SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): SEPTEMBER 9, 1997
CORNELL CORRECTIONS, INC.
(Exact name of registrant as specified in its charter)
1-14472
(Commission File Number)
DELAWARE 76-0433642
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
4801 WOODWAY, SUITE #100E
HOUSTON, TEXAS 77056
(Address of principal executive offices and zip code)
(713) 623-0790
(Registrants telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 9, 1997, Cornell Corrections, Inc., a Delaware corporation (the
"Company") acquired substantially all of the assets (the "Acquisition") of The
Abraxas Group, Inc. and four related entities (collectively "Abraxas"). The
Acquisition was completed pursuant to an Asset Purchase Agreement dated as of
August 14, 1997 by and between the Company and Abraxas. The Company paid an
aggregate purchase price of $19.8 million. The Company financed the purchase
with $19.0 million of borrowings from the revolving line of credit under its
credit facility with ING (U.S.) Capital Corporation, and the remainder with
cash. The Acquisition is being treated as a purchase for accounting purposes.
Abraxas was a non-profit provider of seven residential and eleven
non-residential community-based juvenile programs serving approximately 1,400
juvenile offenders throughout Pennsylvania, Ohio, Delaware and the District of
Columbia.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
As of the filing date of this Form 8-K, the Company has found it
impracticable to file the required financial statements of the
acquired business. The Company intends to file the required
financial statements as soon as they become available but in any
event no later than 60 days after the deadline for filing this
report on Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
As of the filing date of this Form 8-K, the Company has found it
impracticable to file the required pro forma financial information
for the Acquisition. The Company intends to file the required pro
forma financial information as soon as it becomes available but in
any event no later than 60 days after the deadline for filing this
report on Form 8-K.
(c) EXHIBITS.
2.1 Asset Purchase Agreement dated as of August 14, 1997 by and between
Cornell Corrections, Inc., and Abraxas Group, Inc., Foundation for
Abraxas, Inc., Abraxas Foundation, Inc., Abraxas Foundation of Ohio
and Abraxas, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORNELL CORRECTIONS, INC.
Date: SEPTEMBER 22, 1997 By: /s/ STEVEN W. LOGAN
Steven W. Logan
Chief Financial Officer,
Treasurer and Secretary
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
by and among
CORNELL CORRECTIONS, INC.
and
ABRAXAS GROUP, INC., FOUNDATION FOR ABRAXAS, INC.,
ABRAXAS FOUNDATION, INC., ABRAXAS
FOUNDATION OF OHIO AND
ABRAXAS, INC.
Dated as of August 14, 1997
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.......................................................1
SECTION 1.1 ACCOUNTING TERMS. .........................................1
SECTION 1.2 DEFINED TERMS. ............................................1
ARTICLE II CLOSING..........................................................2
SECTION 2.1 CLOSING. ..................................................2
ARTICLE III PURCHASE, SALE AND DELIVERY.....................................2
SECTION 3.1 ACQUISITION ASSETS. .......................................2
SECTION 3.2 EXCLUDED ASSETS............................................5
SECTION 3.3 PURCHASE PRICE.............................................5
SECTION 3.4 ADJUSTMENT AMOUNT. ........................................6
SECTION 3.5 ADJUSTMENT PROCEDURE. ....................................7
SECTION 3.6 ALLOCATION REPORTING. .....................................7
ARTICLE IV LIABILITIES AND OBLIGATIONS......................................8
SECTION 4.1 ASSUMED LIABILITIES. ......................................8
SECTION 4.2 LIABILITIES NOT ASSUMED BY PURCHASER. .....................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER..........................9
SECTION 5.1 ORGANIZATION; QUALIFICATION. ..............................9
SECTION 5.2 AUTHORITY; ENFORCEABILITY. ...............................10
SECTION 5.3 SUBSIDIARIES. ............................................10
SECTION 5.4 CONFLICTING AGREEMENTS AND OTHER
MATTERS; CONSENTS. .............................................10
SECTION 5.6 FINANCIAL STATEMENTS. ....................................11
SECTION 5.7 NO UNDISCLOSED LIABILITIES. ..............................12
SECTION 5.8 ABSENCE OF CERTAIN CHANGES. ..............................12
SECTION 5.9 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS..............13
SECTION 5.10 ACTIONS PENDING. ...................................14
SECTION 5.11 ENVIRONMENTAL. ....................................15
SECTION 5.12 INSURANCE. .........................................17
SECTION 5.13 TITLE. .............................................17
SECTION 5.14 REAL ESTATE.........................................17
SECTION 5.15 SUPPLIES. ..........................................18
SECTION 5.16 ACCOUNTS RECEIVABLE. ...............................18
SECTION 5.17 TAXES. ............................................18
SECTION 5.18 EMPLOYEE BENEFIT PLANS..............................19
SECTION 5.19 EMPLOYEES AND LABOR MATTERS.........................20
SECTION 5.20 INTELLECTUAL PROPERTY RIGHTS. ......................21
SECTION 5.21 RELATIONSHIPS. .....................................21
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SECTION 5.22 CERTAIN PAYMENTS. ..................................22
SECTION 5.23 BOOKS AND RECORDS. .................................22
SECTION 5.24 CONDITION AND SUFFICIENCY OF ASSETS. ...............22
SECTION 5.25 CERTAIN EXPENSES. ..................................22
SECTION 5.26 CLIENT BANK ACCOUNTS. ..............................23
SECTION 5.27 STUDIES, ETC. ......................................23
SECTION 5.28 DISCLOSURE. ........................................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................23
SECTION 6.1 CORPORATE EXISTENCE. .....................................23
SECTION 6.2 AUTHORITY; NO CONFLICTS. .................................23
SECTION 6.3 BINDING AGREEMENT. .......................................23
SECTION 6.4 REGULATORY APPROVALS. ....................................24
SECTION 6.5 PENDING LITIGATION........................................24
ARTICLE VII CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES...........24
SECTION 7.1 EMPLOYEES. ..............................................24
SECTION 7.2 TAXES.....................................................25
SECTION 7.3 CONSENTS. ................................................26
SECTION 7.4 TITLE. ..................................................26
SECTION 7.5 SURVEYS. .................................................27
SECTION 7.7 FURTHER ASSURANCES........................................28
SECTION 7.8 MAIL RECEIVED AFTER CLOSING. .............................28
SECTION 7.9 UNCOLLECTIBLE ACCOUNTS RECEIVABLE. .......................28
SECTION 7.10 BILLS AND PAYMENTS RECEIVED AFTER CLOSING...........29
SECTION 7.11 LOSS DUE TO CONDEMNATION. ..........................29
SECTION 7.12 LOSS DUE TO CASUALTY. ..............................29
SECTION 7.13 NOTICE OF ENVIRONMENTAL CLAIMS. ...................30
SECTION 7.14 PROJECT. ..........................................30
SECTION 7.15 SCHEDULES...........................................30
ARTICLE VIII COVENANTS.....................................................31
SECTION 8.1 SELLER'S COVENANTS. ......................................31
SECTION 8.2 PURCHASER'S COVENANTS. ...................................32
ARTICLE IX CONDITIONS TO CLOSING...........................................33
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER.
33
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF SELLER........39
ARTICLE X TERMINATION......................................................40
SECTION 10.1 GROUNDS FOR TERMINATION. ..........................40
SECTION 10.2 EFFECT OF TERMINATION. .............................40
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ARTICLE XI INDEMNIFICATION.................................................41
SECTION 11.1 SELLER'S INDEMNITY OBLIGATIONS. ....................41
SECTION 11.2 PURCHASER'S INDEMNITY OBLIGATIONS. .................42
SECTION 11.3 INDEMNIFICATION PROCEDURES. .......................42
SECTION 11.4 DETERMINATION OF INDEMNIFIED AMOUNTS. ..............44
SECTION 11.5 ESCROW. ............................................44
SECTION 11.6 LIMITATION OF SELLER'S LIABILITY. .................44
SECTION 11.7 LIMITATION OF PURCHASER'S LIABILITY.................44
SECTION 11.8 SELLER TO MAINTAIN EXISTENCE AFTER CLOSING..........45
ARTICLE XII COVENANTS NOT TO COMPETE.......................................45
SECTION 12.1 SELLER'S COVENANTS NOT TO COMPETE. .................45
ARTICLE XIII MISCELLANEOUS.................................................46
SECTION 13.1 COMMISSIONS. ......................................46
SECTION 13.2 SURVIVAL. ..........................................46
SECTION 13.3 EXPENSES. ..........................................47
SECTION 13.4 NOTICES. ...........................................47
SECTION 13.5 ENTIRE AGREEMENT. ..................................48
SECTION 13.6 GOVERNING LAW. .....................................48
SECTION 13.7 ARBITRATION. ......................................48
SECTION 13.8 ASSIGNMENTS AND THIRD PARTIES. .....................49
SECTION 13.9 SEVERABILITY. ......................................49
SECTION 13.10 AMENDMENTS; NO WAIVERS. ............................49
SECTION 13.12 BEQUESTS, DEVISES AND GIFTS. ......................50
SECTION 13.13 NO THIRD PARTY BENEFICIARIES. ......................50
SECTION 13.14 HEADINGS; USE OF CERTAIN TERMS. ....................50
SECTION 13.15 COUNTERPARTS. ......................................50
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EXHIBITS
Exhibit 1.2 Definitions
Exhibit 7.5 Real Property Descriptions
Exhibit 9.1(o) 1997 Projections
Exhibit 9.1(q) Modified Standard Rate Schedules
Exhibit 9.1(s) Purchaser Employee Benefit Plans
SCHEDULES
Schedule 3.1(i) Acquired Property
Schedule 3.1(iv) Assumed Leases
Schedule 3.1(v) Equipment
Schedule 3.1(vi) Motor Vehicles
Schedule 3.1(viii)Contracts
Schedule 3.1 (ix) Accounts Receivable
Schedule 3.1(x) Cash and Investments
Schedule 3.1 (xiv)Permits
Schedule 3.3(b) Retired Debt
Schedule 3.6 Purchase Price Allocation
Schedule 4.1(a) Assumed Liabilities
Schedule 5.4 Conflicting Agreements and Other Matters; Consents
Schedule 5.5(a) No Default; Compliance with Laws and Regulations
Schedule 5.7 No Undisclosed Liabilities
Schedule 5.8 Absence of Certain Changes
Schedule 5.9 Contracts
Schedule 5.10 Actions Pending
Schedule 5.11 Environmental
Schedule 5.12 Insurance
Schedule 5.14 Real Estate
Schedule 5.16 Accounts Receivable
Schedule 5.18 Employee Benefit Plans
Schedule 5.19 Employees and Labor Matters
Schedule 5.20 Intellectual Property Rights
Schedule 5.21 Relationships
Schedule 5.24 Condition and Sufficiency of Assets
Schedule 5.25 Projected Costs
Schedule 5.26 Client Bank Accounts
Schedule 8.2(a) Existing Contracts
Schedule 9.1(v) Additional Positions
Schedule 13.1 Commissions
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated August 14, 1997,
is by and between ABRAXAS GROUP, INC., a Pennsylvania nonprofit corporation
("TAG"), FOUNDATION FOR ABRAXAS, INC., a Pennsylvania nonprofit corporation
("FFA"), ABRAXAS FOUNDATION, INC., a Pennsylvania nonprofit corporation ("TAF"),
ABRAXAS FOUNDATION OF OHIO, an Ohio nonprofit corporation ("TAFO"), and ABRAXAS,
INC., a Delaware nonprofit corporation ("AI"), and CORNELL CORRECTIONS, INC., a
Delaware corporation ("PURCHASER"). For purposes of this Agreement, TAG, FFA,
TAF, TAFO and AI are collectively referred to as "SELLER".
WHEREAS, Seller is in the business of operating juvenile treatment
programs and educational programs and/or facilities in Delaware, the District of
Columbia, Ohio and Pennsylvania; and
WHEREAS, Purchaser wishes to purchase from Seller and Seller wishes to
sell, transfer, assign and deliver to Purchaser substantially all of the assets
of Seller on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements stated herein, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto covenant and agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles and on a basis not inconsistent with those applied in the
preparation of the financial statements referred to in SECTION 5.6 hereof.
SECTION 1.2 DEFINED TERMS. As used in this Agreement, other words and
terms have the meanings specified in EXHIBIT 1.2. Other capitalized terms have
the meanings assigned to them elsewhere in this Agreement.
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ARTICLE II
CLOSING
SECTION 2.1 CLOSING. The closing of the purchase and sale provided for
herein (the "CLOSING") shall take place at the offices of Liddell, Sapp, Zivley,
Hill & LaBoon, LLP, 600 Travis, 34th Floor, Houston, Texas 77002, on or before
August 31, 1997, unless extended as provided in SECTION 3.3(a), or at such other
place, time or date as may be agreed upon by the parties hereto. Subject to the
provisions of SECTION 10.1, the failure to consummate the purchase and sale
provided for in this Agreement on the date and time and at the place determined
pursuant to this Section shall not result in the termination of this Agreement
and shall not relieve any party to this Agreement of any obligation hereunder.
For purposes of this Agreement, the date on which the Closing actually occurs is
referred to as the "CLOSING DATE".
ARTICLE III
PURCHASE, SALE AND DELIVERY
SECTION 3.1 ACQUISITION ASSETS. Subject to the terms and conditions of
this Agreement, and on the basis of the representations and warranties
hereinafter set forth, at the Closing, Seller shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall acquire and purchase from
Seller, subject to SECTION 3.2 hereof, all of the assets, properties and rights
of Seller, including without limitation all of Seller's right, title and
interest in and to the following:
(i) the fee simple interest in and to the properties described on
SCHEDULE 3.1(i) (the "ACQUIRED PROPERTY" or "ACQUIRED PROPERTIES");
(ii) all buildings, structures, fixtures and other improvements
located on the Acquired Properties (the "IMPROVEMENTS");
(iii) all right, title and interest of Seller in and to (i) all
easements, tenements, hereditaments, privileges and appurtenances in any
way belonging to the Acquired Properties and the Improvements, (ii) any
land lying in the bed of any highway, street, road, avenue or access way,
open or proposed, in front of or abutting or adjoining the Acquired
Properties and the Improvements, (iii) the use of all strips and rights of
way, if any, abutting, adjacent, contiguous to or adjoining the Acquired
Properties and the Improvements, and (iv) all other rights and
appurtenances belonging or in any way pertaining thereto including,
without limitation, all water, wastewater and other utility rights and
capacities (the "APPURTENANCES");
(iv) all right, title and interest in, to and under all real
property leases to which Seller is a party as a tenant or lessee on the
Closing Date including, without limitation, those listed on SCHEDULE
3.1(iv) hereto (the "ASSUMED LEASES");
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(v) all of the machinery, equipment, trade fixtures, tools,
furniture, appliances, implements, spare parts, supplies, leasehold
improvements, construction in progress and all other tangible personal
property owned by Seller, or of which Seller has the current possession
and use, on the Closing Date, including, without limitation, those listed
on SCHEDULE 3.1(v) hereto (collectively, the "EQUIPMENT");
(vi) all motor vehicles and rolling stock owned by Seller on the
Closing Date, including, without limitation, those listed on SCHEDULE
3.1(vi) hereto (collectively, the "MOTOR VEHICLES");
(vii) all office supplies, kitchen supplies, laundry supplies,
medical supplies, spare parts, safety equipment, maintenance supplies,
other supplies used or consumed in the Business and other similar items
which exist on the Closing Date (collectively, the "SUPPLIES");
(viii) all right, title and interest in, to and under all contracts
(including, without limitation, all of the fee-for-service, operating and
other contracts of Seller), leases, agreements, equipment or other lease
licenses, government contract awards, management agreements and building
service agreements to which Seller is a party on the Closing Date or by
which any of the Acquisition Assets (as hereinafter defined) are then
bound including, without limitation, those listed on SCHEDULE 3.1(viii)
hereto (collectively, the "CONTRACTS");
(ix) all accounts receivable of Seller and all other rights of
Seller to payment for goods sold or leased or for services rendered,
including, without limitation, those which are not evidenced by
instruments or chattel paper, whether or not they have been earned by
performance or have been written-off or reserved against as a bad debt or
doubtful account in any financial statements, together with all
instruments and all documents of title representing any of the foregoing,
all rights in any merchandise or goods which any of the same represent,
and all rights, title, security and guaranties in favor of Seller with
respect to any of the foregoing (collectively, the "ACCOUNTS RECEIVABLE"),
including, without limitation, those listed on SCHEDULE 3.1(ix) hereto;
(x) with the exception of the Debt Service Reserve Fund (as defined
in SECTION 3.2 below), all cash and investments of Seller which exist at
the Closing Date, including but not limited to those listed on SCHEDULE
3.1(x) hereto;
(xi) all prepaid items, deposits and other similar assets of Seller
which exist at the Closing Date;
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(xii) all cash or cash equivalents representing fund accounts of
Clients ("CLIENT BANK ACCOUNTS");
(xiii) all goodwill and going concern value;
(xiv) all right, title and interest in all licenses, permits,
applications, registrations, exemptions, notices of intent, franchises,
consents, waivers, variances, authorizations, approvals and orders issued
by any federal, state, municipal or other Governmental Authority
(collectively, the "PERMITS") relating to the Acquisition Assets or the
Business, including, without limitation, those listed on SCHEDULE 3.1(xiv)
hereto;
(xv) all patents, patent applications, processes, shop rights,
formulas, brand names, trade secrets, servicemarks, tradenames,
trademarks, copyrights, intellectual property, drawings, and any similar
items and related rights owned by or licensed to Seller, together with any
goodwill associated therewith and all rights of action on account of past,
present and future unauthorized use or infringement thereof, including,
without limitation, the use of the names "Abraxas," "The Abraxas School,"
"The Abraxas Group, Inc.," "The Abraxas Group," and all derivations
thereof;
(xvi) all rights under express or implied warranties from the
suppliers of Seller with respect to the Acquisition Assets, to the extent
they are assignable;
(xvii) all books, records, papers and instruments of whatever nature
and wherever located that are in the possession or control of Seller, that
relate to the Business or the Acquisition Assets or which are required or
necessary in order for Purchaser to conduct the Business from and after
the Closing Date in the manner in which it is presently being conducted,
including, without limitation, blueprints of the Improvements, if any,
accounting and financial records relating to the Contracts, maintenance
records, environmental records, analytical data and reports,
correspondence with Governmental Authorities relating to the Business,
supplier lists and other supplier data relating to the purchase of
supplies, notices of claims or demands by third parties, and confidential
information relating to the Business;
(xviii) all personnel files and other materials relating to
employees of Seller who are to be offered employment by Purchaser as
contemplated by SECTION 7.1 hereof;
(xix) all records of compliance and noncompliance with the laws,
regulations, ordinances and orders applicable to the Acquisition Assets or
the Business;
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(xx) all right, title and interest in, to and under all rights,
privileges, claims, causes of action, and options relating or pertaining
to the Acquisition Assets or the Business;
(xxi) all insurance policies relating to the Acquisition Assets, the
Business and any underlying property on which the Business is or has been
conducted and rights to make claims under any such current or prior
insurance policy; and
(xxii) subject to the exclusions set forth in SECTION 3.2 hereof,
all other or additional privileges, rights, interests, properties and
assets of every kind and description and wherever located that are used or
intended for use in connection with, or that are necessary to the
continued conduct of, the Business as presently conducted.
