived any rights or
claims, except in the ordinary course of business consistent with past practice;
(f) mortgaged, pledged or subjected to any security interest,
lien, lease or other charge or encumbrance any of its properties or assets,
except in the ordinary course of business consistent with past practice;
(g) suffered any damage or destruction to or loss of any of
its assets (whether or not covered by insurance) that has materially adversely
affected, or could materially adversely affect, its business;
(h) acquired or disposed of any of its assets except in the
ordinary course of business consistent with past practice;
(i) written up or written down the carrying value of any of
its assets, except in the ordinary course of business consistent with past
practice;
(j) changed any accounting principles methods or practices
followed or changed the costing system or depreciation methods of accounting for
its assets;
(k) waived any material rights or forgiven any material
claims;
(l) lost, terminated or experienced any change in the
relationship with any employee, customer, joint venture partner or supplier,
which termination or change has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or its
assets;
(m) increased the compensation of any director or officer;
(n) increased the compensation of any employee except in the
ordinary course of business consistent with past practice;
(o) made any payments to or loaned any money to any person or
entity except in the ordinary course of business;
(p) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(q) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to change the terms and conditions of any such rights paid any
dividends or made any distribution to the holders of GRS' capital stock;
(r) entered into any material agreement with any person or
group, or modified or amended in any material respect the terms of any material
existing agreement except in the ordinary course of business consistent with
past practice;
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(s) entered into, adopted or amended any Employee Benefit
Plan; or
(t) entered into any agreement (written or oral) to do any of
the foregoing, except in the ordinary course of business consistent with past
practice.
Section 5.13 Commitments. (a) Except the material contracts,
agreements, commitments and other arrangements, whether oral or written, to
which GRS is a party (the "GRS Contracts") set forth in Schedule 5.13, GRS has
not entered into, nor is the capital stock, the assets or the business of GRS
bound by, whether or not in writing, any
(i) partnership or joint venture agreement;
(ii) deed of trust or other security agreement,
except in the ordinary course of business consistent with past practice;
(iii) guaranty or suretyship, indemnification or
contribution agreement or performance bond;
(iv) employment, consulting or compensation
agreement or arrangement, including the election or retention in office of any
director or officer;
(v) labor or collective bargaining agreement;
(vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent or to be
lent to another, except in the ordinary course of business;
(vii) deed or other document evidencing an interest
in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or commission
agents, investment bankers, financial advisors, business brokers, public
relations or advertising agencies, accountants or attorneys, except with respect
to confidentiality agreements;
(ix) lease of real or personal property, whether as
lessor, lessee, sublessor or sublessee, except in the ordinary course of
business and excluding the real estate leases set forth on Schedule 5.16(c);
(x) agreement between GRS and any Affiliate;
(xi) agreement relating to any material matter or
transaction in which an interest is held by a person or entity that is an
Affiliate of GRS;
(xii) any agreement for the acquisition of services,
supplies, equipment or other personal property and involving more than $25,000
in the aggregate, except in the ordinary course of business;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition covenants;
(xv) any other contract or arrangement that
involves either an unperformed commitment in excess of $5,000 or that terminates
more than thirty (30) days after the date hereof, except in the ordinary course
of business;
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(xvi) agreement relating to any material matter or
transaction in which an interest is held by any person or entity referred to in
Section 5.24 hereof; or
(xvii) any other agreement or commitment not made in
the ordinary course of business that is material to the business or financial
condition of GRS.
True, correct and complete copies of the written GRS Contracts, and true,
correct and complete written descriptions of the oral GRS Contracts, have
heretofore been delivered or made available to the Stockholders. There are no
existing material defaults, material events of default or events, occurrences,
acts or omissions that, with the giving of notice or lapse of time or both,
would constitute material defaults by GRS, and no material penalties have been
incurred nor are amendments pending, with respect to the GRS Contracts. The GRS
Contracts are in full force and effect and are valid and enforceable obligations
of GRS, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equity remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity). GRS has not received notice of any
material default with respect to any GRS Contracts. For the purposes of this
Section 5.13(a), the term "material" shall mean a condition the existence or
breach of which could result in damage or loss to GRS valued in excess of $5,000
individually or $25,000 in the aggregate.
(b) Except as contemplated hereby, GRS has not received notice
of any plan or intention of any other party to any GRS Contract to exercise any
right to cancel or terminate any GRS Contract. GRS does not currently
contemplate, and has no reason to believe any person or entity currently
contemplates, any amendment or change to any GRS Contract. None of the
customers, joint venture partners or suppliers of GRS has refused, or
communicated that it will or may refuse, to purchase or supply goods or
services, as the case may be, or has communicated that it will or may
substantially reduce the amounts of goods or services that it is willing to
purchase from, or sell to, GRS.
