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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number 1-14089
LANDCARE USA, INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 76-0562801
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2603 AUGUSTA, SUITE 1300
HOUSTON, TEXAS 77057
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 965-0336
-----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of common stock outstanding at November 13, 1998: 17,221,054
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<PAGE>
LANDCARE USA, INC.
INDEX TO FORM 10-Q
For the Quarter Ended September 30, 1998
Part I - Financial Information
Item 1 - Financial Statements
General Information.................................... 3
Historical Consolidated Balance Sheets - LandCARE
USA, Inc. as of September 30, 1998 (unaudited)
and December 31, 1997.......................... 5
Unaudited Statements of Operations - LandCARE USA, Inc.
Historical Consolidated for the three months
and nine months ended September 30, 1998 and
1997 and Pro Forma Combined for the three
months and nine months ended September 30,
1998 and 1997.................................. 6
Unaudited Consolidated Statement of Changes in
Stockholders' Equity - LandCARE USA, Inc.
for the nine month period ended September 30,
1998.......................................... 8
Unaudited Historical Consolidated Statements of Cash
Flows - LandCARE USA, Inc. for the nine
months ended September 30, 1998 and 1997....... 9
Notes to the Consolidated and Combined Financial
Statements............................................. 10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.. 18
Part II - Other Information
Item 1 - Legal Proceedings................................. 26
Item 2 - Recent Sales of Unregistered Securities.......... 26
Item 6 - Exhibits and Reports on Form 8-K................. 26
Signature................................................... 29
2
<PAGE>
LANDCARE USA, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL INFORMATION
LandCARE USA, Inc., a Delaware corporation, ("LandCARE" and
collectively with its subsidiaries, the "Company"), was founded in 1997 to
be a national provider of comprehensive landscape and tree services to the
commercial and institutional markets and to pursue the consolidation of
the highly fragmented landscape and tree services industry. On June 9,
1998, LandCARE completed its initial public offering (the "IPO") of
5,000,000 shares of its common stock, par value $.01 per share (the
"Common Stock"). Simultaneous with the completion of the IPO, LandCARE
acquired: Trees, Inc. ("Trees"), Four Seasons Landscape and Maintenance,
Inc. ("Four Seasons"), Southern Tree & Landscape Co., Inc. ("Southern
Tree"), D.R. Church Landscape Co., Inc. ("Church"), Ground Control
Landscaping, Inc. ("Ground Control"), Arteka Corporation ("Arteka"), and
Desert Care Landscaping, Inc. ("Desert Care") (collectively referred to
herein as the "Founding Companies") for $19.9 million in cash and
5,162,645 shares of Common Stock (the "Mergers"). In connection with the
IPO, the Company granted the underwriters an option to acquire up to
750,000 additional shares of Common Stock at $8.00 per share to cover
over-allotments. On June 29, 1998, the underwriters exercised such
over-allotment option in part, electing to acquire 659,900 shares of
Common Stock.
Prior to the acquisition of the Founding Companies, LandCARE had not
conducted any revenue generating activities of its own. For the period
from inception through June 9, 1998, all of LandCARE'S activity was
related to the completion of the IPO and the Mergers. LandCARE's
expenditures from the date of inception through the completion of the IPO
were advanced by Notre Capital Ventures II, L.L.C. ("Notre"). In exchange,
Notre received 1,565,158 shares of LandCARE'S Common Stock, of which
1,296,408 shares were exchanged for 1,296,408 shares of LandCARE'S
Restricted Voting Common Stock.
Subsequent to June 9, 1998 and through September 30, 1998, the
Company acquired 12 additional commercial landscape and tree services
companies (collectively with the Founding Companies, referred to as the
"Acquired Companies"). Of these additional businesses acquired, 2 were
accounted for as pooling-of-interests (the "Pooled Companies"), one of
which was deemed to be immaterial, with the remaining businesses accounted
for under the purchase method of accounting (the "Purchased Companies").
Historical and pro forma interim period results are not necessarily
indicative of future results because, among other things, the Acquired
Companies were not under common control or management prior to their
acquisition. Additionally, operating results for interim periods are not
necessarily indicative of the results for a full year of operations. The
Company's operations have been and will continue to be subject to seasonal
fluctuations. The financial statements included herein should be read in
conjunction with the Unaudited Pro Forma Combined Financial Statements of
the Company and the related notes thereto, the Financial Statements of the
Company and the related notes thereto, the Financial Statements of Trees,
Four Seasons, Southern Tree, Church, Ground Control, Arteka, and Desert
Care and related notes thereto, and management's discussion and analysis
of financial condition and results of operations related thereto, all of
which are included in the Company's Registration Statement on Form S-1
(No. 333-48215), as amended (the "Registration Statement"), filed with the
United States Securities and Exchange Commission in connection with the
IPO.
3
<PAGE>
For financial statement purposes, Trees, one of the Founding
Companies, was identified as the accounting acquiror. Accordingly, the
accompanying historical financial information represents (i) the
historical results of Trees from January 1, 1997; (ii) the retroactive
restatement to January 1, 1997 of one of the Pooled Companies; (iii) the
acquisition of the remaining Founding Companies effective June 9, 1998;
and (iv) the acquisition of the Purchased Companies and one of the Pooled
Companies deemed to be immaterial from their respective acquisition dates.
The accompanying pro forma combined financial information for the
three- and nine-month periods ended September 30, 1998 and 1997 includes
(i) the results of LandCARE combined with the Founding Companies as if the
Mergers had occurred on January 1, 1997, (ii) the retroactive restatement
to January 1, 1997 of one of the Pooled Companies, and (iii) the
acquisition of the Purchased Companies and one of the Pooled Companies
which was deemed to be immaterial from their respective acquisition dates.
The pro forma financial information includes the effects of (i) the IPO,
(ii) the Mergers, (iii) certain reductions in salaries and benefits paid
to the former owners of the Acquired Companies to which they agreed
prospectively, (iv) certain reductions in lease expense paid to the former
owners of the Acquired Companies to which they agreed prospectively, (v)
elimination of non-recurring, non-cash compensation charges related to
shares of Common Stock issued to management, (vi) amortization of goodwill
resulting from the Mergers and the acquisition of the Purchased Companies,
(vii) decreases in interest expense resulting from the repayment of
substantially all the Founding Companies' outstanding debt and refinancing
certain of the Purchased and Pooled Companies' existing debt; and (viii)
adjustments to the provisions for federal and state income taxes. This
presentation is not intended to be in accordance with the regulations
promulgated by the Securities and Exchange Commission. See Note 3 under
"Notes to Consolidated and Combined Financial Statements" for additional
pro forma information included elsewhere herein.
4
<PAGE>
LANDCARE USA, INC.
HISTORICAL CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 1,161 $ 2,924
Accounts receivable, net ....................... 45,745 9,758
Inventories .................................... 4,271 109
Other current assets ........................... 3,887 577
-------- --------
Total current assets ........................ 55,064 13,368
PROPERTY AND EQUIPMENT, net ....................... 34,537 10,298
GOODWILL, net ..................................... 96,033 --
OTHER ASSETS ...................................... 1,159 448
-------- --------
Total assets ................................ $186,793 $ 24,114
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses .......... $ 26,401 $ 6,640
Payable to related party ....................... -- 2,424
Short term borrowings .......................... 2,449 1,827
Current maturities of long-term debt ........... 721 802
Deferred tax liability ......................... 215 37
Other current liabilities ...................... 1,550 707
-------- --------
Total current liabilities ................... 31,336 12,437
LONG-TERM DEBT, net ............................... 59,544 1,230
OTHER LONG-TERM LIABILITIES ....................... 618 515
DEFERRED TAX LIABILITY ............................ 2,752 1,752
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000
shares authorized; none issued and
outstanding .................................. -- --
Common stock, $.01 par value, 100,000,000
shares authorized; 16,624,463 and 3,551,664
shares issued and outstanding, at September
30, 1998 and December 31, 1997, respectively . 166 36
Additional paid-in capital ..................... 88,697 632
Retained earnings .............................. 3,680 7,512
-------- --------
Total stockholders' equity .................. 92,543 8,180
-------- --------
Total liabilities and stockholders' equity .. $186,793 $ 24,114
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
LANDCARE USA, INC.
UNAUDITED HISTORICAL CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- ----------------------
1998 1997 1998 1997
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES ............................. $ 55,470 $ 17,339 $ 101,908 $ 47,998
COST OF SERVICES ..................... 43,210 14,626 80,496 40,384
--------- --------- --------- ---------
Gross profit ......................... 12,260 2,713 21,412 7,614
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ........................... 7,630 1,455 13,093 4,961
--------- --------- --------- ---------
Income from operations ............... 4,630 1,258 8,319 2,653
OTHER INCOME (EXPENSE):
Interest expense ..................... (528) (150) (847) (406)
Other income, net .................... 117 52 206 622
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ........... 4,219 1,160 7,678 2,869
INCOME TAX PROVISION ................. 1,857 456 3,413 1,141
--------- --------- --------- ---------
NET INCOME ........................... $ 2,362 $ 704 $ 4,265 $ 1,728
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC ................................ $ 0.15 $ 0.20 $ 0.48 $ 0.49
DILUTED .............................. $ 0.15 $ 0.20 $ 0.48 $ 0.49
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC ................................ 15,952 3,552 8,809 3,552
DILUTED .............................. 16,065 3,552 8,851 3,552
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
LANDCARE USA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
----------------------- ---------------------
1998 1997 1998 1997
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES ............................. $ 55,470 $ 35,182 $ 129,832 $ 96,728
COST OF SERVICES ..................... 43,210 27,758 101,321 76,717
--------- --------- --------- ---------
Gross profit ......................... 12,260 7,424 28,511 20,011
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ........................... 7,607 4,560 18,426 13,244
--------- --------- --------- ---------
Income from operations ............... 4,653 2,864 10,085 6,767
OTHER INCOME (EXPENSE):
Interest expense ..................... (528) (83) (665) (200)
Other income, net .................... 117 51 267 828
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ........... 4,242 2,832 9,687 7,395
INCOME TAX PROVISION ................. 1,866 1,273 4,316 3,323
--------- --------- --------- ---------
NET INCOME ........................... $ 2,376 $ 1,559 $ 5,371 $ 4,072
========= ========= ========= =========
NET INCOME PER SHARE:
BASIC ................................ $ 0.15 $ 0.11 $ 0.36 $ 0.28
DILUTED .............................. $ 0.15 $ 0.11 $ 0.36 $ 0.28
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC ................................ 15,952 14,670 14,935 14,670
DILUTED .............................. 16,065 14,670 14,977 14,670
</TABLE>
The accompanying notes are an integral part of
these combined financial statements.
7
<PAGE>
LANDCARE USA, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ---------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 .. 3,551,664 $ 36 $ 632 $ 7,512 $ 8,180
Issuance of shares to
Notre .................. 1,565,158 16 11,253 -- 11,269
Issuance of management,
consultant and director
shares ................. 994,240 10 7,149 -- 7,159
Acquisition of Founding
Companies and LandCARE . 3,299,508 33 23,721 -- 23,754
IPO, net of offering costs 5,659,900 56 36,984 37,040
Acquisition of Purchased
Companies .............. 1,331,771 13 8,955 -- 8,968
Equity of Acquired Company
treated as immaterial
pooling-of-interest .... 222,222 2 3 (18) (13)
S Corporation distribution
made by Pooled Company . -- -- -- (53) (53)
Distribution to
stockholders ........... -- -- -- (8,026) (8,026)
Net income ............... -- -- -- 4,265 4,265
---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 1998 . 16,624,463 $ 166 $ 88,697 $ 3,680 $ 92,543
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
8
<PAGE>
LANDCARE USA, INC.
UNAUDITED HISTORICAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------
1998 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income .................................... $ 4,265 $ 1,728
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............. 3,167 1,732
Capital contributions equal to current
income taxes of S Corporations ........ 364 (72)
Gain on sale of equipment .................. -- (94)
Deferred income tax provision .............. 3,190 208
Changes in assets and liabilities:
Accounts receivable, net ................ (5,663) (3,273)
Accounts payable and accrued expenses ... (4,253) (374)
Other current assets and liabilities .... (1,575) (84)
Other ................................... (804) (15)
-------- --------
Net cash used in operating activities (1,309) (244)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment . -- 100
Purchases of property and equipment ........... (7,043) (2,898)
Cash paid for Founding Companies, net of
cash acquired .......................... (11,796) --
Cash paid for Purchased Companies, net of
cash acquired .......................... (31,143) --
-------- --------
Net cash used in investing activities (49,982) (2,798)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt issuance costs ........................... (275) --
Proceeds from long-term debt .................. 50,662 1,126
Payments of long-term debt .................... (29,872) (311)
Proceeds from issuance of Common Stock, net of
offering costs ............................. 37,092 --
Net proceeds from short-term borrowings ....... -- 109
Distribution to stockholders ............. (8,079) (118)
-------- --------
Net cash provided by financing
activities ........................ 49,528 806
-------- --------
NET DECREASE IN CASH ............................. (1,763) (2,236)
CASH, beginning of period ........................ 2,924 4,370
-------- --------
CASH, end of period .............................. $ 1,161 $ 2,134
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................... $ 508 $ 109
Income taxes ............................... $ 2,065 $ 580
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
9
<PAGE>
LANDCARE USA, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
LandCARE USA, Inc., a Delaware corporation, ("LandCARE" and
collectively with its subsidiaries the "Company"), was founded in 1997 to
be a national provider of comprehensive landscape and tree services to the
commercial and institutional markets and to pursue the consolidation of
the highly fragmented landscape and tree services industry. On June 9,
1998, LandCARE completed its initial public offering (the "IPO") of
5,000,000 shares of its common stock, par value $.01 per share (the
"Common Stock"). Simultaneous with the completion of the IPO, LandCARE
acquired: Trees, Inc. ("Trees"), Four Seasons Landscape and Maintenance,
Inc. ("Four Seasons"), Southern Tree & Landscape Co., Inc. ("Southern
Tree"), D.R. Church Landscape Co., Inc. ("Church"), Ground Control
Landscaping, Inc. ("Ground Control"), Arteka Corporation ("Arteka"), and
Desert Care Landscaping, Inc. ("Desert Care") (collectively referred to
herein as the "Founding Companies") for $19.9 million in cash and
5,162,645 shares of Common Stock (the "Mergers"). In connection with the
IPO, the Company granted the underwriters an option to acquire an
additional 750,000 shares of Common Stock at $8.00 per share to cover
over-allotments. On June 29, 1998, the underwriters exercised such
over-allotment option in part, electing to acquire 659,900 shares of
Common Stock.
Subsequent to June 9, 1998 and through September 30, 1998, the
Company acquired 12 additional commercial landscape and tree services
companies (collectively with the Founding Companies referred to as the
"Acquired Companies"). Of these additional businesses acquired, 2 were
accounted for as pooling-of-interests (the "Pooled Companies"), with the
remaining 10 businesses accounted for under the purchase method of
accounting (the "Purchased Companies"). For financial statement purposes,
the historic financial statements of the Company have been retroactively
restated to give effect to one of the Pooled Companies. The remaining
Pooled Company was deemed to be immaterial and, accordingly, has been
reflected from the acquisition date in the accompanying financial
statements. The Company intends to continue to acquire additional
companies, through merger or purchase, to expand its national operations.
BASIS OF PRESENTATION
HISTORICAL STATEMENTS OF OPERATIONS. For financial statement
purposes, Trees, one of the Founding Companies, was identified as the
accounting acquiror. Accordingly, the accompanying historical financial
information included herein represents (i) the historical results of Trees
from January 1, 1997, (ii) the retroactive restatement to January 1, 1997
of one of the Pooled Companies, (iii) the acquisition of the remaining
Founding Companies effective June 9, 1998, and (iv) the acquisition of the
Purchased Companies and one of the Pooled Companies from their respective
acquisition dates.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS. The accompanying pro
forma combined financial information includes (i) the results of LandCare
combined with the Founding Companies as if the Mergers had occurred at the
beginning of the period, (ii) the retroactive restatement to January 1,
1997 of one of the Pooled Companies, and (iii) the acquisition of the
Purchased Companies and one of the Pooled Companies from their respective
acquisition dates. The pro forma financial information includes the
effects of (i) the IPO, (ii) the Mergers, (iii) certain reductions in
salaries and benefits paid to the former owners of the Acquired Companies
to which they agreed prospectively, (iv) certain
10
<PAGE>
reductions in lease expense paid to the former owners of the Acquired
Companies to which they agreed prospectively, (v) elimination of
non-recurring, non-cash compensation charges related to shares of Common
Stock issued to management, (vi) amortization of goodwill resulting from
the Mergers and the Purchased Companies, (vii) decreases in interest
expense resulting from the repayment of substantially all of the Founding
Companies' outstanding debt and refinancing certain of the Purchased and
Pooled Companies' existing debt, and (viii) adjustments to the provisions
for federal and state income taxes. The pro forma adjustments are based on
estimates, available information and certain assumptions which may be
revised as additional information becomes available. The pro forma
combined statements of operations do not purport to represent what the
Company's consolidated results of operations would actually have been if
such transactions had in fact occurred on those dates and are not
necessarily representative of the Company's results of operations for any
future period. The pro forma financial information may not be comparable
to and may not be indicative of the Company's post-acquisition results of
operations because the Acquired Companies were not under common control or
management. This presentation is not intended to be in accordance with the
regulations promulgated by the Securities and Exchange Commission. See
Note 3 for additional pro forma information.
INTERIM FINANCIAL INFORMATION. The accompanying unaudited interim
financial statements are prepared pursuant to the rules and regulations
for reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete
financial statements are not included herein. The Company believes all
adjustments necessary for a fair presentation of these interim statements
have been included and are of a normal and recurring nature. The interim
statements should be read in conjunction with the financial statements and
related notes thereto included in the Company's Registration Statement on
Form S-1 (No. 333-48215) (the "Registration Statement"), as amended, filed
with the United States Securities and Exchange Commission in connection
with the IPO.
RESTATEMENT OF HISTORICAL FINANCIAL STATEMENTS. During the third
quarter of 1998, the Company completed the acquisition of all of the
capital stock of the Pooled Companies in acquisitions accounted for as
"poolings- of-interests" transactions in accordance with the requirements
of Accounting Principles Board Opinion No. 16. For financial statement
purposes, the historical financial statements have been retroactively
restated to give effect to one of the Pooled Companies which was deemed to
be material. The remaining Pooled Company was deemed to be immaterial and
accordingly, has not been included in the retroactive restatement. The
following table summarizes the restated stockholders' equity, revenues,
net income and per share data of the Company, after giving effect to the
acquisition of the Pooled Company deemed to be material (in thousands,
except share data):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL
------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
As previously reported 1,863,137 $ 19 $ 689 $ 8,360 $ 9,068
Acquisition
accounted for as a
pooling-of-interests. 1,688,527 17 (57) (848) (888)
--------- --------- --------- --------- ---------
As restated .......... 3,551,664 $ 36 $ 632 $ 7,512 $ 8,180
========= ========= ========= ========= =========
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPETMBER 30, 1997
----------------------- ----------------------
REVENUES NET INCOME REVENUES NET INCOME
-------- ---------- -------- ----------
Historical ................. $13,021 $ 610 $36,260 $ 1,618
Acquisition
accounted for as a
pooling-of-interests....... 4,318 94 11,738 110
------- ------- ------- -------
As restated ................ $17,339 $ 704 $47,998 $ 1,728
======= ======= ======= =======
EARNINGS PER SHARE -- BASIC DILUTED BASIC DILUTED
- - --------------------- ----- ------- ----- -------
Historical ................. $ 0.33 $ 0.33 $ 0.87 $ 0.87
Acquisition
accounted for as a
pooling-of-interests....... (0.13) (0.13) (0.38) (0.38)
------- ------- ------- -------
As restated ................ $ 0.20 $ 0.20 $ 0.49 $ 0.49
======= ======= ======= =======
</TABLE>
USE OF ESTIMATES AND ASSUMPTIONS. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS. Certain reclassifications have been made to
the prior period amounts to conform to current period presentations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There were no significant changes in the accounting policies of the
Company during the periods presented. For a description of these policies,
refer to Note 2 of Notes to Financial Statements of Trees included in the
Registration Statement.
3. BUSINESS COMBINATIONS
POOLINGS. During the third quarter of 1998, the Company acquired all
of the outstanding stock of the Pooled Companies in exchange for 1,910,749
shares of LandCARE Common Stock. The Pooled Companies provide
comprehensive landscape and tree services similar to the services provided
by the other Acquired Companies. For financial statement purposes, one of
the Pooled Companies was deemed to be immaterial and, accordingly, the
financial statements of the Company were not retroactively restated for
the acquisition.
11
<PAGE>
PURCHASES. Simultaneous with the IPO, LandCARE acquired the seven
Founding Companies for $19.9 million in cash and 5,162,645 shares of
Common Stock. Subsequent to June 9, 1998 and through September 30, 1998,
the Company acquired the Purchased Companies for aggregate consideration
of $31.0 million in cash, 1,331,771 shares of Common Stock valued at $9.0
million and $6.4 million of convertible notes. The allocations of the
purchase price to the assets acquired and the liabilities assumed from the
Founding and Purchased Companies have been initially assigned and recorded
based on preliminary estimates of fair value and may be revised as
additional information concerning the valuation of such assets and
liabilities becomes available. In connection with the acquisition of the
Founding Companies and the Purchased Companies, LandCARE recognized
goodwill of $94.8 million representing the excess of purchase price over
fair value of the net assets acquired. Goodwill associated with the
Company's acquisitions is recorded as an intangible asset and amortized
over a period not to exceed 40 years. Management has reviewed all of the
factors and related future cash flows which it considered in arriving at
the consideration paid for the Founding Companies and the Purchased
Companies and has determined that there was no persuasive evidence that an
amortization period of less than 40 years would be appropriate.
The unaudited pro forma financial information presented below
includes the income statement data of LandCARE combined with the Acquired
Companies from the beginning of each period as if the acquisitions had
been completed on January 1.
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1997
-------- --------
(In Thousands, Except Per Share Data)
Revenues ........................... $189,089 $157,249
Net income ......................... $ 5,939 $ 4,877
Net income per share:
Basic ........................... $ 0.36 $ 0.29
Diluted ......................... $ 0.34 $ 0.28
Shares used in computing net income:
Basic ........................... 16,624 16,624
Diluted ......................... 17,308 17,308
Pro forma adjustments included in the preceding table regarding the
Acquired Companies primarily relates to (i) certain reductions in salaries
and benefits paid to the former owners of the Acquired Companies to which
they agreed prospectively, (ii) certain reductions in lease expense paid
to the former owners of the Acquired Companies to which they agreed
prospectively, (iii) amortization of goodwill related to the Founding and
Purchased Companies, (iv) elimination of the non-recurring, non-cash
compensation charges related to shares of Common Stock issued to
management, (v) interest expense on borrowings related to the cash portion
of the purchase price of the Purchased Companies, and (vi) interest
expense on the subordinated convertible notes issued in connection with
the acquisition of certain Purchased Companies. In addition, an
incremental tax provision has been recorded as if all of the Acquired
Companies had been subject to federal and state corporate income taxes for
the applicable periods presented.
ADDITIONAL ACQUISITIONS. Subsequent to September 30, 1998, and
through November 13, 1998, the Company completed six additional
acquisitions (the "Additional Acquisitions") for approximately $18.2
million in cash and 596,591 shares of Common Stock. Annualized revenues
from the Additional Acquisitions were $36.0 million. All of the Additional
Acquisitions will be accounted for under the purchase method of
accounting.
12
<PAGE>
4. LONG-TERM DEBT
CREDIT FACILITY. Effective June 9, 1998, the Company entered into a
credit agreement with The First National Bank of Chicago NBD (the "Credit
Facility"). The Credit Facility provided the Company with a revolving line
of credit of up to $50 million, which could be used for general corporate
purposes, including the repayment or refinancing of indebtedness of the
Acquired Companies and financing future acquisitions, capital expenditures
and working capital. During July 1998, the Credit Facility was amended to
increase the borrowing capacity to $55 million and to add Bankers Trust
Company and NationsBank, N.A. as co-lenders under the facility. The Credit
Facility is secured by the stock of the Acquired Companies. Advances under
the Credit Facility bear interest at the bank's designated prime lending
rate. At the Company's option, the loans may bear interest based on the
Eurodollar rate plus a margin ranging from 57.5 to 120 basis points,
depending on the ratio of the Company's total debt on the last day of the
Company's most recently reported fiscal quarter to its earnings before
interest, taxes, depreciation and amortization (the "Leverage Ratio") for
the four quarter period ending on the last day of the Company's most
recently reported fiscal quarter. Commitment fees of 17.5 to 30 basis
points per annum are payable on the total facility, based on the Leverage
Ratio. The Credit Facility contains a provision for standby letters of
credit up to $5 million. The Credit Facility prohibits the payment of
dividends by the Company, restricts the Company's incurring or assuming
other indebtedness and requires the Company to comply with certain
financial covenants, including a minimum net worth, leverage ratio and
minimum fixed charge coverage ratio. The Credit Facility will terminate
and all amounts outstanding thereunder, if any, will be due and payable on
May 31, 2001. As of September 30, 1998, the Company had outstanding
borrowings under the Credit Facility totaling $49.8 million.
CONVERTIBLE SUBORDINATED NOTES. Convertible subordinated notes
totaling $6.4 million were issued to the former owners of two of the
Purchased Companies as partial consideration for the acquisition of their
companies the (the "Notes"). Interest on $5.4 million of the Notes is
payable quarterly at 5.7%. These Notes are convertible into unregistered
shares of LandCARE Common Stock at $10.00 per share on or after September
22, 1999. In the event of a change in control as defined in such Note, the
conversion price adjusts to $6.67 per share. The remaining Notes of $1.0
million bear interest payable quarterly at 5.6%. These Notes are
convertible into unregistered shares of LandCARE Common Stock at $10.00
per share on or after March 4, 2000, and the conversion price does not
adjust in the event of a change in control. All of the aforementioned
Notes mature on March 31, 2002.
SHORT-TERM DEBT. During September 1998, the Company entered into a
separate short-term revolving credit facility (the "Short-Term Facility")
with NationsBank, N.A. as sole lender for up to $20 million. During
October 1998, the Short-Term Facility was amended to increase the
borrowing capacity to $25 million. Borrowings under the Short-Term
Facility bear interest on the same basis as the Credit Facility. There was
no amount outstanding under the Short-Term Facility at September 30, 1998.