Subject to SECTION 3.2 hereof, all of the assets referenced in this
SECTION 3.1 are collectively referred to as the "ACQUISITION ASSETS"
SECTION 3.2 EXCLUDED ASSETS. Notwithstanding SECTION 3.1 hereof, Seller is
not selling and Purchaser is not purchasing pursuant to this Agreement any of
the following, all of which shall be retained by Seller (collectively, the
"EXCLUDED ASSETS"):
(a) the following accounts determined as of Closing, (i) the replacement
reserve with respect to the urban redevelopment authority mortgage (which amount
equaled $20,320 as of December 31, 1996) (the "REPLACEMENT RESERVE"), (ii) the
long term investment account with respect to the urban redevelopment authority
mortgage (which amount equaled $200,752 as of December 31, 1996) (the "LONG TERM
INVESTMENT ACCOUNT"), (iii) the debt service reserve fund (which amount equaled
$1,255,321 as of December 31, 1996), (iv) the sinking fund (which amount equaled
$412,484 as of December 31, 1996), and (v) the unexpended fund proceeds (which
amount equaled $524,747 as of December 31, 1996) (which accounts listed in (i)
through (v) above are collectively referred to as the "DEBT SERVICE RESERVE
FUND"). Any similar funds, proceeds or accounts in addition to those listed in
the preceding sentence shall be included in Acquisition Assets purchased by
Purchaser pursuant to this Agreement;
(b) any minute books, tax returns and similar corporate documents; and
(c) all employee benefit plans (as defined in ERISA) and all other similar
benefit plans, programs, arrangements or commitments (whether written of oral)
of Seller; PROVIDED, HOWEVER, that Purchaser shall make available to the
employees of Seller hired by Purchaser participation in any employee benefit
plan which Purchaser offers to its employees generally, subject to the terms of
such plan.
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SECTION 3.3 PURCHASE PRICE. The aggregate consideration for the purchase
of the Acquisition Assets and Seller's covenants set forth in ARTICLE XII
hereof, shall be $18,083,250 LESS the Adjustment Amount, if any, calculated
pursuant to SECTIONS 3.4 and 3.5 (as adjusted, the "PURCHASE PRICE") consisting
of and payable in accordance with the following:
(a) Prior to the execution of this Agreement, Purchaser delivered to
Seller the sum of $250,000 to serve as an option fee (including any additional
amounts paid pursuant to this SECTION 3.3(a) and interest on the aggregate
amount thereof, the "OPTION FEE"), which has been and shall remain segregated
from other Seller assets and deposited in an interest bearing account. Purchaser
may extend the Closing Date to September 30, 1997 by paying to Seller an
additional $50,000 on or before August 31, 1997. Any additional extensions shall
be subject to the written consent of Seller, which will not be unreasonably
withheld. The amounts paid pursuant to this Section (together with interest
thereon) shall be part of the Option Fee, and such amounts shall be subject to
the same terms of refundability and application against the Purchase Price as
the original $250,000 Option Fee. The Option Fee shall be applied against the
Purchase Price at Closing.
(b) At the Closing, (i) Seller shall use the entire Debt Service Reserve
Fund to prepay the indebtedness of Seller described on SCHEDULE 3.3(b) and (ii)
Purchaser shall pay directly to the applicable creditors the balance of the
amounts listed on SCHEDULE 3.3(b) after application of the Debt Service Reserve
Fund. The entire amount of the indebtedness (principal and interest) paid by
Seller and Purchaser at Closing and described on SCHEDULE 3.3(b) is referred to
in this Agreement as the "RETIRED DEBT" and the amount paid by Purchaser at
Closing shall be applied against the Purchase Price as set forth in SECTION
3.3(d) below.
(c) Upon the terms and subject to the conditions hereof, at the Closing,
Purchaser shall pay $1,200,000 (the "ESCROWED PURCHASE PRICE") of the Purchase
Price to an escrow agent mutually acceptable to Purchaser and Seller (the
"ESCROW AGENT"), to be held by the Escrow Agent and disbursed by the Escrow
Agent in accordance with the terms and conditions of the Escrow Agreement, in a
form reasonably agreed to by the parties (the "ESCROW AGREEMENT"), to be
executed by Purchaser and Seller at the Closing.
(d) Upon the terms and subject to the conditions hereof, at the Closing
and in full satisfaction of the Purchase Price, Purchaser shall pay to Seller an
amount equal to the Purchase Price LESS (i) the Option Fee, (ii) the Retired
Debt paid by Purchaser at Closing on behalf of Seller pursuant to SECTION 3.3(b)
above, (iii) the Escrowed Purchase Price, (iv) the Transaction Expenses paid by
Seller prior to Closing, (v) an amount equal to the sum of the Replacement
Reserve and Long Term Investment Account, and (vi) any other payments of
principal or prepayments of interest on indebtedness of Seller included within
the Retired Debt made after June 30, 1997, by wire transfer to an account
designated in writing by Seller or by a cashier's check made payable to Seller,
as determined by Purchaser.
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SECTION 3.4 ADJUSTMENT AMOUNT. The "ADJUSTMENT AMOUNT" shall be equal to
$1.00 for every $1.00 Net Working Capital is less than $5,664,592.
For purposes of this Agreement, "NET WORKING CAPITAL" shall mean total
current assets included within the Acquisition Assets MINUS total current
liabilities (excluding all Retired Debt) included within the Assumed
Liabilities, as determined in accordance with generally accepted accounting
principles and, to the extent consistent with such principles , on a basis
consistent with prior years.
SECTION 3.5 ADJUSTMENT PROCEDURE.
(a) Seller shall prepare, within 90 days following the Closing Date, a
balance sheet (the "CLOSING DATE BALANCE SHEET") of Seller as of the Closing
Date, including a listing of the Acquisition Assets and Assumed Liabilities and
a computation of Net Working Capital as of such date. The Closing Date Balance
Sheet shall be prepared in accordance with generally accepted accounting
principles and, to the extent consistent with such principles, on a basis
consistent with prior years. If, within 15 days following delivery of the
Closing Date Balance Sheet to Purchaser, Purchaser has not objected in writing
thereto, then the Net Working Capital reflected therein shall be utilized in
computing the Adjustment Amount. If Purchaser shall object in writing to the
computation, then Seller and Purchaser shall negotiate in good faith and attempt
to resolve their disagreement. Should such negotiations not result in an
agreement within 20 days, then the matter will be submitted to a mutually agreed
national accounting firm as is jointly selected by Purchaser and Seller (the
firm accepting the engagement being referred to as the "ACCOUNTING ARBITER"),
whose decision with respect thereto shall be final and binding on the parties in
all respects, except that Seller may withdraw from the transaction if the
Purchase Price is adjusted in favor of Purchaser by an amount in excess of
$3,000,000 unless Purchaser agrees to limit the Adjustment Amount to $3,000,000.
Fees and expenses incurred in preparing the Closing Date Balance Sheet shall be
borne by Seller and shall not be reflected as an expense in the Closing Date
Balance Sheet; provided, however, to the extent necessary, Purchaser shall make
its financial staff at its Pittsburgh, Pennsylvania offices available to Seller
free of charge. Fees and expenses incurred by Purchaser and their auditors in
reviewing the Closing Date Balance Sheet shall be borne by Purchaser. The fees
of any Accounting Arbiter shall be borne equally by Purchaser and Seller.
(b) On the tenth business day following the final determination of the
Adjustment Amount, Seller shall pay the Adjustment Amount to the Purchaser in
immediately available funds, which shall be a joint and several obligation of
each Seller.
(c) For purposes of determining Net Working Capital and due to the parties
agreement that the Transaction Expenses be subtracted from the Purchase Price in
SECTION 3.3(D) above, any paid and any accrued and unpaid Transaction Expenses
shall not be considered current liabilities.
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SECTION 3.6 ALLOCATION REPORTING. Unless otherwise agreed in writing by
Purchaser and Seller, (i) SCHEDULE 3.6 hereto sets forth the allocations
established by Purchaser and Seller of the Purchase Price and the Assumed
Liabilities (as hereinafter defined) (and any other items constituting
consideration paid by Purchaser or received by Seller in connection with the
disposition of the Acquisition Assets) among the Acquisition Assets; (ii) the
allocations set forth on SCHEDULE 3.6 hereto will be used by Purchaser and
Seller as the basis for reporting asset values and other items for purposes of
all required Tax Returns (including any Tax Returns required to be filed under
Section 1060(b) of the Code and the Treasury regulations thereunder); and (iii)
Purchaser and Seller shall not assert, in connection with any audit or other
proceeding with respect to Taxes, any asset values or other items inconsistent
with the allocations set forth on SCHEDULE 3.6 hereto.
ARTICLE IV
LIABILITIES AND OBLIGATIONS
SECTION 4.1 ASSUMED LIABILITIES. In addition to the consideration
specified in SECTION 3.3, and subject to SECTION 4.2 hereof, at the Closing,
Purchaser shall assume, pay, perform and discharge solely the following:
(a) the trade accounts payable and accrued liabilities of Seller incurred
in the normal course of operations, as of the Closing Date, to the extent (i)
recorded on the books of Seller and set forth on SCHEDULE 4.1(a) and (ii)
included in the calculation of Net Working Capital for purposes of SECTIONS 3.4
and 3.5 above; and
(b) any commitments arising after the Closing Date pursuant to the
Contracts (provided that the rights thereunder have been duly and effectively
assigned to Purchaser).
The liabilities referenced in SECTIONS 4.1(a) and 4.1(b) above are
collectively referred to as the "ASSUMED LIABILITIES."
SECTION 4.2 LIABILITIES NOT ASSUMED BY PURCHASER. Except as expressly
provided in SECTION 4.1 hereof, Purchaser does not assume or agree to pay,
perform or discharge, and shall not be responsible for, any other liabilities or
obligations of Seller of any nature whatsoever, whether accrued, absolute,
contingent or otherwise, including, without limitation, liabilities or
obligations based on, arising out of or in connection with the following
(collectively, the "EXCLUDED LIABILITIES"):
(a) any indebtedness (whether short-term or long-term) for borrowed money,
together with all interest thereon, including but not limited to the Retired
Debt;
(b) any Taxes for which Seller is liable (taking into account the
provisions of SECTION 7.2(a) hereof);
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(c) any prepayment penalties or other liabilities related to retiring or
extinguishing any indebtedness of Seller including, without limitation, the
Retired Debt;
(d) any liabilities arising out of or in connection with periods or
activity prior to the Closing Date related to OSHA, EEOC, EPA or any other
Governmental Authority, or any violation of law, and any unrecorded liabilities
or contingencies that are not expressly identified on SCHEDULE 4.1(a);
(e) any liability or obligation (contingent or otherwise) of Seller
arising out of any claim, litigation, or proceeding threatened or pending on or
before the Closing Date or any claim, litigation, or proceeding threatened or
initiated after the Closing Date to the extent based on an act or omission of
Seller or any current or former officer, director, employee, agent or
representative of Seller, or the operation of the Business and/or Acquisition
Assets occurring before the Closing Date, whether or not set forth on SCHEDULE
5.10;
(f) any claims or conditions arising under or relating to Environmental
Laws or similar legal requirements attributable or relating to the Acquisition
Assets (including, without limitation, the operation thereof) or the business of
Seller, including any liability or obligation resulting from Environmental Laws
with respect to the Business Property arising after the Closing Date resulting
from, caused by or related to any act or omission of Seller or any current or
former officer, director, employee, agent, representative, tenant or invitee of
Seller which occurred prior to the Closing Date, or the continuation of
practices or operations with respect to the Acquisition Assets or the Business
Property, that were occurring or in effect on or prior to the Closing Date;
(g) any liability arising out of or in connection with Seller's defective
performance of any Contract or any express or implied warranty with respect to
performance of any Contract prior to the Closing Date;
(h) any unpaid Transaction Expenses;
(i) any liability or obligation arising out of any employee benefit plan
(as defined in ERISA) and all other similar benefit plans, programs,
arrangements or commitments (whether written or oral) of Seller;
(j) any contingent or unknown liability of Seller; and
(k) any liability or obligation under or in connection with or related to
the Excluded Assets.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, jointly and severally, represents, warrants and agrees to and with
Purchaser as follows:
SECTION 5.1 ORGANIZATION; QUALIFICATION. TAG is a nonprofit corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. FFA is a nonprofit corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. TAF is a nonprofit corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania. TAFO is
a nonprofit corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio. AI is a nonprofit corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller has heretofore delivered to Purchaser true, correct and
complete copies of its articles of incorporation and bylaws, each as amended or
restated through the date of this Agreement. Seller has all requisite power and
authority to own and operate its assets and properties and to carry on its
business and the Business as it is now being conducted. Seller is duly licensed
or qualified as a foreign entity to do business and is in good standing in all
jurisdictions wherein the character of the properties owned or held by it or the
nature of the business transacted by it requires it to be so licensed or
qualified.
SECTION 5.2 AUTHORITY; ENFORCEABILITY. Seller has all requisite corporate
power and authority to enter into this Agreement. All necessary action on the
part of Seller has been taken to authorize the execution and delivery of this
Agreement, the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Seller. This Agreement constitutes, as of the date
hereof, and this Agreement and all documents and instruments required hereunder
to be executed and delivered by Seller at or prior to Closing will constitute,
on the Closing Date, legal, valid and binding obligations of Seller enforceable
against Seller in accordance with their terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally.
SECTION 5.3 SUBSIDIARIES. Seller does not have any Subsidiaries, nor does
Seller hold any equity interest in or control (directly or indirectly, through
the ownership of securities, by contract, by proxy, alone or in combination with
others, or otherwise) any corporation, limited liability company, partnership,
business organization or other Person, except that Seller, as defined in this
Agreement, is a group of five related entities, pursuant to which the parent
corporation is the sole corporate member of the other corporations and, as such,
exercises voting power and direct control over such corporations.
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SECTION 5.4 CONFLICTING AGREEMENTS AND OTHER MATTERS;
CONSENTS. Seller is not a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or financial condition as of the date hereof. Except as
set forth on SCHEDULE 5.4 hereto, the execution and delivery of this Agreement
does not, the fulfillment of or compliance with the terms and provisions hereof
will not, and the consummation of the transactions contemplated hereby will not:
(a) violate or conflict with any provision of, or require any notice,
consent, authorization or approval under, the articles of incorporation or
bylaws of Seller;
(b) violate or conflict with any provision of, or require any filing,
consent, authorization or approval under, any Permit, law or administrative
regulation or any judicial, administrative or arbitration order, award,
judgment, writ, injunction or decree applicable to or binding upon Seller or to
which Seller's assets or properties are subject; or
(c) conflict with, result in a material breach of, constitute a material
default under (whether with notice or the lapse of time or both), accelerate or
permit the acceleration of the performance required by, or require any consent,
authorization or approval under, (i) any mortgage, indenture, deed of trust,
loan or credit agreement or any other agreement or instrument evidencing
indebtedness for money borrowed to which Seller is a party or by which Seller is
bound or to which Seller's properties are subject or (ii) any material lease,
license, contract or other agreement or instrument to which Seller is a party or
by which Seller is bound or to which Seller's assets or properties are subject.
SECTION 5.5 NO DEFAULT; COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Except as set forth on SCHEDULE 5.5(a) and except where such default
would not have a Material Adverse Effect, Seller is not in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, (i) any mortgage, indenture, deed of trust, loan or credit
agreement, or any other agreement or instrument evidencing indebtedness or
borrowed money to which Seller is a party or by which Seller or any of its
properties is bound, (ii) any judgment, order or injunction of any court or
Governmental Authority or (iii) any other agreement, contract, lease or license,
including but not limited to the Contracts and the Assumed Leases.