Section 5.14 Insurance. GRS has previously delivered or made available
to the Stockholders all insurance policies of GRS. All of such policies are
valid and enforceable against GRS, except as such enforceability may be limited
by any applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equity remedies may be limited by the application
of general principles of equity (regardless of whether such equitable principles
are applied in a proceeding at law or in equity).
Section 5.15 Patents, Trade-marks, Service Marks and Copyrights.
(a) GRS owns all patents, trade-marks, service marks and
copyrights (collectively "Proprietary Rights"), if any, necessary to conduct its
business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in Schedule 5.15(a) is a
true and correct description of all Proprietary Rights.
(b) GRS has the sole and exclusive right to use the
Proprietary Rights without infringing or violating the rights of any third
parties. Use of the Proprietary Rights does not require the consent of any other
person and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or right to use any Proprietary Right
or challenging or questioning the validity or effectiveness of any license or
agreement constituting a part of any Proprietary Right. Each of the Proprietary
Rights is valid and subsisting, has not been canceled, abandoned or otherwise
terminated and, if applicable, has been duly issued or filed.
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Section 5.16 Title to Assets; Condition of Assets.
(a) A description of all interests in real property owned by
GRS is set forth in Schedule 5.16(a).
(b) Except as disclosed on Schedule 5.16(b), GRS has good and
marketable title to its respective assets, (other than those disposed of since
the date of the GRS Balance Sheet in the ordinary course of business), free and
clear of all security interests, liens, charges and other encumbrances, except
for (i) liens for taxes not yet due and payable or being contested in good faith
in appropriate proceedings, and (ii) encumbrances that are incidental to the
conduct of its businesses or ownership of property, not incurred in connection
with the borrowing of money or the obtaining of credit, and which do not in the
aggregate materially detract from the value of the assets affected or materially
impair their use by GRS. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by GRS are in good operating
condition and repair, normal wear and tear excepted, are adequate and sufficient
for GRS' business and conform in all material respects with all applicable
ordinances, regulations and laws relating to their use and operation.
(c) A listing of all real property leases, their terms and
total lease payments is attached hereto as Schedule 5.16(c). GRS enjoys peaceful
and undisturbed possession under all real property leases under which GRS is
operating, and all such leases are valid and subsisting and none of them is in
default, except for those defaults which, individually or in the aggregate,
would not have a material adverse effect upon GRS.
Section 5.17 Compliance with Laws. GRS has all material franchises,
Permits, licenses and other rights and privileges necessary to permit it to own
its Properties and to conduct its businesses as presently conducted. The
business and operations of GRS have been and are being conducted in accordance
in all material respects with all applicable laws, rules and regulations, and
GRS is not in violation of any judgment, law or regulation except where any such
violation would not have a material adverse effect on GRS' results of
operations, business, assets or financial condition.
Section 5.18 Litigation: Default. Except as otherwise set forth in
Schedule 5.18, there are no claims, actions, suits, investigations or
proceedings against GRS pending or, to the Knowledge of GRS, threatened in any
court or before or by any Governmental Authority, or before any arbitrator, that
could reasonably be expected to have a material adverse effect (whether covered
by insurance or not) on the business, operations, prospects, Properties,
securities or financial condition of GRS. Except as otherwise set forth in
Schedule 5.18, GRS is not in default under, and no condition exists (whether
covered by insurance or not) that with or without notice or lapse of time or
both would (i) constitute a default under, or breach or violation of, any Legal
Requirement or Permit applicable to GRS or any GRS Contract applicable to GRS,
or (ii) accelerate or permit the acceleration of the performance required under,
or give any other party the right to terminate, any GRS Contract, other than
defaults, breaches, violations or accelerations that would not have a material
adverse effect on the business, operations, prospects, Properties, securities or
financial condition of GRS.
Section 5.19 Environmental Matters.
(a) Except as listed in Schedule 5.19(a), to the Knowledge of
GRS, there are no PCBs, TCE, PCE, or asbestos containing materials generated,
used, treated, stored, maintained, disposed of, or otherwise deposited in, or
located on any premises at which GRS' business (the "GRS Business") is or was,
or at which the business or, to the Knowledge of GRS, its predecessors was,
located, which would have a Material Adverse Effect on GRS.
(b) Except as described in Schedule 5.19(b), there are and
were no underground storage tanks used, stored, maintained, located on any
premises at which the GRS Business is or was, or, to knowledge of GRS, at which
the business of its predecessors was, located, which would have a
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Material Adverse Effect on GRS. With respect to underground storage tanks,
Schedule 5.19(b) sets forth the size, location, construction, installation date,
use and testing history of all underground storage tanks (whether or not
excluded from regulation under Environmental Law), including all underground
storage tanks in use, out of service, closed, abandoned, decommissioned, or sold
to a third party.