OTHER LONG-TERM DEBT. Other long-term debt totaled $3.4 million as
of September 30, 1998 and was comprised of secured debt, unsecured debt
and capitalized lease obligations at certain of the Acquired Companies.
5. CAPITAL STOCK
On June 9, 1998, the Company completed the IPO, which involved the
sale by the Company of 5,000,000 shares of Common Stock at a price to the
public of $8.00 per share. In connection with the IPO, the Company granted
the underwriters an option to acquire up to 750,000 additional shares of
Common Stock at $8.00 per share to cover over-allotments. On June 29,
1998, the underwriters exercised such over-allotment option in part,
electing to acquire 659,900 shares of Common Stock. The net proceeds to
the Company from the IPO (after deducting underwriting discounts,
commissions and IPO expenses) were approximately $37.0 million. Of this
amount, $19.9 million was used to pay the cash portion of the purchase
price relating to the Mergers of the Founding Companies and the remainder
was used to repay approximately $16.6 million of outstanding indebtedness
of the Founding Companies.
13
<PAGE>
As a result of the Merger, the Company's historical capital
structure as of December 31, 1997 has been restated to give effect to the
exchange of Trees' then outstanding shares for 1,863,137 shares of
LandCARE Common Stock. In addition, the Company's historical capital
structure as of December 31, 1997 has been restated to give effect to the
issuance of 1,688,527 shares issued in connection with the acquisition of
one of the Pooled Companies. In conjunction with the IPO and the Mergers,
the Company issued (i) 1,565,158 shares of Common Stock to Notre; (ii)
994,240 shares of Common Stock to management, consultants and directors of
LandCARE; and (iii) 3,299,508 shares of Common Stock (excluding 1,863,137
shares issued to Trees) to owners of the Founding Companies as a result of
the Mergers.
During July 1998, the Company's registration statement registering
5,000,000 additional shares of Common Stock to be issued from time-to-time
in connection with future acquisitions was declared effective by the
Securities and Exchange Commission. Subsequent to July 1998 and through
September 30, 1998, the Company issued 3,242,520 shares of the 5,000,000
registered shares in connection with the acquisition of the Pooled
Companies and the Purchased Companies.
6. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," which established new standards for computing and presenting
earnings per share. The provisions of the statement are effective for
fiscal years ending after December 15, 1997, and accordingly have been
adopted in the accompanying financial statements.
The historical periods ended September 30, 1997 represent the
results of operations of Trees and the shares of common stock presented to
calculate earnings per share for these periods are those issued to Trees
in the Mergers, restated to give effect to the retroactive restatement for
one of the Pooled Companies. The computation of historical net income per
share for the three- and nine-month periods ended September 30, 1997 and
1998 and pro forma net income per share for the three- and nine-month
periods ended September 30, 1997 and 1998 is based on the weighted average
of Common Stock outstanding as of September 30, 1998 which includes shares
as follows:
Issued in consideration for acquisition of
Founding Companies............................... 5,162,645
Sold pursuant to the IPO and the over-allotment.. 5,659,900
Issued to Notre ................................ 1,565,158
Issued to management and directors............... 994,240
Issued in consideration of the Pooled Companies.. 1,910,749
Issued in consideration for the Purchased
Companies........................................ 1,331,771
----------
16,624,463
==========
14
<PAGE>
Basic and diluted historical net income per share is computed based on the
following information:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------
(in thousands, except per share amounts)
1998 1997 1998 1997
------ ------ ------ ------
Net income ........................... $ 2,362 $ 704 $ 4,265 $ 1,728
BASIC:
Basic weighted average shares ........ 15,952 3,552 8,809 3,552
DILUTED:
Basic weighted average shares ........ 15,952 3,552 8,809 3,552
Dilutive securities:
Subordinated convertible
notes ................................ 81 -- 28 --
Options ......................... 32 -- 14 --
------- ------- ------- -------
Diluted weighted average shares ...... 16,065 3,552 8,851 3,552
======= ======= ======= =======
NET INCOME PER SHARE:
Basic .......................... $ 0.15 $ 0.20 $ 0.48 $ 0.49
======= ======= ======= =======
Diluted ........................ $ 0.15 $ 0.20 $ 0.48 $ 0.49
======= ======= ======= =======
Basic and diluted pro forma combined net income per share is computed based on
the following information:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------
(in thousands, except per share amounts)
1998 1997 1998 1997
------ ------ ------ ------
Pro forma combined net income ....... $ 2,376 $ 1,559 $ 5,371 $ 4,072
BASIC:
Basic weighted average shares ....... 15,952 14,670 14,935 14,670
DILUTED:
Basic weighted average shares ....... 15,952 14,670 14,935 14,670
Dilutive securities:
Subordinated convertible
notes ........................ 81 -- 28 --
Options ........................ 32 -- 14 --
------- ------- ------- -------
Diluted weighted average shares ..... 16,065 14,670 14,977 14,670
======= ======= ======= =======
PRO FORMA COMBINED NET
INCOME PER SHARE:
Basic ......................... $ 0.15 $ 0.11 $ 0.36 $ 0.28
======= ======= ======= =======
Diluted ....................... $ 0.15 $ 0.11 $ 0.36 $ 0.28
======= ======= ======= =======
15
<PAGE>
7. INCOME TAXES
The Company intends to file a consolidated federal income tax return
which includes the operations of the Acquired Companies for periods
subsequent to the acquisition date. The Acquired Companies will each file
a "short period" federal income tax return through their respective
acquisition dates.
The provision for income taxes included in the Unaudited Historical
Consolidated Statements of Operations for the three- and nine-month
periods ended September 30, 1998 and the Unaudited Pro Forma Combined
Statements of Operations for the three- and nine-month periods ended
September 30, 1998, assumes the application of statutory federal and state
income tax rates and the non-deductibility of goodwill amortization.
Interim period income tax provisions are based upon estimates of annual
effective tax rates, and events may occur which will cause such rates to
vary.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings that have
arisen in the ordinary course of business. While it is not possible to
predict the outcome of such proceedings with certainty, management's
assessment is that none of these matters are anticipated to have a
material adverse effect on the financial position, liquidity or results of
operations of the Company.
9. RECENT PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosures About Segments of an Enterprise and Related
Information," which requires that a public business enterprise report
financial and descriptive information about its reportable operating
segments. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. The Company will adopt SFAS No. 131 in
the year ended December 31, 1998.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement the SFAS No. 133 at the beginning of
any fiscal quarter after issuance (that is, fiscal quarters beginning June
16, 1998 and thereafter). SFAS No. 133 cannot be applied retroactively.
SFAS No. 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997 (and, at the
Company's election, before January 1, 1998).
The Company has not yet quantified the impacts of adopting SFAS No.
133 on the financial statements and has not determined the timing of or
method of adoption.
16
<PAGE>
10. SUBSEQUENT EVENTS
On November 1, 1998, LandCARE and The ServiceMaster Company
("ServiceMaster") entered into a Plan of Reorganization and Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which LandCARE will
become a subsidiary of ServiceMaster (the "ServiceMaster Merger"). The
Merger Agreement is subject to LandCARE stockholder approval, regulatory
approvals and certain other closing conditions and termination events.
Under the terms of the Merger Agreement, ServiceMaster will exchange a
fraction of a share of ServiceMaster common stock for each share of
LANDCARE Common Stock (the "Exchange Ratio"). The Exchange Ratio is based
on a collar that adjusts the Exchange Ratio if the ServiceMaster Final
Average Closing Price (defined below) exceeds $20.00 per share or is less
than $16.36 per share, such that the value of LandCARE Common Stock will
not be more than $11.00 per share and, subject to certain conditions, will
not be less than $9.00 per share. The "Final Average Closing Price" is the
average of the closing prices of ServiceMaster common stock on the New
York Stock Exchange on the 20 consecutive trading days ending three
trading days prior to the date of the LandCARE stockholder meeting held to
consider the ServiceMaster Merger. If the Final Average Closing Price is
more than $16.35 per share and not more than $20.00 per share, then the
Exchange Ratio will be 0.55. If the Final Average Closing Price is more
than $20.00 per share, then the Exchange Ratio will be adjusted to result
in a value of LandCARE Common Stock of $11.00 per share. If the Final
Average Closing Price is less than $16.36 per share, then ServiceMaster
may elect to not permit the adjustment to the Exchange Ratio as discussed
above, which would thereby result in the value of LandCARE Common Stock
being less than $9.00 per share. In such event, LandCARE may elect to
terminate the Merger Agreement. The ServiceMaster Merger is expected to be
completed by the end of the first quarter of 1999.
On November 9, 1998, the Credit Facility was amended to, among other
things, increase the borrowing capacity available and to provide for
additional banks to participate in the Credit Facility (the "Amended
Credit Facility"). All amounts outstanding under the Credit Facility and
the Short-Term Facility were paid off with the proceeds from the Amended
Credit Facility, and the Credit Facility and the Short-Term Facility were
cancelled. Under the Amended Credit Facility, the Company's borrowing
capacity was increased to $110 million from $55 million. In addition,
First Chicago NBD assigned its interest as administrative and collateral
agent to Nations Bank, N.A., and Bankers Trust Company became
documentation agent of the Amended Credit Facility. Additionally, the
number of banks participating in the facility increased from three to
seven. Borrowings under the Amended Credit Facility bear interest at the
bank's designated prime lending rate, plus a margin ranging from zero to
75 basis points depending on the ratio of the Company's Leverage Ratio as
calculated on the last day of the most recently reported fiscal quarter.
At the Company's option, borrowings under the Amended Credit Facility may
bear interest based on the Eurodollar rate plus a margin ranging from 125
to 225 basis points depending on the Company's Leverage Ratio. In
addition, commitment fees of 30 to 50 basis points, also depending on the
Leverage Ratio, are payable quarterly on the unused portion of the
borrowing capacity. The Amended Credit Facility contains a provision for
standby letters of credit up to $10 million.
Subsequent to September 30, 1998 and through November 13, 1998, the
Company completed six additional acquisitions (the "Additional
Acquisitions") for approximately $18.2 million in cash and 596,591 shares
of Common Stock. Annualized revenues from the Additional Acquisitions were
$36.0 million. All of the Additional Acquisitions will be accounted for
under the purchase method of accounting.
17
<PAGE>
LANDCARE USA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Unaudited
Pro Forma Combined Financial Statements of the Company and related notes
thereto, the individual financial statements of LandCARE and the seven Founding
Companies and related notes thereto and management's discussion and analysis of
financial condition and results of operations related thereto which are included
in the Company's Registration Statement. This discussion contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements are based on the Company's current plans and
expectations and involve risks and uncertainties that could cause actual future
activities and results of operations to be materially different from those set
forth in the forward-looking statements. Important factors that could cause
actual results to differ include, among others, risks associated with
acquisitions, volatility of stock price, changes in government regulations,
competition, integration of operations and growth of newly acquired businesses
and other risks detailed in the Company's reports filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
On June 9, 1998, the Company acquired the Founding Companies in connection
with its initial public offering. For financial statement presentation, however,
Trees was identified as the "accounting acquiror." Accordingly, the accompanying
historical financial information included herein represents (i) the historical
results of Trees from January 1, 1997, (ii) the retroactive restatement to
January 1, 1997 of one of the Pooled Companies, (iii) the acquisition of the
remaining Founding Companies effective June 9, 1998, and (iv) the acquisition of
the Purchased Companies and one of the Pooled Companies, which was deemed to be
immaterial, from their respective acquisition dates. In addition, the Historical
Consolidated Statements of Operations for the three- and nine-month periods
ended September 30, 1998 reflect income taxes provided at the statutory federal
and state income tax rates prior to non-deductible goodwill amortization.
The pro forma combined financial information for the three- and nine-months
ended September 30, 1998 and 1997 includes (i) the results of LANDCARE combined
with the Founding Companies as if the Mergers had occurred at the beginning of
the period, (ii) the retroactive restatement to January 1, 1997 of one of the
Pooled Companies, and (iii) the acquisition of the Purchased Companies and one
of the Pooled Companies from their respective acquisition dates. The pro forma
financial information includes the effects of (i) the IPO, (ii) the Mergers,
(iii) certain reductions in salaries and benefits paid to the former owners of
the Acquired Companies to which they agreed prospectively, (iv) certain
reductions in lease expense paid to the former owners of the Acquired Companies
to which they agreed prospectively, (v) elimination of non-recurring, non-cash
compensation charges related to shares of Common Stock issued to management,
(vi) amortization of goodwill resulting from the Mergers and the Purchased
Companies, (vii) decreases in interest expense resulting from the repayment of
substantially all of the Founding Companies' outstanding debt and refinancing
certain of the Purchased and Pooled Companies' existing debt, and (viii)
adjustments to the provisions for federal and state income taxes. The pro forma
financial information may not be comparable to and may not be indicative of the
Company's post-acquisition results of operations because the Founding Companies
were not under common control or management.
Interim results may also be materially affected by the timing and magnitude
of acquisitions, assimilation costs, gain or loss of a material customer and
variations in the services provided. Accordingly, the Company's operating
results for any three-month or nine-month period are not necessarily indicative
of the results that may be achieved for any subsequent three-month or nine-month
period or for a full fiscal year.
18
<PAGE>
PRO FORMA COMBINED RESULTS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND 1997
The following table sets forth certain selected pro forma combined financial
data and such data as a percentage of pro forma combined revenues for the
periods indicated:
PRO FORMA COMBINED
THREE MONTH PERIOD ENDED
SEPTEMBER 30
-----------------------------------------
1998 1997
------------------ ------------------
(dollars in thousands)
Revenues ......................... $55,470 100.0% $35,182 100.0%
Cost of services ................. 43,210 77.9 27,758 78.9
------- ----- ------- -----
Gross profit ................ 12,260 22.1 7,424 21.1
Selling, general and
administrative expenses ........ 7,190 13.0 4,246 12.1
Goodwill amortization ............ 417 0.8 314 0.9
------- ----- ------- -----
Income from operations ........... 4,653 8.3 2,864 8.1
Interest and other expense,
net ............................ 411 0.7 32 0.1
======= ===== ======= =====
Income before income taxes ....... $ 4,242 7.6% $ 2,832 8.0%
======= ===== ======= =====
REVENUES. The Company's pro forma combined revenues increased by $20.3
million, or 57.7%, to $55.5 million for the three months ended September 30,
1998 from $35.2 million for the corresponding period of 1997 due primarily to an
increase of $10.8 million associated with the acquisition of the Purchased
Companies. Pro forma combined maintenance revenues for utility line clearing at
Trees increased by $3.4 million between the periods due primarily to the
addition of two new contracts during 1998 and the expansion of several other
contracts by utility customers. The Company's pro forma combined landscape
maintenance revenues increased by $2.7 million, principally due to: (i) the
acquisition by Arteka of two companies during December 1997 whose operations are
exclusively maintenance; (ii) the acquisition of Clean Cut which was accounted
for as a pooling-of-interests; and (iii) the addition of new landscape
maintenance contracts at Four Seasons and Southern Tree. The Company's pro forma
combined landscape installation revenues increased by $3.3 million between the
periods, which increase was primarily attributable to (i) early startup of
installation projects during 1998 at Church and Arteka; (ii) the addition of
Clean Cut; and (iii) the inclusion of several large installation projects of
Southern Tree, Ground Control and Desert Care.
GROSS PROFITS. The Company's pro forma combined gross profit increased by
$4.8 million, or 65.1%, to $12.3 million for the three months ended September
30, 1998 from $7.4 million for the corresponding period of 1997. As a percentage
of pro forma combined revenues, pro forma combined gross profit increased to
22.1% for the three months ended September 30, 1998 from 21.1% for the
corresponding period of 1997. The margin increase was primarily due to (i)
budget increases on several utility line clearing contracts at Trees resulting
in higher overtime billings; (ii) an increase in maintenance contracts at Four
Seasons' two newest branches, which were opened during late 1996 and early 1997;
(iii) savings realized on workers compensation and general liability insurance
as a result of LandCARE's group insurance program; and (iv) the implementation
of cost control measures at Clean Cut during 1998 which resulted in lower
overtime pay.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased by $2.9 million to $7.2 million
for the three months ended September 30, 1998 from $4.3 million for the
corresponding period of 1997 primarily due to an increase of $2.1 million
related to the addition of the Purchased Companies and corporate overhead for
which no amount was included in 1997. Corporate overhead is comprised primarily
of salaries of the LandCARE corporate staff and professional fees associated
with being a public company. In addition, combined selling, general and
administrative expenses increased at the Founding Companies due to an increase
at Arteka related to the two acquisitions completed during December 1997 and the
inclusion of additional sales personnel at Southern Tree. As a percentage of pro
forma combined revenues, pro forma combined selling, general and administrative
expenses increased to 13.0% for the three months ended September 30, 1998 from
12.1% for the corresponding period of 1997.
19
<PAGE>
INTEREST AND OTHER EXPENSE, NET. Pro forma combined interest and other
expense, net, increased by $0.4 million in the three month period ended
September 30, 1998 compared to the corresponding period of 1997 primarily due to
an increase in outstanding borrowings under the Company's Credit Facility used
primarily to fund the cash portion of the purchase price of the acquisitions
completed during 1998.
PRO FORMA COMBINED RESULTS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND 1997
The following table sets forth certain selected pro forma financial data as
a percentage of pro forma revenues for the periods indicated:
PRO FORMA
NINE MONTH PERIOD ENDED
SEPTEMBER 30
-----------------------------------------
1998 1997
------------------ -------------------
(dollars in thousands)
Revenues ......................... $129,832 100.0% $ 96,728 100.0%
Cost of services ................. 101,321 78.0 76,717 79.3
-------- ----- -------- -----
Gross profit ................ 28,511 22.0 20,011 20.7
Selling, general and
administrative expenses ........ 17,390 13.4 12,301 12.7
Goodwill
amortization ................... 1,036 0.8 943 1.0
-------- ----- -------- -----
Income from operations ........... 10,085 7.8 6,767 7.0
Interest and other expense,
net ............................ 398 0.3 (628) (0.6)
======== ===== ======== =====
Income before income taxes ....... $ 9,687 7.5% $ 7,395 7.6%
======== ===== ======== =====
REVENUES. The Company's pro forma combined revenues increased by $33.1
million, or 34.2%, to $129.8 million for the nine months ended September 30,
1998 from $96.7 million for the corresponding period of 1997, including an
increase of $10.8 million associated with the acquisition of the Purchased
Companies. The Company's pro forma combined landscape maintenance revenues
increased by $6.6 million due primarily to: (i) the addition of new maintenance
contracts at Four Seasons, Clean Cut and Southern Tree; (ii) an increase in
commercial tree services at Four Seasons; and (iii) the acquisition by Arteka of
two landscape maintenance companies during December 1997. Pro forma combined
maintenance revenues for utility line clearing at Trees increased by $9.9
million between the periods due primarily to the addition of two new contracts
during 1998 and the expansion of several other contracts by utility customers.
The Company's pro forma combined landscape installation revenues increased by
$5.8 million due primarily to (i) the inclusion of several large installation
jobs at Church, Ground Control, and Southern Tree and (ii) the earlier startup
of installation work by Church and Arteka due to mild winter conditions in the
Midwest during early 1998.
GROSS PROFIT. The Company's pro forma combined gross profit increased by
$8.5 million, or 42.5%, to $28.5 million for the nine months ended September 30,
1998 from $20.0 million for the corresponding period of 1997. As a percentage of
pro forma combined revenues, pro forma combined gross profit increased to 22.0%
for the nine months ended September 30, 1998 from 20.7% for the same period of
1997. The margin increase was primarily due to: (i) budget increases on several
line clearing contracts at Trees resulting in higher overtime billings; (ii) the
addition of new maintenance contracts at Four Seasons' two newest branches;
(iii) savings realized by the Acquired Companies as a result of LandCARE'S group
insurance program; and (iv) the implementation of cost control measures at Clean
Cut which resulted in lower overtime pay. The gross margins were adversely
affected by inefficiencies related to weather at Desert Care and Ground Control
and scheduling delays on a major installation project at Ground Control.
20
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma combined selling,
general and administrative expenses increased by $5.1 million, or 41.4%, to
$17.4 million for the nine months ended September 30, 1998 from $12.3 million
for the corresponding period of 1997. As a percentage of pro forma combined
revenues, pro forma combined selling, general and administrative expenses
increased to 13.4% for the nine months ended September 30, 1998 from 12.7% for
the corresponding period of 1997. The increase in pro forma combined selling,
general and administrative expenses was primarily due to (i) an increase of $2.1
million resulting from the acquisition of the Purchased Companies; (ii) an
increase of $1.8 million resulting from the establishment of the LandCARE
corporate office for which no costs were included in 1997; (iii) the addition of
sales and administrative personnel at Church and Southern Tree; and (iv) an
increase at Arteka related to the two acquisitions completed during December
1997.
INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net, increased
by $1.0 million in the nine month period ended September 30, 1998 compared to
the corresponding period of 1997 primarily due to an increase in outstanding
borrowings under the Company's Credit Facility used primarily to fund the cash
portion of the purchase price of the Purchased Companies. In addition, Trees
received a non-recurring insurance settlement totaling $0.5 million during 1997.
HISTORICAL RESULTS FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER
30, 1998 AND 1997
The following discussion includes (i) the historical results of Trees from
January 1, 1997; (ii) the retroactive restatement to January 1, 1997 of one of
the Pooled Companies; (iii) the acquisition of the Founding Companies effective
June 9, 1998; and (iv) the acquisition of the Purchased Companies and one of the
Pooled Companies, which was deemed to be immaterial, from their respective
acquisition dates. The following table sets forth certain selected historical
financial data and such data as a percentage of historical revenues for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
-------------------------------------------------------------------------------
1998 % 1997 % 1998 % 1997 %
-------- ------ ------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ........... $ 55,470 100.0% $ 17,339 100.0% $101,908 100.0% $ 47,998 100.0%
84.1
Cost of services ... 43,210 77.9 14,626 84.4 80,496 79.0 40,384
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit ..... 12,260 22.1 2,713 15.6 21,412 21.0 7,614 15.9
Selling, general and
administrative ... 7,213 13.0 1,455 8.4 12,573 12.3 4,961 10.3
Goodwill
amortization ..... 417 0.8 -- -- 520 0.5 -- --
-------- ----- -------- ----- -------- ----- -------- -----
Income from
operations ..... 4,630 8.3 1,258 7.2 8,319 8.2 2,653 5.6
Interest and other
expense, net ....... 411 0.7 98 0.5 641 0.7 (216) (0.4)
-------- ----- -------- ----- -------- ----- -------- -----
Income before income
taxes .............. $ 4,219 7.6% $ 1,160 6.7% $ 7,678 7.5% $ 2,869 6.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
REVENUES. Historical revenues increased to $55.5 million and $101.9 million
for the three- and nine-months ended September 30, 1998, respectively, from
$17.3 million and $48.0 million for the three- and nine-month periods ended
September 30, 1997, respectively, primarily due to the acquisition of the
Founding and Purchased Companies. Excluding the acquisition of the Founding and
Purchased Companies, revenues increased between the corresponding periods due to
the addition of new utility line clearing contracts and the expansion of several
other contracts by utility customers at Trees and an increase in landscape
maintenance and installation jobs at Clean Cut.
GROSS PROFIT. Gross profit increased to $12.3 million and $21.4 million for
the three- and nine-month periods ended September 30, 1998, respectively, from
$2.7 million and $7.6 million for the three- and nine-months ended September 30,
1997, respectively, primarily due to the acquisition of the Founding and
Purchased Companies. Excluding the acquisition of the Founding and Purchased
Companies, gross profit increased due to the inclusion of overtime on two
utility line clearing contracts at Trees. In addition, cost control measures
were implemented at Clean Cut during 1998, which reduced the amount of overtime
pay resulting in improved margins. As a percentage of revenues, gross profit
increased to 22.1% and 21.0% for the three- and nine-month periods ended
September 30, 1998, respectively, from 15.6% and 15.9% for the three and nine
months ended September 30, 1997, respectively.
21
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $7.2 million and $12.6 million for the
three-month and nine-month periods ended September 30, 1998, respectively, from
$1.5 million and $5.0 million for the three-month and nine-month periods ended
September 30, 1997, respectively, primarily due to the acquisition of the
Founding and Purchased Companies and the addition of LandCARE's corporate
overhead. Corporate overhead is comprised of LandCARE corporate salaries and
professional fees associated with being a public company.
INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net, increased
to an expense of $0.4 million in the three-month period ended September 30,
1998, from an expense of $0.1 million in corresponding period of 1997. For the
nine-month period ended September 30, 1998, interest and other expense, net,
totaled $0.6 million compared to income of $0.2 million in the corresponding
period of 1997. The increase is primarily related to an increase in interest
expense resulting from an increase in outstanding debt under the Credit
Facility. In addition, Trees received a non-recurring insurance settlement
during 1997 totaling $0.5 million.
LIQUIDITY AND CAPITAL RESOURCES - HISTORICAL.
As of September 30, 1998, the Company had working capital of $23.7 million
and $59.5 million of outstanding long-term debt (including $6.4 million of
convertible subordinated notes). Net cash used in operating activities for the
nine months ended September 30, 1998 totaled $1.3 million and included an
increase in accounts receivable of $5.7 million resulting from increased
billings associated with the Company's revenue growth and a decrease in accounts
payable of $4.3 million. Net cash used in investing activities totaled $50.0
million for the nine months ended September 30, 1998, of which $42.9 million
represents the cash consideration paid for the Founding and Purchased Companies
(excluding Trees), net of cash acquired. Net cash provided by financing
activities totaled $49.5 million for the nine months ended September 30, 1998
and was comprised of $37.1 million of net proceeds from the IPO and $50.7
million of borrowings under the Credit Facility. These amounts were offset by
$29.9 million of debt repayments at the Acquired Companies and $8.0
million of distributions to Trees' stockholders representing the cash paid for
Trees in the Merger.
Effective June 9, 1998, the Company entered into a credit agreement with The
First National Bank of Chicago NBD (the "Credit Facility"). The Credit Facility
provided the Company with a revolving line of credit of up to $50 million, which
could be used for general corporate purposes, including the repayment or
refinancing of indebtedness of the Founding Companies and financing future
acquisitions, capital expenditures and working capital. During July 1998, the
Credit Facility was amended to increase the borrowing capacity to $55 million
and to add Bankers Trust Company and NationsBank, N.A. as co-lenders under the
facility. The Credit Facility is secured by the stock of the Acquired Companies.