(b) Except where such violation would not have a Material Adverse Effect,
Seller is not in violation of any law, regulation, order, judgment or decree of
any federal or state court or Governmental Authority applicable to its business
or operation.
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(c) Except where failure to hold a permit would not have a Material
Adverse Effect, Seller holds all Permits as are necessary to carry on its
business and the Business as currently conducted in compliance with all
applicable laws rules, regulations and decisions of Governmental Authorities
having jurisdiction over Seller, the Business and the Acquisition Assets. Seller
is not in violation of any such Permit. All such Permits are in full force and
effect, and no written or oral notice of suspension, revocation or cancellation
thereof has been threatened, and Seller is fully authorized, subject to the
approval of the licensing agencies, to assign to Purchaser such Permits. To the
Best Knowledge of Seller, upon assignment of the Permits to Purchaser, such
Permits will not impose any restrictions, limitations, terms or conditions that
were not in effect prior to such assignment.
SECTION 5.6 FINANCIAL STATEMENTS. Seller has heretofore furnished
Purchaser with the following financial statements: (a) the audited balance
sheets of Seller as of June 30 in each of the fiscal years ending June 30, 1995
and 1996, and the related income statements for the years then ended, and (b) an
unaudited balance sheet of Seller as of December 31, 1996 and the related income
statement for the six months ending December 31, 1996. Such financial statements
(including any related schedules and notes) are true, complete and correct, and
fairly present the financial position of Seller as of their respective dates and
the results of operations of Seller for the periods therein indicated, and were
prepared in accordance with generally accepted accounting principles and, to the
extent consistent with such principles, on a basis consistent with prior years.
Except for ordinary and customary liabilities that have arisen in the ordinary
course of business of Seller since December 31, 1996, Seller does not have any
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) that are not reflected in the Balance Sheet. The projections set
forth on EXHIBIT 9.1(o) are based upon assumptions that management of Seller
made in good faith and believes are reasonable.
SECTION 5.7 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
5.7, there is no existing, contingent or threatened liability, obligation, Lien
or claim of any nature (absolute, accrued, contingent or otherwise) that relates
to the Business or has been asserted or threatened to be asserted against
Seller, other than liabilities arising after the date of the Balance Sheet in
the ordinary course of business consistent with past practice.
SECTION 5.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE
5.8 hereto, since the date of the Balance Sheet there has not been:
(a) any material adverse change in the business, financial condition,
properties, prospects, net worth or results of operations of Seller;
(b) any material damage, destruction or loss suffered by Seller, whether
covered by insurance or not;
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(c) any change by Seller in tax methods, principles or elections or in
accounting methods or principles that would be required to be disclosed under
generally accepted accounting principles;
(d) any sale, lease or other disposition of properties and assets of
Seller, other than those in the ordinary course of business consistent with past
practices;
(e) any merger or consolidation of Seller with any other Person or any
acquisition by Seller of the stock or business of another Person;
(f) any borrowing, agreement to borrow funds or guaranty by Seller or any
termination or amendment of any evidence of indebtedness, contract, agreement,
deed, mortgage, lease, license or other instrument to which Seller is bound or
by which Seller or any of its properties is bound other than in the ordinary
course of business and consistent with past practices;
(g) any cancellation of debt by Seller or waiver of any claim or right of
substantial value to Seller;
(h) any increase in the compensation payable or to become payable by
Seller to the directors, officers or employees of Seller, any increase in
benefits or benefit plan costs or any increase in any bonus, insurance,
compensation or other benefit plan made for or with or covering any directors,
officers or employees of Seller;
(i) any employment, consulting, severance or indemnification agreement
entered into or made by Seller with any of its employees, or any collective
bargaining agreement or other obligation to any labor organization incurred or
entered into by Seller;
(j) the creation or imposition of any Lien, other than a Permitted
Encumbrance, on any of the Acquisition Assets;
(k) any reduction in accruals or reserves, except to the extent of related
cash payments or other reductions consistent with past practice;
(l) any write-up or write-down of the value of Seller's assets, except for
write-ups or write-downs in accordance with generally accepted accounting
principles and in the ordinary course of business and consistent with past
practice;
(m) the making of any capital expenditure or commitments therefor in
excess of $10,000 in the aggregate;
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(n) any amendment to the articles of incorporation or bylaws of Seller;
(o) any contract bid for an amount in excess of $10,000;
(p) any contract or commitment to do any of the foregoing;
(q) any principal payment due or paid on any of the Retired Debt with the
exception of the payment made on April 1, 1997 in the aggregate amount of
$60,000 and the payment made in June, 1997, in the aggregate amount of $63,750;
or
(r) any imposition of any new or additional restriction, limitation, term
or condition under any Permit or any Environmental Law.
SECTION 5.9 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS.
SCHEDULE 5.9 hereto sets forth a complete list of the following contracts,
agreements, plans and commitments to which Seller is a party or by which Seller
or any of its properties is bound as of the date hereof:
(a) any contract, commitment or agreement that involves aggregate
expenditures by Seller of more than $10,000 per year;
(b) any contract or agreement (including any such contracts or agreements
entered into with any Governmental Authority) relating to the maintenance or
operation of the Business that involves aggregate expenditures by Seller of more
than $10,000 per year;
(c) any indenture, loan agreement or note under which Seller has
outstanding indebtedness, obligations or liabilities for borrowed money;
(d) any lease or sublease for the use or occupancy of real property,
including but not limited to the Assumed Leases;
(e) any agreement that restricts the right of Seller to engage in any type
of business;
(f) any guarantee, direct or indirect, by any Person of any contract,
lease or agreement entered into by Seller;
(g) any partnership, joint venture or construction and operation
agreement;
(h) any agreement of surety, guarantee or indemnification with respect to
which Seller is the obligor, outside of the ordinary course of business;
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(i) any contract that requires Seller to pay for goods or services
substantially in excess of its estimated needs for such items or the fair market
value of such items;
(j) any contract, agreement, agreed order or consent agreement that
requires Seller to take any actions or incur expenses to remedy non-compliance
with any Environmental Law; and
(k) any other contract material to the Business. True, correct and
complete copies of each of such contracts, agreements, plans and commitments
have been delivered to or made available for inspection by Purchaser. All such
contracts, agreements, plans and commitments (i) were duly and validly executed
and delivered by Seller and, to the best knowledge of Seller, the other parties
thereto and (ii) are valid and in full force and effect. Seller has fulfilled
all material obligations required of Seller under each such contract, agreement,
plan or commitment to have been performed by it prior to the date hereof,
including timely paying all interest on its debt, including but not limited to
the Retired Debt, as such interest has become due and payable. Except as set
forth on SCHEDULE 5.9, there are no counterclaims or offsets under any of such
contracts, agreements, plans and commitments. The assignment of the Contracts
will vest in Purchaser the right to operate the Business and Acquisition Assets
under the terms of the Contract and to use the Acquisition Assets in the manner
currently operated and used by Seller. Set forth on SCHEDULE 5.9 is a listing of
all Contracts which have expired and all Contracts which have been renewed since
December 31, 1996.
SECTION 5.10 ACTIONS PENDING. Except as set forth on SCHEDULE 5.10 hereto,
there is no action, claim, suit, investigation or proceeding pending or, to the
best knowledge of Seller, threatened against Seller, the Acquisition Assets, the
Business, the Business Property or involving any properties or rights of Seller
by or before any court, arbitrator or Governmental Authority. There is no
action, claim, suit, investigation or proceeding pending or threatened against
Seller which purports to affect the validity or enforceability of this Agreement
or that seeks to prohibit, restrict or delay the consummation of the
transactions contemplated hereby or that reasonably may be expected to have a
Material Adverse Effect on Seller or its assets or property. SCHEDULE 5.10 sets
forth a summary description (including the cost to Seller of each such lawsuit
(including any settlements or judgments paid by Seller) and the amount, if any,
covered by insurance) of all current and prior lawsuits (which were filed or
resolved within the last three years) by or against Seller or any of Seller's
Affiliates.
SECTION 5.11 ENVIRONMENTAL. Except as set forth on SCHEDULE 5.11 and
without in any manner limiting any other representations and warranties set
forth in this Agreement:
(a) Neither Seller, nor the Acquisition Assets, nor any Business Property,
is in violation of, or has violated, or has been or is in non-compliance with,
any Environmental Laws in connection with the ownership, use, maintenance,
operation of, or conduct of the Business or any Business Property.
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(b) Without in any manner limiting the generality of (a) above:
(i) Except in compliance with Environmental Laws (including, without
limitation, by obtaining necessary Permits) and to the Best Knowledge of
Seller, no Materials of Environmental Concern have been used, generated,
extracted, mined, beneficiated, manufactured, stored, treated, or disposed
of, or in any other way released (and no release is threatened), on, under
or about any Business Property or transferred or transported to or from
any Business Property, and to the Best Knowledge of Seller, no Materials
of Environmental Concern have been generated, manufactured, stored,
treated or disposed of, or in any other way released (and no release is
threatened), on, under, about or from any property adjacent to any
Business Property;
(ii) Seller is not, as a result of the operation or condition of the
Business, the Acquisition Assets, or any Business Property on or prior to
the Closing Date, subject to any: (a) contingent liability in connection
with any release or threatened release of any Materials of Environmental
Concern into the environment whether on or off any Business Property; (b)
reclamation, decontamination or Remediation requirements under
Environmental Laws, or any reporting requirements related thereto; or (c)
consent order, compliance order or administrative order relating to or
issued under any Environmental Law;
(iii) There are no Environmental Claims known, pending or threatened
against Seller, the Acquisition Assets, or any of the Business Properties;
(iv) Seller and all of its current Business Properties, to the Best
Knowledge of Seller, have all Permits necessary to comply with all
Environmental Laws and have made all capital improvements necessary for
compliance with all Environmental Laws (including, without limitation, for
compliance with all Permits), and operation of Seller's Business and each
Business Property is in compliance in all material respects with all terms
and conditions of such required Permits;
(v) To the Best Knowledge of Seller, there are no, nor have there
ever been any, storage tanks or solid waste management units (not exempt
from permit requirements) located on or under any Business Property of
Seller, and there are no Materials of Environmental Concern in, under or
on any Business Property in an amount exceeding naturally occurring
background levels for such geographic area or which would require
reporting to any Governmental Authority or Remediation to comply with the
most stringent requirements of Environmental Laws;
(vi) To the Best Knowledge of Seller, none of the off-site locations
where Materials of Environmental Concern generated from any Business
Property or for which Seller has arranged for treatment, storage, or
disposal has been nominated or identified as
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a facility requiring Remediation which is subject to an existing or
potential claim under Environmental Laws;
(vii) Seller has not been named as a potentially responsible party
under, and no Business Property has been nominated or identified as a
facility which is subject to an existing or potential claim under CERCLA
or similar Environmental Laws, and no Business Property is subject to any
claim or lien arising under Environmental Laws;
(viii) Seller has not received any notice of any release or
threatened release of Materials of Environmental Concern, or of any
violation of, noncompliance with, or remedial obligation under,
Environmental Laws or Permits, relating to the ownership, use,
maintenance, operation of the Business, the Acquisition Assets or any
Business Property, nor is there any basis for any of the foregoing, nor
has Seller voluntarily undertaken Remediation or other decontamination or
cleanup of any facility or site or entered into any agreement for the
payment of costs associated with such activity;
(ix) Seller is not aware of any requirement of any Environmental
Laws that will require future compliance costs on the part of Seller in
excess of Ten Thousand Dollars ($10,000) above costs currently expended in
the ordinary course of business;
(x) Seller has filed all notices, notices of intent, notifications,
financial security, waste managements plans, waste generation reports,
Form R and chemical inventory reports, or other applications and documents
which are required to be obtained or filed by Seller for the lawful
operation of the Business or the use or operation of any Business
Property; and
(xi) To the Best Knowledge of Seller, no current Business Property
(or equipment thereon) contains any asbestos containing materials or
polychlorintated biphenyls in any form nor any wetland areas or other land
subject to restricted development under Environmental Laws.
(c) No improvements or alterations been made to any Business Property
without a Permit where one was required, nor is there any unfulfilled order
directive of any applicable Governmental Authority or casualty insurance company
that any work of investigation, Remediation, repair, maintenance or improvement
required to be performed on the Business Property;
(d) With regard to any Business Property, there is no unfulfilled
requirement that any environmental impact statement (or similar document) be
prepared by or filed with any Governmental Authority to evaluate its impact on
the environment; and
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(e) To the Best Knowledge of Seller, there is no consent necessary or
application required to be filed under any Environmental Law to transfer the
Acquisition Assets.
SECTION 5.12 INSURANCE. SCHEDULE 5.12 hereto sets forth a list of all
insurance policies owned by Seller by which Seller or any of its properties or
assets is covered against present losses, all of which are now in full force and
effect. No insurance has been refused with respect to any operations, properties
or assets of Seller nor has coverage of any insurance been limited by any
insurance carrier that has carried, or received any application for, any such
insurance during the last three years. No insurance carrier has denied any
claims made against any of the policies listed on SCHEDULE 5.12 hereto.
SECTION 5.13 TITLE. Seller has good and marketable title to its personal,
tangible and intangible properties and assets, including such properties and
assets reflected in the Balance Sheet and, except as noted in the financial
statements and the notes thereto delivered pursuant to SECTION 5.6 hereof, said
properties and assets are not subject to any Lien, other than Permitted
Encumbrances. Seller has not received any written notice of any material adverse
claim that has not been satisfied with respect to its title to any material
Permit, right-of-way, easement or lease on or under which any of its facilities
are located. Seller enjoys peaceful and undisturbed possession under all
material Permits or leases under which it is operating, and all such Permits and
leases are valid, subsisting and in full force and effect with respect to the
Seller and to the knowledge of Seller, with respect to the other parties
thereto.
SECTION 5.14 REAL ESTATE.
(a) SCHEDULE 5.14 hereto contains an accurate and complete list of all
real property owned in whole or in part by Seller as part of or related to the
Business (including but not limited to the Business Property), and includes the
name of the record title holder thereof and a list of all indebtedness secured
by any Lien thereon. Seller has good and marketable title in fee simple to all
the real property owned by it, free and clear of any Lien, except for Permitted
Encumbrances. None of the buildings, structures or appurtenances (or any
equipment therein) located on any such currently owned or operated real
property, nor the operation or maintenance thereof, violates in any respect any
restrictive covenant, or encroaches on any property owned by others. No
condemnation proceeding is pending or, to the knowledge of Seller, threatened
which would preclude or impair in any material respect the use of such real
property by Seller for the purpose for which it is currently used.
(b) SCHEDULE 5.14 hereto sets forth a list and summary description
(including property location, parties and annual rental payments) of all leases,
subleases, management agreements and other agreements as part of or related to
the Business under which Seller is lessor or lessee of, or uses or occupies or
allows the use or occupancy of, any real property, including but not limited to
the Assumed Leases. All such leases, subleases and other agreements are valid
and subsisting and in full force and effect
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(c) The real and leased property listed on SCHEDULE 5.14 (i) has full and
free access to and from highways, streets and roads and there is no proceeding
pending or, to the knowledge of Seller, threatened that could result in the
termination of or material limitations on such access (ii) is connected to and
serviced by utilities and public services all of which are adequate for the use
of the real property listed thereon as the Business is currently conducted, and
(iii) is zoned, platted and permitted for use in the manner in which it is
currently being used. Seller has not experienced during the three years
preceding the date hereof any material interruption in the delivery of adequate
quantities of any utilities (including, without limitation, electricity, natural
gas, potable water, water for cooling or similar purposes and fuel oil) or other
public services (including, without limitation, sanitary and industrial sewer
service) required in the operation of the Business during such period and no
such material interruption is, to the knowledge of Seller, threatened.
SECTION 5.15 SUPPLIES. The Supplies of Seller are of a quantity and
quality that have been normal for Seller in the ordinary course of business of
Seller and are owned by Seller free and clear of any Liens. Seller neither
records nor maintains a supplies inventory on its books.
SECTION 5.16 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Balance Sheet represent sales actually made in the ordinary course of business
and are fully collectible (within six months after the Closing Date) except as
reflected in the reserve for doubtful accounts in the Balance Sheet, including
but not limited to the $1.5 million of receivables which have been fully
reserved as further described on SCHEDULE 5.16 (the "PAST DUE RECEIVABLES"). The
reserve for doubtful accounts reflected in the Balance Sheet has been determined
in accordance with generally accepted accounting principles and on a basis
consistent with prior years.
SECTION 5.17 TAXES.
(a) Seller has provided Purchaser with true and correct copies of all Tax
Returns, if any, of Seller for the past five years.
(b) Seller has caused to be duly filed in a timely manner with the
appropriate Governmental Authorities all Tax Returns required to be filed by or
with respect to the Business or the Acquisition Assets and has caused to be paid
or deposited all Taxes (including estimated Taxes) required with respect to the
periods covered by such Tax Returns or by any taxing authority. All Taxes
required to be collected or withheld with respect to the Business or the
Acquisition Assets have been duly collected or withheld, and all Taxes with
respect to the Business or the Acquisition Assets required under generally
accepted accounting principles to be accrued on the financial statements of
Seller have been so accrued
(c) No liens with respect to Taxes exist, and Seller has no reason to
expect that any lien with respect to Taxes will arise, on or with respect to the
Business or the Acquisition Assets, except for liens imposed by law and incurred
in the ordinary course of business for obligations
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not yet due. No extension of time is in effect with respect to the date on which
any Tax Return is to be filed by or with respect to the Business or the
Acquisition Assets. There are no outstanding agreements or waivers extending the
period for assessment or collection of any Taxes relating to the ownership or
operation of the Business or the Acquisition Assets.