(c) Except as listed in Schedule 5.19(c), to the Knowledge of
GRS, there has been no "release" as defined in 42 U.S.C. 9601(22) or, to the
best knowledge of GRS, threat of a "release" of any Hazardous Substance on, from
or under any premises from which (i) GRS' operations have been or are being
conducted related to the GRS Business. or (ii) to the Knowledge of GRS, the
operations of any predecessor of GRS, which would have a Material Adverse Effect
on GRS.
(d) Except as listed in Schedule 5.19(d), neither GRS nor
their respective predecessors have received written notice alleging any
potential liability with respect to the contamination, investigation, or cleanup
of any site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, discharged, emitted or disposed of and, to the
Knowledge of GRS, there are no past or present events, facts, conditions or
circumstances which may interfere with or prevent material compliance by GRS
with Environmental Law, or with any order, decree, judgment, injunction, notice
or demand issued, entered, promulgated or approved thereunder, or which may give
rise to any liability under applicable law including, without limitation, any
Environmental Law, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of Hazardous Substances by GRS or, to
the Knowledge of GRS, any predecessor, as a result of any act or omission of GRS
or any predecessors related to the GRS Business.
(e) Except as disclosed in Schedule 5.19(e), all of GRS' and,
to the Knowledge of GRS, their respective predecessor's, Hazardous Substances
disposal and recycling practices related to the GRS Business have been
accomplished in material compliance with all applicable Environmental Laws.
GRS' representation(s) with respect to this Section 5.19 shall not be
interpreted to imply that the Stockholders have constructive knowledge regarding
any aspect of the GRS Business with respect to environmental matters nor to
limit the scope of any of GRS' representations under this Agreement. No such due
diligence examination or related activities of, or on behalf of, the
Stockholders however, shall constitute a waiver or relinquishment by the
Stockholders of their right to rely upon GRS' representations, warranties,
covenants and agreements as made herein or pursuant hereto, and no such
disclosure shall constitute an assumption by the Stockholders of any conditions
or liabilities, and such disclosure shall not relieve GRS of its duties and
obligations hereunder.
Section 5.20 Banks. Schedule 5.20 sets forth (i) the name of each bank,
trust company or other financial institution and stock or other broker with
which GRS has an account, credit line or safe deposit box or vault, (ii) the
names of all persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
or vault, and (iv) the names of all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of GRS in matters concerning
any of its business or affairs. Except as otherwise set forth in Schedule 5.20,
no such proxies, powers of attorney or other like instruments are irrevocable.
Section 5.21 Suppliers and Customers Sales. Schedule 5.21 sets forth
all of GRS' material suppliers, together with the dollar amount of goods
purchased by GRS from each such supplier during the twelve month period ended
December 31, 1997 and the four month period ended April 30, 1998, as well as
each of the principal customers of GRS. Except as otherwise set forth in
Schedule 5.21, since December 31, 1997, there has been no material adverse
change in the business relationship of GRS with any supplier or customer named
in Schedule 5.21. No customer or supplier named in Schedule 5.21 has terminated
or materially altered, or notified GRS of any intention to terminate or
materially alter, its
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relationship with GRS and GRS has no reason to believe that any such customer or
supplier will terminate or materially alter its relationship with GRS or to
materially decrease its services or supplies to GRS or its direct or indirect
usage of the services or products of GRS. For purposes of Sections 5.21 and 5.24
hereof "material suppliers" refers to suppliers from whom GRS purchased five
percent (5%) or more of the total amount of the goods purchased by GRS during
the twelve month period ended December 31, 1997 and the four month period ended
April 30, 1998, and "principal customers" refers to customers who accounted for
5% or more of GRS' revenues during the twelve month period ended December 31,
1997 and the four month period ended April 30, 1998.
Section 5.22 Brokerage. There are no claims for brokerage commissions,
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
GRS.
Section 5.23 Disclosure; Due Diligence. This Agreement and the Exhibits
and Schedules hereto, when taken as a whole with other documents and
certificates furnished by GRS to the Stockholders or their counsel, do not
contain any untrue statement of material fact or omit any material fact
necessary in order to make the statements therein not misleading; provided,
however, certain materials provided to the Stockholders contain projections and
estimates of future events, and such projections and estimates have been based
upon certain assumptions that management of GRS made in good faith and believed
are reasonable at the time such materials were prepared.
Section 5.24 Ownership Interests of Interested Persons. Except as set
forth in Schedule 5.24, no director or executive officer of GRS or their
respective spouses or children, owns directly or indirectly, on an individual or
joint basis, any material interest in, or serves as an officer or director of,
any principal customer or material supplier which has a business relationship
with GRS or any organization that has a material contract or arrangement with
GRS.