As of September 30, 1998, the Company had outstanding borrowings under the
Credit Facility totaling $49.8 million.
During September 1998, the Company entered into a separate short-term
revolving credit facility (the "Short-Term Facility") with NationsBank, N.A., as
sole lender, for up to $20 million. During October 1998, the Short-Term Facility
was amended to increase the borrowing capacity to $25 million. Borrowings under
the Short-Term Facility bear interest on the same basis as the Credit Facility.
There was no amount outstanding under the Short-Term Facility at September 30,
1998.
On November 9, 1998, the Credit Facility was further amended to, among other
things, increase the borrowing capacity available and to provide for additional
banks to participate in the Credit Facility (the "Amended Credit Facility").
Under the Amended Credit Facility, the Company's borrowing capacity was
increased to $110 million from $55 million. All amounts outstanding under the
Credit Facility and the Short-Term Facility were paid off with the proceeds from
the Amended Credit Facility, and the Credit Facility and the Short-Term Facility
were cancelled. In addition, First Chicago NBD assigned its interest as
administrative and collateral agent to NationsBank, N.A., and Bankers Trust
Company became documentation agent of the Amended Credit Facility. Additionally,
the number of banks participating in the facility increased from three to seven.
Borrowings under the Amended Credit Facility bear interest at the bank's
designated prime lending rate,
22
<PAGE>
plus a margin ranging from zero to 75 basis points depending on the ratio of the
Company's total debt on the last day of the Company's most recently reported
fiscal quarter to its earnings before interest, taxes, depreciation and
amortization (the "Leverage Ratio"), as calculated on the last day of the most
recently reported fiscal quarter. At the Company's option, borrowings under the
Amended Credit Facility may bear interest based on the Eurodollar rate plus a
margin ranging from 125 to 225 basis points depending on the Leverage Ratio. In
addition, commitment fees of 30 to 50 basis points are payable quarterly on the
unused portion of the borrowing capacity. The Amended Credit Facility contains a
provision for standby letters of credit up to $10 million. The Amended Credit
Facility prohibits the payment of dividends by the Company, restricts the
Company's incurring or assuming other indebtedness and requires the Company to
comply with certain customary financial covenants, including a minimum net
worth, leverage ratio and minimum fixed charge coverage ratio. The Amended
Credit Facility will terminate and all amounts outstanding thereunder, if any,
will be due and payable on November 9, 2001.
On November 1, 1998 LandCARE and The ServiceMaster Company ("ServiceMaster")
entered into a Plan of Reorganization and Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which LandCARE will become a subsidiary of
ServiceMaster (the "ServiceMaster Merger"). The Merger Agreement is subject to
LandCARE stockholder approval, regulatory approvals and certain other closing
conditions and termination events. Under the terms of the Merger Agreement,
ServiceMaster will exchange a fraction of a share of ServiceMaster common stock
for each share of LandCARE Common Stock (the "Exchange Ratio"). The Exchange
Ratio is based on a collar that adjusts the Exchange Ratio if the ServiceMaster
Final Average Closing Price (defined below) exceeds $20.00 per share or is less
than $16.36 per share, such that the value of LandCARE Common Stock will not be
more than $11.00 per share and, subject to certain conditions, will not be less
than $9.00 per share. The "Final Average Closing Price" is the average of the
closing prices of ServiceMaster common stock on the New York Stock Exchange on
the twenty consecutive trading days ending three trading days prior to the date
of the LandCARE stockholder meeting held to consider the ServiceMaster Merger.
If the Final Average Closing Price is more than $16.35 per share and not more
than $20.00 per share, then the Exchange Ratio will be 0.55. If the Final
Average Closing Price is more than $20.00 per share, then the Exchange Ratio
will be adjusted to result in a value of LandCARE Common Stock of $11.00 per
share. If the Final Average Closing Price is less than $16.36 per share, then
ServiceMaster may elect to not permit the adjustment to the Exchange Ratio as
discussed above, which would thereby result in the value of LandCARE Common
Stock being less than $9.00 per share. In such event, LandCARE may elect to
terminate the Merger Agreement. The ServiceMaster Merger is expected to be
completed by the end of the first quarter of 1999.
The Company intends to continue aggressively pursuing acquisition
opportunities. It is believed that the ServiceMaster Merger will provide the
Company with the liquidity required to continue its acquisition plan. If the
Service Master Merger is not approved by the LandCARE stockholders, the Company
will be required to seek additional sources of capital through one or more
funding sources that may include borrowings under the Amended Credit Facility or
offerings of debt and/or equity securities of the Company. In light of recent
volatility in the debt and equity markets, the Company's ability to obtain
additional capital in these markets may be impaired. Since the IPO, the
Company's stock price has fluctuated from a high of $10.13 to a low of $5.00. If
the Company's stock price were to decline for an extended period of time, the
Company's ability to use its Common Stock for future acquisition consideration
may be limited. Although management believes that the Company will generate
sufficient cash flow from operations to fund its future operations, there can be
no assurances that sufficient capital will be available to the Company at the
time it is required or on terms acceptable to the Company, thereby curtailing
the Company's aggressive acquisition plan.
YEAR 2000 COMPLIANCE. Numerous computer programs and electronic circuitry
components that rely on two-digit date codes rather than four-digit date codes
may be unable to differentiate between the years 1900 and 2000. If not
corrected, many of these computer programs and applications and date-sensitive
devices could fail or produce erroneous results when processing dates after
December 31, 1999 (the "Year 2000 Issue"). The Year 2000 Issue affects virtually
all companies and organizations, including the Company.
The Company uses a number of information technology ("IT") applications in
its operations, including computer networking systems, accounting and financial
reporting applications and other general office use applications. The Company
also employs numerous non-IT devices with embedded electronic circuits in its
operations, including landscape installation and maintenance equipment,
elevators, building security systems, and voice mail and other communication
systems. Both the IT and non-IT systems and devices used by the Company could
fail as a result of the Year 2000 Issue.
23
<PAGE>
The Company has engaged a Houston-based consulting firm (the "Consulting
Firm") to assist the Company in developing and implementing a plan to achieve
Year 2000 compliance (the "Year 2000 Plan") for both the IT systems and non-IT
systems and devices used by the Company. The Company expects that its final Year
2000 Plan will consist of the following phases: (i) inventory and assessment;
(ii) remediation; and (iii) testing/validation. As it works with the Consulting
Firm on the development of its final Year 2000 Plan, the Company is currently in
the inventory and assessment phase for both its IT and non-IT systems and for
identifying material third-party Year 2000 readiness.
The Consulting Firm is currently auditing IT and non-IT systems and devices
at representative Company facilities. Specifically, the Consulting Firm is
performing the following audit functions at such representative facilities: (i)
reviewing hardware, software, user-developed systems and spreadsheets and other
computer equipment for Year 2000 compliance; (ii) identifying Year 2000 risks
associated with the non-IT systems and devices used by the Company; (iii)
creating a list of vendors and other third parties with whom the Company has a
material relationship to be contacted regarding their own Year 2000 readiness;
and (iv) developing models for assessing and addressing the Company's Year 2000
risks. The Consulting Firm's final report, which the Company expects will be
completed in November 1998, will include an analysis of the current state of the
Company's systems, the Company's Year 2000 risks, recommendations for system
changes and assessment of third-party readiness, remediation cost estimates, and
a detailed implementation timetable for remediating non-compliant systems and
devices and post-remediation testing. The Company expects to finalize
development of its Year 2000 Plan by December 1998 and believes that it can
fully implement the remediation and testing phases of this Year 2000 Plan prior
to the end of 1999. If the Consulting Firm is unable to complete its audit
and/or deliver its final report to the Company under the anticipated schedule,
the Company's ability to fully implement a final Year 2000 Plan could be
jeopardized.
The Company has agreed to pay the Consulting Firm approximately $31,000 in
fees relating to their audit of Company facilities and development of the
Company's Year 2000 Plan. The Company has paid the Consulting Firm $15,000 in
fees to date and will pay the balance of the fees when the Consulting Firm
delivers its final report to the Company. Until it receives the final report
from the Consulting Firm detailing the scope of the Company's Year 2000 risks
and setting out the Consulting Firm's remediation cost estimates, the Company
cannot fully estimate the extent of costs relating to achieving Year 2000
compliance. Based on the information currently available to it and its
assessment efforts to date, the Company has budgeted expenditures aggregating
$750,000 to achieve full Year 2000 compliance. The Company has not deferred any
normally scheduled information systems and technology projects as a result of
the Year 2000 Issue. The Company's currently-budgeted Year 2000 expenditures do
not include any amounts that might be required to be expended if any of the
Company's principal suppliers or other critical vendors do not achieve Year 2000
readiness on a timely basis. The Company believes, however, that any additional
costs associated with its Year 2000 Plan or any costs that might be associated
with partial or incomplete Year 2000 compliance (on the part of the Company or
third parties with whom it has a material relationship) will not have a material
adverse effect on the Company's financial condition or operations.
The Company believes that few, if any, of its computer applications or
equipment containing embedded date-sensitive devices constitute functions
critical to the Company's ongoing daily operations. The pervasiveness of the
Year 2000 Issue nonetheless makes it likely that previously unidentified issues
will require remediation and testing during the ordinary course of business in
the early months of 2000. In such case, the Company believes that transactions
could be processed manually while IT and other systems are remediated and that
such interruptions would have only a minor effect on the Company's operations.
If all the Company's principal suppliers were not Year 2000 compliant, the
Company believes that any resulting product delivery delays or other disruptions
could have a material adverse effect on the Company's financial condition or
operations. Prolonged loss of electrical power, telephone line service or other
basic business services could have a material adverse effect on the Company's
financial condition or operations.
24
<PAGE>
The Company expects to develop various contingency plans in connection with
implementing its overall Year 2000 Plan. The Company expects that the the
Consulting Firm final report will outline the Company's worst-case scenarios and
make recommendations for creation of various contingency plans in the event of
such worst-case scenarios.
SEASONALITY AND CYCLICALITY. The Company has experienced and expects to
continue to experience variability in revenue and net income as a result of the
seasonal nature of the Company's business. Generally, the Company's revenues
from installation projects are concentrated during the warmer months of April to
October. Revenues from maintenance contracts remain relatively constant
throughout the year, except in colder climates where landscape maintenance
contracts typically do not generate revenues in the winter unless snow removal
is contracted for by the customer. As a result, the gross margin from landscape
maintenance contracts can vary seasonally because the Company recognizes
revenues from the monthly payments from its landscape maintenance services in
full when they are due, rather than in proportion to the work performed. The
Company generally reports higher profit margins from landscape maintenance
services during winter months and significantly lower profit margins during peak
service periods in late spring and summer. The Company has not performed an
analysis to estimate the impact of accounting for revenue in proportion to the
work performed as compared with accounting for revenue from the monthly payments
from its landscape maintenance services in full when they are due; however, the
Company believes that combined gross margins would not have been or expect to be
materially different than historical actual gross margins. Most line clearing
contracts are not affected by seasonality. Line clearing contracts typically
have a lower gross profit margin than landscape maintenance and installation
services. Historically, the Founding Companies' maintenance services have not
been cyclical and have not been significantly affected by changes in economic
conditions. However, the Founding Companies' landscape services operations have
experienced significant fluctuations based on weather, economic conditions, the
commercial real estate market and other factors beyond the control of the
Company. The Founding Companies collectively have a geographically broad
customer mix which may tend to mitigate regional seasonal and cyclical trends.
There can be no assurance, however, that period-to-period differences will not
occur in the future or that pronounced cyclical or seasonal patterns will not
emerge.
25
<PAGE>
LANDCARE USA, INC.
PART II - - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that have arisen in the
ordinary course of business. The Company does not believe that any of these
proceedings will have a material adverse effect on the financial position or
results of operations of the Company.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 - Plan of Reorganization and Agreement and Plan of Merger dated
November 1, 1998, by and among LandCARE USA, Inc. (the "Company"),
The ServiceMaster Company and SVM Acquisition Corporation (filed
herewith).
3.1 - Amended and Restated Certificate of Incorporation of LandCARE USA,
Inc., as amended. (Filed as Exhibit 3.1 to the Registration
Statement on Form S-1 declared effective on June 4, 1998, and is
incorporated herein by reference in its entirety (File No.
333-48215)).
3.2 - Bylaws of LandCARE USA, Inc., as amended. (Filed as Exhibit 3.2 to
the Registration Statement on Form S-1 declared effective on June 4,
1998, and is incorporated herein by reference in its entirety (File
No. 333-48215)).
4.1 - Form of Certificate Evidencing Ownership of Common Stock of
LandCARE USA, Inc. (Filed as Exhibit 4.1 to the Registration
Statement on Form S-1 declared effective on June 4, 1998, and is
incorporated herein by reference in its entirety (File No.
333-48215)).
4.2 - Form of Convertible Subordinated Note of the Company (filed
herewith).
10.1- Agreement and Plan of Merger dated August 3, 1998, by and among
the Company, Desert Care Landscaping, Inc., Continental Landscape
Management, Inc. and Aaron Eubank (filed herewith).
10.2- Agreement and Plan of Merger dated August 4, 1998, by and among
the Company, LW Acquisition Corp., Landscape West, Inc. and Barry
Konier (filed herewith).
10.3- Agreement and Plan of Merger dated August 4, 1998, by and among
the Company, Ground Control Landscaping, Inc., Gator & Gator
Landscaping Company and the stockholders named therein (filed
herewith).
10.4- Agreement and Plan of Merger dated August 5, 1998, by and among
the Company, CCI Acquisition Corp., Clean Cut, Inc. and the
stockholders named therein (filed herewith).
10.5- Agreement and Plan of Merger dated August 5, 1998, by and among
the Company, HI Acquisition Corp., Horticultural Industries, Inc.
and William H. Davoli (filed herewith).
26
<PAGE>
10.6- Stock Purchase Agreement dated August 10, 1998 by and among the
Company, Landscape Resources, Inc. and Stephen W. Barley (filed
herewith).
10.7 - Agreement and Plan of Merger dated August 14, 1998, by and among
the Company, RLC Acquisition Corp., R.L. Company, Inc. and Lebo
Newman (filed herewith).
10.8- Agreement and Plan of Merger dated August 27, 1998, by and among
the Company, Artse Acquisition Corp., Arteka Southeast Corporation
and Karen Corcoran (filed herewith).
10.9- Stock Purchase Agreement dated September 3, 1998, by and among
the Company, Greentree Incorporated of Georgia and the stockholders
named therein (filed herewith).
10.10- Stock Purchase Agreement dated September 3, 1998, by and among the
Company, Carolina Landscape Management, Inc. and the stockholders
named therein (filed herewith).
10.11- Stock Purchase Agreement September 3, 1998, by and among the
Company, Nashville Landscape Management, L.L.C. and the stockholders
named therein (filed herewith).
10.12- Stock Purchase Agreement dated September 3, 1998, by and among the
Company, Memphis Landscape Management, L.L.C. and the stockholders
named therein (filed herewith).
10.13- Stock Purchase Agreement dated September 4, 1998, by and among the
Company, Pacific Environmental Landscape Maintenance, Inc. and the
stockholders named therein (filed herewith).
10.14- Agreement and Plan of Merger dated September 18, 1998, by and
among the Company, LNI Acquisition Corp., Lighthouse Nursery, Inc.
and Ken Clegg (filed herewith).
10.15- Stock Purchase Agreement dated September 22, 1998, by and among
the Company, Schumacher Landscaping, Inc. and the stockholders named
therein (filed herewith).
10.16- Stock Purchase Agreement dated October 25, 1998, by and among the
Company, Landtrends, Inc. and the stockholders named therein (filed
herewith).
10.17- Stock Purchase Agreement dated October 25, 1998, by and among the
Company, Miramar Wholesale Nurseries, Inc., and the stockholders
named therein (filed herewith).
10.18- Stock Purchase Agreement dated October 26, 1998, by and among the
Company, Real Property Maintenance, Inc. and the stockholders named
therein (filed herewith).
10.19- Agreement and Plan of Merger dated November 9, 1998, by and among
the Company, AGM Acquisition Corp., Albuquerque Grounds Maintenance,
Inc. and Sandra Lee Weaver (filed herewith).
10.20- Agreement and Plan of Merger dated November 9, 1998 by and among
the Company, Goldbear Acquisition Corp., Golden Bear Arborists,
Inc., Realgreen Gardening, Inc. and the stockholder named therein
(filed herewith).
10.21- Amended and Restated Credit Agreement dated as of November 9,
1998, by and among the Company, the lenders named therein, Bankers
Trust Company as Documentation Agent, NationsBank, N.A. as
Administrative and Collateral Agent and the Bank of Nova Scotia as
Co-Agent (filed herewith).
10.22- Revolving Credit Promissory Note dated September 30, 1998 by an
among the Company and NationsBank, N.A. as lender (filed herewith)
10.23- Replacement Revolving Promissory Note dated October 30, 1998 by and
among the Company and NationsBank, N.A. as lender (filed herewith)
27
<PAGE>
27.1- Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
None
28
<PAGE>
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 thereunto duly authorized, who has signed this report on behalf of
the Registrant and as the principal financial officer of the Registrant.
LANDCARE USA, INC.
By: /s/ PETER C. FORBES
Date: November 16, 1998 Peter C. Forbes
Senior Vice President and Chief
Financial Officer (Principal
Accounting Officer)
29
<PAGE>
EXHIBIT 2.1
PLAN OF REORGANIZATION AND AGREEMENT AND PLAN OF MERGER
DATED AS OF
NOVEMBER 1, 1998
BY AND AMONG
LANDCARE USA, INC.,
THE SERVICEMASTER COMPANY
AND
SVM ACQUISITION CORPORATION
MA111ECA.WPD - 1 -
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
THE MERGER...................................................................1
Section 1.1 The Merger.....................................1
Section 1.2 Conversion of Shares...........................2
Section 1.3 Surrender and Payment..........................4
Section 1.4 Stock Options..................................6
Section 1.5 Fractional Shares..............................7
Section 1.6 Adjustments....................................9
ARTICLE 2
THE SURVIVING CORPORATION....................................................9
Section 2.1 Certificate of Incorporation...................9
Section 2.2 Bylaws.........................................9
Section 2.3 Directors and Officers.........................9
ARTICLE 3
LANDCARE WARRANTIES.........................................................10
Section 3.1 Organization..................................10
Section 3.2 Corporate Authorization; Validity of Agreement;
Board Action..................................10
Section 3.3 Consents and Approvals; No Violations.........11
Section 3.4 Capitalization................................12
Section 3.5 Subsidiaries; Capitalization of Subsidiaries..13
Section 3.6 SEC Reports and Financial Statements..........13
Section 3.7 Disclosure Documents..........................14
Section 3.8 Absence of Certain Changes....................14
Section 3.9 No Undisclosed Liabilities....................16
Section 3.10 Employee Benefit Plans........................16
Section 3.11 Compliance with Law...........................19
Section 3.12 Litigation....................................19
Section 3.13 No Default....................................19
Section 3.14 Taxes.........................................19
Section 3.15 Contracts.....................................23
Section 3.16 Transactions with Affiliates..................23
Section 3.17 Environmental Matters.........................23
Section 3.18 Intellectual Property.........................25
Section 3.19 Opinion of Financial Advisor..................25
Section 3.20 Finders and Investment Bankers................25
Section 3.21 Takeover Statutes.............................26
MA111ECA.WPD - ii -
<PAGE>
Section 3.22 Insurance.....................................26
Section 3.23 Supportive Stockholder Actions................26
ARTICLE 4
WARRANTIES OF SERVICEMASTER AND MERGER SUBSIDIARY...........................27
Section 4.1 Organization..................................27
Section 4.2 Corporate Authorization; Validity of Agreement;
Necessary Action..............................27
Section 4.3 Consents and Approvals; No Violations.........28
Section 4.4 Capitalization................................29
Section 4.5 SEC Reports and Financial Statements..........29
Section 4.6 Absence of Certain Changes....................29
Section 4.7 No Undisclosed Liabilities....................30
Section 4.8 Litigation. .................................30
Section 4.9 Compliance with Law...........................30
Section 4.10 No Default....................................30
Section 4.11 Disclosure Documents..........................30
Section 4.12 Opinion of Financial Advisor..................31
ARTICLE 5
COVENANTS OF LANDCARE.......................................................31
Section 5.1 Conduct of Business by LandCare Pending the
Merger........................................31
Section 5.2 LandCare Stockholders Meeting.................33
Section 5.3 Access to Information.........................34
Section 5.4 No Solicitation...............................34
Section 5.5 Corporate Organization........................35
Section 5.6 Pipeline Acquisitions.........................36
Section 5.7 Redemption of Convertible Notes...............39
ARTICLE 6
COVENANTS OF SERVICEMASTER..................................................40
Section 6.1 Obligations of Merger Subsidiary. ............40
Section 6.2 Indemnification...............................40
ARTICLE 7
COVENANTS OF SERVICEMASTER AND LANDCARE.....................................41
Section 7.1 Diligent Efforts..............................41
Section 7.2 Certain Filings...............................41
Section 7.3 Public Announcements..........................41
Section 7.4 Further Assurances............................41
Section 7.5 Notices of Certain Events.....................42
Section 7.6 Preparation of the Registration Statement and
the LandCare Proxy Statement..................42
Section 7.7 Letters of LandCare's Accountants.............43
Section 7.8 Affiliates....................................43
MA111ECA.WPD - iii -
<PAGE>
Section 7.9 NYSE Listing..................................43
Section 7.10 Regulatory Matters and Approvals..............43
Section 7.11 Tax Treatment.................................44
Section 7.12 Representations...............................44
Section 7.13 Material Consents.............................44
ARTICLE 8
CONDITIONS TO THE MERGER....................................................44
Section 8.1 Conditions to the Obligations of Each Party...44
Section 8.2 Additional Conditions to the Obligations of
ServiceMaster and Merger Subsidiary...........45
Section 8.3 Additional Conditions to the Obligations of
LandCare......................................45
ARTICLE 9
TERMINATION.................................................................46
Section 9.1 Termination...................................46
Section 9.2 Waiver........................................47
Section 9.3 Closing.......................................47
Section 9.4 Effect of Termination; Termination Fee........48
ARTICLE 10
MISCELLANEOUS...............................................................49
Section 10.1 Notices.......................................50
Section 10.2 Survival of Representations and Warranties....50
Section 10.3 Amendments; No Waivers........................50
Section 10.4 Expenses......................................50
Section 10.5 Successors and Assigns........................50
Section 10.6 Governing Law.................................50
Section 10.7 Counterparts; Effectiveness...................50
Section 10.8 Headings......................................51
Section 10.9 No Third Party Beneficiaries..................51
MA111ECA.WPD - iv -
<PAGE>
PLAN OF REORGANIZATION AND AGREEMENT AND PLAN OF MERGER
This Plan of Reorganization and Agreement and Plan of Merger (this
"AGREEMENT") has been made as of November 1, 1998 (the "DATE HEREOF") among
LandCare USA, Inc., a Delaware corporation ("LANDCARE"), The ServiceMaster
Company, a Delaware corporation ("SERVICEMASTER"), and SVM Acquisition
Corporation, a Delaware corporation and a wholly- owned subsidiary of
ServiceMaster ("MERGER SUBSIDIARY").
WHEREAS, the respective boards of directors of ServiceMaster, Merger
Subsidiary and LandCare have approved, and declared advisable and in the best
interests of their respective stockholders, this Agreement and the acquisition
of LandCare by ServiceMaster on the terms and conditions set forth herein.
WHEREAS, ServiceMaster has entered into Voting Agreements with
stockholders of LandCare who collectively own approximately 30% of LandCare's
Common Stock outstanding on the date hereof (the "Voting Agreements").
The parties hereto agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 THE MERGER.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as hereinafter defined), Merger Subsidiary
shall be merged (the "MERGER") with and into LandCare in accordance with the
General Corporation Law of the State of Delaware ("DELAWARE LAW"), whereupon the
separate existence of Merger Subsidiary shall cease, and LandCare shall continue
as the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth herein,
LandCare and Merger Subsidiary will file a certificate of merger with the
Secretary of State of the State of Delaware and make all other filings or
recordings required by Delaware Law in connection with the Merger. The Merger
shall become effective at such time as the certificate of merger is duly filed
with the Secretary of State of the State of Delaware or at such later time as is
agreed by ServiceMaster and LandCare and specified in the certificate of merger
(the "EFFECTIVE TIME").
(c) The Merger shall have the effects set forth in Section 259 of
the Delaware Law.
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Section 1.2 CONVERSION OF SHARES.
(a) At the Effective Time:
(i) each share of common stock, par value $0.01 per share (the
"LANDCARE COMMON STOCK"), of LandCare (the "SHARES") held by
LandCare as treasury stock immediately prior to the Effective Time
shall be canceled, and no consideration shall be delivered in
exchange therefor;
(ii) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving
Corporation and shall constitute the only outstanding share of
capital stock of the Surviving Corporation; and
(iii) subject to Section 1.5, each Share outstanding
immediately prior to the Effective Time shall be converted into the
right to receive a fraction (herein called the "EXCHANGE RATIO") of
one share common stock, par value $0.01 per share, of ServiceMaster
("SERVICEMASTER COMMON STOCK"). The shares of ServiceMaster Common
Stock to be received as consideration pursuant hereto (together with
cash in lieu of fractional shares of ServiceMaster Common Stock as
specified below) are referred to herein as the "MERGER
CONSIDERATION."
(b) ADJUSTMENT OF EXCHANGE RATIO.
(i) The Exchange Ratio shall be 0.55 in the event that the
average of the closing prices (the "FINAL AVERAGE CLOSING PRICE") of
ServiceMaster Common Stock on the New York Stock Exchange (the
"NYSE") Composite Transaction Tape (as reported in THE WALL STREET
JOURNAL or, if not reported thereby, any other authoritative source)
on the 20 consecutive Trading Days (as hereinafter defined) ending
on the third Trading Day prior to the Scheduled Meeting Date is more
than $16.35 per share and not more than $20.00 per share. The term
"SCHEDULED MEETING DATE" means the date specified in the LandCare
Proxy Statement (as hereinafter defined) distributed to LandCare's
stockholders as the date on which the meeting at which LandCare's
stockholders will vote on the Merger is scheduled to occur; provided
that if such meeting shall actually be held on a later date, then if
ServiceMaster and LandCare shall both agree, the period during which
the Final Average Closing Price shall be determined may be changed
to a period of 20 consecutive Trading Days ending not more than
three Trading Days before the date on which such meeting shall
actually occur. "TRADING DAY" means any day on which the NYSE is
open for trading. "LANDCARE STOCKHOLDERS MEETING" means the meeting
at which the record holders of LandCare Common Stock shall actually
vote with respect to the Merger.