(d) Except as set forth on SCHEDULE 5.17(D), there is no pending action,
proceeding or investigation, and, no action, proceeding or investigation has
been threatened by any Governmental Authority, for assessment or collection of
Taxes with respect to the Business or the Acquisition Assets. No claim for
assessment or collection of Taxes has been asserted during the past five years
and no actual or proposed assessment has been made with respect to Taxes
relating to the ownership or operation of the Business or the Acquisition
Assets.
SECTION 5.18 EMPLOYEE BENEFIT PLANS.
(a) Each Plan and each Benefit Program (defined in SECTION 5.18(b)(iv)
below) is listed on SCHEDULE 5.18 hereto. No Plan or Benefit Program is or has
been (i) covered by Title IV of ERISA, (ii) subject to the minimum funding
requirements of Section 412 of the Code or (iii) a "multi-employer plan" as
defined in Section 3(37) of ERISA, nor has Seller contributed to, or ever had
any obligation to contribute to, any multi-employer plan. Each Plan and Benefit
Program intended to be qualified under Section 401(a) of the Code is designated
as a tax-qualified plan on SCHEDULE 5.18 and is so qualified. No Plan or Benefit
Program provides for any retiree health benefits for any employees or dependents
of the Seller other than as required by COBRA. There are no claims pending with
respect to, or under, any Plan or any Benefit Program, other than routine claims
for benefits, and there are no disputes or litigation pending or, to the
knowledge of Seller, threatened, with respect to any such Plans or Benefit
Programs.
(b) Seller has heretofore delivered to Purchaser true and correct copies
of the following, if any:
(i) each Plan and each Benefit Program listed on SCHEDULE 5.18, all
amendments thereto as of the date hereof and all current summary plan
descriptions provided to employees regarding the Plans and Benefit
Programs;
(ii) each trust agreement and annuity contract (or any other funding
instruments) pertaining to any of the Plans or Benefit Programs, including
all amendments to such documents to the date hereof;
(iii) each management or employment contract or contract for
personal services and a complete description of any understanding or
commitment between Seller and any officer, consultant, director, employee
or independent contractor of Seller; and
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(iv) a complete description of each other plan, policy, contract,
program, commitment or arrangement providing for bonuses, deferred
compensation, retirement payments, profit sharing, incentive pay,
commissions, hospitalization or medical expenses or insurance or any other
benefits for any officer, consultant, director, annuitant, employee or
independent contractor of Seller as such or members of their families
(other than directors' and officers' liability policies), whether or not
insured (a "BENEFIT PROGRAM").
(c) Each Plan and Benefit Program has been maintained and administered in
compliance with its terms and in accordance with all applicable laws, rules and
regulations. Seller has no commitment or obligation to establish or adopt any
new or additional Plans or Benefit Programs or to increase the benefits under
any existing Plan or Benefit Program.
(d) Except as set forth in SCHEDULE 5.18, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any payment to be made by Seller,
including, without limitation, severance, unemployment compensation, golden
parachute (defined in Section 280G of the Code) or otherwise, becoming due to
any employee of Seller, or (ii) increase any benefits otherwise payable under
any Plan or any Benefit Program.
SECTION 5.19 EMPLOYEES AND LABOR MATTERS.
(a) Seller has provided Purchaser with a true and complete list dated as
of June 30, 1997 (the "EMPLOYEE SCHEDULE ") of all employees of Seller listing
the title or position held, base salary or wage rate and any bonuses,
commissions, profit sharing, Seller's vehicles, club memberships or other
compensation or perquisites payable, all employee benefits received by such
employees and any other material terms of any written agreement with Seller. As
of the date of this Agreement and as of the Closing Date, the combined projected
annual payroll for the calendar year ending December 31, 1997 of Seller required
to operate the Business is not materially different from that as listed on the
Employee Schedule, and Seller has not entered into any agreement or agreements
pursuant to which the combined annual payroll of Seller, including projected pay
increases, overtime and fringe benefit costs, required to operate the Business
(including all administrative and support personnel) would be greater than as
listed on the Employee Schedule. Set forth on SCHEDULE 5.19 is a detailed
description of all health, dental, life and disability insurance plans of Seller
and a description of the cost per employee under each such plan for individual
coverage as well as for coverage of such employee's dependents.
(b) Except as set forth on SCHEDULE 5.19, Seller is not a party to or
bound by any written employment agreements or commitments, other than on an at
will basis. Seller is in compliance with all applicable laws respecting the
employment and employment practices, terms and conditions of employment and
wages and hours of its employees and is not engaged in any unfair labor
practice. All employees of Seller who work in the United States are lawfully
authorized to work in the United States according to federal immigration laws.
There is no labor
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strike or labor disturbance pending or, to the knowledge of Seller, threatened
against Seller with respect to the Business and, during the past five years,
Seller has not experienced a work stoppage with respect to the Business.
(c) Except as set forth on SCHEDULE 5.19, (i) Seller is not a party to or
bound by the terms of any collective bargaining agreement or other union
contract applicable to any employee of Seller and no such agreement or contract
has been requested by any employee or group of employees of Seller, nor has
there been any discussion with respect thereto by management of Seller with any
employees of Seller, (ii) Seller is not aware of any union organizing activities
or proceedings involving, or any pending petitions for recognition of, a labor
union or association as the exclusive bargaining agent for, or where the purpose
is to organize, any group or groups of employees of Seller, or (iii) there is
not currently pending, with regard to any of its facilities, any proceeding
before the National Labor Relations Board, wherein any labor organization is
seeking representation of any employees of Seller.
SECTION 5.20 INTELLECTUAL PROPERTY RIGHTS. Except as set forth on SCHEDULE
5.20, all patents, trademarks (whether registered or not), trade names, computer
software, copyrights and patent or know-how licenses (wherein Seller is either
licensee or licensor) and any other intellectual property of Seller (the
"INTELLECTUAL PROPERTY RIGHTS") are lawfully owned, possessed or used by Seller,
as the case may be. No past due royalties or other payments subsequent to the
Closing Date are or will be required to be paid to any Person who is the
licensor under such license agreements as they currently exist, and Seller is
not now nor upon consummation of the transactions contemplated hereby will be in
default in any obligation with respect to any agreement with others concerning
the Intellectual Property Rights. There is no existing or threatened
infringement, misuse or misappropriation by others of the Intellectual Property
Rights; there is no pending or threatened claim by Seller against others for any
such infringement, misuse or misappropriation; and there is no pending judicial
proceeding involving any claim, and Seller has not received any notice or claim
of any infringement, misuse or misappropriation by Seller of any patent,
trademark, trade name, copyright, Intellectual Property Rights license or
similar right owned by any third party during the past five years.
SECTION 5.21 RELATIONSHIPS. Except as set forth on SCHEDULE 5.21, the
Seller has not received notice from any supplier or from any party to any
Contract involving more than $10,000 annually with Seller (each a "CONTRACT
PARTY"), during the past two years that such supplier or Contract Party intends
to discontinue doing business with Seller, and no supplier or Contract Party
during the past two years has indicated any intention (a) to terminate its
existing business relationship with Seller or (b) not to continue its business
relationship with Seller, whether as a result of the transactions contemplated
hereby or otherwise. Seller has not entered into any related party transaction
during the past year. The consummation of the transactions contemplated in this
Agreement, including but not limited to assignment of the Contracts by Seller to
Purchaser, will not affect Purchaser's rights to any previous grants to, or
contracts with Seller, except as related to school breakfast, lunch and food
stamp programs in an
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annual amount not to exceed $850,000, and except to the extent such grants are
reflected in the records of Seller as an accrued liability.
SECTION 5.22 CERTAIN PAYMENTS. Neither Seller nor any officer, director or
employee of Seller has paid or received or caused to be paid or received,
directly or indirectly, in connection with the business of Seller (a) any bribe,
kickback or other similar payment to or from any domestic or foreign government
or agency thereof or any other Person or (b) any contribution to any domestic or
foreign political party or candidate (other than from personal funds of such
officer, director or employee not reimbursed by Seller or as permitted by
applicable law).
SECTION 5.23 BOOKS AND RECORDS. The corporate minute books, and other
corporate records of Seller are correct and complete in all material respects
and the signatures appearing on all documents contained therein are the true
signatures of the person purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction and no meeting of the board of
directors of Seller or any committee thereof has been held for which minutes
have not been prepared and are not contained in the minute books. To the extent
that they exist, all personnel files, reports, strategic planning documents,
financial forecasts, accounting and tax records and all other records of every
type and description that relate to the business of Seller have been prepared
and maintained in accordance with good business practices and, where applicable,
in conformity with generally accepted accounting principles and applicable laws
and regulations. All such books and records are located in the offices of
Seller.
SECTION 5.24 CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth on
SCHEDULE 5.24, the Improvements and Equipment are structurally sound, are in
good operating condition and repair (subject to normal wear and tear) and are
adequate for the uses to which they are being put, and Seller is not aware that
any of such Improvements or Equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. Except as set forth on SCHEDULE 5.24, the Improvements,
Equipment and Motor Vehicles reflected in the Balance Sheet (except any such
tangible property disposed of since December 31, 1996 in the ordinary course of
business) or acquired since December 31, 1996 by Seller constitute all of the
operating assets held for use or used in connection with Seller's business other
than those disposed of in the ordinary course of business, and are sufficient
for the continued conduct of the Business at the Closing in substantially the
same manner as conducted prior to the Closing.
SECTION 5.25 CERTAIN EXPENSES. The projected costs as determined under
generally accepted accounting principles to Seller to operate the Business
during the fiscal year 1997 as listed on SCHEDULE 5.25 are reasonable based on
historical financial data.
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SECTION 5.26 CLIENT BANK ACCOUNTS. SCHEDULE 5.26 lists each of the Client
Bank Accounts.
SECTION 5.27 STUDIES, ETC. Seller has provided to Purchaser all studies,
reports, plans, analyses or similar documents (including all drafts thereof and
whether prepared by Seller's employees or others) in their possession or control
relating to Materials of Environmental Concern and Environmental Laws or
relating to the Business, any Business Property and the Improvements.
SECTION 5.28 DISCLOSURE. To the best knowledge of Seller, there is no fact
known to Seller that has specific application to Seller (other than general
economic or industry conditions) that would have a Material Adverse Effect that
has not been set forth in this Agreement or in the Schedules attached hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants that:
SECTION 6.1 CORPORATE EXISTENCE. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to transact business in all jurisdictions wherein
the nature of its business or ownership of its assets require such
qualification.
SECTION 6.2 AUTHORITY; NO CONFLICTS. Purchaser has all requisite corporate
power to carry on its business as presently conducted, to enter into this
Agreement and to perform its other obligations under this Agreement. The
consummation of the transactions contemplated by this Agreement will not
violate, or be in conflict with, any provision of Purchaser's charter, bylaws,
any agreement or instrument to which Purchaser is a party or by which Purchaser
is bound or any law applicable to Purchaser. Prior to Closing, the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby will have been duly and validly authorized by all requisite corporate
action on the part of Purchaser. There is no action, claim, suit, arbitration,
investigation or proceeding pending or threatened against Purchaser which
purports to affect the validity or enforceability of this Agreement or that
seeks to prohibit, restrict or delay the consummation of the transactions
contemplated hereby.
SECTION 6.3 BINDING AGREEMENT. This Agreement constitutes, as of the date
hereof, and this Agreement and all documents and instruments required hereunder
to be executed and delivered by Purchaser at Closing will constitute, on the
Closing Date, legal, valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their respective terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally.
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SECTION 6.4 REGULATORY APPROVALS. Except with respect to Purchaser's
applications for required licenses or permits, no filings or other regulatory
approvals are required to be filed or obtained by Purchaser in connection with
the execution, delivery and performance by Purchaser of this Agreement prior to
the consummation of the transactions contemplated herein.
SECTION 6.5 PENDING LITIGATION. There is no action, claim, suit,
investigation or proceeding pending, or, to the best knowledge of Purchaser,
threatened against Purchaser which purports to affect the validity or
enforceability of this Agreement or that seeks to prohibit, restrict, delay or
enjoin the consummation of the transactions contemplated hereby.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1 EMPLOYEES.
(a) Purchaser may, but shall not be obligated to, offer employment to any
of the employees of the Seller with the exception of Arlene Lissner and Tom
Jenkins. Seller will not solicit, or endeavor to solicit, after the Closing Date
any employee or discourage any such person from accepting such employment with
Purchaser. Seller has not made any representations or promises, oral or written,
to employees of Seller concerning employment by Purchaser.
(b) Purchaser shall not be responsible for any costs, obligations or
liabilities which may result from the termination of employment by Seller of any
employee of the Business not hired by Purchaser as of the first payroll date
after the Closing; provided, however, Purchaser shall be responsible for and
shall assume any and all costs, obligations or liabilities directly related to
the termination by Purchaser of any employee of the Business who is hired by
Purchaser on or after the Closing Date solely to the extent that such costs,
obligations or liabilities relate directly to the period beginning with the
hiring of such employee by Purchaser and ending with such termination by
Purchaser. Purchaser makes no representation with respect to the comparability
of Purchaser's employee benefits to those offered by Seller. Purchaser
specifically disclaims any obligation to remunerate employees of Seller who,
following the Closing Date, will be employed by Purchaser, at levels comparable
to the aggregate remuneration provided to such employees while employed by
Seller. Prior to the Closing Date, Seller shall have taken all necessary actions
to comply with the Worker Adjustment and Retraining Notification Act (the "WARN
ACT") to the extent it is subject to the WARN Act, and Purchaser shall not have
any disclosure or announcement obligations or any other responsibilities under
the WARN Act as a result of the transactions contemplated by this Agreement.
(c) Seller shall take such actions as it deems appropriate to terminate,
modify, alter or amend the existing Plans or Benefit Programs with respect to
employees of the Business due to the transactions contemplated by this
Agreement. Purchaser does not and shall not assume any of such Plans or Benefit
Programs, including, without limitation, any severance plans of Seller.
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(d) Except for obligations, if any, expressly included within the Assumed
Liabilities, Seller shall be solely responsible for and shall pay in full to all
of Seller's employees all compensation, bonuses and other payments, and all sick
pay, vacation pay, and any other benefits otherwise payable under the Benefit
Programs, accrued to the Closing for which Seller is obligated thereunder, and
Seller shall satisfy all such obligations to such employees.
(e) Seller will retain responsibility for, and continue to pay, all
hospital, medical, life insurance, disability, supplemental unemployment and all
other welfare plan expenses and benefits for each Seller employee hired by
Purchaser (and covered dependents) with respect to claims incurred by such
employee or their covered dependent prior to the Closing. Seller will retain
responsibility for, and continue to pay, any life, health or other welfare
benefits payable to each former employee of Seller who terminated employment
with Seller (and their dependents) prior to the Closing in respect of claims
incurred on their behalf prior to the Closing. For purposes of this paragraph, a
claim is deemed incurred when the event that first gave rise to the claim
occurred, notwithstanding the fact that such benefits may be paid at a
subsequent date.
(f) Seller is responsible for any liabilities that may arise with respect
to application of Section 4980B of the Internal Revenue Code of 1986 or Part 6
of Subtitle B of Title I of ERISA ("COBRA") with respect to any of its employees
or covered dependents as a result of the transactions contemplated by this
Agreement, as well as for any prior COBRA violations which occurred prior to
Closing. Purchaser is not a successor employer for COBRA purposes.
(g) Purchaser is not, and shall not be deemed to be, a successor employer
to Seller with respect to any Plans or Benefit Programs; and no plan or other
program adopted or maintained by Purchaser after the Closing is or shall be
deemed to be a "successor plan", as such term is defined in ERISA or the Code,
of any such Plan or Benefit Program.
SECTION 7.2 TAXES.
(a) LIABILITY FOR TAXES. Subject to SECTION 7.2(d) hereof, Seller shall be
liable for, and shall indemnify and hold Purchaser and its Affiliates harmless
from, (i) all Taxes that are imposed on or incurred by Seller, (ii) all Taxes
that are imposed on or incurred with respect to the Acquisition Assets or the
Business for any taxable period ending on or before the Closing Date, except to
the extent that accruals were made therefor at December 31, 1996 and such Taxes
are included in the Assumed Liabilities, (iii) a portion, determined as
described below, of any Taxes that are imposed on or incurred with respect to
the Acquisition Assets or the Business for any taxable period beginning prior to
and ending after the Closing Date ("STRADDLE PERIOD") which is allocable to the
period ending on or before the Closing Date, but not otherwise, (iv) any Taxes
payable as a result of a breach by Seller of any of the representations set
forth in SECTION 5.17 hereof, and (v) any attorneys' fees or other costs
incurred by Purchaser or its Affiliates in connection with any payment from
Seller under this SECTION 7.2(a). The determination of the portion of any Taxes
imposed on or incurred with
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respect to the Acquisition Assets or the Business for a Straddle Period which is
allocable to the period ending on or before the Closing Date shall be made, in
the case of ad valorem, property or similar Taxes, if any, which are not
measured by or based upon production, or franchise or capital Taxes which are
not measured by or based upon net income, by allocating such Taxes on a per diem
basis, and, in the case of all other Taxes, by assuming that the period ending
on or before the Closing Date constitutes a separate taxable period and by
taking into account the actual taxable events occurring during such period.
(b) TAX RETURNS. Seller shall be responsible for the preparation and
filing of any Tax Return relating to the Acquisition Assets or the Business that
is originally due on or before the Closing Date. Purchaser shall be liable for
the preparation and filing of all other Tax Returns that relate to the
Acquisition Assets or the Business.