Section 5.25 Investments in Competitors. No director or executive
officer of GRS owns directly or indirectly any material interests or has any
investment equal to 5% or more of the outstanding voting securities in any
corporation, business or other person that is a direct competitor of GRS.
Section 5.26 Certain Payments. Neither GRS, nor any director, officer
or employee of GRS has paid or caused to be paid, directly or indirectly, in
connection with the business of GRS: (a) to any government or agency thereof or
any agent of any supplier or customer any bribe, kick-back or other similar
payment; or (b), any material contribution to any political party or candidate
(other than from personal funds of directors, officers or employees not
reimbursed by their respective employers or as otherwise permitted by applicable
law).
Section 5.27 Government Inquiries. Except as set forth on Schedule
5.27, there have been no material inspection reports, questionnaires, inquiries,
demands or requests for information received by GRS from, or any material
statement, report or other document filed by GRS with, the federal government or
any federal administrative agency (including but not limited to, the Justice
Department, Internal Revenue Service, Department of Labor, Occupational Safety
and Health Administration, Federal Trade Commission, National Labor Relations
Board, and Interstate Commerce Commission), any state securities administrator
or any local or state taxing authority.
Section 5.28 Tax Matters.
(a) Except as set forth in Schedule 5.28 hereto, GRS:
(i) has filed all federal income Tax Returns, and
all other material Tax Returns which it is required to file under applicable
laws and regulations;
(ii) all such Tax Returns are true and accurate in
all material respects;
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(iii) has paid all Taxes due and owing by it (whether
or not such Taxes are required to be shown on a Tax Return) and has withheld and
paid over to the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party, except where the amounts of such unpaid Taxes or the amounts
that have not been withheld and paid over do not, in the aggregate, exceed
$25,000;
(iv) the accrual for Taxes on the Unaudited GRS
Balance Sheet (excluding any amount recorded which is attributable to timing
differences between book and Tax income) would be adequate to pay all material
Tax liabilities of GRS if its current tax year were treated as ending on the
date of the Unaudited GRS Balance Sheet;
(v) the federal income Tax Returns of GRS have been
filed through the date hereof, and, as of the date hereof, none of such Tax
Returns has been audited.
(b) To the Knowledge of GRS, no claim has been made by a
taxing authority in a jurisdiction where GRS does not file Tax Returns that GRS
is or may be subject to taxation by that jurisdiction.
(c) To the Knowledge of GRS;
(i) there are no foreign, federal, state or local
tax audits or administrative or judicial proceedings pending or being conducted
with respect to GRS;
(ii) no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority and no
written notice indicating an intent to open an audit or other review has been
received by GRS from any foreign, federal, state or local taxing authority; and
(iii) there are no material unresolved claims
concerning GRS' Tax liability.
(d) No waivers of statutes of limitation have been given or
requested with respect to GRS in connection with any Tax Returns covering GRS,
except where such waiver would not have a material adverse effect on GRS.
(e) GRS has not executed or entered into a closing agreement
pursuant to IRC ss. 7121 or any predecessor provision thereof or any similar
provision of state, local or foreign law; nor has GRS agreed to or is required
to make any adjustments pursuant to IRC ss. 481(a) or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by GRS. GRS has no knowledge that the IRS has proposed any such adjustment or
change in accounting method, or has any knowledge with respect to any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of GRS.
(f) GRS has not made an election under IRC ss. 341(f).
(g) GRS is not liable for the Taxes of another person.
(h) GRS is not a party to any tax sharing agreement.
(I) GRS has not made any payments nor is it obligated to make
payments nor is it a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC ss. 280G.
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Section 5.29 Participation in Secondary Offering. In the event that
after the Offering GRS files a registration statement with the Securities and
Exchange Commission with respect to a subsequent public offering (the "Secondary
Offering") of shares of GRS Common Stock, and any shareholders of GRS
participate in the Secondary Offering through the sale of their respective
shares of GRS Common Stock, then (i) ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall first be entitled to
participate in the Secondary Offering with respect to 250,000 shares of GRS
Common Stock (in recognition of the fact that ▇▇. ▇▇▇▇▇▇▇ is not receiving any
cash proceeds from the sale of the common stock of the Founding Companies owned
by him) and (ii) thereafter the Stockholders shall be entitled to participate in
the Secondary Offering by including therein such number of shares of GRS Common
Stock owned by the Stockholders as shall equal (i)(A) the total number of shares
of GRS Common Stock owned by such Stockholders divided by (B) the total number
of shares of GRS Common Stock owned by all shareholders of the Founding
Companies, multiplied by (ii) the total number of shares of GRS Common Stock
owned by shareholders of the Company which are to be included in the Secondary
Offering.
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