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(ii) In the event that the Final Average Closing Price is more
than $20.00, then the Exchange Ratio shall be the quotient derived
by dividing $11 by the Final Average Closing Price.
(iii) In the event the Final Average Closing Price is less
than $16.36, then unless ServiceMaster shall otherwise notify
LandCare in writing prior to the date immediately prior to the date
upon which the LandCare Stockholders Meeting is then scheduled to
occur (the "FREEZE DEADLINE"), the Exchange Ratio shall
automatically adjust to the smallest decimal which when multiplied
by the Final Average Closing Price will equal $9.00. If
ServiceMaster shall notify LandCare in writing prior to the Freeze
Deadline that ServiceMaster elects not to permit the adjustment
prescribed by the preceding sentence, then: (i) the Exchange Ratio
shall be 0.55 (or such greater number as ServiceMaster shall specify
in ServiceMaster's notice to LandCare), (ii) LandCare shall have the
right to reschedule the LandCare Stockholders Meeting up to ten days
later than the date upon which it otherwise would have been held
(provided that without the agreement of LandCare and ServiceMaster
such rescheduling shall not cause the period used to determine the
Final Average Closing Price to change), and (iii) LandCare shall
have the right to terminate this Agreement by giving written notice
to ServiceMaster.
(iv) If any adjustment is made to the Exchange Ratio pursuant
to this Section 1.2(b), then such adjusted Exchange Ratio shall be
rounded to four decimal places, rounding upward from 0.00005.
(v) LandCare shall set the date for the LandCare Stockholders
Meeting; provided that without ServiceMaster's consent, such date
shall not be earlier than February 15, 1999 and shall not be later
than the later of February 15, 1999 or the 45th day after the
Securities and Exchange Commission (the "SEC") shall have declared
the Registration Statement effective. The parties may by agreement
change the date on which the LandCare Stockholders Meeting will
occur.
(c) From and after the Effective Time, all Shares converted in
accordance with Section 1.2(a)(iii) shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration and any
dividends payable pursuant to Section 1.3(f) upon surrender in accordance with
Section 1.3, without interest.
For purposes of this Agreement, "PERSON" or "person" means an individual,
a corporation, a limited liability company, a partnership, an association, a
trust or any other entity or
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organization, including a government or political subdivision or any agency or
instrumentality thereof. For purposes of this Agreement, the word "SUBSIDIARY"
when used with respect to any Person means any other corporation or other entity
of which a majority of the securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are directly or indirectly owned by such
Person. For purposes of this Agreement, any reference to any event, change or
effect having a material adverse effect on or with respect to any entity (or
group of entities taken as a whole) means such event, change or effect, in the
aggregate with such other events, changes or effects, which is materially
adverse to the business, financial condition, operations, results of operations
or prospects of such entity (or group of entities taken as a whole).
Section 1.3 SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, ServiceMaster shall appoint an
agent reasonably acceptable to LandCare (the "EXCHANGE AGENT") for the purpose
of exchanging certificates representing Shares for the Merger Consideration.
Immediately following the Effective Time, ServiceMaster shall deposit with the
Exchange Agent, for the benefit of the holders of certificates formerly
representing Shares, the Merger Consideration issuable pursuant to Section
1.2(a)(iii) in exchange for outstanding Shares. Promptly after the Effective
Time, ServiceMaster will send, or will cause the Exchange Agent to send, to each
holder of Shares at the Effective Time (i) a letter of transmittal for use in
such exchange (which shall specify that delivery of the Merger Consideration
shall be effected, and risk of loss and title to the certificates representing
ServiceMaster Common Stock and LandCare Common Stock shall pass, only upon
proper deliver of the certificates formerly representing Shares to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
certificates formerly representing Shares in exchange for the Merger
Consideration.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates formerly representing such Shares, together with a
properly completed and duly executed letter of transmittal covering such Shares
and such other documents as may reasonably be required by the Exchange Agent,
will be entitled to receive the Merger Consideration payable in respect of such
Shares and any dividends payable pursuant to Section 1.3(f). Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes only the right to receive the Merger Consideration and any
dividends payable pursuant to Section 1.3(f), without interest.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the Shares formerly represented by
the certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of
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such Shares represented by the certificate or certificates so surrendered or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable.
(d) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article 1.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.3(a) that remains unclaimed by the holders
of Shares one year after the Effective Time shall be returned to ServiceMaster,
upon demand, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 1.3 prior to that time shall
thereafter look only to ServiceMaster for payment of the Merger Consideration
and any dividends payable pursuant to Section 1.3(f) in respect of his Shares.
Neither ServiceMaster, LandCare nor the Exchange Agent shall be liable to any
person in respect of any shares of ServiceMaster Common Stock, any dividends or
distributions with respect thereto or any cash in lieu of fractional shares of
ServiceMaster Common Stock, in each case, delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
certificate representing Shares shall not have been surrendered prior to two
years after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration, any dividends or distributions payable to the
holder of such certificate or any cash payable to the holder of such certificate
formerly representing LandCare Common Stock pursuant to this Article 1, would
otherwise escheat to or become the property of any Governmental Entity (as
hereinafter defined)), any such Merger Consideration, dividends or distributions
in respect of such certificate or such cash shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(f) No dividends or other distributions with respect to
ServiceMaster Common Stock issued in connection with the Merger shall be paid to
the holder of any unsurrendered certificates formerly representing Shares until
such certificates are surrendered as provided in this Section 1.3. Subject to
the effect of applicable laws, following the surrender of such certificates,
there shall be paid, without interest, to the record holder of ServiceMaster
Common Stock issued in exchange therefor at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time payable prior to or on the date of such surrender with respect to
such whole shares of ServiceMaster Common Stock and not previously paid, less
the amount of any withholding taxes which may be required thereon.
(g) The Exchange Agent shall invest any cash deposited with the
Exchange Agent, as directed by ServiceMaster, on a daily basis. Any interest and
other income resulting from such investments shall be paid to ServiceMaster.
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(h) If any certificate representing Shares shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration and, if applicable, any unpaid dividends
and distributions on shares of ServiceMaster Common Stock deliverable in respect
thereof and any cash in lieu of fractional shares, in each case, due to such
person pursuant to this Agreement.
Section 1.4 STOCK OPTIONS.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of LandCare (and, if appropriate, any committee administering
its 1998 Long-Term Incentive Plan and 1998 Non-Employee Director's Stock Plan
(the "LANDCARE OPTION PLANS")) shall adopt such resolutions or take such other
actions as may be required to effect the following:
(i) adjust the terms of all outstanding LandCare Stock Options
(defined below) granted under the LandCare Option Plans and the
terms of the LandCare Option Plans, to provide that at the Effective
Time, each LandCare Stock Option outstanding immediately prior to
the Effective Time shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under
such LandCare Stock Option (subject to adjustments and lapsing of
restrictions, vesting or acceleration of exercisability of LandCare
Stock Options required by this Section 1.4), the same number of
shares of ServiceMaster Common Stock as the holder of such LandCare
Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such LandCare Stock Option in full
immediately prior to the Effective Time, at a price per share equal
to the quotient derived by dividing the Exchange Ratio into the
exercise price per share at which the LandCare Common Stock shall
have been purchasable on exercise of such LandCare Stock Option
prior to the Effective Time; and
(ii) make such other changes to the LandCare Option Plans as
it deems appropriate to give effect to the Merger (subject to
approval of ServiceMaster, which shall not be unreasonably
withheld).
(b) At the Effective Time and subject to the last sentence to this
Section 1.4(b), all conditions and restrictions relating to all outstanding
LandCare Stock Options which have been granted pursuant to the LandCare Option
Plans (the "LANDCARE STOCK OPTIONS"), including limitations on exercisability,
risks of forfeiture and conditions and restrictions requiring continued
performance of services with respect to the exercisability or settlement of such
LandCare Stock Options, shall immediately lapse. LandCare shall use diligent
efforts to cause the individuals listed
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in Section 1.4(b) of the LandCare Disclosure Schedule (as hereinafter defined)
(hereinafter referred to as the "SENIOR OPTION HOLDERS") to waive the complete
lapsing of conditions and restrictions relating to exercisability of LandCare
Stock Options set forth above, and accept a modified vesting schedule whereby
one-half of each Senior Option Holder's LandCare Stock Options shall vest and
thereafter be exercisable as provided in the respective LandCare Option
Agreement on the date six months immediately following the Effective Time, and
the remaining one-half of such LandCare Stock Options shall vest and thereafter
be exercisable as provided in the respective LandCare Option Agreement on the
first anniversary of the Effective Time; provided, however, in the event a
Senior Option Holder's employment is terminated by LandCare without Cause (as
defined in the respective Senior Option Holder's employment agreement with
LandCare) or if the Senior Option Holder elects to terminate his employment with
LandCare for Good Reason (as defined in the respective Senior Option Holder's
employment agreement with LandCare) the unvested portion of such Senior Option
Holder's LandCare Stock Options shall immediately vest and be exercisable for a
period of three months following termination of employment.
(c) As soon as practicable after the Effective Time, ServiceMaster
shall deliver to the holders of LandCare Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective LandCare Option
Plans and the agreements evidencing the grants of such LandCare Stock Options
shall continue in effect on the same terms and conditions (except as expressly
provided above).
(d) ServiceMaster shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of ServiceMaster Common Stock
for delivery on exercise of the LandCare Stock Options assumed in accordance
with this Section 1.4. As soon as reasonably practicable after the Effective
Time, ServiceMaster shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the shares of ServiceMaster
Common Stock subject to such LandCare Stock Options and shall use reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such LandCare Stock Options
remain outstanding.
Section 1.5 FRACTIONAL SHARES.
(a) No certificates or scrip representing fractional shares of
ServiceMaster Common Stock shall be issued upon the surrender for exchange of
certificates formerly representing Shares, no dividend or distribution of
ServiceMaster shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of ServiceMaster.
(b) As promptly as practicable following the Effective Time,
ServiceMaster shall cause the Exchange Agent to determine the excess of (i) the
number of whole shares of ServiceMaster Common Stock delivered to the Exchange
Agent by ServiceMaster pursuant to
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Section 1.3(a) hereof over (ii) the aggregate number of whole shares of
ServiceMaster Common Stock to be distributed to former holders of Shares
pursuant to Section 1.3(b) hereof (such excess being herein called the "EXCESS
SHARES"). Following the Effective Time, the Exchange Agent shall, on behalf of
former holders of certificates representing Shares, sell the Excess Shares at
then-prevailing prices on the NYSE, all in the manner provided in this Section.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. ServiceMaster shall cause the
Exchange Agent to use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Effective Time as, in the Exchange Agent's sole
judgment, is practicable consistent with obtaining the best execution of such
sales in light of prevailing market conditions. Until the net proceeds of such
sale or sales have been distributed to the holders of certificates formerly
representing Shares, the Exchange Agent shall hold such proceeds in trust for
such holders (the "COMMON STOCK TRUST"). The Surviving Corporation shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the portion
of the Common Stock Trust to which each former holder of Shares is entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Stock Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such former holder of Shares is entitled
(after taking into account all Shares held at the Effective Time by such holder)
and the denominator of which is the aggregate amount of fractional share
interests to which all former holders of Shares are entitled.
(d) Notwithstanding subsections (a), (b) and (c) above, the
Surviving Corporation may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of the
payments herein above contemplated, to pay each former holder of Shares an
amount in cash equal to the product obtained by multiplying (i) the fractional
share interest to which such former holder (after taking into account all Shares
held at the Effective Time by such holder) would otherwise be entitled by (ii)
the closing price for a share of ServiceMaster Common Stock as reported on the
NYSE Composite Transaction Tape (as reported in THE WALL STREET JOURNAL, or, if
not reported thereby, any other authoritative source) on the Closing Date (as
hereinafter defined), and, in such case, all references herein to the cash
proceeds of the sale of the Excess Shares and similar references shall be deemed
to mean and refer to the payments calculated as set forth in this subsection
(d).
(e) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of certificates formerly representing Shares
with respect to any fractional share interests, ServiceMaster shall cause the
Exchange Agent to make available such amounts to such holders of certificates
formerly representing Shares, subject to surrender of such certificates in
accordance with Section 1.3. For purposes of this Section 1.5, Shares of any
holder represented
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by two or more certificates may be aggregated, and in no event shall any holder
be paid an amount in cash in respect of more than one share of ServiceMaster
Common Stock.
Section 1.6 ADJUSTMENTS. In the event of any stock dividend in respect of
outstanding ServiceMaster Common Stock, or of any split, combination or
reclassification of the outstanding ServiceMaster Common Stock or of any
issuance of any other securities in exchange or in substitution for outstanding
shares of ServiceMaster Common Stock at any time during the period from the date
of this Agreement to the Effective Time, LandCare and ServiceMaster shall make
such adjustment to the Merger Consideration as LandCare and ServiceMaster shall
mutually agree so as to preserve the economic benefits that LandCare and
ServiceMaster each reasonably expected on the date of this Agreement to receive
as a result of the consummation of the Merger and the other transactions
contemplated by this Agreement.
ARTICLE 2
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of Merger Subsidiary in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
Section 2.2 BYLAWS. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.3 DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
the Delaware Law and the certificate of incorporation and bylaws of the
Surviving Corporation, the directors and officers of Merger Subsidiary at the
Effective Time shall be the directors and officers of the Surviving Corporation,
and the directors and officers of LandCare immediately prior to the Effective
Time shall cease to be directors and officers of LandCare at the Effective Time.
ARTICLE 3
LANDCARE WARRANTIES
References in this Agreement to the "LANDCARE DISCLOSURE SCHEDULE" mean
the document captioned "LandCare Disclosure Schedule" as constituted upon its
delivery to ServiceMaster prior to ServiceMaster's execution and delivery of
this Agreement. LandCare warrants to ServiceMaster and Merger Subsidiary,
subject in the case of the warranties in each particular section below to the
exceptions set forth in the corresponding section of the LandCare Disclosure
Schedule:
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Section 3.1 ORGANIZATION. Each of LandCare and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and governmental approvals would not have a material adverse
effect on LandCare and its Subsidiaries taken as a whole. Each of LandCare and
its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a material
adverse effect on LandCare and its Subsidiaries taken as a whole.
Section 3.2 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; BOARD ACTION.
(a) LandCare has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining any necessary approval of its
stockholders as contemplated by Section 5.2 with respect to the adoption of this
Agreement, to consummate the transactions contemplated hereby. The execution,
delivery and performance by LandCare of this Agreement, and the consummation by
it of the transactions contemplated hereby, have been duly and validly
authorized by its board of directors and, except for obtaining the approval of
the stockholders of LandCare as contemplated by Section 5.2 with respect to the
adoption of this Agreement, no other corporate action or proceedings on the part
of LandCare is necessary to authorize the execution and delivery by LandCare of
this Agreement, and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by LandCare and,
assuming this Agreement constitutes a valid and binding obligation of
ServiceMaster and Merger Subsidiary, constitutes a valid and binding obligation
of LandCare, enforceable against LandCare in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) The affirmative vote of the holders of a majority of the
LandCare Common Stock outstanding at the record date for the LandCare
Stockholders Meeting is the only vote of the holders of any class or series of
capital stock of LandCare necessary to adopt this Agreement, and thus to approve
of the transactions contemplated by this Agreement.
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for all filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Hart-Scott-Rodino Antitrust Improvements Act of
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1976, as amended (the "HSR ACT"), the state securities or "blue sky" laws, state
takeover laws, and except for the adoption of this Agreement by the stockholders
of LandCare and the filing of the certificate of merger as required by Delaware
Law, neither the execution, delivery or performance of this Agreement nor the
consummation by LandCare of the transactions contemplated hereby nor compliance
by LandCare with any of the provisions hereof will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws or similar organizational documents of
LandCare or of any of its Subsidiaries;
(b) require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or other regulatory authority, commission or agency (a
"GOVERNMENTAL ENTITY"), except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on LandCare and its Subsidiaries taken as a whole and
would not, or would not be reasonably likely to, materially impair the ability
of LandCare, ServiceMaster or Merger Subsidiary to consummate the transactions
contemplated by this Agreement;
(c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness (collectively, the "DEBT
INSTRUMENTS"), lease, license, contract, agreement or other instrument or
obligation to which LandCare or any of its Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound (a "LANDCARE
AGREEMENT"), except for any violation, breach or default which would not have a
material adverse effect on LandCare and its Subsidiaries taken as a whole;
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to LandCare, any of its Subsidiaries or any of their
properties or assets, except for any violation which would not have a material
adverse effect on LandCare and its Subsidiaries taken as a whole; or
(e) result in the creation or imposition of any mortgage, lien,
pledge, charge, encumbrance or other security interest on any asset of LandCare
or any of its Subsidiaries, except for any such results which would not have a
material adverse effect on LandCare and its Subsidiaries taken as a whole.
Section 3.4 CAPITALIZATION.
(a) The authorized capital stock of LandCare consists of 102,000,000
shares of LandCare Common Stock (including shares of LandCare Common Stock
issued upon the conversion of LandCare's Restricted Voting Common Stock) and
5,000,000 shares of preferred
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stock, par value $ .01 per share ("LANDCARE PREFERRED STOCK"). As of the close
of business on the date hereof, (i) 16,624,463 shares of LandCare Common Stock
were issued and outstanding and no shares of LandCare Common Stock were held in
treasury and (ii) no shares of LandCare Preferred Stock were issued and
outstanding or held in treasury. All outstanding shares of the capital stock of
LandCare are, and all shares which may be issued pursuant to the exercise of
LandCare Stock Options will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and non-assessable.
(b) As of the date hereof, options to acquire an aggregate of
2,185,673 shares of LandCare Common Stock are outstanding under the LandCare
Option Plans. Schedule 3.4(b) lists each holder of an option under the LandCare
Option Plans, the number of shares of LandCare Common Stock issuable with
respect to each such option (assuming full vesting) and the exercise price of
such option. No option issued by the LandCare is or purports to be an "incentive
stock option" within the meaning of Section 422 of the Code (as hereinafter
defined).
(c) There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights)
("VOTING DEBT") of LandCare or any of its Subsidiaries issued and outstanding.
There are no shares of capital stock of LandCare authorized, issued or
outstanding and there are no existing options, warrants, calls, preemptive
rights, subscriptions or other rights, convertible securities, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of LandCare or any of its Subsidiaries, obligating LandCare or any
of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, LandCare or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of LandCare or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment.
(d) There are no outstanding contractual obligations of LandCare or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any capital
stock of LandCare or any Subsidiary or affiliate of LandCare or to provide funds
to make any investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other entity. None of LandCare or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of LandCare, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.
(e) Except for the Voting Agreements identified in the preamble to
this Agreement, there are no voting trusts or other agreements or understandings
to which LandCare or any of its Subsidiaries is a party with respect to the
voting of the capital stock of LandCare or any of the Subsidiaries.
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Section 3.5 SUBSIDIARIES; CAPITALIZATION OF SUBSIDIARIES. Schedule 3.5
sets forth a complete and correct list of the direct and indirect Subsidiaries
of LandCare. All of the outstanding shares of capital stock of, or other
ownership interests in, each Subsidiary of LandCare, is owned by LandCare,
directly or indirectly, free and clear of any mortgage, lien, pledge, charge,
encumbrance or other security interest (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests), and all such shares or other ownership interests have been validly
issued and are fully paid and nonassessable.
Section 3.6 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) LandCare has filed with the SEC and has heretofore made
available to ServiceMaster true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by it and its
Subsidiaries since the LandCare's inception under the Exchange Act and the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "LANDCARE SEC DOCUMENTS"). As of their respective
dates or, if amended, as of the date of the last such amendment, the LandCare
SEC Documents, including, without limitation, any financial statements and
schedules included therein, (i) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder.
(b) Each of the consolidated financial statements included in
LandCare SEC Documents and the Third Quarter Financial Statements (as
hereinafter defined) has been prepared from, and is in accordance with, the
books and records of LandCare and/or its consolidated Subsidiaries, complies in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, has been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly presents in all
material respects the consolidated financial position and the consolidated
results of operations (and changes in financial position, if any) of LandCare
and its consolidated Subsidiaries as at the dates thereof or for the periods
presented therein (subject, in the case of unaudited interim financial
statements, to normal year end adjustments and lack of footnote disclosures).
"THIRD QUARTER FINANCIAL STATEMENTS" means the unaudited consolidated and
consolidating balance sheets and statements of income and changes in
stockholders' equity of LandCare as of and for the three and nine months ended
September 30, 1998 attached hereto as Schedule 3.6.
Section 3.7 DISCLOSURE DOCUMENTS.
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(a) None of the information supplied or to be supplied by LandCare
specifically for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by ServiceMaster in connection
with the issuance of ServiceMaster Common Stock in connection with the Merger
(the "REGISTRATION STATEMENT") will, at the time the Registration Statement is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (ii) the proxy statement of LandCare to
be filed by LandCare with the SEC in connection with the Merger (the "LANDCARE
PROXY STATEMENT") will, at the date it is first mailed to the stockholders of
LandCare or at the time of the LandCare Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The LandCare Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act, except that no
representation or warranty is made by LandCare with respect to statements made
or incorporated by reference therein based on information supplied by
ServiceMaster specifically for inclusion or incorporation by reference in the
LandCare Proxy Statement.
(c) At the time of the filing of any disclosure document filed after
the date hereof pursuant to the Securities Act, the Exchange Act or any state
securities law (other than the LandCare Proxy Statement, each a "LANDCARE
DISCLOSURE DOCUMENT"), and at the time of distribution thereof and until the
Closing Date, each such LandCare Disclosure Document (as supplemented or
amended) will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
Section 3.8 ABSENCE OF CERTAIN CHANGES. Since June 30, 1998, LandCare and
its Subsidiaries have conducted their respective businesses and operations in
the ordinary course of business. Since June 30, 1998 there has not occurred:
(a) any events, changes or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, or which would be reasonably likely to have, in the aggregate, a
material adverse effect on LandCare and its Subsidiaries taken as a whole;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of LandCare or of any of its Subsidiaries, other than dividends
paid by wholly-owned Subsidiaries;
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(c) any change by LandCare or any of its Subsidiaries in accounting
principles or methods, except for any such change required by reason of a change
in GAAP;
(d) any amendment of any term of any outstanding security of
LandCare or any of its Subsidiaries that would materially increase the
obligations of LandCare or of such Subsidiary under such security;
(e) any incurrence or assumption by LandCare or any of its
Subsidiaries of any indebtedness for borrowed money other than (i) under
existing credit facilities (or any renewals, replacements or extensions that do
not increase the aggregate commitments thereunder), (ii) in the ordinary course
of business (it being understood that any indebtedness incurred prior to the
date hereof in respect of capital expenditures shall be considered to have been
in the ordinary course of business) or (iii) in connection with any acquisition
or capital expenditure permitted by Section 5.1 or the transactions contemplated
hereby;
(f) any guarantee, endorsement or other incurrence or assumption of
liability (whether directly, contingently or otherwise) by LandCare or any of
its Subsidiaries for the obligations of any other person (other than any
wholly-owned Subsidiary of LandCare), other than in the ordinary course of
business;
(g) any making of any loan, advance or capital contribution to or
investment in any person by LandCare or any of its Subsidiaries other than (i)
any acquisition permitted by Section 5.6, (ii) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of LandCare or
(iii) loans or advances to employees of LandCare or any of its Subsidiaries made
in the ordinary course of business;
(h) any contract or agreement entered into by LandCare or any of its
Subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or any modification, amendment,
assignment, termination or relinquishment by LandCare or any of its Subsidiaries
of any contract, license or other right (including any insurance policy naming
it or any of its Subsidiaries as a beneficiary or a loss payable payee) that
would have a material adverse effect on LandCare and its Subsidiaries taken as a
whole, other than transactions, commitments, contracts or agreements in the
ordinary course of business and those contemplated by this Agreement; or
(i) any employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer or employee of
LandCare or any of its Subsidiaries (or any amendment to any such existing
agreement), grant of any severance or termination pay to any director, officer
or employee of LandCare or any of its Subsidiaries or change in compensation or
other benefits payable to any director, officer or employee of LandCare or any
of its Subsidiaries pursuant to any severance or retirement plans or policies
thereof, in each case other than in the ordinary course of business.
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For purposes of this Agreement, "ordinary course of business" with respect
to LandCare and/or its Subsidiaries shall be determined by reference to the
period subsequent to the time LandCare became subject to the Exchange Act and
with respect to any particular Subsidiary, subsequent to the time that such
Subsidiary became a Subsidiary of LandCare .
Section 3.9 NO UNDISCLOSED LIABILITIES. Except (i) to the extent disclosed
in LandCare SEC Documents filed prior to the date of this Agreement and (ii) for
liabilities and obligations incurred since September 30, 1998 in the ordinary
course of business, neither LandCare nor any of its Subsidiaries has incurred
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that have, or would be reasonably likely to have, individually or
in the aggregate, a material adverse effect on LandCare and its Subsidiaries
taken as a whole. Schedule 3.9 sets forth each instrument evidencing
indebtedness of LandCare and its Subsidiaries which will accelerate or become
due or payable, or result in a right of redemption or repurchase on the part of
the holder of such indebtedness, or with respect to which any other payment or
amount will become due or payable, in any such case with or without due notice
or lapse of time, as a result of this Agreement or the transactions contemplated
hereby.
Section 3.10 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.10(a) contains an accurate and complete list of (i)
each "employee benefit plan" (as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
contributed to, maintained or sponsored by LandCare or any of its Subsidiaries,
or with respect to which LandCare or any of its Subsidiaries has any liability
or potential liability; and (ii) each other retirement, savings, thrift,
deferred compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, travel, fringe benefit,
hospitalization or other medical, disability, life or other insurance, and any
other welfare benefit policy, trust, understanding or arrangement of any kind,
whether written or oral, contributed to, maintained or sponsored by LandCare or
any of its Subsidiaries for the benefit of any present or former employee,
officer or director of LandCare or any of its Subsidiaries, or with respect to
which LandCare or any of its Subsidiaries has any liability or potential
liability. Each item listed on Schedule 3.10(a) is referred to herein as a
"BENEFIT PLAN."