(c) RIGHT TO REFUNDS. If Seller, on the one hand, or Purchaser, on the
other hand, receives a refund of any Taxes for which the other is liable, then
the party receiving such refund shall, within 10 days after its receipt, remit
it to the other party.
(d) RECAPTURE AND TRANSFER TAXES. Notwithstanding any other provisions
set forth herein, Seller and Purchaser shall each be liable for and pay one-half
of any transfer and recapture taxes incurred by Seller and/or Purchaser relating
to the sale by Seller of the Acquired Property and Improvements to Purchaser as
contemplated in this Agreement.
(e) OTHER TAXES. Except as expressly set forth in SECTION 7.2(d) above,
Seller shall be liable for and pay, and shall indemnify and hold Purchaser
harmless from all transfer, sales, use, gross receipts, stamp, value added,
excise, or similar Taxes imposed on or relating to the sale or transfer of the
Acquisition Assets or the Business.
SECTION 7.3 CONSENTS. Seller shall use best efforts to procure all
consents, novations, approvals or waivers in a form reasonably satisfactory to
Purchaser which must be obtained by Seller pursuant to this Agreement or which
are necessary to assign the Contracts and transfer any other Acquisition Assets
to Purchaser. At the Closing, Purchaser may, but shall not be obligated to,
elect to close the transactions contemplated hereby, notwithstanding the fact
that Seller may have failed to obtain consents to the transfer.
SECTION 7.4 TITLE.
(a) Seller has caused Chicago Title Company (the "TITLE COMPANY"), to
furnish Purchaser a Commitment for Title Insurance (the "COMMITMENT") from the
Title Company addressed to Purchaser covering (i) each Acquired Property and the
Improvements and (ii) each Assumed Lease requested by Purchaser, pursuant to
which the Title Company shall commit to issue to Purchaser an Owner's Policy of
Title Insurance (the "TITLE POLICY"), together with legible copies of all
instruments described in the Commitment evidencing defects in, exceptions or
objections to or encumbrances upon title to each Acquired Property and the
Improvements.
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Seller and Purchaser shall each bear one-half of all costs associated with the
Commitment and Title Policy.
(b) Seller shall have provided Purchaser with a report of searches made of
the Uniform Commercial Code Records in jurisdictions determined by Purchaser in
the name of Seller (the "UCC SEARCHES"), evidencing any Liens relating thereto
granted by Seller. Seller and Purchaser shall each bear one-half of all costs
associated with the UCC Searches.
(c) Purchaser shall have 15 business days following receipt of the later
of the Commitment provided for in this SECTION 7.4 and the Survey provided for
in SECTION 7.5 hereof to deliver to Seller its written objections to any matters
reflected in the Commitment or the Survey. Any such matters which are not
objected to by Purchaser within said 15 business days shall all be considered
Permitted Encumbrances. Seller shall in good faith diligently work to have the
title and survey exceptions raised by Purchaser, other than the Permitted
Encumbrances, cured or removed to the reasonable satisfaction of Purchaser
within 15 days after Purchaser notifies Seller in writing of such exceptions or
objections. If Seller fails to cure or satisfy such objections for any reason
within such time period, Purchaser may either (i) accept conveyance of title to
the Acquired Properties, the Improvements and the Assumed Leases subject to such
uncured matters and proceed with the Closing contemplated herein (in which event
all such matters shall be deemed Permitted Encumbrances), or (ii) give written
notice to Seller electing to terminate this Agreement pursuant to ARTICLE X
hereof.
SECTION 7.5 SURVEYS. Seller has caused surveys (the "SURVEYS") of (i) each
of the Acquired Properties and (ii) each of the Properties which are the subject
of Assumed Leases as requested by Purchaser, to be made by a licensed surveyor.
The Surveys shall be acceptable to Purchaser and the Title Company and shall
contain a certification in favor of Purchaser and the Title Company that the
Surveys are correct and accurate and that the Properties are free of
encroachments, except as shown, the form and content of which certification
shall be approved by the Purchaser and the Title Company. For purposes of the
description of the land to be included in the deeds to be delivered pursuant to
SECTION 9.1(e) hereof, the descriptions prepared by the surveyor shall control
any conflicts or inconsistencies with the descriptions of the Properties on
EXHIBIT 7.5 hereto, and such descriptions shall be deemed to be incorporated
into this Agreement upon its completion and approval by Purchaser. Seller and
Purchaser shall each bear one-half of all costs associated with the Surveys.
SECTION 7.6 ENVIRONMENTAL DUE DILIGENCE. Seller hereby grants to
Purchaser, and its counsel, accountants, consultants and other representatives,
such access to its respective business facilities (whether owned, operated, or
leased), personnel and records (including without limitation for purposes of
conducting site inspections, asbestos surveys, or sampling and analyses of soil,
groundwater or other media) as Purchaser may reasonably request, including for
the purpose of conducting an investigation of the (a) compliance of Seller and
any of its Business Properties with applicable Environmental Laws, and (b) the
exposure to, presence, release, or any aspect of management, handling, or use of
Materials of Environmental
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Concern at any such facility ("ENVIRONMENTAL DUE DILIGENCE"). If the Closing
under this Agreement does not occur, Seller shall cause, at its expense, (x) any
investigation-derived waste generated or created in connection with performance
of the Environmental Due Diligence (including without limitation, drill
cuttings, purged or developed water, or sample remnants) to be disposed in
compliance with applicable Environmental Laws, and (y) any wells or borings
installed during the Environmental Due Diligence to be plugged and abandoned.
Seller shall be responsible for executing on its own behalf any and all
manifests, shipping documents, plugging and abandoning reports and similar
documents in connection with its obligations hereunder, and Seller agrees to
indemnify and hold Purchaser harmless from and against any and all claims,
liabilities, damages and causes of action arising out of its failure to fulfill
such obligations hereunder. Seller shall provide to Purchaser copies of all (a)
Permits, (b) reports or results of all inspections, audits, assessments, and
analytical data and (c) such other information as Purchaser may reasonably
request in the possession or control of Seller regarding any of Seller's current
or prior business facilities or operations and relating to (i) compliance with
applicable requirements of Environmental Laws or (ii) the exposure to, presence,
release, or any aspect of management, handling, or use of Materials of
Environmental Concern.
SECTION 7.7 FURTHER ASSURANCES. Seller and Purchaser shall execute and
deliver to the other, at the Closing or thereafter, any other instrument which
may be requested by the other and which is reasonably appropriate to perfect or
evidence any of the sales, assignments, transfers or conveyances contemplated by
this Agreement or to transfer any Acquisition Assets identified after the
Closing or to obtain any consents or licenses necessary for Purchaser to operate
the Business in the manner operated by Seller prior to Closing.
SECTION 7.8 MAIL RECEIVED AFTER CLOSING. Following the Closing,
Purchaser may receive and open all mail addressed to Seller and, to the extent
that such mail and the contents thereof relate to the Business or the
Acquisition Assets, deal with the contents thereof in its discretion. Purchaser
shall notify Seller of (and provide Seller copies of the relevant portions of)
any mail that obliges Seller to take any action or indicates that action may be
taken against Seller. To the extent that such mail and the contents thereof do
not relate to the Business or the Acquisition Assets, such mail and the contents
thereof shall be promptly forwarded to Seller at Seller's address for notices
set forth in SECTION 13.4, or at such other address as may be designated in
writing by Seller.
SECTION 7.9 UNCOLLECTIBLE ACCOUNTS RECEIVABLE. Seller, jointly and
severally, will indemnify Purchaser for 75% of any accounts receivable included
in the Acquisition Assets (other than the Past Due Receivables) that Purchaser,
using its reasonable efforts, is unable to collect within 180 days after the
Closing Date. The Seller shall indemnify the Purchaser for the remaining 25% of
the account receivables including in the Acquisition Assets (other than the Past
Due Receivables) that Purchaser, using its reasonable efforts, is unable to
collect within one year after the Closing Date. Seller shall pay Purchaser
pursuant to Seller's obligations under this SECTION 7.9 within 30 business days
after written notice from Purchaser of the amount Seller owes Purchaser pursuant
to this SECTION 7.9. After receipt of
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payment from Seller for the full amount for any Uncollectible Accounts
Receivable, Purchaser shall assign the rights and interests to such
Uncollectible Accounts Receivable to Seller.
SECTION 7.10 BILLS AND PAYMENTS RECEIVED AFTER CLOSING. Purchaser
shall promptly send Seller any bills or other notices that payment is due that
Purchaser receives after Closing related to obligations of Seller not assumed by
Purchaser under this Agreement, and Seller shall timely pay such bills or other
debts on or before the date that such bills are due. Seller shall promptly send
Purchaser any bills or other notices that payment is due that Seller receives
after Closing related to obligations of Seller expressly assumed by Purchaser
under this Agreement, and Purchaser shall timely pay such bills or other debts
on or before the date that such bills are due. Seller and Purchaser shall each
promptly send to the other any payments received by them after Closing that is
an asset of the other.
SECTION 7.11 LOSS DUE TO CONDEMNATION. In the event of a condemnation
proceeding commenced on or before the Closing Date with respect to all or any
material portion of any of the Acquired Properties or the Improvements,
Purchaser may, upon written notice to Seller given within 10 days of receipt of
written notice of such event, terminate this Agreement pursuant to ARTICLE X of
this Agreement. In the event that Purchaser does not elect to terminate, then
this Agreement shall remain in full force and effect, and the transaction hereby
contemplated shall close in accordance with the terms and conditions of this
Agreement except that Seller shall assign to Purchaser at Closing all of
Seller's rights and interests in and to any condemnation awards which have been
paid or are or become payable to Seller.
SECTION 7.12 LOSS DUE TO CASUALTY. In the event of a Substantial Loss or
damage (defined below) to any of the Acquired Properties or the Improvements by
fire or other casualty prior to the Closing Date, Purchaser may, upon written
notice to Seller within 10 days of receipt of written notice of such event,
terminate this Agreement pursuant to ARTICLE X of this Agreement. In the event
that Purchaser does not elect to terminate, then this Agreement shall remain in
full force and effect, and the transaction hereby contemplated shall close in
accordance with the terms and conditions of this Agreement except that Seller
may elect, with the consent of Purchaser, such consent not to be unreasonably
withheld, to repair the damaged property or improvement prior to Closing. In the
event Seller elects not to repair the property, Seller shall assign to Purchaser
at Closing all of Seller's rights and interests in and to any insurance proceeds
which have been or are or become payable to Seller as a result of such damage or
loss, less reasonable costs and attorneys fees of Seller in connection therewith
plus the amount of the deductible delivered to Purchaser in cash. "SUBSTANTIAL
LOSS OR DAMAGE" shall mean a loss or damage of 10% or more of the square footage
of the Improvements or material damage to a particular Acquired Property or
Improvement which results in the loss of the use thereof for a period exceeding
six months. In the event of a loss or damage arising prior to the Closing Date
that constitutes less than a Substantial Loss or damage by fire or other
casualty, Purchaser shall not have the right to terminate this Agreement
pursuant to this SECTION 7.12; HOWEVER, Seller shall assign to Purchaser at
Closing all of Seller's rights and interests in and to any
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insurance proceeds which have been or are or become payable to Seller as a
result of such damage or loss.
SECTION 7.13 NOTICE OF ENVIRONMENTAL CLAIMS. In Seller shall give prompt
written notice to Purchaser of the commencement of any Environmental Claim, or
inspection by any Governmental Authority with responsibility for enforcing or
implementing any applicable Environmental Laws, and provide to Purchaser such
information as Purchaser may reasonably request regarding such Environmental
Claim, any developments in connection therewith, and, as applicable, Seller's
anticipated or actual response thereto.
SECTION 7.14 PROJECT. Purchaser shall use its commercially reasonable
efforts to complete the efforts of Seller and bring the successful commencement
of operations of the new 250-bed juvenile detention facility. For purposes of
this paragraph "successful commencement of operations" shall be deemed to have
occurred when (i) the facility has been opened and is operating, (ii) a fee for
service contract has been signed with appropriate governmental agencies, and
(iii) the facility maintains an average occupancy of at least 90% for a
consecutive 60 day period. In the event the "successful commencement of
operations" does not occur within three years from the Closing Date, the
Purchase Price shall be reduced by $500,000 and said amount shall be due and
paid by Seller, jointly and severally, to Purchaser. Notwithstanding any other
provision in this SECTION 7.14, in the event that Purchaser determines in good
faith that the requirements for successful commencement of operations will not
occur within the parameters set forth herein or that the cost and per diem
structure as reasonably agreed upon exceeds that which would otherwise make the
project economically feasible or desirable to Purchaser and Arlene Lissner
concurs in such determination (which concurrence will not be unreasonably
withheld), Purchaser's obligations under this SECTION 7.14 shall cease and
Seller shall promptly pay Purchaser the amount of $500,000. Amounts payable by
Seller to Purchaser under this Section shall be paid out of funds in the Escrow
Agreement to the extent available. In the event adequate funds are not available
in the Escrow Agreement, Seller, jointly and severally, shall pay any shortfall
to Purchaser in immediately available funds.
SECTION 7.15 SCHEDULES.
(a) Within 10 days after the date of this Agreement, Seller shall deliver
all schedules required by Seller to be delivered pursuant to this Agreement (the
"SCHEDULES") together with a certificate from an executive officer of Seller
certifying on behalf of Seller that all representations and warranties of Seller
in this Agreement are true and correct as of the date of the delivery of the
Schedules. Purchaser shall have 20 days after receipt of the Schedules to accept
the Schedules or terminate this Agreement in accordance with SECTION 10.1 of
this Agreement. The decision by Purchaser to accept the Schedules or terminate
this Agreement shall be made by Purchaser in Purchaser's sole and absolute
discretion.
(b) Except for Schedule 4.1(a), a Schedule to this Agreement shall not be
considered deficient for an inadvertent failure to disclose certain information
required to be disclosed on
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such Schedule if the same information is disclosed on another Schedule for
substantially the same purpose.
SECTION 7.16 NAME CHANGE. Seller agrees to change within 30 days after
Closing all of Seller's names to names which do not incorporate the name
"Abraxas" or any derivation thereof or name similar thereto.
ARTICLE VIII
COVENANTS
SECTION 8.1 SELLER'S COVENANTS. Seller, jointly and severally, covenants
and agrees with Purchaser as follows:
(a) CONDUCT OF BUSINESS. Except as permitted hereunder or contemplated
hereby or as consented to in writing by Purchaser, through the Closing Date
Seller will (i) conduct the Business in the usual and ordinary course thereof,
including, without limitation, the making of proposals, quotations, bids and
solicitations, and the entering into of contracts for the purchase of products
and purchase and sale of services; (ii) communicate regularly with Purchaser and
keep Purchaser closely advised of any material developments relating to the
Business; (iii) permit Purchaser to have access at reasonable times to the
Seller's facilities and to review and copy the books and records of the
Business; (iv) maintain and preserve the assets of Seller in customary repair,
order and condition, reasonable wear and tear and loss by fire and casualty
(which loss shall be governed by SECTION 7.12 hereof) excepted, and proceed with
any improvements in progress at the Improvements associated with the Business
subject to SECTION 8.1(a)(viii) below; (v) use best efforts to preserve Seller's
business organization intact, to retain the services of Seller's officers and
employees and to preserve Seller's relationships with its suppliers and all
Governmental Authorities with which Seller has engaged in business related to
the Business; (vi) use its Best Efforts to cause all of the representations and
warranties in ARTICLE V hereof to continue to be true and correct; (vii)
continue to purchase supplies and similar items in the ordinary course through
the Closing Date; (viii) not make any new commitments or capital purchases in an
amount greater than $10,000, without the prior written consent of Purchaser
which will not be unreasonably withheld; and (ix) not prepay in whole or in part
any indebtedness of Seller or increase the balance of the Debt Service Reserve
Fund or any similar fund or account.
(b) MAINTENANCE OF INSURANCE. Seller will (i) maintain or cause to be
maintained the insurance policies or risk retention programs (or policies or
programs of substantially the same nature) of Seller in full force and effect at
all times until the Closing Date and (ii) assign to Purchaser rights accruing
under such policies, programs or coverage (including self-insurance or any
insurance reserves) from and after the Closing with respect to incidents
occurring prior to the Closing.
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(c) INFORMATION AND ACCESS. At all times until the Closing, Seller will
afford representatives of Purchaser access during normal business hours to its
offices, personnel, Improvements, equipment and records, for the purpose of
conducting an investigation thereof. Seller will furnish to Purchaser such
additional financial and operating data and other information as Purchaser may
reasonably request; PROVIDED, HOWEVER, that the confidentiality of any data or
information so acquired shall be maintained by Purchaser and its representatives
in accordance with SECTION 8.2(a) hereof.
(d) BEST EFFORTS. Seller will use its best efforts to obtain the
satisfaction of the conditions to Closing set forth in SECTION 9.1 hereof.
(e) PUBLIC ANNOUNCEMENTS AND DISCLOSURE OF COMPANY
INFORMATION. Subject to applicable law, at all times until the Closing, Seller
will promptly advise, and obtain the approval of, Purchaser before (i) issuing,
or permitting any of Seller's directors, officers to issue, any press release
with respect to this Agreement or the transactions contemplated hereby or (ii)
disclosing, or permitting any of Seller's directors, officers, employees,
representatives or agents to disclose, to any Person (other than Seller or
Purchaser or their respective directors, officers, employees, representatives or
agents) nonpublic information regarding Purchaser.