(b) Schedule 3.10(b) contains an accurate and complete list of each
collective bargaining agreement and each other agreement, arrangement,
commitment, understanding, plan, or policy of any kind, whether written or oral,
with or for the benefit of any current or former employee, officer, director or
consultant of LandCare or any of its Subsidiaries (including, without
limitation, each employment, compensation, termination or consulting agreement
or arrangement). Each item listed on Schedule 3.10(b) is referred to herein as a
"COMPENSATION COMMITMENT."
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(c) Each Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"CODE") and each trust which forms a part of any such Benefit Plan (i) has
received a determination from the Internal Revenue Service (the "IRS") that such
Benefit Plan is qualified under Section 401(a) of the Code and that such related
trust is exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such determination that could adversely affect the
qualification of such Benefit Plan or the exemption from taxation of such
related trust; and (ii) is in compliance with the requirements of Sections
401(a)(4) and 410(b) of the Code for each plan year of such Benefit Plan
commencing on or before the Closing Date.
(d) Neither LandCare nor any of its Subsidiaries currently
contribute to, maintain, sponsor or have any liability with respect to any
"employee pension benefit plan" (as such term is defined in Section 3(2) of
ERISA) that is subject to Section 302 of ERISA or Section 412 of the Code, and
neither LandCare nor any of its Subsidiaries has contributed to, maintained or
sponsored or have any liability with respect to any such employee pension
benefit plan for any time preceding the Closing Date.
(e) None of the Benefit Plans or Compensation Commitments obligates
LandCare or any of its Subsidiaries to pay any separation, severance,
termination or similar benefit solely as a result of any transaction
contemplated by this Agreement or solely as a result of a change in control or
ownership within the meaning of Section 280G of the Code.
(f) (i) Each Benefit Plan and any related trust, insurance contract
or fund has been maintained, funded and administered in compliance with its
respective terms and the terms of any applicable collective bargaining
agreements and in compliance with all applicable laws and regulations,
including, but not limited to, ERISA and the Code; (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan, and neither LandCare nor any
of its Subsidiaries is aware of any facts or circumstances that would materially
change the funded status of any such Benefit Plan; (iii) no asset of LandCare or
any of its Subsidiaries that is to be acquired by ServiceMaster, directly or
indirectly, pursuant to this Agreement is subject to any lien under ERISA or the
Code; (iv) neither LandCare nor any of its Subsidiaries has incurred any
liability under Title IV of ERISA (other than for contributions not yet due) or
to the Pension Benefit Guaranty Corporation (other than for payment of premiums
not yet due); and (v) there are no pending or threatened actions, suits,
investigations or claims with respect to any Benefit Plan or Compensation
Commitment (other than routine claims for benefits) which could result in
liability to LandCare or any of its Subsidiaries (whether direct or indirect),
and neither LandCare nor any of its Subsidiaries has knowledge of any facts
which could give rise to (or be expected to give rise to) any such actions,
suits, investigations or claims.
(g) (i) LandCare and each of its Subsidiaries has complied with the
health care continuation requirements of Part 6 of Title I of ERISA; and (ii)
LandCare and its Subsidiaries
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have no obligation under any Benefit Plan or otherwise to provide health
benefits to former employees of LandCare or any of its Subsidiaries or any other
person, except as specifically required by Part 6 of Title I of ERISA.
(h) (i) Neither LandCare nor any of its Subsidiaries has incurred
any liability on account of a "partial withdrawal" or a "complete withdrawal"
(within the meaning of Sections 4205 and 4203, respectively, of ERISA) from any
Benefit Plan subject to Title IV of ERISA which is a "multiemployer plan" (as
such term is defined in Section 3(37) of ERISA) (a "MULTIEMPLOYER PLAN"), no
such liability has been asserted, and there are no events or circumstances which
could result in any such partial or complete withdrawal; and (ii) neither
LandCare nor any of its Subsidiaries is bound by any contract or agreement or
has any obligation or liability described in Section 4204 of ERISA. To the best
knowledge of LandCare and each of its Subsidiaries, each Multiemployer Plan
complies in form and has been administered in accordance with the requirements
of ERISA and, where applicable, the Code; and each Multiemployer Plan is
qualified under Section 401(a) of the Code as amended to the date hereof.
(i) The actions contemplated by this Agreement will not give rise to
any liability with respect to any "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that is a "multiemployer plan" (as such
term is defined in Section 3(37) of ERISA).
(j) Neither LandCare nor any ERISA Affiliate has any liability or
potential liability with respect to any "employee benefit plan" (as defined in
Section 3(3) of ERISA) solely by reason of being treated as a single employer
under Section 414 of the Code with any trade, business or entity.
(k) Neither LandCare nor any of its Subsidiaries has, contributes
to, maintains or sponsors or has any liability with respect to any employee
benefit plan, agreement or arrangement applicable to employees of LandCare or
any of its Subsidiaries located outside the United States (the "FOREIGN PLANS").
(l) With respect to each Benefit Plan and each Compensation
Commitment, LandCare or the appropriate Subsidiary of LandCare has made
available to ServiceMaster true, complete and correct copies of (to the extent
applicable) (i) all documents pursuant to which the Benefit Plan or Compensation
Commitment is maintained, funded and administered, (ii) the most recent annual
report (Form 5500 series) filed with the IRS (with applicable attachments),
(iii) the most recent financial statement, (iv) the most recent actuarial
valuation of benefit obligations, and (v) the most recent determination letter
received from the IRS and the most recent application to the IRS for such
determination letter.
Section 3.11 COMPLIANCE WITH LAW. LandCare and its Subsidiaries have
complied with all laws, statutes, regulations, rules, ordinances and judgments,
decrees, orders, writs and
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injunctions, of any court or Governmental Entity relating to any of the property
owned, leased or used by them, or applicable to their business, including, but
not limited to, equal employment opportunity, discrimination, occupational
safety and health, environmental, insurance regulatory, antitrust laws, ERISA
and laws relating to Taxes (as hereinafter defined), except to the extent that
any such non-compliance would not have a material adverse effect on LandCare and
its Subsidiaries taken as a whole.
Section 3.12 LITIGATION. There is no suit, claim, action, proceeding,
review or investigation pending or, to the knowledge of LandCare, threatened
against or affecting, LandCare or any of its Subsidiaries which, individually or
in the aggregate, is reasonably likely to have a material adverse effect on
LandCare and its Subsidiaries taken as a whole, or would, or would be reasonably
likely to, materially impair the ability of LandCare to consummate the
transactions contemplated by this Agreement.
Section 3.13 NO DEFAULT. The business of LandCare and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
bylaws or similar organizational documents, or (b) any LandCare Agreement,
excluding from the foregoing clause (b) defaults or violations that would not
have a material adverse effect on LandCare and its Subsidiaries taken as a whole
and would not, or would not be reasonably likely to, materially impair the
ability of LandCare, ServiceMaster or Merger Subsidiary to consummate the
transactions contemplated by this Agreement.
Section 3.14 TAXES.
(a) DEFINITIONS. For purposes of all of Section 3.14:
(i) The term "LANDCARE" includes LandCare and each Subsidiary
of LandCare, including without limitation any corporation or other
entity that became or becomes a Subsidiary of the Company prior to
the Effective Time.
(ii) The term "TAX" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation, premium,
windfall profit, environmental, customs, duties, real property,
personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, including any interest, penalties
or additions to tax or additional amounts in respect of the
foregoing.
(iii) The term "RETURN" means any returns, declarations,
reports, claims for refund, amended returns, information returns or
other documents (including any related or supporting schedules,
statements or information) filed or required to be
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filed in connection with the determination, assessment or collection
of any Tax, or the administration of any laws, regulations or
administrative requirements relating to any Tax.
(b) TAX FILINGS AND PAYMENTS.
(i) All Returns (as hereinafter defined) required to be filed
on or before the date hereof and the date of the Closing by or on
behalf of LandCare have been duly filed on a timely basis and such
Returns are true, correct and complete in all material respects,
except that such returns may contain inadvertent errors and
omissions which are not material.
(ii) LandCare has timely paid or made adequate provision for
all Taxes and, no other material Taxes are payable by LandCare with
respect to items or periods covered by such Returns (whether or not
shown on or reportable on such Returns).
(iii) LandCare has made or will make adequate provision for
all Taxes payable for any periods that end on or before the Closing
for which no Returns have yet been filed and for any periods that
begin before the Closing and end after the Closing to the extent
such Taxes are attributable to the portion of any such period ending
at the Closing.
(iv) The charges, accruals and reserves for current Taxes
(excluding reserves for deferred Taxes) reflected on the books of
LandCare are not materially less than the Tax liabilities accruing
or payable by LandCare in respect of periods prior to the date
hereof and such charges, accruals and reserves are reflected on
LandCare's most recent financial statements.
(v) LandCare is not delinquent in the payment of any Taxes or
has requested any extension of time within which to file or send any
Return, which Return has not since been filed or sent and which
Taxes have not been paid.
(vi) No deficiencies exist for any Taxes or any penalties,
interest or assessments nor have any been proposed, asserted, or
assessed against LandCare that are not adequately reserved for.
(vii) There is no dispute or claim concerning any material Tax
liability of LandCare either (A) claimed or raised by any authority
in writing or (B) as to which LandCare has knowledge based upon
personal contact with any agent of such authority.
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(viii) There is no pending audit, examination, or, to
LandCare's knowledge, any investigation of any Return by any
authority nor has LandCare received any notice of such audit,
examination, or investigation.
(ix) LandCare has not waived any statute of limitations in
respect of Taxes or granted any extension of the limitations period
applicable to any claim of Taxes.
(x) LandCare is not subject to liability for Taxes of any
person (other than LandCare or any other member of the affiliated
group of corporations that files a consolidated federal income tax
return, of which LandCare is the common parent), including, without
limitation, liability arising from the application of U.S. Treasury
Regulation section 1.1502-6 or any analogous provision of state,
local or foreign law.
(xi) LandCare is not nor has it ever been a party to any tax
sharing agreement with any entity.
(xii) To LandCare's knowledge, no claim has ever been made by
an authority in a jurisdiction where LandCare does not file Returns
that it is or may be subject to taxation by that jurisdiction.
(xiii) There are no liens on any of the assets of LandCare
that arose in connection with any failure (or alleged failure) to
pay any Taxes.
(xiv) LandCare has withheld and paid over and complied with
all material information reporting and backup withholding
requirements, including, without limitation, maintenance of required
records with respect thereto, in connection with amounts paid or
owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(xv) LandCare does not expect any authority to assess any
additional Taxes for any period for which Returns have been filed
except to an extent consistent with LandCare's past experience as
reflected in its publicly released financial statements.
(xvi) LandCare has delivered to ServiceMaster correct and
complete copies of all Returns, examination reports, and statements
of deficiencies assessed against or agreed to by LandCare.
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(xvii) LandCare is not a party to any safe harbor lease within
the meaning of Section 168(f)(8) of the Code, as in effect prior to
the amendment by the Tax Equity and Fiscal Responsibility Act of
1982.
(xviii) All material net operating losses, credits and other
tax attributes utilized by LandCare during any taxable year ending
on or prior to the Closing were fully and properly available to
LandCare under all applicable tax laws, regulations and
administrative interpretations thereof.
(c) TAX CHARACTERISTICS OF LANDCARE.
(i) To LandCare's knowledge, no stockholder of LandCare who
owns more than 5% of LandCare's Common Stock is a "foreign person"
(as that term is defined in Section 1445(f)(3) of the Code).
(ii) LandCare is not a "consenting corporation" under Section
341(f) of the Code.
(iii) LandCare has not entered into any compensatory agreement
with respect to the performance of services which payment thereunder
would result in a nondeductible expense to LandCare pursuant to
Sections 162(m) or 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code.
(iv) LandCare has not agreed, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(v) To LandCare's knowledge, LandCare will not be required as
a result of any "closing agreement" described in Section 7121 of the
Code (or any corresponding provision of state, local or foreign
income Tax law), to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing.
(vi) LandCare will not be required as a result of any deferred
intercompany gain described in Treasury Regulation Section 1.1502-13
or any excess loss account described in Treasury Regulation Section
1.1502-19 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax
law), to include any item of income in taxable income for any period
(or portion thereof) ending after the Closing Date.
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(vii) Not later than December 1, 1998, LandCare will supply a
schedule to ServiceMaster showing: (A) the amount of any net
operating loss, net capital loss, unused credits, unused foreign tax
or excess charitable contribution; and (B) the amount of any
deferred gain or loss arising out of any deferred intercompany
transaction.
Section 3.15 CONTRACTS. Each material LandCare Agreement is valid, binding
and enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on LandCare and its Subsidiaries taken as a whole, and there are
no defaults thereunder, except those defaults that would not have a material
adverse effect on LandCare and its Subsidiaries taken as a whole. Neither
LandCare nor any of its Subsidiaries is a party to any agreement that expressly
and materially limits the ability of LandCare or any of its Subsidiaries to
compete in or conduct any line of business or compete with any person or in any
geographic area or during any period of time. All material contracts of LandCare
and its Subsidiaries will continue to be legal, valid, binding and enforceable,
and in full force and effect, on identical terms following the consummation of
the Merger.
Section 3.16 TRANSACTIONS WITH AFFILIATES. Except to the extent disclosed
in LandCare SEC Documents filed prior to the date of this Agreement, since June
30, 1998 there have been no material transactions, agreements, arrangements or
understandings between LandCare or its Subsidiaries, on the one hand, and the
affiliates of LandCare (other than wholly-owned Subsidiaries of LandCare) or
other Persons, on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act.
Section 3.17 ENVIRONMENTAL MATTERS. Except as set forth in LandCare SEC
Documents filed prior the date hereof:
(a) For purposes of this Agreement, "ENVIRONMENTAL, HEALTH AND
SAFETY REQUIREMENTS" shall mean all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended.
(b) Each of LandCare and its Subsidiaries has complied and is in
compliance with all Environmental, Health, and Safety Requirements, except for
any noncompliance that
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would not, in the aggregate, have a material adverse effect on LandCare and its
Subsidiaries taken as a whole.
(c) Without limiting the generality of the foregoing, each of
LandCare and its Subsidiaries has obtained and complied with, and is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health and Safety Requirements
("ENVIRONMENTAL PERMITS") for the occupation of its facilities and the operation
of its business, except for any failure to maintain or comply with Environmental
Permits that would not, in the aggregate, have a material adverse effect on
LandCare and its Subsidiaries taken as a whole.
(d) Neither LandCare, nor any of its Subsidiaries has received any
written or oral notice, report or other information regarding any actual or
alleged violation of Environmental, Health and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental, Health and Safety Requirements, except for such notices, reports
or other information, the subject of which would not, in the aggregate, have a
material adverse effect on LandCare and its Subsidiaries taken as a whole.
(e) None of LandCare or its Subsidiaries, or their respective
predecessors, has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA"),
or any other Environmental, Health and Safety Requirements, except for such
liabilities that would not, in the aggregate, have a material adverse effect on
LandCare and its Subsidiaries taken as a whole.
(f) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health and Safety Requirements.
(g) Neither LandCare nor its Subsidiaries has, either expressly or
by operation of law, assumed, undertaken or otherwise become subject to any
liability, including without limitation any obligation for corrective or
remedial action, of any other person or entity relating to Environmental, Health
and Safety Requirements except that the Company acquires ownership of businesses
by merging the entity owning the business with a subsidiary of the Company and
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in such acquisitions the resulting subsidiary would be subject to the
liabilities to which the merging entity was subject.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of LandCare, its Subsidiaries or any of
their predecessors will prevent, hinder or limit continued compliance with
Environmental, Health and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health and Safety
Requirements or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health and
Safety Requirements, including without limitation any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resources damage, except for
such liabilities which would not, in the aggregate, have a material adverse
effect on LandCare and its Subsidiaries taken as a whole.
Section 3.18 INTELLECTUAL PROPERTY. LandCare and its Subsidiaries own or
have a valid license to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets and other intellectual property rights (collectively,
the "LANDCARE INTELLECTUAL PROPERTY") necessary to carry on their respective
business as currently conducted; and neither LandCare nor any of its
Subsidiaries has received any notice of infringements of or conflict with, and
to LandCare's knowledge, there are no infringements of or conflicts with, the
rights of others with respect to the use of any of LandCare Intellectual
Property that, in either such case, would have a material adverse effect on
LandCare.
Section 3.19 OPINION OF FINANCIAL ADVISOR. LandCare has received the
written opinion of BT Alex. Brown Incorporated ("BT ALEX. BROWN") to the effect
that, as of the date hereof, the Merger Consideration to be received by the
holders of Shares in connection with the Merger is fair to such holders from a
financial point of view. LandCare has delivered or made available to
ServiceMaster a copy of such opinion.
Section 3.20 FINDERS AND INVESTMENT BANKERS. No broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission, or to the reimbursement of any of its expenses, in connection with
the transactions contemplated by this Agreement or any similar transaction based
upon arrangements made by or on behalf of LandCare, except for the arrangements
between LandCare and BT Alex. Brown under which the aggregate payments will not
exceed $1.2 million. LandCare shall supply ServiceMaster not later than November
5, 1998 with the engagement letter for BT Alex. Brown and all other agreements
or understandings affecting the amount that may be payable by LandCare to BT
Alex. Brown.
Section 3.21 TAKEOVER STATUTES. To the best of LandCare's knowledge, no
"fair price," "moratorium," "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal laws in the
United States (each, a "TAKEOVER STATUTE") applicable to
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LandCare or any of its Subsidiaries is applicable to the Merger or the other
transactions contemplated by this Agreement.
Section 3.22 INSURANCE. The LandCare Disclosure Schedule lists the
insurance policies covering LandCare on the date hereof and on the date hereof
each such policy is in full force and effect. Neither LandCare nor any
Subsidiary of LandCare is in default with respect to its obligations under any
insurance policy maintained by it, and neither LandCare nor any LandCare
Subsidiary (since the time any such Subsidiary became a Subsidiary of LandCare)
has been denied insurance coverage at any time for any reason.
Section 3.23 SUPPORTIVE STOCKHOLDER ACTIONS.
(a) Every person listed in Section 3.23(a) of the LandCare
Disclosure Schedule has executed in the capacity of stockholder a Voting
Agreement in a form substantially identical to the Voting Agreement executed on
the date hereof between ServiceMaster and Linda T. Benge. The persons listed in
Section 3.23(a) of the LandCare Disclosure Schedule collectively own and have
the right to vote approximately 30% shares of LandCare Common Stock outstanding
on the date hereof.
(b) LandCare has obtained Voting and Share Substitution Agreements
from each of the persons listed in Section 3.23(b) of the LandCare Disclosure
Schedule in substantially the form previously provided to ServiceMaster and each
such agreement is enforceable against the person listed in Section 3.23(b) of
the LandCare Disclosure Schedule who is a party to that Agreement in accordance
with its terms.
(c) Agreements complying with Section 1.4 (b) have been obtained
from the five individuals cited in Section 1.4(b) of the LandCare Disclosure
Schedule and each such Agreement is enforceable against the individual party to
it in accordance with its terms.
(d) LandCare will provide ServiceMaster with two original executed
copies of each such agreement cited in this Section 3.23 not later than November
5, 1998.
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ARTICLE 4
WARRANTIES OF
SERVICEMASTER AND MERGER SUBSIDIARY
References in this Agreement to the "SERVICEMASTER DISCLOSURE SCHEDULE"
mean the document captioned "ServiceMaster Disclosure Schedule" as constituted
upon its delivery to LandCare prior to LandCare's execution and delivery of this
Agreement. ServiceMaster warrants to LandCare, subject in the case of the
warranties in each particular section below to the exceptions set forth in the
corresponding section of the ServiceMaster Disclosure Schedule:
Section 4.1 ORGANIZATION. ServiceMaster is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of ServiceMaster and its
Subsidiaries has all requisite corporate or other power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not have a material adverse effect on ServiceMaster
and its subsidiaries taken as a whole. ServiceMaster and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate, have a material adverse effect on
ServiceMaster and its Subsidiaries taken as a whole. Merger Subsidiary has not
heretofore conducted any business other than in connection with this Agreement
and the transactions contemplated hereby.
Section 4.2 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY
ACTION. ServiceMaster and Merger Subsidiary have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
ServiceMaster and Merger Subsidiary of this Agreement and the consummation by
ServiceMaster and Merger Subsidiary of the transactions contemplated hereby have
been duly and validly authorized by their respective boards of directors and no
other corporate action or proceedings on the part of ServiceMaster and Merger
Subsidiary are necessary to authorize the execution and delivery by
ServiceMaster and Merger Subsidiary of this Agreement, and the consummation by
ServiceMaster and Merger Subsidiary of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by ServiceMaster and Merger
Subsidiary, and, assuming this Agreement constitutes a valid and binding
obligation of LandCare, constitutes a valid and binding obligation of each of
ServiceMaster and Merger Subsidiary, enforceable against each of them in
accordance with their terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance
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and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. ServiceMaster Common Stock to be issued in connection with the
Merger will when issued be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. No vote of the holders of
ServiceMaster Common Stock is necessary for ServiceMaster to consummate the
Merger or to issue the shares of ServiceMaster Common Stock to be issued in
connection with the Merger or for Merger Subsidiary to consummate the Merger.
Section 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, state Securities or "blue sky" laws and any applicable state takeover laws,
and the filing of the Certificate of Merger as required by Delaware Law, neither
the execution, delivery or performance of this Agreement by ServiceMaster and
Merger Subsidiary nor the consummation by ServiceMaster and Merger Subsidiary of
the transactions contemplated hereby nor compliance by ServiceMaster and Merger
Subsidiary with any of the provisions hereof will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of ServiceMaster or Merger Subsidiary or
any other Subsidiary of ServiceMaster;
(b) require any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
have a material adverse effect on ServiceMaster and its Subsidiaries taken as a
whole and would not, or would not be reasonably likely to, materially impair the
ability of LandCare, ServiceMaster and Merger Subsidiary to consummate the
transactions contemplated by this Agreement;
(c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which ServiceMaster or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound other than any violation, breach or default which would not
have a material adverse effect on ServiceMaster and its Subsidiaries taken as a
whole; or
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ServiceMaster, any of its Subsidiaries or any of their
properties or assets, other than any violation which would not have a material
adverse effect on ServiceMaster and its Subsidiaries taken as a whole.
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Section 4.4 CAPITALIZATION. The authorized capital stock of ServiceMaster
consists of 1,000,000,000 shares of ServiceMaster Common Stock and 11,000,000
shares of preferred stock, par value $0.01 per share (the "SERVICEMASTER
PREFERRED STOCK"). As of the close of business on October 23, 1998, (a)
296,104,099 shares of ServiceMaster Common Stock were issued and outstanding and
(b) no shares of ServiceMaster Preferred Stock were issued and outstanding. As
of the close of business on September 30, 1998, 1,552,369 shares of
ServiceMaster Common Stock were held in treasury. All of the issued and
outstanding shares of ServiceMaster Common Stock are duly authorized, validly
issued, fully paid and non-assessable.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) ServiceMaster has filed with the SEC and has heretofore made
available to LandCare true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by it since
December 31, 1996 under the Exchange Act and the Securities Act (as such
documents have been amended since the time of their filing, collectively, the
"SERVICEMASTER SEC DOCUMENTS"). As of their respective dates or, if amended, as
of the date of the last such amendment, ServiceMaster SEC Documents, including,
without limitation, any financial statements and schedules included therein (i)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder.
(b) Each of the consolidated financial statements included in
ServiceMaster SEC Documents complies in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, has been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presents in all material respects the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of ServiceMaster and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of unaudited interim financial statements, to
normal year end adjustments and lack of footnote disclosures).
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
ServiceMaster SEC Documents filed with the SEC prior to the date hereof, since
June 30, 1998, ServiceMaster and its Subsidiaries have conducted their
respective businesses and operations in the ordinary course of business
consistent with past practice. Since June 30, 1998, there has not occurred: (i)
any events, changes or effects (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, in the aggregate, a material adverse effect
on ServiceMaster and its Subsidiaries taken as a whole; (ii) any declaration,
setting aside or payment of any distribution (whether in cash, shares or
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property) with respect to the equity interests of ServiceMaster or of any of its
Subsidiaries, other than regular quarterly cash dividends or dividends paid by
wholly-owned Subsidiaries; or (iii) any change by ServiceMaster or any of its
Subsidiaries in accounting principles or methods, except for any such change
required by reason of a change in GAAP.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except (i) to the extent disclosed
in ServiceMaster SEC Documents filed prior to the date of this Agreement and
(ii) for liabilities and obligations incurred in the ordinary course of business
consistent with past practice, since September 30, 1998, neither ServiceMaster
nor any of its Subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, individually or in the aggregate, a material adverse
effect on ServiceMaster and its Subsidiaries taken as a whole.
Section 4.8 LITIGATION. There is no suit, claim, action, proceeding,
review or investigation pending or, to the knowledge of ServiceMaster,
threatened against or affecting, ServiceMaster or any of its Subsidiaries which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on ServiceMaster and its Subsidiaries taken as a whole, or would,
or would be reasonably likely to, materially impair the ability of ServiceMaster
to consummate the transactions contemplated by this Agreement.
Section 4.9 COMPLIANCE WITH LAW. ServiceMaster and its Subsidiaries have
complied with all laws, statutes, regulations, rules, ordinances and judgments,
decrees, orders, writs and injunctions, of any court or Governmental Entity
relating to any of the property owned, leased or used by them, or applicable to
their business, including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, insurance,
regulatory, antitrust laws, ERISA and laws relating to Taxes, except to the
extent that any such non-compliance would not have a material adverse effect on
ServiceMaster and its Subsidiaries taken as a whole.
Section 4.10 NO DEFAULT. The business of ServiceMaster and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective certificate of incorporation or
bylaws or similar organizational documents, or (ii) agreements to which
ServiceMaster and its Subsidiaries are parties, excluding from the foregoing
clause (ii) defaults or violations that would not have a material adverse effect
on ServiceMaster and its Subsidiaries taken as a whole and would not, or would
not be reasonably likely to, materially impair the ability of ServiceMaster,
LandCare or Merger Subsidiary to consummate transactions contemplated by this
Agreement.
Section 4.11 DISCLOSURE DOCUMENTS. None of the information supplied or to
be supplied by ServiceMaster specifically for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any
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untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading or (ii) the
LandCare Proxy Statement will, at the date it is first mailed to LandCare
stockholders or at the time of LandCare Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Registration
Statement will comply as to form in all material respects with the requirements
of the Securities Act, except that no representation or warranty is made by
ServiceMaster with respect to statements made or incorporated by reference in
either the Registration Statement or the LandCare Proxy Statement based on
information supplied by LandCare specifically for inclusion or incorporation by
reference therein.