(f) OTHER OFFERS. Except in connection with the transactions contemplated
by this Agreement, from and after the date hereof, Seller shall not, and shall
not permit any of its officers, directors, employees, Affiliates,
representatives or agents to, directly or indirectly, (i) solicit, initiate or
knowingly encourage any offer or proposal for, or any indication of interest in,
a merger or business combination involving Seller or the acquisition of an
equity interest in, or a substantial portion of the assets of, Seller or (ii)
engage in negotiations with or disclose any nonpublic information relating to
Seller or Purchaser, or afford access to the properties, books or records of
Seller, to any Person. Seller shall promptly notify and provide copies to
Purchaser of any offer, proposal or indication of interest, or communication
with respect thereto, received from any third party.
(g) NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to
Purchaser of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
of such party contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii) any material failure
by Seller to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, that the delivery of any
notice pursuant to this SECTION 8.1(g) shall not limit or otherwise affect the
remedies available hereunder to Purchaser.
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SECTION 8.2 PURCHASER'S COVENANTS. Purchaser covenants and agrees with
Seller as follows:
(a) PUBLIC ANNOUNCEMENTS AND DISCLOSURE OF COMPANY
INFORMATION. Purchaser shall keep confidential any information regarding Seller
that is not otherwise generally available to the public or has not been made
available to the public by persons other than Purchaser, its representatives,
agents or employees, except as is necessary in connection with the preparation
of this Agreement and the documents contemplated herein, arranging acceptable
financing of this transaction or as may be required by applicable law. If for
any reason the transaction contemplated herein is abandoned or terminated prior
to being consummated, Purchaser will return promptly all confidential or
proprietary information concerning Seller previously disclosed to Purchaser, and
will not use or allow the use of any such information for any purpose, except as
may be required by law. If for any reason this transaction is not consummated,
Purchaser agrees that for a period of two years after this Agreement is
abandoned or terminated it will not compete with Seller for any of Seller's
existing contracts specified on the list attached hereto as SCHEDULE 8.2(a).
(b) BEST EFFORTS. Purchaser will use its best efforts to cause the
representations and warranties contained in ARTICLE VI hereof to continue to be
true and correct through the Closing Date and to obtain the satisfaction of the
conditions to Closing set forth in SECTION 9.2 hereof.
ARTICLE IX
CONDITIONS TO CLOSING
SECTION 9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the transactions contemplated herein are subject, at the
option of Purchaser, to satisfaction or waiver of the following conditions:
(a) COMPLIANCE. Seller shall have complied in all material respects with
all of its covenants and agreements contained herein, and all of the
representations and warranties contained in ARTICLE V hereof shall be true and
correct in all material respects on the date hereof and as of the Closing Date.
(b) OFFICER'S CERTIFICATE. Purchaser shall have received a certificate
dated the Closing Date of an executive officer of Seller certifying as to the
matters specified in SECTION 9.1(a) hereof in a form satisfactory to Purchaser.
(c) SELLER'S RESOLUTIONS. Seller shall deliver to Purchaser certified
copies of resolutions duly adopted by the board of directors of Seller,
authorizing and approving the execution and delivery of this Agreement,
including the exhibits and schedules hereto, and the consummation of the
transactions contemplated herein.
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(d) NONCANCELLATION OF OPERATING CONTRACTS. No Contracts listed on
SCHEDULE 3.1(viii) hereto shall have been canceled, amended or renewed at
reduced per diem levels or otherwise adversely affected prior to Closing.
(e) TRANSFER DOCUMENTS. At Closing, Seller shall execute and deliver to
Purchaser such bills of sale and other instruments of sale, transfer,
conveyance, assignment and delivery covering the Acquisition Assets or any part
thereof, executed by Seller or other appropriate parties, as Purchaser may
reasonably require to assure the full and effective sale, transfer, conveyance,
assignment and delivery to Purchaser of the Acquisition Assets free and clear of
any rights and claims of third parties (other than Permitted Encumbrances)
including, but not limited to, the following:
(i) a general warranty deed in a form acceptable to Purchaser, duly
executed by Seller, or its duly authorized agent, duly acknowledged and in
form for recording, conveying to Purchaser good and marketable fee simple
title to each Acquired Property and the Improvements thereon and all of
Seller's right, title and interest in and to the Appurtenances related
thereto free and clear of all liens, encumbrances, covenants, conditions,
restrictions, rights of way, easements, and other matters effecting the
title to the Acquired Property and the Improvements thereon, except for
the Permitted Encumbrances.
(ii) a general assignment in a form acceptable to Purchaser, duly
executed by Seller, or its duly authorized agent, duly acknowledged and in
form for recording, conveying to Purchaser all of Seller's right, title
and interest in and to each of the Assumed Leases, free and clear of all
liens, encumbrances, covenants, conditions, restrictions, rights-of-way,
easements and other matters affecting the title to the Assumed Leases
except for the Permitted Encumbrances.
(iii) the standard form of Owner's Policy of Title Insurance issued
by the Title Company in each applicable jurisdiction insuring good and
marketable fee simple title to the Acquired Property and Improvements,
subject only to the Permitted Encumbrances with such endorsements and/or
deletions thereto as are set forth on EXHIBIT D thereto, or as otherwise
acceptable to Purchaser.
(iv) the standard form of Leasehold Policy of Title Insurance issued
by the Title Company in each applicable jurisdiction insuring good and
marketable leasehold title to the Assumed Leases, subject only to the
Permitted Encumbrances with such endorsements and/or deletions thereto as
are acceptable to Purchaser.
(v) a bill of sale, general assignment and conveyance by Seller
transferring to Purchaser good and marketable title to all of the
Acquisition Assets in a form satisfactory to Purchaser.
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(vi) all documents in a form satisfactory to Purchaser required for
the assignment of Seller's rights under all registrations, Permits and
licenses (to the extent permitted by law), equipment or motor vehicle
leasing agreements, motor vehicle and rolling stock titles, rights under
sales and/or purchase orders and of Seller's rights under all other
Contracts (including the operating contracts of Seller listed on SCHEDULE
3.1(viii) hereto) constituting a part of the Acquisition Assets.
(vii) originals of all of the Assumed Leases, contracts, agreements,
commitments, books, records, files and other data that (x) are included in
the Acquisition Assets or (y) relate to or affect the Acquisition Assets
and are reasonably necessary for the continued conduct of the Business.
(viii) such other instruments of transfer and assignment in respect
of the Acquisition Assets as Purchaser shall reasonably require and as
shall be consistent with the terms and provisions of this Agreement.
(ix) Prior to the Closing Date, Seller will take such reasonable
steps as may be requisite or appropriate so that no later than the close
of Business on the Closing Date, Purchaser will be in actual ownership and
control of all of the Acquisition Assets.
(f) ABSENCE OF MATERIAL ADVERSE EFFECT. No Material Adverse Effect
shall have occurred since the date hereof or shall occur as a result of the
consummation of the transactions contemplated by this Agreement.
(g) FACILITY PERMITS. To the extent required under applicable law,
Purchaser shall have obtained or received a transfer of all required permits or
licenses allowing Purchaser to operate the Business at the Acquired Property
under the requirements of any applicable Governmental Authority, or a letter
from the appropriate Governmental Authority satisfactory to Purchaser regarding
the issuance of such required permits to Purchaser subsequent to Closing.
(h) ENVIRONMENTAL REVIEW. Purchaser shall have received an environmental
audit at its expense regarding such Business Property as Purchaser deems
relevant and Purchaser shall be satisfied in its sole discretion with the
environmental condition of all Business Property, and including without
limitation the Acquired Property.
(i) SURVEYS. Purchaser shall have received surveys of the Acquired
Property and Improvements and such survey shall not have raised any questions as
to the accuracy of Seller's representations and warranties in SECTION 5.11
hereto.
(j) ORDERS, ETC. No action, suit or proceeding shall have been commenced
or shall be pending or threatened, and no statute, rule, regulation or order
shall have been enacted, promulgated, issued or deemed applicable to the
Business, the Acquisition Assets or the transactions contemplated by this
Agreement, by any Governmental Authority or court that
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reasonably could be expected to (i) materially impair Purchaser's ownership or
operation (as currently conducted) of all or a material portion of the Business
or the Acquisition Assets, or compel Purchaser to dispose of or hold separate
all or a material portion of Purchaser's or Seller's business or assets, as a
result of the transactions contemplated by this Agreement or (ii) prohibit
consummation of the transactions contemplated by this Agreement.
(k) REMOVAL OF LIENS. Seller shall have caused any and all Liens on the
Acquisition Assets, other than Permitted Encumbrances, to be released and shall
have provided Purchaser with documentary evidence to such effect.
(l) ADDITIONAL REAL PROPERTY MATTERS.
(i) Purchaser shall have timely received the Title Commitment, the
Survey, and each of the items described in SECTION 7.4 hereof and any
objections of Purchaser thereto shall have been addressed or waived
pursuant to such Section;
(ii) Except as provided in SECTION 7.2(d) hereof, there shall be no
unpaid ad valorem taxes or assessments levied or assessed against the
Acquired Property for years prior to the year in which Closing occurs. If
the Acquired Property, or any part thereof, shall be or shall have been
affected by any such assessments for any period prior to Closing, which
are or may become payable in installments, then for the purposes of this
Agreement all the installments of any such assessment whether due or
payable prior to or after the date of Closing shall be paid and discharged
by Seller at the Closing and Purchaser shall take title free of the lien
of all the unpaid installments of any such assessment;
(iii) Each Assumed Leased shall be in full force and effect without
any uncured default and Purchaser shall have received estoppel
certificates in a form reasonably acceptable to Purchaser from each of the
lessors with respect to each such Assumed Lease.
(m) CONSENTS. All consents and approvals required in connection with (i)
the execution, delivery and performance of this Agreement and (ii) the
assignment of the Contracts and all other agreements necessary for Purchaser to
conduct the Business as it is currently being conducted by Seller, including,
without limitation, those consents listed on SCHEDULE 5.4 hereto, shall have
been obtained in form satisfactory to Purchaser.
(n) OTHER DOCUMENTS; VERIFICATION BY INDEPENDENT AUDITOR.
Seller shall have delivered to Purchaser such other documents, instruments and
certificates as may be reasonably requested by Purchaser. Purchaser, at its sole
cost and expense, shall have the right to have an independent public auditing
firm verify the accuracy of Seller's representations and warranties and
satisfaction of conditions to Closings which relate the financial condition of
the Business, provided, that such verification shall not delay Closing by more
than seven days.
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(o) REVENUES.
(i) Purchaser shall have received reasonable evidence that the
revised fiscal 1997 projected revenues, direct expenses and related net
earnings of Seller are not materially different than as reflected on
EXHIBIT 9.1(o) for fiscal 1997, including any stop increase pay
adjustments.
(ii) Purchaser shall have received reasonable evidence that Seller's
projected revenues (including other income) listed on EXHIBIT 9.1(o) are
supported by appropriate contracted funding from the relevant Governmental
Authorities.
(iii) Purchaser shall have received reasonable evidence that the
impact upon revenues and expenses resulting from the conversion of
Seller's operations from a non-profit to for-profit entity has been
accurately reflected in the revised 1997 project statement of operations
set forth on EXHIBIT 9.1(o).
(iv) Purchaser shall have received reasonable evidence that
financial projections related to all Facilities within the revised 1997
projected statement of operations set forth on EXHIBIT 9.1(o) are accurate
based upon year-to-date December 1996 through June 30, 1997 actual
results.
(p) NO EFFECT ON CONTRACTS OR GRANTS. Purchaser shall have received
written evidence from applicable Governmental Authorities that consummation of
the transactions contemplated in this Agreement, including but not limited to
assignment of the Contracts by Seller to Purchaser, will not affect Purchaser's
rights to any previous grants to, or contracts with Seller, except as related to
school breakfast, lunch and food stamp programs in an annual amount not to
exceed $850,000 for fiscal 1998, as reflected in EXHIBIT 9.1(o), and except to
the extent such grants are reflected in the records of Seller as an accrued
liability.
(q) MEETINGS; CONSENTS. Purchaser shall have engaged in meetings with, and
received written consents in form satisfactory to Purchaser from, all applicable
Governmental Authorities and other third parties permitting the assignment of
all Contracts which comprise the total projected revenues as listed on EXHIBIT
9.1(o) to Purchaser as a "for-profit" company at revenue and profitability
levels not less than as currently in effect as specified on EXHIBIT 9.1(q) and
not less than the 1997 projected amounts as set forth on EXHIBIT 9.1(o).
(r) NO PREPAYMENT PENALTIES. Purchaser shall incur no prepayment penalties
related to the Retired Debt (i.e., any prepayment penalties will be paid by
Seller out of the Purchase Price).
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(s) EMPLOYEE BENEFIT PLANS. Purchaser shall have received evidence
satisfactory to Purchaser that all eligible employees of Seller have either been
offered, or are currently covered by, the health insurance and pension plans,
listed on EXHIBIT 9.1(s) at the approximate cost as scheduled on EXHIBIT 9.1(s).
Purchaser shall have received evidence to its satisfaction that replacing
Seller's employees' benefit plans with Purchaser's benefit plans will be
accomplished on terms acceptable to Purchaser without jeopardizing the
continuity of employees which are considered for employment, including but not
limited to, any unionized employees which are considered for employment. Seller
agrees, to the extent directed by Purchaser, to immediately and diligently
proceed with discussing Purchaser benefit plans with all appropriate Seller
employees.
(t) UNIONS. Except for employees at the Abraxas I facility, the employees
of Seller shall not be unionized, nor shall there be any plans or other
developments for unionization.
(u) MINIMUM EBIT. Only to the extent that such is needed to achieve an
annualized $3,000,000 run-rate minimum earnings before interest and taxes
("EBIT") level, Purchaser shall have received evidence to Purchaser's
satisfaction that up to $800,000 of the combined total of (i) annualized direct
expense compensation payroll and related direct payroll fringe cost and (ii)
corporate administrative overhead (without giving effect to any consolidation
into Purchaser) has been identified by Seller for elimination ("DIRECT EXPENSE
COMPENSATION AND G&A REDUCTION") by the Closing Date without impairing the
integrity or revenue stream of the related programs. This Direct Expense
Compensation and G&A Reduction must be detailed program, by specific employee,
etc. and may not include reductions from changes in benefit programs (i.e.,
insurance, retirement, paid-days-off, etc.) related to non-terminated employees
or any reductions in real estate taxes, but may include reductions in other
out-of-pocket direct operating expenses. Prior to Closing, Seller shall have
implemented at least $250,000 of the Direct Expense Compensation and G&A
Reduction, without impairing the integrity or profitability of the Seller's
operations.
(v) EMPLOYEES. Purchaser shall have received evidence to its satisfactions
that the number and compensation of employees as listed on Seller's "Staff
Information Report-Distribution Month of January 1997" ("1/97 SIR") are
sufficient to operate the level of operations listed on the revised 1997
projected statement of operations set forth on EXHIBIT 9.1(o). The parties
acknowledge that, to achieve this level of operations, there will need to be
added to the 1/97 SIR the positions (at the locations and at the compensation
and fringe levels) as set forth on SCHEDULE 9.1(v).
(w) PURCHASER REVIEW. Within 20 days of receipt of the Schedules,
Purchaser shall have toured and/or reviewed the Acquired Property and
Improvements thereon, Seller's leased facilities, Contracts and Seller's
operations which shall be reasonably satisfactory to Purchaser.
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(x) CONTRACT RENEWALS. All Contracts which expire between December 31,
1996 and the later of the Closing Date or July 1, 1997 shall be renewed on terms
satisfactory to Purchaser.
(y) BOARD APPROVAL. The board of directors of Purchaser shall have
approved this Agreement and the transactions contemplated herein.
(z) OFFICER AND DIRECTOR RELEASES. The officers and directors of Seller
shall have delivered to Purchaser an instrument dated the Closing Date releasing
the Seller from any and all claims of such officers and directors (except as to
accrued compensation prior to the Closing Date in accordance with the terms of
this Agreement).
(aa) OPINIONS OF COUNSEL. Purchaser shall have received the opinions of
counsel to Seller reasonably acceptable to Purchaser and its counsel as to the
matters reasonably requested by Purchaser. Purchaser shall have received an
opinion from qualified bond counsel that the consummation of the transactions
contemplated in this Agreement will not adversely affect the tax-exempt
character of any bonds included within the Retired Debt. Any fees incurred with
respect to obtaining such opinion shall be borne equally by Purchaser and
Seller.
(bb) NO INDEBTEDNESS. There shall be no indebtedness of any kind (whether
or not evidenced by one or more promissory notes and whether or not reflected in
the Balance Sheet or the notes thereto) owed by Seller to any officer, director
or affiliate of Seller, or owed by any officer, director or affiliate of Seller
to Seller.
(cc) EMPLOYMENT AGREEMENTS. Purchaser shall have entered into employment
agreements with Arlene Lissner and Tom Jenkins and a noncompete agreement with
Arlene Lissner in form reasonably satisfactory to Purchaser.
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate the transactions contemplated herein are subject, at the
option of Seller, to satisfaction of the following conditions:
(a) COMPLIANCE. Purchaser shall have complied with its covenants and
agreements contained herein, and the representations and warranties contained in
ARTICLE VI hereof shall be true and correct in all respects on the date hereof
and as of the Closing Date.
(b) OFFICER'S CERTIFICATE. Seller shall have received a certificate dated
the Closing Date of an executive officer of Purchaser certifying as to the
matters specified in SECTION 9.2(a) hereof in a form satisfactory to Seller.