Section 4.12 OPINION OF FINANCIAL ADVISOR. ServiceMaster has received an
opinion from CS First Boston dated the date of this Agreement to the effect
that, as of such date, the consideration to be paid by ServiceMaster in the
Merger is fair to ServiceMaster from a financial point of view.
ARTICLE 5
COVENANTS OF LANDCARE
Section 5.1 CONDUCT OF BUSINESS BY LANDCARE PENDING THE MERGER. LandCare
covenants and agrees that prior to the Effective Time or the date, if any, on
which this Agreement is earlier terminated pursuant to Section 9.1 hereof,
unless ServiceMaster and Merger Subsidiary shall otherwise consent in writing or
except as otherwise contemplated by this Agreement:
(a) the businesses of LandCare and its Subsidiaries will be
conducted only in the ordinary and usual course; LandCare will use its
reasonable best efforts to preserve intact its business organization and
goodwill, keep available the services of its officers and employees and maintain
satisfactory relationships with customers and others having business
relationships with it and its Subsidiaries; and LandCare will promptly notify
ServiceMaster and Merger Subsidiary of any event or occurrence or emergency not
in the ordinary and usual course of the business of LandCare or any of its
Subsidiaries or material to the business of LandCare and its Subsidiaries, taken
as a whole;
(b) LandCare will not (i) amend its certificate of incorporation or
bylaws or (ii) split, combine or reclassify the outstanding Shares or declare,
set aside or pay any dividend payable in cash, stock or property with respect to
the Shares, other than dividends paid by any of its Subsidiaries to LandCare;
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(c) neither LandCare nor any of its Subsidiaries will issue or agree
to issue any additional shares of, or rights of any kind to acquire shares of,
its capital stock of any class, other than (i) the issuance of shares of capital
stock of a Subsidiary of LandCare to LandCare, (ii) with respect to LandCare,
Shares issuable upon exercise of LandCare Stock Options outstanding on the date
hereof, (iii) options to purchase Shares issued to employees of enterprises
acquired in Additional Acquisitions closed after the date hereof provided that
the number of Shares subject to options issued with respect to any particular
Additional Acquisition shall not exceed 10% of the number of Shares issued in
that Acquisition and the exercise price for such Option shall not be lower than
$11 per Share; (iv) Shares issuable in connection with the conversion of any of
the notes set forth in the Section of LandCare Disclosure Schedule corresponding
to Section 3.4(c) and (v) the issuance of shares of capital stock as expressly
permitted under Section 5.6 of this Agreement.
(d) neither LandCare nor any of its Subsidiaries will enter into or
agree to enter into any new or amended contract or agreement with any labor
unions representing employees of LandCare or any of its Subsidiaries;
(e) except permitted by Section 5.4 or by Section 5.6, LandCare will
not authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an agreement
with respect to any merger, consolidation or business combination (other than
the Merger), any acquisition or disposition of a material amount of assets or
securities (including, without limitation, the assets or securities of any of
its Subsidiaries) or any material change in its capitalization, or enter, other
than in the ordinary course of business, into a material contract;
(f) neither LandCare nor any of its Subsidiaries shall modify, amend
or terminate any of the material LandCare Agreements or waive, release or assign
any material rights or claims, except in the ordinary course of business;
(g) neither LandCare nor any of its Subsidiaries shall: (i) grant
any increase in the compensation payable or to become payable by LandCare or any
of its Subsidiaries to any officer or management employee other than scheduled
annual increases in the ordinary course of business; (ii) adopt any new, or
amend or otherwise increase, or accelerate the payment or vesting of the amounts
payable or to become payable under any existing, bonus, incentive compensation,
deferred compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; (iii) enter into any, or amend any existing, employment, consulting
or severance agreement with or, except in accordance with the existing written
policies of LandCare, grant any severance or termination pay to any officer,
director or employee of LandCare or any of its Subsidiaries; (iv) make any
additional contributions to any grantor trust created by LandCare to provide
funding for non-tax-qualified employee benefits or compensation; or (v) provide
any new severance program or rights;
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(h) to the extent within their control, neither LandCare nor any of
its Subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated, except in the
ordinary course of business;
(i) except for increases in the aggregate principal amount of
LandCare's senior credit facility of up to $125 million, neither LandCare nor
any of its Subsidiaries shall: (i) incur or assume any debt except for
borrowings under existing credit facilities in the ordinary course of business;
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business; (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than to wholly-owned Subsidiaries of LandCare, customary loans or advances to
employees in the ordinary course of business and short-term investments pursuant
to customary cash management systems of LandCare in the ordinary course of
business); or (iv) make or commit to make any material capital expenditure in an
amount or character that is not consistent with LandCare's past practices;
(j) neither LandCare nor any of its Subsidiaries shall change any of
the accounting principles used by it unless required by GAAP;
(k) except upon the prior written consent of ServiceMaster, LandCare
shall not make any Tax election; and
(l) neither LandCare nor any Subsidiary of LandCare shall agree in
writing or otherwise to take (i) any action that it is prohibited from taking by
this Section 5.1, or (ii) any action that would constitute or is likely to cause
or result in a breach of any covenant, agreement, representation or warranty set
forth herein.
Section 5.2 LANDCARE STOCKHOLDERS MEETING. The board of directors of
LandCare shall unanimously recommend to the stockholders of LandCare the
adoption of this Agreement and declare the approval of this Agreement advisable
and LandCare shall take all reasonably lawful action to solicit such adoption by
its stockholders. Notwithstanding the previous sentence, the board of directors
of LandCare may withdraw or modify its recommendation that stockholders approve
this Agreement and its finding that such approval is advisable if the board of
directors of LandCare, after having consulted with outside counsel, determines
that the refusal to do so would constitute a breach by the board of directors of
LandCare of their fiduciary duties under applicable laws; provided, the board of
directors of LandCare may not approve or recommend (and in connection therewith,
withdraw or modify its approval or recommendation with respect to this
Agreement) an Acquisition Transaction (as hereinafter defined) unless such
Acquisition Transaction is a bona fide unsolicited written proposal from a third
party that the board of directors of LandCare determines in good faith is more
favorable to the stockholders of LandCare than the Merger; provided, further,
that the board of directors shall continue to take all action necessary to
convene the LandCare Stockholders Meeting and shall submit for (or shall not
MA111ECA.WPD - 33 -
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withdraw from) the consideration of the stockholders of LandCare the adoption of
this Agreement (even if the board of directors of LandCare is permitted to
withdraw or modify its approval with respect to this agreement or is permitted
to approve or recommend an Acquisition Transaction to its stockholders pursuant
to this sentence).
Section 5.3 ACCESS TO INFORMATION. LandCare will give ServiceMaster, its
counsel, financial advisors, auditors and other authorized representatives full
access throughout the period prior to the Effective Time to all of the offices,
properties, business and marketing plans, books, files and records of LandCare
and the Subsidiaries of LandCare, will furnish to ServiceMaster, its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such persons may request and will
instruct LandCare's employees, counsel and financial advisors to cooperate with
ServiceMaster in its investigation of the business of LandCare and its
Subsidiaries and to promptly answer and respond to any questions and inquiries
of ServiceMaster. LandCare will furnish promptly to ServiceMaster and Merger
Subsidiary (a) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of Federal or state securities laws
and (b) all such other information concerning its business, properties and
personnel as ServiceMaster or Merger Subsidiary may reasonably request; provided
that no investigation pursuant to this Section 5.3 shall affect any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
Section 5.4 NO SOLICITATION.
(a) LandCare warrants to ServiceMaster that the board of directors
of LandCare has (i) made such assessments of LandCare's value and has taken such
other actions as to satisfy the fiduciary duties of its board of directors that
must be satisfied to enable LandCare to enter into this Agreement and to render
this Agreement binding upon LandCare in accordance with its terms and (ii) has
adopted a resolution approving this Agreement and declaring its advisability.
(b) LandCare agrees that, prior to the Effective Time, it shall not,
and shall not authorize or permit any of its Subsidiaries or any of its or its
Subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or knowingly encourage (including
by way of furnishing or disclosing non-public information) any inquiries or the
making of any proposal with respect to any merger, consolidation or other
business combination involving LandCare or the acquisition of all or any
material portion of the assets or capital stock of LandCare (an "ACQUISITION
TRANSACTION") or negotiate, explore or otherwise engage in substantive
discussions with any person (other than ServiceMaster, Merger Subsidiary or
their respective directors, officers, employees, agents and representatives), or
enter into any agreement, with respect to any Acquisition Transaction or enter
into any agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement.
MA111ECA.WPD - 34 -
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(c) Notwithstanding subsection (b) above:
(i) LandCare may provide non-public information to and seek to
negotiate an Acquisition Transaction with a person (the
"COMPETITOR") provided that the Competitor shall make a bona fide
unsolicited written proposal to make an Acquisition Transaction for
all the capital stock or assets of LandCare on Superior Terms. For
purposes of this Agreement, terms will be deemed to be "SUPERIOR
TERMS" only if the proposal of such Competitor is more favorable
than the Merger to the stockholders of LandCare as determined in
good faith by the board of directors of LandCare. A proposal to
acquire LandCare on Superior Terms is herein called a "QUALIFIED
COMPETING PROPOSAL." LandCare shall prior to entering into an
agreement with respect to a Qualified Competing Proposal pay or
cause to be paid to ServiceMaster the amount specified in Section
9.4(b). Nothing contained in this Agreement shall prevent the board
of directors of LandCare from complying with Rule 14c-2 under the
Exchange Act with regard to an Acquisition Transaction.
(ii) If LandCare receives a Qualified Competing Proposal,
LandCare will nevertheless (i) permit its stockholders to vote on
the adoption of this Agreement and (ii) not take any action that
would preclude LandCare from consummating the Merger if this
Agreement is adopted by LandCare's stockholders or make the Merger
any less advantageous to ServiceMaster if this Agreement is adopted
by LandCare's stockholders. If this Agreement is adopted by
LandCare's stockholders (i) LandCare will consummate the Merger and
(ii) shall not consummate any Acquisition Transaction contemplated
by a Qualified Competing Proposal.
(d) Upon executing this Agreement, LandCare shall immediately advise
ServiceMaster in writing regarding (i) the identity of any other persons or
entities with whom LandCare has had direct or indirect contact since January 1,
1998 regarding a possible Acquisition Transaction and (ii) the status of any
discussions or negotiations regarding a possible Acquisition Transaction
involving any such person or entity. LandCare warrants that LandCare is not
bound by any contract or agreement that would require it to take any action
which would violate any restriction contained in Section 5.4(b). Hereafter,
LandCare shall advise ServiceMaster in writing of the receipt, directly or
indirectly, of any inquiries or proposals relating to an Acquisition Transaction
promptly upon such receipt and of its intention to enter into any agreement
relating to an Acquisition Transaction which is a Qualified Competing Proposal
at least 48 hours prior to executing any such agreement, and promptly advise
ServiceMaster in writing of any actions taken pursuant to Section 5.4(c) hereof
and furnish to ServiceMaster either a copy of such proposal or a written summary
of such proposal.
Section 5.5 CORPORATE ORGANIZATION. Notwithstanding anything to the
contrary contained in this Agreement or in the disclosure schedules hereto,
LandCare and each of its Subsidiaries
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shall take all actions necessary in order to be duly qualified and in good
standing on the Effective Time with the Secretary of State in each jurisdiction
in which the character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary.
Section 5.6 PIPELINE ACQUISITIONS.
(a) LandCare has delivered to ServiceMaster prior to the execution
of this Agreement a schedule captioned "PIPELINE SCHEDULE" which as constituted
when so delivered to ServiceMaster prior to execution of this Agreement is
herein called the "Pipeline Schedule." LandCare warrants to ServiceMaster that
the Pipeline Schedule shows: (i) every enterprise with which LandCare has
entered into a letter of intent or binding acquisition agreement contemplating
the acquisition of such enterprise by LandCare which is in existence on the date
hereof (except that the acquisition of Albuquerque Landscape identified in
Section 5.6(f) shall not be deemed to be part of the Pipeline Schedule); (ii)
the purchase price for such enterprise specified in such letter of intent or
acquisition agreement; and (iii) the annual revenues and proforma EBITDA that
LandCare estimates such enterprise generated in the trailing 12 months prior to
the execution of the letter of intent with respect to that enterprise.
(b) LandCare shall not enter into any letter of intent or agreement
to make any acquisition of any business enterprise or consummate any acquisition
of any business enterprise after the date hereof except that LandCare may enter
into purchase agreements for the enterprises shown on the Pipeline Schedule on
terms that comply with the requirements in Section 5.6(d) and may consummate
such acquisitions and except that LandCare shall have the right to make
additional acquisitions of enterprises not shown on the Pipeline Schedule that
comply with the requirements set forth in paragraphs (c) and (d) of this Section
5.6.
(c) LandCare may without ServiceMaster's consent acquire businesses
not shown on the Pipeline Schedule provided that the standards in Section 5.6(d)
and the following additional standards are met with respect to each such
acquisition:
(i) the purchase price payable for such business shall not
exceed .8 times trailing twelve month revenues or six times trailing
twelve month pro forma EBITDA for the business (both calculated in
the same manner used to calculate trailing 12 month revenues and pro
forma EBITDA for purposes of the Pipeline Schedule and for purposes
of this requirement all debt obligations to which the acquired
enterprise shall be subject (net of excess cash) shall count as part
of the purchase price);
(ii) such business shall have generated during the trailing 12
months and shall be likely to continue to generate pro forma EBITDA
margins of at least 10%; and
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(iii) such business has a quality and potential comparable to
the businesses shown on the Pipeline Schedule on the date hereof.
(d) The following requirements shall apply to every acquisition made
by LandCare after the date hereof ("NEW ACQUISITIONS"):
(i) LandCare shall not use its LandCare Common Stock for any
New Acquisition unless that such stock shall be valued for purposes
of that acquisition at:
(A) not less than the actual average closing price for
LandCare Common Stock during a five Trading Day period ending
within two Trading Days prior to the closing of the New
Acquisition;
(B) not less than $9 per LandCare share; and
(C) not less than $1 per LandCare share issued in the
New Acquisition below the "Applicable ServiceMaster Deal
Price." For purposes of this Section 5.6, the "APPLICABLE
SERVICEMASTER DEAL PRICE" for purposes of any particular New
Acquisition shall be equal to the Applicable Exchange Ratio
times the average closing price per share for ServiceMaster
Common Stock for the period of 20 consecutive Trading Days
ending on the third Trading Day before the date on which the
particular New Acquisition closes. The "APPLICABLE EXCHANGE
RATIO" shall be the Exchange Ratio that would have been
applicable if the Scheduled Meeting Date coincided with the
date on which the New Acquisition shall close.
(ii) LandCare shall limit the shares of LandCare Common Stock
issuable in New Acquisitions so that in the aggregate the shares of
LandCare Common Stock issued in such transactions will result in
aggregate Deal Losses of not more than $1 million. For purposes of
this requirement, the Deal Loss in any particular New Acquisition
shall be the product derived by multiplying the number of shares of
LandCare Common Stock issued in that New Acquisition times the
amount by which the Applicable Service Master Deal Price shall
exceed the value per share for which shares of LandCare Common Stock
were valued for purposes of that New Acquisition.
(iii) LandCare shall not use LandCare Shares in any particular
New Acquisition unless the characteristics of the persons receiving
such stock and all other relevant considerations with respect to
that New Acquisition are such that the use of such stock will not
cause either LandCare or ServiceMaster to breach any of the
requirements of the federal securities laws.
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(iv) The terms governing each New Acquisition will include (i)
warranties to LandCare and indemnifications from the sellers
comparable to the scope and value of the warranties usually obtained
by LandCare in acquisitions made after its acquisition of its
"founding companies" and prior to the date hereof and (ii) other
terms as favorable to LandCare as the comparable terms in
acquisitions made after its acquisition of its "founding companies"
and prior to the date hereof. The indemnification and other rights
that continue after the closing of a New Acquisition shall be on
terms such that LandCare's rights will not be impaired or diminished
in value by the consummation of the Merger. Without ServiceMaster's
consent, such terms shall not allow the sellers to use stock to
satisfy their indemnification obligations and shall prohibit the
sellers from transferring any interest in the shares of LandCare
Common Stock they receive in the deal (or in the ServiceMaster
shares issued in the Merger to replace those Shares) for a period of
one year after their New Acquisition closes.
(e) ServiceMaster shall have the right to terminate this Agreement
if by the Scheduled Meeting Date:
(A) LandCare shall not have completed and closed Qualified New
Acquisitions that meet the following criteria: (i) the aggregate
purchase price for the Qualified Pipeline Acquisitions shall not be
more than 5% in excess of the aggregate of the projected acquisition
prices projected on the Pipeline Schedule for New Acquisitions shown
on that Schedule and closed prior to the Scheduled Meeting Date; and
(ii) the aggregate purchase price for Qualified Post Pipeline
Acquisitions shall not exceed the maximum price permitted by clause
(i) in Section 5.6(c); and (iii) the trailing 12 month revenues for
the Qualified New Acquisitions (measured as of the time each such
New Acquisition closed) shall not be less than $46.6 million; and
(iv) the trailing 12 month EBITDA for the Qualified New Acquisitions
(measured as of the time each such New Acquisition closed) shall not
be less than $5.9 million; or
(B) LandCare shall have made any New Acquisitions after the date
hereof (other than Albuquerque Landscape) that are contrary to the
requirements in paragraphs (c) or (d) in this Section 5.6; or
(C) the aggregate trailing 12 month revenues of all businesses
acquired in New Acquisitions closed prior to the Scheduled Meeting
Date shall exceed $70 million.
For purposes of this Section 5(e):
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(i) New Acquisitions shown on the Pipeline Schedule that in
ServiceMaster's reasonable judgment satisfy the requirements
paragraph (d) of this Section 5.6 are herein called "QUALIFIED
PIPELINE ACQUISITIONS."
(ii) New Acquisitions not listed on the Pipeline Schedule that
in ServiceMaster's reasonable judgment satisfy the requirements
paragraphs (c) and (d) of this Section 5.6 are herein called
"QUALIFIED POST PIPELINE ACQUISITIONS."
(iii) The term "QUALIFIED NEW ACQUISITIONS" means all
Qualified Pipeline Acquisitions and all Qualified Post Pipeline
Acquisitions that shall have closed prior to the Scheduled Meeting
Date.
(iv) In the event ServiceMaster or any ServiceMaster
subsidiary shall acquire any enterprise shown on the Pipeline
Schedule, then for purposes of this Section 5.6(e) LandCare shall be
deemed to have acquired such enterprise on the terms specified in
the Pipeline Schedule for that enterprise.
(f) In the event LandCare shall within the next two weeks close its
acquisition of Albuquerque Landscape on the terms provided in the definitive
agreements governing that acquisition in effect on the date hereof, then (i)
such acquisition shall not be required to meet any of the standards prescribed
by this Section 5.6 but (ii) such acquisition shall not be deemed a New
Acquisition and shall not be taken into account in determining whether
ServiceMaster shall have a termination right under the provisions in Section
5.6(e).
(g) LandCare shall supply ServiceMaster at such time as
ServiceMaster shall reasonably request in order to enable ServiceMaster to
prepare for the Closing and to determine whether applicable closing conditions
have been satisfied all information ServiceMaster shall reasonably request about
New Acquisitions.
Section 5.7 REDEMPTION OF CONVERTIBLE NOTES. LandCare shall use diligent
efforts to cause each of the convertible notes of LandCare described in the
section of LandCare Disclosure Schedule corresponding to Section 3.4(c) to be
redeemed and repaid in full for an amount less than the greater of (unless
otherwise agreed by ServiceMaster) (i) the outstanding principal amount of such
note plus accrued interest or (ii) the then market value of the LandCare shares
into which the notes would be convertible if the conversion were governed by the
conversion ratio applicable after a change in control.
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ARTICLE 6
COVENANTS OF SERVICEMASTER
Section 6.1 OBLIGATIONS OF MERGER SUBSIDIARY. ServiceMaster will take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
Section 6.2 INDEMNIFICATION.
(a) From and after the Effective Time, ServiceMaster and the
Surviving Corporation jointly and severally shall indemnify, to the full extent
permitted under Delaware Law, the present and former directors and officers of
LandCare and its Subsidiaries (the "INDEMNIFIED PARTIES") in respect of actions
taken prior to and including the Effective Time in connection with their duties
as directors or officers of LandCare or its Subsidiaries (including the
transactions contemplated hereby) for a period of not less than six years from
the Effective Time; provided that, in the event any claim or claims are asserted
or made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims. Without limitation of the foregoing, in the event any Indemnified
Party becomes involved in such capacity in any action, proceeding or
investigation in connection with any matter, including the transactions
contemplated hereby, occurring prior to and including the Effective Time, the
Surviving Corporation, to the extent permitted and on such conditions as may be
required by applicable law, will periodically advance expenses to such
Indemnified Party for his legal and other out-of-pocket expenses (including the
cost of any investigation and preparation) incurred in connection therewith.
(b) For not less than six years after the Effective Time,
ServiceMaster or the Surviving Corporation shall maintain in effect directors'
and officers' liability insurance covering the persons who are currently covered
by LandCare's existing directors' and officers' liability insurance with respect
to actions that shall have taken place prior to the Effective Time, on terms and
conditions no less favorable to such persons than those in effect on the date
hereof under LandCare's existing directors' and officers' liability insurance;
provided, however, that in no event shall ServiceMaster or the Surviving
Corporation be required to pay in any year an amount to maintain such insurance
covering the Indemnified Parties in excess of twice the amount paid by LandCare
as of the Closing Date for such coverage; provided further that if the annual
premiums of such insurance coverage exceed such amount, ServiceMaster shall be
obligated to obtain a policy with a premium equal to such amount.
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ARTICLE 7
COVENANTS OF SERVICEMASTER AND LANDCARE
Section 7.1 DILIGENT EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its diligent efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement; provided that nothing herein shall
require ServiceMaster to hold, manage or operate any assets separately or to
enter into any sale or divestiture of assets. LandCare, ServiceMaster and Merger
Subsidiary shall each furnish to one another and to one another's counsel all
such information as may be required in order to accomplish the foregoing
actions. In connection with and without limiting the foregoing, LandCare and
ServiceMaster shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
the Merger, this Agreement or any of the other transactions contemplated hereby
and (ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement or any of the other transactions
contemplated hereby, take all action necessary to ensure that the Merger and the
other transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
Section 7.2 CERTAIN FILINGS. LandCare and ServiceMaster shall cooperate
with one another (i) in connection with the preparation of the Registration
Statement and the LandCare Proxy Statement, (ii) in determining whether any
other action by or in respect of, or filing with, any governmental body, agency
or official, or authority or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts in connection
with the consummation of the transactions contemplated by this Agreement and
(iii) in seeking any such actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith or with
the Registration Statement and the LandCare Proxy Statement and seeking timely
to obtain any such actions, consents, approvals or waivers.
Section 7.3 PUBLIC ANNOUNCEMENTS. ServiceMaster and LandCare will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
Section 7.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of LandCare or Merger Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf LandCare or Merger Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and
MA111ECA.WPD - 41 -
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all right, title
and interest in, to and under any of the rights, properties or assets of
LandCare acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
Section 7.5 NOTICES OF CERTAIN EVENTS. LandCare and ServiceMaster shall
promptly notify the other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting LandCare or any of its Subsidiaries, on the one
hand, or ServiceMaster or Merger Subsidiary, on the other hand, which relate to
the consummation of the transactions contemplated by this Agreement; and
(d) any action, event or occurrence that would constitute a breach
of any representation, warranty, covenant or agreement of it set forth in this
Agreement.
Section 7.6 PREPARATION OF THE REGISTRATION STATEMENT AND THE LANDCARE
PROXY STATEMENT. As soon as practicable following the date of this Agreement,
LandCare and ServiceMaster shall jointly prepare and file with the SEC the
LandCare Proxy Statement and ServiceMaster shall prepare and file with the SEC
the Registration Statement, in which the LandCare Proxy Statement will be
included. Each of LandCare and ServiceMaster shall use best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. LandCare will use its reasonable best efforts
to cause the LandCare Proxy Statement to be mailed to the stockholders of
LandCare as promptly as practicable after the Registration Statement is declared
effective under the Securities Act. ServiceMaster shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of ServiceMaster Common Stock in the Merger and LandCare shall furnish all
information concerning LandCare and the holders of the Shares as may be
reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Registration Statement will be made by
ServiceMaster or to the LandCare Proxy Statement will be made by LandCare or
ServiceMaster without providing the other party the opportunity to review and
comment thereon. ServiceMaster will advise LandCare, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of ServiceMaster
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Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the LandCare Proxy
Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to LandCare or ServiceMaster, or
any of their respective affiliates, officers or directors, should be discovered
by LandCare or ServiceMaster which should be set forth in an amendment or
supplement to any of the Registration Statement or the LandCare Proxy Statement,
so that any of such documents would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the party which discovers such information shall promptly notify the
other party hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of LandCare.
Section 7.7 LETTERS OF LANDCARE'S ACCOUNTANTS. LandCare shall use its
reasonable best efforts to cause to be delivered to ServiceMaster two letters
from LandCare's independent accountants, one dated a date within two business
days before the date on which the Registration Statement shall become effective
and one dated a date within two business days before the Closing Date, each
addressed to ServiceMaster, in form and substance reasonably satisfactory to
ServiceMaster and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 7.8 AFFILIATES. Not less than 30 days prior to the Effective Time,
LandCare shall deliver to ServiceMaster a list of names and addresses of each
person who, in the reasonable judgment of LandCare, is an affiliate of LandCare
within the meaning of Rule 145 of the rules and regulations promulgated under
the Securities Act (each such person, an "AFFILIATE"). Each person who shall
execute a Voting Agreement shall be deemed an affiliate of LandCare and shall be
so designated on the list contemplated in the preceding sentence. LandCare shall
provide ServiceMaster such information and documents as ServiceMaster shall
reasonably request for purposes of reviewing such list. ServiceMaster shall be
entitled to place Rule 145 legends on the certificates evidencing any shares of
ServiceMaster Common Stock to be received by the Affiliates in the Merger.