(c) PURCHASER'S RESOLUTIONS. Purchaser shall deliver to Seller certified
copies of resolutions duly adopted by the board of directors of Purchaser
authorizing and
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approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein.
(d) ORDERS, ETC. No action, suit or proceeding shall have been commenced
or shall be pending or, to the actual knowledge of the officers and directors of
Purchaser, threatened, and no statute, rule, regulation or order shall have been
enacted, promulgated, issued or deemed applicable to the Business, the
Acquisition Assets or the transactions contemplated by this Agreement, by any
Governmental Authority or court that reasonably may be expected to (i) prohibit
Purchaser's ownership or operation of all or a material portion of the Business
or the Acquisition Assets, or compel Purchaser to dispose of or hold separate
all or a material portion of Seller's business or assets, as a result of the
transactions contemplated by this Agreement or (ii) prohibit consummation of the
transactions contemplated by this Agreement.
(e) FAIRNESS OPINION; APPROVALS. Seller shall have obtained, at Seller's
expense, a fairness opinion in form reasonably satisfactory to Seller and
approval from the attorney general of each state for which approval is required.
Seller shall use its best efforts to have obtained such approvals on or before
August 31, 1997.
ARTICLE X
TERMINATION
SECTION 10.1 GROUNDS FOR TERMINATION. This Agreement may be terminated
at any time prior to the Closing Date:
(a) by the mutual written agreement of Seller and Purchaser;
(b) by Purchaser by written notice thereof to Seller if any of the
conditions set forth in SECTION 9.1 hereof shall have become incapable of
fulfillment by or before the Closing Date, and shall not have been waived by
Purchaser;
(c) by Seller by written notice thereof to Purchaser if any of the
conditions set forth in SECTION 9.2 hereof shall have become incapable of
fulfillment by or before the Closing Date, and shall not have been waived by
Seller;
(d) by Purchaser, as set forth in SECTIONS 7.4, 7.11, 7.12 and 7.15
hereof;
(e) by Purchaser or Seller, as set forth in SECTION 7.6 hereof;
(f) by Seller or Purchaser by written notice thereof to the other if the
transactions contemplated hereby shall not have been consummated by August 31,
1997 (or such later date as shall apply pursuant to SECTION 3.3(b) hereof), or
such other date as Seller and Purchaser shall agree upon in writing; or
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(g) by Seller or Purchaser by written notice thereof to the other if the
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or Governmental
Authority having competent jurisdiction enjoining, restraining or otherwise
preventing, or awarding substantial damages in connection with, or imposing a
material adverse condition upon, the consummation of this Agreement or the
transactions contemplated hereby.
SECTION 10.2 EFFECT OF TERMINATION. The following provisions shall apply
in the event of a termination of this Agreement:
(a) Subject to subsections (b) and (c) of this SECTION 10.2, if this
Agreement is terminated by Seller or by Purchaser as permitted under SECTION
10.1 hereof, such termination shall be without liability to any party to this
Agreement or any stockholder, director, officer, employee, agent or
representative of such party; PROVIDED, that if this Agreement is terminated by
Seller or Purchaser as permitted by SECTION 10.1, unless the event giving rise
to such termination right shall be due to the material breach by Purchaser of
its obligations under this Agreement, Seller shall refund the Option Fee to
Purchaser promptly after such termination of this Agreement;
(b) If this Agreement is terminated as a result of the material breach by
Purchaser of its obligations under this Agreement, Purchaser shall forfeit the
Option Fee to Seller as full payment for damages for such breach. The parties
hereto acknowledge and agree that the actual damages that Seller might sustain
by reason of such breach by Purchaser to perform its obligations hereunder are
uncertain and would be difficult, if not impossible, to ascertain, and that the
Option Fee would be reasonable compensation for any such breach by Purchaser;
(c) If this Agreement is terminated as a result of the breach by Seller of
its obligations under this Agreement, Seller shall promptly refund to Purchaser
the Option Fee. The parties hereto acknowledge and agree that Purchaser, as a
result of the actual damages Purchaser would sustain by reason of such negligent
or willful failure of Seller to perform its obligations hereunder, could not be
made whole by monetary damages, and it is accordingly agreed that Purchaser
shall have the right to elect, in addition to any and all other remedies at law
or in equity, to enforce specific performance under this Agreement and Seller
waives the defense in any such action for specific performance that a remedy at
law would be adequate; and
(d) The parties hereto hereby agree that the provisions of SECTIONS 10.2,
13.1, 13.3, 13.5 and 13.7 hereof and ARTICLE XI hereof shall survive any
termination of this Agreement.
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ARTICLE XI
INDEMNIFICATION
SECTION 11.1 SELLER'S INDEMNITY OBLIGATIONS. Seller (except for TAF)
shall, jointly and severally, indemnify and hold harmless Purchaser and
Purchaser's officers, directors, stockholders, employees, agents,
representatives and Affiliates (each a "PURCHASER INDEMNIFIED PARTY") from and
against any and all claims (including without limitation, Environmental Claims),
actions, causes of action, arbitrations, proceedings, losses, damages,
remediations, liabilities, strict liabilities, judgments, fines, penalties and
expenses (including, without limitation, reasonable attorneys' fees)
("INDEMNIFIED AMOUNTS") incurred by a Purchaser Indemnified Party or for which a
Purchaser Indemnified Party bears responsibility as a result of (a) any breach
or misrepresentation in any of the representations and warranties made by or on
behalf of Seller in this Agreement, including without limitation with respect to
environmental matters, or any certificate or instrument delivered in connection
with this Agreement, (b) any violation or breach by Seller of or default by
Seller under the terms of this Agreement or any certificate or instrument
delivered in connection with this Agreement, (c) except for the Assumed
Liabilities, any act or omission by Seller or any officer, director, employee,
agent or representative of Seller, occurring on or prior to the Closing Date
with respect to the Business or the Acquisition Assets (including any claim by a
third party, including employees and Clients arising out of or related to any
act or omission by Seller or any officer, director, employee, agent or
representative of Seller occurring on or prior to the Closing Date with respect
to the Business or Acquisition Assets), (d) any Environmental Claim, or (e) any
liabilities or obligations of Seller or any officer, director, employee, agent
or representative of Seller not expressly assumed by Purchaser pursuant to this
Agreement. For purposes of this SECTION 11.1, Indemnified Amounts shall include
without limitation those Indemnified Amounts ARISING OUT OF THE STRICT LIABILITY
OR NEGLIGENCE OF ANY PARTY, INCLUDING ANY PURCHASER INDEMNIFIED PARTY, WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE
SECTION 11.2 PURCHASER'S INDEMNITY OBLIGATIONS. Purchaser shall indemnify
and hold harmless Seller and Seller's officers, directors, employees, agents,
representatives and Affiliates (each a "SELLER INDEMNIFIED PARTY") from and
against any and all Indemnified Amounts incurred by a SELLER INDEMNIFIED PARTY
as a result of (a) any breach or misrepresentation in any of the representations
and warranties made by or on behalf of Purchaser in this Agreement or any
certificate or instrument delivered in connection with this Agreement, (b) any
violation or breach by Purchaser of or default by Purchaser under the terms of
this Agreement or any certificate or instrument delivered in connection with
this Agreement, or (c) the Assumed Liabilities.
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SECTION 11.3 INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an "INDEMNIFIED
PARTY") shall with reasonable promptness (i) notify the party from whom
indemnification is sought (the "INDEMNIFYING PARTY") of any third-party claim or
claims asserted against the Indemnified Party ("THIRD PARTY CLAIM") for which
indemnification is sought and (ii) transmit to the Indemnifying Party a copy of
all papers served with respect to such claim (if any) and a written notice
("CLAIM NOTICE") containing a description in reasonable detail of the nature of
the Third Party Claim, an estimate of the amount of damages attributable to the
Third Party Claim to the extent feasible (which estimate shall not be conclusive
of the final amount of such claim) and the basis of the Indemnified Party's
request for indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "ELECTION PERIOD"),
the Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this SECTION 11.3(a). The Indemnifying
Party shall have full control of such defense and proceedings. The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall reasonably deem necessary or
appropriate to protect its interests. If requested by the Indemnifying Party,
the Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. Except as otherwise provided herein, the
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party claim controlled by the Indemnifying Party pursuant to this
SECTION 11.3 and shall bear its own costs and expenses with respect to such
participation.
If the Indemnifying Party fails to notify the Indemnified Party within the
Election Period that the Indemnifying Party elects to defend the Indemnified
Party pursuant to the preceding paragraph, or if the Indemnifying Party elects
to defend the Indemnified Party but fails to prosecute or settle the Third Party
Claim as herein provided, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third Party
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Claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or settled.
The Indemnified Party shall have full control of such defense and proceedings.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this SECTION 11.3,
and the Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
The Indemnifying Party shall not settle or compromise any Third Party
Claim unless (i) the terms of such compromise or settlement require no more than
the payment of money (i.e., such compromise or settlement does not require the
Indemnified Party to admit any wrongdoing or take or refrain from taking any
action), (ii) the full amount of such monetary compromise or settlement will be
paid by the Indemnifying Party, and (iii) the Indemnified Party receives as part
of such settlement a legal, binding and enforceable unconditional satisfaction
and/or release, in form and substance reasonably satisfactory to it, providing
that such Third Party Claim and any claimed lability of the Indemnified Party
with respect thereto is being fully satisfied by reason of such compromise or
settlement and that the Indemnified Party is being released from any and all
obligations or liabilities it may have with respect thereto. The Indemnified
Party shall not settle or admit liability to any Third Party Claim without the
prior written consent of the Indemnifying Party unless (x) the Indemnifying
Party has disputed its potential liability to the Indemnified Party, and such
dispute either has not been resolved or has been resolved in favor of the
Indemnifying Party or (y) the Indemnifying Party has failed to respond to the
Indemnified Party's Claim Notice.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"INDEMNITY NOTICE") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement.
SECTION 11.4 DETERMINATION OF INDEMNIFIED AMOUNTS. The Indemnified Amounts
payable by an Indemnifying Party hereunder shall be determined (i) by the
written agreement of the parties, (ii) by mediation, (iii) by binding
arbitration pursuant to SECTION 13.7 hereof, (iv) by a final judgment or decree
of any court of competent jurisdiction, or (v) by any other means agreed to in
writing by the parties. A judgment or decree of a court shall be deemed final
when the time for appeal, if any, shall have expired and no appeal shall have
been taken or when all appeals taken have been fully determined. In calculating
or determining the Indemnified Amounts, such calculation or determination shall
take into account the actual receipt of any amounts from any insurance company
or other third party.
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SECTION 11.5 ESCROW. Seller and Purchaser expressly acknowledge that the
indemnification obligations of Seller and Purchaser and the payment of
Indemnified Amounts pursuant to this ARTICLE XI shall not be limited to or by
the Escrowed Purchase Price or the terms of the Escrow Agreement.
SECTION 11.6 LIMITATION OF SELLER'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in ARTICLE XI, the
aggregate liability of Seller for any event or occurrence giving rise to Seller
being required to indemnify Purchaser Indemnified Parties pursuant to ARTICLE XI
or any other ARTICLE under this Agreement shall be limited to the Purchase Price
less the Transaction Expenses and the portion of the Retired Debt paid by the
Purchaser pursuant to SECTION 3.3(b) above. Reasonable attorney's fees and costs
incurred by Seller in defending any Third Party Claim shall be considered
Transaction Expenses for purposes of the preceding sentence solely to the extent
mutually agreed by the parties to this Agreement; provided, however, that in no
event shall such attorney's fees and costs exceed $150,000 in the aggregate.
(b) Purchaser Indemnified Parties are entitled to indemnification pursuant
to ARTICLE XI or any other ARTICLE under this Agreement only to the extent that
the amount of any Indemnified Amount, individually or in the aggregate, exceeds
$50,000 and then only to the extent of such excess.
SECTION 11.7 LIMITATION OF PURCHASER'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in ARTICLE XI, the
aggregate liability of Purchaser for any event or occurrence giving rise to
Purchaser being required to indemnify Seller Indemnified Parties pursuant to
SECTION 11.2 shall be limited to $2,000,000.
(b) Seller Indemnified Parties are entitled to indemnification pursuant to
SECTION 11.2 only to the extent that the amount of any Indemnified Amount,
individually or in the aggregate, exceeds $50,000 and then only to the extent of
such excess. Provided, however, this paragraph does not apply to the forfeiture
of the Option Fee by Seller to Purchaser under ARTICLE X of this Agreement.
SECTION 11.8 SELLER TO MAINTAIN EXISTENCE AFTER CLOSING. Seller,
jointly and severally, agrees and covenants (a) to maintain its existence and
good standing in the State of Pennsylvania for a period of three years following
the Closing Date (the "CONTINUATION PERIOD"), and (b) to maintain during the
Continuation Period an aggregate net worth (determined in accordance with
generally accepted accounting principles consistently applied) of not less than
(i) the Purchase Price LESS the Transaction Expenses and the portion of the
Retired Debt paid by the Purchaser pursuant to SECTION 3.3(b) above, MULTIPLIED
BY (ii) 80% throughout the first two years of the Continuation Period, and 50%
during the third year
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of the Continuation Period. Notwithstanding the preceding sentence, immediately
after Closing, TAF shall transfer all of TAF's assets, including but not limited
to the Purchase Price proceeds received in connection with the transactions
contemplated herein, to TAG, which assets shall remain with TAG.
ARTICLE XII
COVENANTS NOT TO COMPETE
SECTION 12.1 SELLER'S COVENANTS NOT TO COMPETE. Except as otherwise
consented to or approved in writing by Purchaser, Seller shall not, at any time
for a period of five years following the Closing Date, directly or indirectly,
acting alone or as a member of a partnership, as a holder of any security, as a
contributor of funds, as an agent, owner in full or in part, advisor, consultant
to or representative of, any Person:
(a) engage in any business in competition with the Business or any other
business of Purchaser relating to the operation of juvenile treatment programs
and educational programs and/or facilities in the United States; or
(b) request any present or future customer or supplier of the Business to
curtail or cancel its business with Purchaser in respect to the Business; or
(c) unless otherwise required by law, disclose to any person, firm or
corporation any details of organization or business affairs of the Business, any
names of past or present customers of Seller or any other nonpublic information
concerning the Business; or
(d) induce or attempt to influence any employee of Purchaser engaged in
the conduct of the Business to terminate his or her employment; or (ii) at any
time following the date hereof, disclose to any person, firm or corporation any
trade, technical or technological secrets used by the Business or any other
knowledge or information of a confidential nature (which knowledge and
information is not otherwise in the public domain) with respect to the Business.
Seller acknowledges that this covenant not to compete is being provided as
an inducement to Purchaser to acquire the Acquisition Assets and that this
ARTICLE XII contains reasonable limitations as to time, geographical area and
scope of activity to be restrained and no broader than necessary to protect
legitimate business interests of Purchaser directly or indirectly associated
with the transactions pursuant to this Agreement. Seller acknowledges that, in
the event the scope of the covenants set forth in this ARTICLE XII is deemed to
be too broad in any court proceeding, the court may reduce such scope to that
which it deems reasonable under the circumstances. The parties hereto agree and
acknowledge that Purchaser does not have any adequate remedy at law for the
breach or threatened breach by Seller of the covenants and agreements set forth
in this ARTICLE XII and, accordingly, Seller further agrees that Purchaser may,
in addition to the other remedies which may be available to it hereunder, file a
suit in equity
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(without the posting of bond) to enjoin Seller from such breach or threatened
breach and consent to the issuance of injunctive relief hereunder. If Seller is
found to have violated this ARTICLE XII, Seller shall pay all costs and
reasonable attorneys' fees incurred by Purchaser to enforce its rights under
this ARTICLE XII.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 COMMISSIONS. Except as set forth on SCHEDULE 13.1, Seller
represents and warrants that it has done nothing to create any liability for the
payment of any commission or compensation in the nature of a finder's fee or
similar fee to any broker or any other Person in connection with this Agreement
and the transactions contemplated hereby. Seller shall indemnify and hold
Purchaser harmless from and against any and all claims for finders' fees,
brokers' commissions or similar fees made by any party as a result of this
Agreement and the transactions contemplated hereunder to the extent that any
such commission or fee was incurred, or alleged to have been incurred, by,
through or under Seller. Purchaser shall indemnify and hold Seller harmless from
and against any and all claims for finders' fees, brokers' commissions or
similar fees made by any party as a result of this Agreement and transactions
contemplated hereunder to the extent that any such commission was incurred, or
alleged to have been incurred, by, through or under Purchaser.
SECTION 13.2 SURVIVAL. The representations and warranties set forth in
this Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing for a period of two
years following the Closing Date; PROVIDED, HOWEVER, that in the case of all
representations and warranties, there shall be no such termination with respect
to any such representation or warranty as to which a bona fide claim has been
asserted by written notice of such claim delivered to the party or parties
making such representation or warranty prior to the expiration of the survival
period; PROVIDED, FURTHER, that the representations and warranties set forth in
SECTIONS 5.2, 5.11, and 5.13 hereof shall survive the Closing indefinitely and
SECTIONS 5.17 and 5.18 shall survive the Closing for the statutory survival
period. The covenants and agreements, including but not limited to
indemnification obligations, set forth in this Agreement and in any certificate
or instrument delivered in connection herewith shall be continuing and survive
Closing; PROVIDED, HOWEVER, that the indemnification obligations of the parties
hereto (i) set forth in SECTIONS 11.1(a) and 11.2(a) with respect to a breach of
a representation or warranty shall terminate at the time such particular
representation or warranty shall terminate, and (ii) set forth in SECTIONS
11.1(b) and 11.2(b) shall terminate two years following the Closing Date.