Section 7.9 NYSE LISTING. ServiceMaster shall use its reasonable best
efforts to cause the shares of ServiceMaster Common Stock to be issued in
connection with the Merger to be approved for listing on the New York Stock
Exchange, subject to official notice of issuance, as promptly as practicable
after the date hereof, and in any event prior to the Closing Date.
Section 7.10 REGULATORY MATTERS AND APPROVALS. Each of LandCare and
ServiceMaster shall (and ServiceMaster shall cause Merger Subsidiary to) give
any notices to, make any filings with and use its reasonable best efforts to
obtain any authorizations, consents and approvals of, Governmental Entities in
connection with the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, LandCare and ServiceMaster shall each
file any Notification and Report
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Forms and related material that it may be required to file in connection with
the transactions contemplated by this Agreement with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the HSR Act, shall each use its reasonable best efforts to obtain an early
termination of the applicable waiting period, and shall each make any further
filings pursuant thereto that may be necessary, proper or advisable.
Section 7.11 TAX TREATMENT. Each of ServiceMaster and LandCare shall use
reasonable best efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368(a) of the Code, including, without limitation,
forbearing from taking any action that would cause the Merger not to qualify as
a reorganization under the provisions of Section 368(a) of the Code.
Section 7.12 REPRESENTATIONS. Each of LandCare, on the one hand, and
ServiceMaster and Merger Subsidiary, on the other, (i) will use their reasonable
best efforts to take all action necessary to render true and correct as of the
Closing its representations and warranties contained in this Agreement, (ii)
will refrain from taking any action that would render any such representation or
warranty untrue or incorrect as of such time and (iii) will perform or cause to
be satisfied each agreement, covenant or condition to be performed or satisfied
by it.
Section 7.13 MATERIAL CONSENTS. Between the date of this Agreement and the
Closing Date, LandCare and ServiceMaster and each of their respective
Subsidiaries shall in good faith use their reasonable best efforts to obtain all
consents and approvals of all lenders, lessors, vendors, customers and other
persons necessary to permit the transactions contemplated by this Agreement to
be consummated without violating any loan agreement, lease or other material
contract to which LandCare, ServiceMaster or any of their respective
Subsidiaries is a party or by which LandCare, ServiceMaster or any of their
respective Subsidiaries is bound.
ARTICLE 8
CONDITIONS TO THE MERGER
Section 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of LandCare, ServiceMaster and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement shall have been adopted by the stockholders of
LandCare in accordance with Delaware Law;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
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(c) no judgment, injunction, order or decree shall prohibit the
consummation of the Merger;
(d) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order;
(e) the shares of ServiceMaster Common Stock issuable to the
stockholders of LandCare in the Merger as contemplated by this Agreement shall
have been approved for listing on the New York Stock Exchange, subject to
official notice of issuance; and
(f) this Agreement shall not have been terminated in accordance with
its terms.
Section 8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SERVICEMASTER AND
MERGER SUBSIDIARY. The obligations of ServiceMaster and Merger Subsidiary to
consummate the Merger are subject to the satisfaction of the following
additional conditions: (i) the representations and warranties of LandCare as set
forth in this Agreement shall be true and correct in all material respects as if
made on and as of the Effective Time (other than those representations and
warranties which address matters only as of a certain date, which shall be true
and correct in all material respects as of such certain date), (ii) LandCare
shall have complied with or performed in all material respects all agreements
and covenants required to be complied with or performed by it under this
Agreement at or prior to the Closing Date, and (iii) ServiceMaster shall have
received from each person who is, immediately prior to the Effective Time, a
director or officer of LandCare or any of its Subsidiaries his written
resignation, effective as of the Effective Time, from each position as a
director of LandCare and each Subsidiary.
Section 8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF LANDCARE. The
obligations of LandCare to consummate the Merger are subject to the satisfaction
of the following additional condition: the representations and warranties of
ServiceMaster and Merger Subsidiary as set forth in this Agreement shall be true
and correct in all material respects as if made on and as of the Effective Time
(other than those representations and warranties which address matters only as
of a certain date, which shall be true and correct in all material respects as
of such certain date) and ServiceMaster and Merger Subsidiary shall have
complied with or performed in all material respects all agreements and covenants
required to be complied with or performed by it under this Agreement at or prior
to the Closing Date.
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ARTICLE 9
TERMINATION AND CLOSING
Section 9.1 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of LandCare):
(a) by mutual written consent of LandCare, ServiceMaster and Merger
Subsidiary;
(b) by either LandCare or ServiceMaster, if the Merger has not been
consummated by May 1, 1999; provided that no party may terminate this Agreement
pursuant to this subsection if such party's failure to fulfill any of its
obligations under this Agreement shall have been the primary and but-for reason
that the Effective Time shall not have occurred on or before said date and
provided further that in no event shall ServiceMaster's failure to permit an
adjustment in the Exchange Ratio under Section 1.2(b)(iii) preclude or impair
ServiceMaster's right to terminate under this clause (b);
(c) by either LandCare or ServiceMaster, if there shall be any
judgment, injunction, order or decree enjoining ServiceMaster or LandCare from
consummating the transactions contemplated by this Agreement is entered and such
judgment, injunction, order or decree shall have become final and nonappealable;
(d) by either LandCare or ServiceMaster, if this Agreement shall not
have been adopted by the stockholders of LandCare at the LandCare Stockholders
Meeting;
(e) by ServiceMaster or Merger Subsidiary, if the board of directors
of LandCare shall (i) withdraw, modify or change its recommendation or approval
in respect of this Agreement in a manner adverse to ServiceMaster or (ii) have
recommended any proposal other than by ServiceMaster or Merger Subsidiary in
respect of an Acquisition Transaction; and
(f) by ServiceMaster or Merger Subsidiary, if any corporation,
partnership, person, other entity or group (as defined in Section 13(d)(3) of
the Exchange Act) other than ServiceMaster or Merger Subsidiary or any of their
respective Subsidiaries or affiliates shall have become the beneficial owner of
more than 40% of the outstanding LandCare Common Stock (either on a primary or a
fully diluted basis).
(g) by ServiceMaster, if LandCare shall have breached (regardless of
the knowledge of ServiceMaster of such breach at or subsequent to the date of
this Agreement) in any material respect any of its representations, warranties,
covenants or agreements contained herein ;
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(h) by ServiceMaster if the Committee acting under the 1998
Long-Term Incentive Plan, LandCare's Board of Directors and all other necessary
persons shall not have taken all actions necessary to cause the conversions
prescribed by Section 1.4(a) to occur automatically upon consummation of the
Merger; or
(i) by LandCare, if a Qualified Competing Proposal is made to
LandCare, subject to the restrictions set forth in Section 5.4(c)(ii); provided
that the right to terminate described in this subsection shall not be effective
unless and until LandCare shall have paid to ServiceMaster the fee described in
Section 9.4(b); provided further that the right to terminate described in this
subsection shall immediately expire and be of no force or effect if LandCare's
stockholders approve the Merger; or
(j) by LandCare, if ServiceMaster or Merger Subsidiary shall have
breached (regardless of the knowledge of LandCare of such breach at or
subsequent to the date of this Agreement) in any material respect any of its
representations, warranties, covenants or agreements contained herein; or
(k) by LandCare if LandCare shall become entitled to terminate under
Section 1.2(b)(iii); or
(l) by ServiceMaster if the right to termination shall arise under
Section 5.6(e).
Such right of termination shall be exercised by written notice of termination
given by the terminating party to the other parties hereto in the manner
hereinafter provided. Any such right of termination shall not be an exclusive
remedy hereunder but shall be in addition to any other legal or equitable
remedies that may be available to any non-defaulting party hereto arising out of
any default hereunder by any other party hereto.
Section 9.2 WAIVER. At any time prior to the Effective Time, the parties
hereto, by action taken by or pursuant to resolutions of their respective boards
of directors, may (a) extend the time for the performance of any of the
obligations or other acts of the parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) except for adoption of this Agreement by the
stockholders of LandCare waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
Section 9.3 CLOSING. Subject to the satisfaction of the conditions
contained in Article 8 hereof, the closing of the Merger (the "CLOSING") shall
take place at the offices of Kirkland & Ellis in Chicago, Illinois as soon as
practicable after the satisfaction or waiver of all of the conditions to
MA111ECA.WPD - 47 -
<PAGE>
the Merger or at such other time and place as LandCare, ServiceMaster, and
Merger Subsidiary shall agree (the "CLOSING DATE").
Section 9.4 EFFECT OF TERMINATION; TERMINATION FEE.
(a) If this Agreement is terminated pursuant to Section 9.1 hereof,
this Agreement shall become void and of no effect with no liability on the part
of any party hereto, except that the agreements contained in Sections 9.4(b),
9.4(c) and 10.4 hereof shall survive the termination hereof and except that no
such termination shall relieve any party from liability for breach of this
Agreement or failure by it to perform its obligations hereunder.
(b) If this Agreement shall be terminated pursuant to clause (d),
(e), (f), (g), (h), or (i) in Section 9.1, then LandCare shall promptly, but in
no event later than two business days after the date of such termination, pay
ServiceMaster a termination fee equal to the sum of (i) $7,577,045 plus (ii)
$0.44 multiplied by the aggregate number of shares of LandCare Common Stock
(other than any shares of LandCare Common Stock issued upon the exercise of
LandCare Stock Options) issued subsequent to the date hereof and on or prior to
the date of termination of this Agreement pursuant to Section 9.1. In no event
shall LandCare be required to pay more than one termination fee pursuant to this
Section 9.4(b).
(c) If this Agreement shall be terminated by ServiceMaster pursuant
to its termination rights in Section 5.6(e), then LandCare shall promptly, but
in no event later than two business days after the date of such termination, pay
ServiceMaster an amount, not to exceed $1,000,000, equal to the actual and
reasonably documented out-of-pocket expenses incurred by ServiceMaster directly
attributable to the proposed acquisition of LandCare and incurred since October
15, 1998, including negotiation and execution of this Agreement and the
attempted completion of the Merger, which fee and amount shall be payable in
cash in same day funds.
MA111ECA.WPD - 48 -
<PAGE>
ARTICLE 10
MISCELLANEOUS
Section 10.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile, telex or similar
writing) and shall be given,
If to ServiceMaster or Merger Subsidiary, to:
One ServiceMaster Way
Downers Grove, IL 60515
Attention: General Counsel
Facsimile: (630) 271-5870
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Robert H. Kinderman
Facsimile: (312) 861-2200
If to LandCare, to:
2603 Augusta
Suite 1300
Houston, TX 77057
Attention: General Counsel
Facsimile: (713) 965-0343
with a copy to:
Bracewell & Patterson L.L.P.
South Tower Pennzoil Place
711 Louisiana Street
Houston, TX 77002
Attention: Thomas Adkins
Facsimile: (713) 221-1212
or such other address, telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be
MA111ECA.WPD - 49 -
<PAGE>
effective (a) if given by facsimile or telex, upon confirmation of receipt, or
(b) if given by any other means, when delivered at the address specified in this
Section 10.1.
Section 10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein shall not survive the Effective
Time.
Section 10.3 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior
to the Effective Time if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by LandCare, ServiceMaster and Merger
Subsidiary or in the case of a waiver, by the party against whom the waiver is
to be effective; provided that after the adoption of this Agreement by the
stockholders of LandCare, no such amendment or waiver shall, without the further
approval of such stockholders, alter or change the amount or kind of
consideration to be received in exchange for the Shares (except as contemplated
by Section 1.02(b)).
(b) 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.
Section 10.4 EXPENSES. Except as provided in Section 9.4 hereof, each
party shall pay its own costs and expenses relating to this Agreement and the
transactions contemplated hereby, except that each of ServiceMaster and LandCare
shall bear and pay one-half of the costs and expenses incurred in connection
with the filing, printing and mailing of the Registration Statement and the
LandCare Proxy Statement (including SEC filing fees).
Section 10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 10.6 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 10.7 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts (including by means of telecopied signature pages),
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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<PAGE>
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 10.8 HEADINGS. Section headings used in this Agreement are for
convenience only and shall be ignored in the construction and interpretation
hereof.
Section 10.9 NO THIRD PARTY BENEFICIARIES. Except for Section 6.2 hereof,
no provision of this Agreement is intended to, or shall, confer any third party
beneficiary or other rights or remedies upon any person other than the parties
hereto.
* * * * *
MA111ECA.WPD - 51 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE SERVICEMASTER COMPANY
By: _________________________________
Name: Phillip B. Rooney
Title: Vice Chairman
SVM ACQUISITION CORPORATION
By: _________________________________
Name: Phillip B. Rooney
Title: Vice President
LANDCARE USA, INC.
By: _________________________________
Name: William F. Murdy
Title: Chief Executive Officer
MA111ECA.WPD - 52 -
EXHIBIT 4.2
FORM
[NOTE NUMBER]
LANDCARE USA, INC.
____ % Convertible Subordinated Note due [insert Maturity Date]
$[ ________________ ]
[insert Issuance Date]
_______________________
THE SECURITIES REPRESENTED HEREBY WERE ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED
HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAW OR, IN THE OPINION OF COUNSEL TO THE ISSUER, IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
THIS NOTE IS SUBORDINATED TO THE SENIOR DEBT (AS DEFINED HEREIN) IN FAVOR
OF THE HOLDERS OF THE SENIOR DEBT IN THE MANNER AND TO THE EXTENT SET
FORTH HEREIN.
_______________________
LandCARE USA, Inc., a Delaware corporation (the "COMPANY"), for value
received, hereby promises to pay to the order of [insert name of Noteholder]
("NOTEHOLDER") the aggregate principal amount of [_________________________]
Dollars ($ ________) in one installment on [insert date of end of first calendar
quarter immediately following fourth anniversary of Issuance Date] (the
"Maturity Date") and to pay interest from the date hereof, quarterly on March
31, June 30, September 30 and December 31 of each year commencing on [insert
date of end first full calendar quarter after Issuance Date], on the unpaid
principal amount of this Note at a rate per annum of ____[insert current AFR
rounded up to nearest tenth] percent (__%) until payment of such unpaid
principal amount has been made. Payments of principal and interest shall be made
by wire transfer of funds to such bank account in the United States of America
as shall be designated in writing to the Company by the Noteholder. Interest on
this Note shall be calculated on the basis of a 360-day year of twelve 30-day
months.
<PAGE>
1. DEFINITIONS; CERTAIN RULES OF CONSTRUCTION. Except as otherwise explicitly
specified to the contrary, (a) "Section" and "Exhibits" refer to sections of
this Note, (b) references to a particular Section include all subsections
thereof, and (c) references to a particular statute or regulation include all
rules and regulations thereunder and any successor statute, regulation or rules,
in each case as from time to time in effect. The terms defined above shall have
the meanings set forth above and the following terms shall have the following
meanings:
1.1. "BANKRUPTCY CODE" means Title 11 of the United States Code.
1.2. "BOARD OF DIRECTORS" means the Board of Directors of the Company or
any committee of the Board of Directors of the Company authorized to exercise
the powers and authority of the Board of Directors of the Company with respect
to any action taken by such committee.
1.3. "BUSINESS DAY" means any day except a Saturday, a Sunday or a day on
which banking institutions in Houston, Texas are authorized or required by law
to close.
1.4. "COMMON STOCK" means, except as provided in Section 3.10, any stock of
any class of the Company which (a) has no preference in respect of dividends or
in respect of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and (b) is not, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or on the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 366 days after the final maturity of all Senior Debt.
1.5. "CONVERSION PRICE" means $____________[insert the amount the greater
of $10.00 or 1.5 times the average closing price for 5 consecutive Trading Days
beginning on the 7th Trading Day prior to the Issuance Date] per share of Common
Stock, as such Conversion Price shall be adjusted from time to time as
hereinafter provided.
1.6. "CURRENT MARKET PRICE" means, with respect to any share of Common
Stock on any day, the average of the last reported sale prices for the ten (10)
consecutive Trading Days next preceding the day in question. The last reported
sale price for each day shall be (i) the last sale price, or the closing bid
price if no sale occurred, of such class of stock on the New York Stock Exchange
(as reported in THE WALL STREET JOURNAL) or, if not listed on the New York Stock
Exchange, such other principal securities exchange on which such class of stock
is listed, or (ii) the last reported sale price of Common Stock on the National
Market of the National Association of Securities Dealers, Inc., Automated
Quotation System, or any similar system of automated dissemination of quotations
of securities prices then in common use, if so quoted, or (iii) if not quoted as
described in
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<PAGE>
clause (ii) above, the mean between the high bid and low asked quotations for
Common Stock as reported by the National Quotation Bureau Incorporated if at
least two securities dealers have inserted both bid and asked quotations for
such class of stock on at least 5 of the 10 preceding Trading Days. If the
Common Stock is quoted on a national securities or central market system, in
lieu of a market or quotation system described above, the closing price shall be
determined in the manner set forth in clause (ii) of the preceding sentence if
bid and asked quotations are reported but actual transactions are not, and in
the manner set forth in clause (iii) of the preceding sentence if actual
transactions are reported. If none of the conditions set forth above is met, the
closing price of Common Stock on any day or the average of such closing prices
for any period shall be the fair market value of such class of stock as
determined in good faith in the exercise of their reasonable business judgment
by the Board of Directors of the Company.
1.7. "CONVERSION TRIGGER DATE" means [insert date that is 18 months after
the Issuance Date].
1.8. "DEFAULT NOTICE" is defined in Section 5.1(c).
1.9. "DETERMINATION DATE" is defined in Section 3.3(b).
1.10. "EVENT OF DEFAULT" is defined in Section 5.1.
1.11. "ISSUANCE DATE" means the date this Note was issued to the
Noteholder as set forth on the first page of this Note.
1.12. "NOTE" means this Convertible Subordinated Note.
1.13. "NON-ELECTING SHARE" is defined in Section 3.5(a).
1.14. "PERMITTED ASSIGNS" means (a) for any Noteholder which is a
corporation, partnership or limited liability company, the stockholders,
partners or members, respectively, of such corporation, partnership or limited
liability company on the date hereof or (b) for any Noteholder who is an
individual, the heirs or assigns of such individual pursuant to the laws of
descent and distribution on the death of such individual.
1.15. "PERSON" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
1.16. REDEMPTION TRIGGER DATE" means any date on or after the date on
which the Current Market Price exceeds $__________[insert amount equal to1.2
times the Conversion Price] per share for ten (10) consecutive Trading Days
after [insert date which is 18 months after the Issuance Date].
1.17. SENIOR DEBT" shall mean (a) (i) the outstanding principal balance of
all loans made under and pursuant to the Credit Agreement dated as of June 9,
1998 among the Company, the lenders party thereto, and The First National Bank
of Chicago, as contractual representative for such lenders, together with all
interest and fees in respect thereof, including, without limitation, all
"OBLIGATIONS" as defined in the above-referenced Credit Agreement, as such
agreement may be further amended, renewed, extended increased, substituted,
refinanced, restructured, replaced, supplemented or otherwise modified from time
to time (the "CREDIT AGREEMENT"; the lenders
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<PAGE>
thereunder being referred to herein as the "Senior Lenders" and the agent
thereunder being referred to herein as the "AGENT") and (ii) all other
obligations, liabilities, and indebtedness, including, without limitation
reimbursement obligations under letters of credit issued pursuant to the Credit
Agreement, obligations with respect to acceptances issued pursuant to the Credit
Agreement and obligations under interest rate or foreign currency hedging, swap,
cap, collar or similar agreements of Company to any Senior Lender (or any
affiliate thereof); and (b) all principal, interest and other amounts under any
other indebtedness of the Company now or hereafter outstanding unless, in the
case of any particular indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
indebtedness shall not be senior in right of payment to the Subordinated Debt,
in each case whether now existing or hereafter arising (and whether such
indebtedness arises or accrues before or after the commencement of any
bankruptcy, insolvency or receivership proceedings) directly between Company and
the Agent, any Senior Lender or any other person, or acquired outright,
conditionally or as collateral security from another by the Agent, any Senior
Lender or such other person, including, without limitation, interest and fees
accruing pre-petition or post-petition at the rate or rates prescribed in the
Credit Agreement or other applicable agreement and costs, expenses, and
attorneys' and paralegals' fees, whenever incurred (and whether or not such
claims, interest, costs, expenses or fees are allowed or allowable in any such
proceeding). Senior Debt shall be considered to be outstanding whenever any
Senior Lender has an outstanding commitment therefor.
1.18. "SENIOR LENDERS" shall mean each of the financial institutions from
time to time party to the Credit Agreement and each other holder of the Senior
Debt.
1.19. "SUBORDINATED DEBT" shall mean (a) all principal of, and premium, if
any, and interest on, the Note and (b) all other indebtedness, fees, expenses,
obligations and liabilities of the Company (or any other person, firm,
partnership or corporation for the benefit of Company) to any Noteholders,
whether now existing or hereafter incurred or created, under or with respect to
the Note, in each case, whether such amounts are due or not due, direct or
indirect, absolute or contingent.
1.20. "TRADING DAY" means, with respect to the Common Stock (i) if the
Common Stock is listed or admitted for trading on the New York Stock Exchange or
any other principal securities exchange, days on which such principal securities
exchange is open for business, or (ii) if the Common Stock is quoted on the
National Market of the National Association of Securities Dealers, Inc.,
Automated Quotation System or any similar system of automated dissemination of
quotations of securities prices, days on which trades may be made on such
system.
2. REDEMPTION OF NOTE.
2.1. REDEMPTION PRICE. Subject to the provisions of Section 6, the Company
may, at its option, redeem all or from time to time any part of this Note on any
date on or after the Redemption Trigger Date and prior to maturity, on notice as
set forth in Section 2.2 and on payment of the principal amount to be redeemed,
together with accrued interest on the principal amount to be redeemed to the
date fixed for redemption.
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<PAGE>
2.2. NOTICE OF REDEMPTION.
(a) If the Company shall desire to exercise the right to redeem all
or any part of this Note pursuant to Section 2.1, the Company shall fix a
date for redemption and, at least 30 days prior to the date fixed for
redemption, shall mail a notice of such redemption to the Noteholder.
(b) Each such notice of redemption shall be given in the name of the
Company and shall specify (i) the date fixed for redemption, (ii) the
redemption price at which this Note is to be redeemed, (iii) the place of
payment, (iv) that payment will be made on presentation and surrender of
this Note, (v) that interest accrued to the date fixed for redemption will
be paid as specified in such notice of redemption, (vi) that on and after
the date fixed for redemption interest on this Note or the portion hereof
to be redeemed will cease to accrue and (vii) that the right to convert
this Note or any portion hereof into Common Stock will terminate at the
close of business on the second day prior to the date fixed for
redemption. If this Note is to be redeemed in part only, such notice of
redemption shall state the portion of the principal amount hereof to be
redeemed and shall state that on and after the date fixed for redemption,
on surrender of this Note, a new Note or Notes in aggregate principal
amount equal to the unredeemed portion of this Note will be issued without
charge to the Noteholder.
2.3. PAYMENT OF NOTE CALLED FOR REDEMPTION. If notice of redemption has
been given as provided in Section 2.2:
(a) this Note or the portion hereof called for redemption, shall
become due and payable on the date and at the place stated in such notice
of redemption at the applicable redemption price, together with interest
accrued to the date fixed for redemption;
(b) on and after the date fixed for redemption (unless the Company
shall default in the payment of the applicable redemption price, together
with interest accrued thereon to such date), interest on this Note or the
portion hereof called for redemption shall cease to accrue; and
(c) this Note or the portion hereof called for redemption shall be
deemed not to be outstanding and shall not be entitled to any benefit
under this Note, except for the right to receive payment of the applicable
redemption price, together with interest accrued thereon to the date fixed
for redemption.
On presentation and surrender of this Note at the place of payment specified in
such notice of redemption, this Note or the portion hereof called for redemption
shall be paid and redeemed by the Company at the applicable redemption price,
together with interest accrued thereon to the date fixed for redemption.
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<PAGE>
3. CONVERSION OF NOTE.
3.1 CONVERSION RIGHT AND CONVERSION PRICE.
(a) Subject to, and in compliance with, the provisions of this
Section 3, at any time after the Conversion Trigger Date and prior to
[insert date which is 2 weeks prior to Maturity Date], the Noteholder
shall have the right, at his option, to convert any portion of the
outstanding principal amount of this Note which is greater than or equal
to $25,000 or an integral multiple thereof into that number of fully-paid
and nonassessable shares (calculated as to such conversion to the nearest
1/100th of a share) of Common Stock obtained by dividing (i) the portion
of the outstanding principal amount surrendered for conversion by (ii) the
Conversion Price in effect at the time of conversion, on surrender of (A)
this Note, (B) a duly executed notice of conversion, which may be in the
form appearing as Exhibit A hereto or such other form as is satisfactory
to the Company (specifying, if less than the entire principal amount of
this Note is to be converted, the portion of the principal amount hereof
to be converted) and (C) a written instrument or instruments of transfer
in form satisfactory to the Company duly executed by the Noteholder or his
attorney duly authorized in writing, in each case at any time during usual
business hours at the office of the Company listed in Section 7.2;
PROVIDED, HOWEVER, that the Noteholder shall not exercise his right under
this Section 3.1 to convert this Note or any portion hereof into shares of
Common Stock more than three times in any 12-month period. For
convenience, the conversion of all or any portion of the principal of this
Note into Common Stock is hereafter sometimes referred to as the
conversion of this Note.
(b) Subject to, and on compliance with, the provisions of this
Section 3, if any portion of the principal amount of this Note shall have
been called for redemption prior to [insert date which is 2 weeks prior to
Maturity Date], then at any time before the close of business on the
second day before the applicable redemption date, but (unless the Company
shall default in the payment due on such redemption date) not after, the
Noteholder shall have the right, at his option, to convert any portion of
the outstanding principal amount which is greater than or equal to $25,000
or an integral multiple thereof into that number of fully-paid and
nonassessable shares (calculated as to such conversion to the nearest
1/100th of a share) of Common Stock obtained by dividing (i) the portion
of the principal amount of this Note surrendered for conversion by (ii)
the Conversion Price in effect at the time of conversion, on surrender of
(A) this Note, (B) a duly executed notice of conversion, which may be in
the form appearing as Exhibit A hereto or such other form as is
satisfactory to the Company (specifying, if less than the entire principal
amount of this Note is to be converted, the portion of the principal
amount hereof to be converted) and (C) a written instrument or instruments
of transfer in form satisfactory to the Company duly executed by the
Noteholder or his attorney duly authorized in writing, in each case at any
time during usual business hours at the office of the Company listed in
Section 7.2.