SECTION 13.3 EXPENSES. Except as otherwise expressly provided herein, each
party shall bear its own respective expenses incurred in connection with the
negotiation, preparation and execution of this Agreement and the transactions
contemplated hereby (as well as in connection with negotiations with other
potential purchasers), including its legal, accounting, advisory, travel,
finders and brokers and other professional fees and expenses.
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SECTION 13.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been received only if and when(i)
personally delivered or (ii) on receipt after mailing, by United States mail,
first class, postage prepaid, by certified mail return receipt requested, or by
facsimile transmission to the respective parties, addressed in each case as
follows (or to such other address as may be specified by like notice):
If to Seller, to:
Obermayer Rebmann Maxwell & Hippel LLP
USX Tower, Suite 4440
800 Grant Street
Pittsburgh, PA 15219
Attention: Marvin S. Lieber
Telephone: 412-566-1500
Facsimile: 412-566-1508
If to Purchaser, to:
Cornell Corrections, Inc.
4801 Woodway, Suite 100E
Houston, Texas 77056
Attention: Steve W. Logan
Telephone: 713-623-0790
Facsimile: 713-623-2853
With a copy (which shall not constitute notice) to:
Liddell, Sapp, Zivley, Hill & LaBoon, LLP
3400 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002
Attention: Marcus Watts
Telephone: 713-226-1200
Facsimile: 713-223-3717
SECTION 13.5 ENTIRE AGREEMENT. This Agreement, including all schedules and
exhibits hereto, which schedules or exhibits are incorporated herein by
reference and deemed to be a part of this Agreement, constitutes the entire
agreement of the parties with respect to the subject matter hereof, and may not
be modified, amended or terminated except by a written instrument specifically
referring to this Agreement signed by all the parties hereto.
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SECTION 13.6 GOVERNING LAW. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of Texas without giving
effect to the principles of conflicts of laws thereof.
SECTION 13.7 ARBITRATION.
(a) Any issue, controversy or claim arising out of or relating to this
Agreement or its alleged breach that cannot be resolved by mutual agreement
within 60 days' notice thereof shall be resolved exclusively by final and
binding arbitration in Delaware in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA"), and judgment on the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof; PROVIDED, HOWEVER, that the parties shall have the right to agree among
themselves as to the amount of the claim
(b) The arbitrators shall be selected by mutual agreement of the parties,
if possible. If the parties fail to reach agreement upon appointment of
arbitrators within 30 days following receipt by one party of the other party's
notice of arbitration, each party shall select one arbitrator and the two
resulting arbitrators shall mutually agree on a third arbitrator from a list or
lists of proposed arbitrators submitted by AAA. The selection process shall be
that which is set forth in the AAA commercial arbitration rules then prevailing,
except that (i) the number of preemptory strikes shall not be limited and (ii)
if the parties' arbitrators fail to select an arbitrator from one or more lists,
AAA shall not have the power to make an appointment but, subject to SECTION
13.7(c) hereof, shall continue to submit additional lists until an arbitrator
has been selected. Initially, however, promptly following its receipt of a
request to submit a list of proposed arbitrators, AAA shall convene the parties'
arbitrators in person or by telephone and attempt to facilitate their selection
of the third arbitrator by agreement. If an arbitrator should die, withdraw or
otherwise become incapable of serving, replacement shall be selected and
appointed in the same manner as the initial third arbitrator.
(c) If the third (or successor) arbitrator has not been selected following
submission of three or more lists by AAA, either party may declare the existence
of an impasse by giving written notice to the other. In that event, the third
(or successor) arbitrator shall be selected in the following manner: Each party
shall designate three proposed arbitrators whose names appear on any of the
lists previously submitted by AAA. The parties shall then eliminate five of the
designated names by alternately striking one, and the person whose name remains
shall serve as arbitrator. If necessary, the party to make the first strike
shall be designated by lot.
(d) All aspects of the arbitration shall be confidential, and the parties
and arbitrators shall not disclose to others, or permit disclosure of, any
information related to the proceedings, including but not limited to discovery,
testimony and other evidence, briefs and the award.
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(e) Upon the motion of either party, and for good cause shown, the
arbitrators, by majority vote, may make any order which justice requires to
protect a party from the disclosure of proprietary, privileged or confidential
business information, including orders (i) that depositions or hearings be
conducted with no one present except the lead attorney for the respective
parties and persons designated by a majority of the arbitrators, and (ii) that
depositions, exhibits, other documents filed with the arbitrators or transcripts
of the hearing be sealed and not disclosed except as specified by the
arbitrators.
SECTION 13.8 ASSIGNMENTS AND THIRD PARTIES. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. No party hereto
shall assign this Agreement or any part hereof without the prior written consent
of the other party; PROVIDED, HOWEVER, that it is understood and agreed that
Purchaser may assign all or any portion of its rights and delegate all or any
portion of its duties hereunder to an Affiliate of Purchaser, in which event the
assignee of Purchaser shall execute and deliver all documents, certificates and
other instruments to be executed and delivered by Purchaser at the Closing in
lieu of Purchaser, which documents, certificates and other instruments shall be
appropriately modified to conform to such assignee's organizational status. No
assignment shall release a party of any of its obligations under this Agreement;
PROVIDED, HOWEVER, Purchaser shall be released from its obligations under this
Agreement upon Purchaser's assignment of its rights and obligations under this
Agreement to an Affiliate of Purchaser.
SECTION 13.9 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any of the parties hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible
SECTION 13.10 AMENDMENTS; NO WAIVERS. Any provision of this
Agreement may be amended or waived prior to the Closing Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by all parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
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SECTION 13.11 ACCESS; COOPERATION. Upon consummation of the
transactions provided herein and for a period of three (3) years thereafter,
Purchaser agrees that upon the reasonable written request of Seller, Purchaser
will provide Seller with reasonable access to Purchaser's personnel and
Purchaser's financial books and records (or copies thereof) transferred by the
Seller to the Purchaser pursuant to this Agreement. All material costs and
expenses associated with providing such personnel and financial books and
records (or copies thereof) shall be borne by Seller. Purchaser agrees to use
reasonable efforts post-Closing to cooperate with Seller in Seller's efforts to
(i) cure or remedy Seller's defective performance prior to Closing of any
Contract, and (ii) administer Seller's COBRA obligations relating to the
transactions contemplated herein; provided, however, that Seller shall promptly
reimburse Purchaser for all reasonable out-of-pocket expenses incurred by
Purchaser with respect to (i) and (ii) above.
SECTION 13.12 BEQUESTS, DEVISES AND GIFTS. Purchaser agrees to
promptly forward to Seller all bequests, devises and gifts received by Purchaser
after the Closing Date which are intended for the benefit of or use of Seller as
a Section 501(c)(3) organization.
SECTION 13.13 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement
shall entitle any Person other than the parties hereto or their respective
successors and assigns permitted hereby to any claim, cause of action, remedy or
right of any kind.
SECTION 13.14 HEADINGS; USE OF CERTAIN TERMS. The headings and table of
contents herein are for convenience only and shall have no significance in the
interpretation hereof. Unless the context shall otherwise require, the singular
shall include the plural and vice versa, and each pronoun in any gender shall
include all other genders.
SECTION 13.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed for all purposes to be an
original, but all of which together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.
ABRAXAS GROUP, INC.
By:/s/ ANTHONY N. CIVELLO
Name: Anthony N. Civello
Title: Director
FOUNDATION FOR ABRAXAS, INC.
By:/s/ ANTHONY N. CIVELLO
Name: Anthony N. Civello
Title: Director
ABRAXAS FOUNDATION, INC.
By:/s/ ANTHONY N. CIVELLO
Name: Anthony N. Civello
Title: Director
ABRAXAS FOUNDATION OF OHIO
By:/s/ ANTHONY N. CIVELLO
Name: Anthony N. Civello
Title: Director
ABRAXAS, INC.
By:/s/ ANTHONY N. CIVELLO
Name: Anthony N. Civello
Title: Director
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CORNELL CORRECTIONS, INC.
By:/s/ STEVE W. LOGAN
Name: Steve W. Logan
Title: Chief Financial Officer,
Secretary and Treasurer
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EXHIBIT 1.2
DEFINITIONS
AFFILIATE: with respect to any Person, means any Person directly or
indirectly controlling, controlled by or under common control with such Person,
and any natural Person who is an officer, director or partner of such Person and
any members of their immediate families living within the same household. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
BALANCE SHEET: means the balance sheet of Seller as of December 31, 1996
described in SECTION 5.6.
BEST KNOWLEDGE OF SELLER: means, with respect to any matter in question,
knowledge of any of the directors or officers of Seller or Seller's onsite
management or knowledge that would have been disclosed through reasonable
diligence.
BUSINESS: means the business engaged in by Seller, consisting primarily of
owning and operating juvenile treatment programs and educational programs and/or
facilities, and holding certain rights under contracts, including without
limitation the Contracts set forth on SCHEDULE 3.1(viii).
BUSINESS PROPERTY: means the Acquired Property, the Improvements, the real
property and improvements that are the subject of the Assumed Leases and any
other property (whether real or personal) which Seller currently owns, leases,
manages or operates in any manner or which Seller or any of its organizational
predecessors formerly owned, leased, managed or operated in any manner.
CERCLA: means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended from time to time.
CLIENT: means any adult or juvenile parolee, probationer or other
resident, some of whom may be homeless juveniles, utilizing the facilities
operated as part of the Business.
CODE: means the Internal Revenue Code of 1986, as amended, or any amending
or superseding tax laws of the United States of America.
DAMAGES: includes damages, losses (including, but not limited to, any
diminution in value), shortages, liabilities, payments, obligations, penalties,
claims, causes of action, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including,
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without limitation, fees, disbursements and expenses of attorneys, accountants
and other professional advisors and of expert witnesses and costs of
investigation, testing and preparation) of any kind or nature whatsoever.
EEOC: means United States Equal Employment Opportunity Commission.
ENVIRONMENTAL CLAIM: means any claim; litigation; demand; action; cause of
action; suit; loss; cost, including, but not limited to, attorneys' fees,
diminution in value, expert's fees; damage; punitive damage; fine, penalty,
expense, liability, criminal liability, judgment, governmental or private
investigation and testing; notification of status of being potentially
responsible for clean-up of any facility or for being in violation or in
potential violation of any Environmental Law; proceeding; lien; personal injury
or death of any person; or property damage, whether threatened, sought, brought
or imposed, that is related to or that seeks to recover Damages related to, or
seeks to impose liability regarding Seller or any of its subsidiaries or
operations conducted by any of them for: (i) improper use or treatment of
wetlands, pinelands or other protected land or wildlife; (ii) noise; (iii)
radioactive materials (including naturally occurring radioactive materials
["NORM"]); (iv) explosives; (v) pollution, contamination, preservation,
protection, decontamination, remediation or clean-up of the air, surface water,
groundwater, soil or protected lands; (vi) solid, gaseous or liquid waste
generation, handling, discharge, release, threatened release, treatment,
storage, disposal or transportation; (vii) exposure of persons or property to
Materials of Environmental Concern and the effects thereof; (viii) the release,
threatened release, generation, extraction, mining, beneficiating, manufacture,
processing, distribution in commerce, use, transfer, transportation, treatment,
storage, disposal or Remediation of Materials of Environmental Concern; (ix)
injury to, death of or threat to the health or safety of any person or persons
caused directly or indirectly by Materials of Environmental Concern; (x)
destruction caused directly or indirectly by Materials of Environmental Concern
or the release or threatened release of any Materials of Environmental Concern
on any property (whether real or personal); (xi) the implementation of spill
prevention and/or disaster plans relating to Materials of Environmental Concern;
(xii) community right-to-know and other disclosure laws; or (xiii) maintaining,
disclosing or reporting information to governmental authorities under any
Environmental Law. The term, "Environmental Claim" also includes, without
limitation, any Damages incurred in testing for the need for Remediation or for
breach or violation of any Environmental Laws; monitoring or responding to
efforts to require Remediation and any claim based upon any asserted or actual
breach or violation of any Environmental Law.
ENVIRONMENTAL LAWS: means any and all laws, common law, statutes,
ordinances, rules, regulations, judgments, guidance documents, orders or other
official acts or determinations of any Governmental Authority relating to the
preservation or protection of the environment, human health or safety, a
community's right to know, or regulating or imposing liability or standards of
conduct concerning any hazardous or solid waste, hazardous, toxic or other
regulated substances, elements, compounds, mixtures or materials in any and all
jurisdictions in which property of Seller is located or the Business is
conducted or in which such Business at any
<PAGE>
time has been conducted, including, without limitation, (a) CERCLA, (b) RCRA,
(c) the Solid Waste Disposal Act, as amended, (d) the Hazardous and Solid Waste
Amendments Act of 1984, as amended, (e) the Clean Air Act, as amended, (f) the
Toxic Substances Control Act, as amended, (g) the Safe Drinking Water Act, as
amended, (h) the Federal Water Pollution Prevention and Control Act, as amended,
(i) the Occupational Safety and Health Act of 1970, as amended, (j) the
Hazardous Materials Transportation Act, as amended, (k) the Rivers and Harbors
Act of 1899, as amended, and (l) any rules and regulations promulgated pursuant
to any or all of (a) through (k) above. The terms "RELEASE"or "THREATENED
RELEASE" shall have the meanings specified in CERCLA, and the terms "SOLID
WASTE" and "DISPOSAL" (or "DISPOSED") shall have the meanings specified in RCRA;
PROVIDED, HOWEVER, that, to the extent the laws of any jurisdiction applicable
to Seller or any of its properties or assets establish a meaning for "release,"
"solid waste" or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply in such jurisdiction.
EPA: means the United States Environmental Protection Agency and any
successor organization.
ERISA: means the Employee Retirement Income Security Act of 1974, as
amended.
GOVERNMENTAL AUTHORITY: means any nation or government, any state or
political subdivision thereof and any agency or entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government.
KNOWLEDGE OF SELLER: means, with respect to any matter in question, actual
knowledge of any of the directors or officers of Seller.
LIEN: means any mortgage, pledge, hypothecation, security interest,
encumbrance, right of first refusal, option, lien, charge, condition,
restriction or burden of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction).
MATERIAL ADVERSE EFFECT: means any material adverse effect on the
business, financial condition, properties, prospects, net worth or results of
operations of Seller.
MATERIALS OF ENVIRONMENTAL CONCERN: means: (i) those substances
included within the statutory and/or regulatory definitions of "hazardous
substance," "hazardous waste," "extremely hazardous substance," "regulated
substance," "hazardous materials," or "toxic substances," under any
Environmental Law; (ii) any material, waste or substance which is or contains:
(A) petroleum, oil or a fraction thereof, (B) explosives, (C) radioactive
materials (including naturally occurring radioactive materials), or (D) solid
wastes that post imminent and substantial endangerment to health or the
environment; and (iii) such other substances, materials, or wastes that are or
become classified or regulated as hazardous or toxic under any applicable
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federal, state or local law or regulation. To the extent that the laws or
regulations of any applicable state or local jurisdiction establish a meaning
for any term defined herein through reference to federal Environmental Laws
which is broader than the meaning under such federal Environmental Laws, such
broader meaning shall apply.
OSHA: means the United States Occupational Safety and Health
Administration.
PERMITTED ENCUMBRANCES: means (a) materialmen's, mechanics', repairmen's,
employees', contractors', operators', tax and other similar liens or charges
arising in the ordinary course of business prior to the Closing Date (i) if they
relate to obligations that have not yet become due and payable or (ii) if their
validity is being contested in good faith by appropriate actions; (b) minor
defects and irregularities affecting title to the assets of Seller, but only if
such defects and irregularities do not and will not impair the operation, value,
marketability or use of the asset affected by such defect or irregularity; (c)
rights reserved to or vested in any governmental body to control or regulate any
asset in any manner that does not materially impair the value or use of such
asset; and (d) encumbrances deemed to be Permitted Encumbrances pursuant to
SECTION 7.4(c) hereof.
PERSON: means any individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.
PLAN: means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by Seller or by any trade or business, whether or not
incorporated, which, together with Seller, is under common control, as described
in Section 414(b) or (c) of the Code.
RCRA: means the Resources Conservation and Recovery Act of 1976, as
amended from time to time.
SUBSIDIARY or SUBSIDIARIES: means, with respect to any specified Person, a
corporation, partnership, joint venture, trust, limited liability company,
unincorporated organization or other Person at least a majority of whose
securities having ordinary voting power for the election of its board of
directors or other similar managing body are, at the time as of which any
determination is being made, owned legally or beneficially by such Person or one
or more Subsidiaries thereof.
TAX RETURN: means any return, report, statement, information return or
other document (including any related or supporting information) filed or
required to be filed with any Governmental Authority in connection with the
determination, assessment or collection of any Taxes or the administration of
any laws, regulations or administrative requirements relating to any Taxes.
<PAGE>
TAXES: means all federal, foreign, state, local or other net or gross
income, gross receipts, sales, use, transfer, real property gains or transfer,
school, ad valorem, property, value-added, franchise, production, severance,
windfall profit, withholding, payroll, employment, excise or similar taxes,
assessments, duties, fees, levies or other governmental charges, together with
any interest thereon, any penalties, additions to tax or additional amounts with
respect thereto and any interest in respect of such penalties, additions or
additional amounts.
TRANSACTION EXPENSES: means all fees, costs and expenses of Seller
incurred in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby or in previous negotiations
with other potential purchasers, including but not limited to Seller's
attorneys' fees and brokers' and finders' fees.