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<PAGE>
3.2 ISSUANCE OF COMMON STOCK ON CONVERSION.
(a) As promptly as practicable after the surrender of this Note for
conversion in accordance with the terms hereof, the Company shall deliver,
or cause to be delivered, at its office listed in Section 7.2 to or on the
written order of the Noteholder, certificates representing the number of
fully paid and nonassessable shares of Common Stock into which this Note
may be converted in accordance with this Section 3. Such conversion shall
be deemed to have been made at the close of business on the date that this
Note shall have been surrendered for conversion with a notice of
conversion and written instruments of transfer, in each case duly
executed, so that (i) subject to Section 3.2(b), the rights of the
Noteholder, including, but not limited to, the right to receive interest
(accrued and otherwise) thereon, shall cease at such time, (ii) each
Person entitled to receive shares of Common Stock on conversion of this
Note shall be treated for all purposes as having become the recordholder
of such shares of Common Stock at such time and (iii) such conversion
shall be at the Conversion Price in effect at such time. Any such
surrender on any date when the stock transfer books of the Company are
closed (A) shall be effective to constitute each Person entitled to
receive shares of Common Stock on such conversion as the recordholder of
such shares of Common Stock for all purposes at the close of business on
the next succeeding day on which such stock transfer books are open and
(B) shall be effective to convert this Note or the portion hereof to be
converted into shares of Common Stock at the Conversion Price in effect on
the date that this Note shall have been surrendered for conversion, as if
the stock transfer books of the Company had not been closed.
(b) On a partial conversion of this Note, the Company shall execute
and deliver to or on the order of the Noteholder, at the expense of the
Company, a new Note or Notes of authorized denominations in an aggregate
principal amount equal to the unconverted portion of this Note. The
payment of interest on the next succeeding interest payment date will be
calculated based only on the then remaining unconverted portion of this
Note.
(c) If the last day for the exercise of the right to convert this
Note or a portion hereof into shares of Common Stock is not a Business
Day, then the right to convert this Note or a portion hereof into shares
of Common Stock may be exercised on the next succeeding Business Day.
(d) No fractional shares of Common Stock shall be issued on
conversion of this Note or any portion hereof. Instead of any fractional
share of Common Stock which would otherwise be issuable on conversion of
this Note or any portion hereof, the Company shall pay a cash adjustment
in respect of such fraction in an amount equal to (i) such fraction
multiplied by (ii) the Current Market Price per share of Common Stock at
the close of business on the Business Day which next precedes the date of
conversion as determined in accordance with this Section 3.2.
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<PAGE>
3.3 ADJUSTMENTS OF CONVERSION PRICE. The Conversion Price in effect at any
time shall be subject to adjustment from time to time on or after the date
hereof as follows:
(a) If the Company (i) declares a dividend or makes a distribution
in respect of the Common Stock which is payable in Common Stock, (ii)
subdivides or reclassifies its outstanding shares of Common Stock into a
greater number of shares or (iii) combines its outstanding shares of
Common Stock into a smaller number of shares, then the Conversion Price in
effect at the time of the record date for such dividend or distribution or
the effective date of such subdivision, combination or reclassification
(A) shall be proportionately reduced in the case of any increase in the
number of shares of Common Stock outstanding and (B) shall be
proportionately increased in the case of any reduction in the number of
shares of Common Stock outstanding, in each case so that the Noteholder,
on surrender of this Note for conversion after such time, shall be
entitled to receive the kind and amount of shares of Common Stock which he
would have been entitled to receive had this Note been converted into
shares of Common Stock immediately prior to such time and had such shares
of Common Stock received such dividend or other distribution or
participated in such subdivision, combination or reclassification. Such
adjustment shall be effective as of the record date for such dividend or
distribution or the effective date of such combination, subdivision or
reclassification and shall be made successively whenever any event
described above shall occur. If, as a result of an adjustment made
pursuant to this Section 3.3(a), the Noteholder, on surrender of this Note
for conversion, shall become entitled to receive shares of two or more
classes of the capital stock of the Company, then the Board of Directors
(whose determination shall be described in a statement provided to the
Noteholder and shall, if made in good faith, be conclusive) shall in good
faith determine the allocation of the Conversion Price among the shares of
such classes of capital stock.
(b) If the Company issues rights or warrants to all holders of its
Common Stock entitling them (for a period expiring within 45 days of the
date fixed for the determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase shares of Common Stock at
a price per share less than the Current Market Price of the Common Stock,
then on the date fixed for the determination of stockholders entitled to
receive such rights or warrants (the "DETERMINATION DATE"), the Conversion
Price at the opening of business on the date following the Determination
Date shall be reduced by multiplying (i) the Conversion Price then in
effect by (ii) a fraction, of which:
(A) the numerator shall be the sum of (1) the number of shares
of Common Stock outstanding at the close of business on the
Determination Date plus (2) the number of shares of Common Stock
which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at the Current Market Price of the Common Stock, and
(B) the denominator shall be the sum of (1) the number of
shares of Common Stock outstanding at the close of business on the
Determination Date plus (2) the number of shares of Common Stock so
offered for subscription or purchase.
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Such reduction of the Conversion Price shall become effective immediately
after the opening of business on the day following the Determination Date.
For purposes of determining under this Section 3.3(b) the number of shares
of Common Stock outstanding at any time, there shall be excluded all
shares of Common Stock held in the treasury of the Company. If any or all
such rights or warrants are not so issued or expire or terminate before
being exercised, the Conversion Price then in effect shall be
appropriately readjusted, but such readjustment shall not be applied
retroactively to any conversion of this Note or any portion hereof
effected prior to such readjustment.
(c) All calculations under this Section 3.3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(d) No adjustment in the Conversion Price shall be required pursuant
to any provision of this Section 3.3 unless such adjustment (together with
prior adjustments which by reason of this Section 3.3(d) were not required
to be made at the time otherwise required by the provisions of this
Section 3.3) would require a change of at least one percent (1%) in such
Conversion Price; PROVIDED, HOWEVER, that any adjustments which by reason
of this Section 3.3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
3.4 CERTAIN NOTICES AND CALCULATIONS. Whenever the Conversion Price is
adjusted as provided in Section 3.3, the Company shall promptly deliver to the
Noteholder a certificate signed by an officer of the Company setting forth (a)
the Conversion Price after such adjustment, (b) a brief statement of the facts
requiring such adjustment, and (c) the computation of such adjustment, which
certificate shall be conclusive evidence of the correctness of any such
adjustment.
3.5 EFFECT OF CONSOLIDATION, MERGER, ETC.
(a) In the event of (i) any consolidation or merger of the Company
with and into any other corporation (other than a merger which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock), (ii) any sale or transfer of all or
substantially all of the assets of the Company, or (iii) the
reclassification of the Common Stock into another form of capital stock of
the Company, whether in whole or in part, the Noteholder shall have the
right thereafter to convert this Note into the kind and amount of shares
of stock and other securities and property or cash (including, if
applicable, Common Stock) which the Noteholder would have been entitled to
receive on such consolidation, merger, sale, transfer or reclassification
if he had held the Common Stock issuable on the conversion of this Note
immediately prior to such consolidation, merger, sale, transfer or
reclassification. Notwithstanding the foregoing, if the holders of Common
Stock in any such consolidation, merger, sale, transfer or
reclassification are afforded an election or are otherwise permitted or
required to exchange shares of Common Stock for two or more alternate
forms of consideration, then the Noteholder shall, after such
consolidation, merger, sale, transfer or reclassification, have the right
to convert this Note into the kind and amount
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of shares of stock and other securities and property or cash (including,
if applicable, Common Stock) into or for which the Common Stock issuable
on conversion of this Note would have been converted or exchanged as a
result of such consolidation, merger, sale, transfer or reclassification
if held by a holder of Common Stock who failed to exercise his rights of
election. If the kind and amount of shares of stock and other securities
and property or cash receivable on such consolidation, merger, sale,
transfer or reclassification is not the same for each share of Common
Stock in respect of which such rights of election shall not have been
exercised (each such share a "NON-ELECTING SHARE"), then for purposes of
this Section 3.5(a), the kind and amount of shares of stock and other
securities and property or cash receivable on such consolidation, merger,
sale, transfer or reclassification in respect of each Non-Electing Share
shall be deemed to be the kind and amount so receivable per share of
Common Stock by a plurality of the Non-Electing Shares).
(b) The provisions of this Section 3.5 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, transfers and
reclassifications.
3.6 RESERVES. The Company covenants that it will at all times reserve and
keep available, free from preemptive rights, as part of its authorized but
unissued Common Stock, solely for the purpose of issuance on conversion of this
Note as herein provided, such number of shares of Common Stock as shall then be
issuable on the conversion of this Note. The Company covenants that all shares
of Common Stock which shall be so issuable shall, on issuance, be duly and
validly issued, fully paid and non-assessable. The Company shall from time to
time, in accordance with applicable law, increase the authorized amount of
Common Stock if at any time the authorized amount of Common Stock remaining
unissued shall not be sufficient to permit the conversion of this Note and all
other Notes at the time outstanding.
3.7 CERTAIN COVENANTS.
(a) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then stated or par value of the
shares of Common Stock issuable on conversion of this Note, the Company
will take any corporate action which may, in the opinion of its counsel,
be necessary so that the Company may validly and legally issue fully-paid
and non-assessable shares of Common Stock at such adjusted Conversion
Price.
(b) The Company covenants that on redemption or conversion of any
portion of this Note, the Company shall issue to the holder hereof shares
of Common Stock which will be available for public resale under Rule 144
of the Securities Act. The Company further covenants that if any shares of
Common Stock required to be reserved for purposes of conversion of this
Note require registration with or approval of any governmental authority
under any federal or state law, or listing on any national securities
exchange, before such shares may be issued on conversion of this Note,
then the Company will in good faith and as expeditiously as possible
endeavor to cause such shares to be duly registered, approved or listed,
as the case may be.
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3.8 TAXES ON CONVERSION. The issuance of certificates representing shares
of Common Stock on the conversion of this Note shall be made without charge to
the Noteholder for any tax in respect of the issuance of such certificates, and
such certificates shall be issued in the name of, or in such names as may be
directed by, the Noteholder. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of the
Noteholder, and the Company shall not be required to issue or deliver any such
certificate unless or until the Noteholder or the Person to which such
certificate shall be issued shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid. The Company shall not be required to pay or reimburse the
Noteholder or the holder of any such certificate for any income tax payable by
the Noteholder or such holder as a result of such issuance.
3.9 CERTAIN NOTICES. If the Company:
(a) authorizes the distribution to all holders of Common Stock of
evidences of indebtedness or assets (other than cash dividends or other
cash distributions paid out of surplus);
(b) authorizes the granting to all holders of Common Stock of rights
or warrants to subscribe for or purchase any shares of capital stock of
any class or of any other rights;
(c) reclassifies any of its the capital stock (other than a
subdivision or combination of its outstanding shares of Common Stock);
(d) enters into a consolidation or merger for which approval of any
stockholders of the Company is required;
(e) sells, leases or transfers all or substantially all of its
property; or
(f) voluntarily or involuntarily dissolves, liquidates or winds
itself up;
then, in each case, the Company shall cause to be mailed to the holder hereof,
at least 20 days prior to the applicable record or effective date hereinafter
specified, a notice stating (i) the date on which a record is to be taken for
the purpose of such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which such reclassification, consolidation,
merger, sale, lease, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable on such
reclassification, consolidation, merger, sale, lease, transfer, dissolution,
liquidation or winding up.
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3.10 COMMON STOCK. Whenever reference is made in this Section 3 to the
issuance or sale of shares of Common Stock, the term "COMMON STOCK" shall
include only (a) shares of the class of the Company's capital stock designated
as Common Stock, $.01 par value, at the date hereof or (b) shares of any class
or classes resulting from any reclassification or reclassifications thereof
which (i) have no preference in respect of dividends or amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company and (ii) are not subject to redemption by the Company; PROVIDED,
HOWEVER, that if at any time there shall be more than one such class resulting
from reclassification, then the shares of each such class then so deliverable
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.
3.11 STANDSTILL. Notwithstanding the provisions of Section 3.1, during the
term of this Note the Company shall not be obligated to effect the conversion of
this Note or any portion hereof into shares of Common Stock for a period of 120
days after (i) the filing by the Company of a registration statement pertaining
to an underwritten public offering of securities of the Company or (ii) the
Company shall furnish to the Noteholder a certificate signed by an officer of
the Company stating that in the good faith judgment of the Board of Directors it
would not be in the best interests of the Company and its stockholders generally
to issue the shares of Common Stock issuable on conversion of this Note;
PROVIDED, HOWEVER, that the Company shall not use the right set forth in this
Section 3.11 more than once in any 12-month period.
4 IMMUNITY OF INCORPORATORS, DIRECTORS, OFFICERS AND STOCKHOLDERS. No recourse
(a) for the payment of the principal of or interest on this Note, (b) for any
claim based hereon or otherwise in respect hereof, (c) under or on any
obligation, covenant or agreement of the Company in this Note or in any
supplemental debenture or (d) because of the creation of any indebtedness
represented hereby, shall be had against any past, present or future
incorporator, director, officer or stockholder of the Company or any successor
corporation, as such, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Note.
5. REMEDIES IN EVENT OF DEFAULT.
5.1 EVENTS OF DEFAULT. The following events shall be "EVENTS OF DEFAULT"
for purposes of this Note:
(a) The Company shall fail to make any payment of any interest on
this Note as the same shall become due and payable (whether or not such
payment is prohibited by Section 6), and such failure shall continue for
30 days.
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(b) The Company shall fail to make any payment of the principal of
this Note as the same shall become due and payable, whether at maturity,
on redemption, by declaration or otherwise (whether or not such payment is
prohibited by Section 6).
(c) The Company shall fail to perform or observe any covenant or
agreement (other than any covenant or agreement the breach, or a default
in the performance, of which is specifically treated elsewhere in this
Section 5.1) to be performed or observed by it under this Note, and such
failure shall not be cured within 60 days after the date on which written
notice (each such notice a "DEFAULT NOTICE") (i) specifying such failure
and (ii) requiring the Company to remedy such failure, shall have been
given by the Noteholder to the Company.
(d) The Company shall have entered against it by a court of
competent jurisdiction (i) an order for relief with respect to the Company
under the Bankruptcy Code, (ii) a judgment, order or decree adjudging the
Company a bankrupt or insolvent or (iii) an order for relief for
reorganization, arrangement, adjustment or composition of or in respect of
the Company under the Bankruptcy Code or any applicable state insolvency
law, and, in the case of clauses (ii) and (iii), such judgment, order or
decree shall remain unstayed and in effect for a period of 90 consecutive
days.
(e) The Company (i) shall institute proceedings for entry of an
order for relief with respect to the Company under the Bankruptcy Code or
for an adjudication of insolvency; (ii) shall consent to the institution
of bankruptcy or insolvency proceedings against it; (iii) shall file a
petition seeking, or shall seek or consent to, reorganization,
arrangement, composition or relief under the Bankruptcy Code or any
applicable state law; (iv) shall consent to the filing of such petition or
to the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator or similar official (other than a custodian pursuant
to 8 Delaware Code ss.226 or any similaR statute under other state laws)
for the Company or substantially all of its property; or (v) shall make a
general assignment for the benefit of creditors as recognized under the
Bankruptcy Code.
(f) The Company shall fail to make any payment of principal of, or
interest on, any Senior Debt in excess of $5,000,000 when the same shall
become due and payable (after giving effect to any applicable grace
periods).
(g) Any Senior Debt in excess of $5,000,000 shall be declared to be
due and payable prior to the stated maturity thereof.
5.2 REMEDIES ON AN EVENT OF DEFAULT. If any one or more Events of Default
shall occur and be continuing, then and in each and every such case, unless the
principal of this Note shall have already become due and payable, the Noteholder
may, by notice in writing to the Company, declare the principal of this Note and
any accrued interest to the date of declaration to be due and payable
immediately, and on any such declaration by the Noteholder, such amounts shall
become immediately due and payable, subject to Section 6.
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5.3 REMEDIES CUMULATIVE AND CONTINUING. All powers and remedies given to
the Noteholder by this Section 5 shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any other powers or remedies available to
the Noteholder, whether hereunder or by judicial proceedings or otherwise, to
enforce the observance or performance of the covenants and agreements contained
in this Note. No delay or omission by the Noteholder to exercise any right or
power accruing on any Event of Default shall impair such right or power or shall
be construed to be a waiver of any Event of Default or an acquiescence therein.
Every power and remedy given to the Noteholder by this Section 5 or by law may
be exercised by the Noteholder from time to time and as often as the Noteholder
shall deem expedient.
5.4 WAIVER OF PRESENTMENT, DEMAND, ETC. Except as expressly provided
above, the Company waives presentment and demand for payment, protest, notice of
protest and nonpayment, notice of the intention to accelerate and notice of
acceleration.
6. SUBORDINATION. By acceptance of this Note, the holder hereof (together with
his successors and assigns, individually, a "NOTEHOLDER" and collectively, the
"NOTEHOLDERS") agrees to the following subordination terms:
6.1 STANDBY; SUBORDINATION; SUBROGATION. The payment and performance of
the Subordinated Debt is hereby subordinated to the Senior Debt and, except as
set forth in Sections 6.2 and 6.3 below, none of the Noteholders will
accelerate, ask, demand, sue for, take or receive from Company, by setoff or in
any other manner, payment of the whole or any part of the Subordinated Debt,
including, without limitation, the taking of any negotiable instruments
evidencing such amounts, nor any security for any of the Subordinated Debt,
unless and until all of the Senior Debt shall have been fully and indefeasibly
paid and satisfied in cash and all financing arrangements among Company, the
Agent and the Senior Lenders have been terminated. Each of the Noteholders also
hereby agrees that, regardless of whether the Senior Debt is secured or
unsecured, the Senior Lenders shall be subrogated for the Noteholders with
respect to the Noteholders' claims against Company and the Noteholders' rights,
liens and security interests, if any, in any of Company's assets or any other
assets securing the Senior Debt and the proceeds thereof until all of the Senior
Debt has been fully and indefeasibly paid and satisfied in cash and all
financing arrangements among Company, the Agent and the Senior Lenders have been
terminated.
6.2 PERMITTED PAYMENTS. Notwithstanding the provisions of Section 6.1 of
this Section 6, until the Agent or any other Senior Lender gives the Noteholders
written notice (in the manner set forth below) of the occurrence of a "DEFAULT"
or UNMATURED DEFAULT (as defined in the Credit Agreement) or any other default
with respect to the Senior Debt (any such Default or other default being
referred to herein as a "SENIOR DEFAULT"), and provided that (i) there shall not
then exist any breach of this Section 6 by any of the Noteholders which has not
been waived, in writing, by the Agent, and (ii) the payment described below, if
made, would not give rise to the occurrence of a Senior Default, the Company may
pay to the Noteholders, and the Noteholders may accept from the Company,
regularly scheduled payments of principal and interest, when due, on an
unaccelerated basis, and redemption of principal pursuant to the Note as entered
into as of the date of issuance thereof ("PERMITTED PAYMENTS"). It is further
expressly understood and agreed by the Noteholders
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that: (i) prepayments (whether optional or mandatory, by setoff or otherwise) of
principal with respect to the Subordinated Debt; (ii) any whole or partial
prepayments (whether optional or mandatory, by setoff or otherwise) of interest;
and (iii) any payments (whether optional or mandatory, by setoff or otherwise)
of interest at any rate greater than the initial per annum interest rate
specified in the Note shall not be Permitted Payments; PROVIDED, HOWEVER,
prepayments of principal and interest shall be Permitted Payments to the extent
one of the financial officers of the Company certifies in writing to the
Noteholder that the making of such payments is permitted under the terms of the
Credit Agreement. The Company shall use its reasonable efforts to provide a copy
of each such certification to the Agent.
6.3 ENFORCEMENT RIGHTS. During certain periods specified below (each an
"ENFORCEMENT BLOCKAGE PERIOD"), the Noteholders will not have any of the
following rights (an "ENFORCEMENT BLOCKAGE"): (i) to demand, sue for or take
from or on behalf of the Company, by set-off or in any other manner, any moneys
which may then or thereafter be owing by the Company on the Subordinated Debt,
(ii) to commence, or to join with any person in commencing, any suit, action or
proceeding against the Company (A) to enforce payment of or to collect all or
any portion of the Subordinated Debt or (B) to commence judicial enforcement of
any of the rights and remedies under the Note or any other documents or
instruments governing the Subordinated Debt or applicable law, (iii) to
accelerate the principal of or interest on or any other amount under the
Subordinated Debt, or (iv) to commence, or to join with any person in
commencing, against Company or any of its property a bankruptcy, reorganization,
insolvency, receivership or other similar proceeding (except that the
Noteholders may (1) accrue interest at the default rate, if any, specified in
the Note, (2) accelerate the Subordinated Debt after the Senior Obligations are
accelerated, and (3) sue for specific performance, but not for damages or other
sums of money, or obtain injunctive relief, in either case, in respect of the
covenants of the Subordinated Debt which do not require, directly or indirectly,
the payment by the Company of money, and give notices and file law suits to
prevent the running of the relevant statute of limitations, pursue rights in
bankruptcy, reorganization, insolvency, receivership, or other similar
proceedings, and otherwise protect legal rights). The Enforcement Blockage
Periods shall be as follows:
(a) if there shall exist a default in the payment of any amounts
owing under the Subordinated Debt (a "SUBORDINATED PAYMENT DEFAULT"), the
Enforcement Blockage shall remain in effect for an Enforcement Blockage
Period ending 180 days after the Agent and the Company receives written
notice from any Noteholder (or any designated representative thereof) of
the occurrence of the Subordinated Payment Default, unless extended as
provided in clause (b) below and
(b) if there shall exist any default with respect to the
Subordinated Debt other than a Subordinated Payment Default, the
Enforcement Blockage Period with respect thereto shall commence on the
date the Agent gives the Noteholder written notice that such period has
commenced and such Enforcement Blockage Period shall remain in effect
until such default is cured or waived or the Senior Obligations have been
finally and indefeasibly paid in full in cash or the Agent gives the
Noteholder written notice that such period has ended; PROVIDED, HOWEVER,
that all Enforcement Blockage Periods pursuant to this Section 6.3(b)
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shall terminate and no further such Enforcement Blockage Periods shall
commence on the expiration of any Enforcement Blockage Period which has
expired pursuant to Section 6.3(a) hereof.
6.4 LIENS; PERMITTED TRANSFERS; PERMITTED CHANGE OF CONTROL. Each of the
Noteholders hereby represents as of the date hereof that it has not been granted
or obtained any liens or security interests in any assets of the Company or any
of its affiliates. Each of the Noteholders agrees that it shall not take any
liens on or security interests in any assets of the Company or any of its
affiliates or any other assets (if any) securing the Senior Debt.
6.5 SENIOR LENDER PRIORITY. In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Company or any of its
affiliates or the proceeds thereof to the creditors of the Company to any of its
affiliates or readjustment of the obligations and Subordinated Debt of Company
or any of its affiliates, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any part of the Senior
Debt or the Subordinated Debt, or the application of the assets of Company or
any of its affiliates to the payment or liquidation thereof, or on the
dissolution or other winding up of Company's or any of its affiliate's business,
or on the sale of all or substantially all of Company's or any of its
affiliates' assets (an "INSOLVENCY OR LIQUIDATION PROCEEDING"), then, and in any
such event, (i) the Agent and the Senior Lenders shall be entitled to receive
indefeasible payment in full in cash of any and all of the Senior Debt prior to
the payment of all or any part of the Subordinated Debt, and (ii) any payment or
distribution of any kind or character, whether in cash, securities or other
property, which shall be payable or deliverable on or with respect to any or all
of the Subordinated Debt shall be paid or delivered directly to Agent for
application on any of the Senior Debt, due or not due, until the Senior Debt
shall have first been fully and indefeasibly paid and satisfied in cash.
6.6 GRANT OF AUTHORITY TO AGENT. In the event of the occurrence of any
Insolvency or Liquidation Proceeding, and in order to enable the Agent and the
Senior Lenders to enforce their rights hereunder in any of the aforesaid actions
or proceedings, Agent is hereby irrevocably authorized and empowered, in the
Agent's discretion, to file, make and present for and on behalf of the
Noteholders such proofs of claims against the Company on account of the
Subordinated Debt or other motions or pleadings as the Agent may deem expedient
or proper and to vote such proofs of claims in any such proceeding and to
receive and collect any and all dividends or other payments or disbursements
made thereon in whatever form the same may be paid or issued and to apply the
same on account of any portion of the Senior Debt. In voting such proofs of
claim in any proceeding, the Agent may act in a manner consistent with the sole
interest of the Senior Lenders, and the Agent shall have no duty to take any
action to optimize or maximize the Noteholders' recovery with respect to its
claim. The Noteholders each irrevocably authorizes and empowers the Agent to
demand, sue for, collect and receive each of the aforesaid payments and
distributions described in Section 6.5 above and give acquittance therefor and
to file claims and take such other actions, in the Agent's own name or in the
name of the Noteholders or otherwise, as the Agent may deem necessary or
advisable. To the extent that payments or distributions are made in property
other than cash, each of the Noteholders authorizes the Agent to sell such
property to such buyers and on such terms as the
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Agent, in the Agent's sole discretion, shall determine. Each of the Noteholders
will execute and deliver to the Agent such powers of attorney, assignments and
other instruments or documents, including notes and stock certificates (together
with such assignments or endorsements as the Agent shall deem necessary), as may
be requested by the Agent in order to enable the Agent and to enforce any and
all claims of the Agent and the Senior Lenders on or with respect to any or all
of the Subordinated Debt and to collect and receive any and all payments and
distributions which may be payable or deliverable at any time on or with respect
to the Subordinated Debt, all for the Agent's and the Senior Lenders' own
benefit. Following the indefeasible payment in full in cash of the Senior Debt,
the Agent will remit to the Noteholders, to the extent of the Noteholders'
respective interest therein, all dividends or other payments or distributions
paid to and held by the Agent in excess of the Senior Debt. Each of the powers
and authorizations granted to the Agent in this Section 6.6, being coupled with
an interest, is irrevocable.
6.7 PAYMENTS RECEIVED BY THE NOTEHOLDERS. Except for Permitted Payments
received by the Noteholders prior to the Agent's notification to the Noteholders
of a Senior Default as provided in Section 6.2 above, should any payment or
distribution or security or instrument or proceeds thereof be received by any
Noteholder on or with respect to the Subordinated Debt or any other obligations
of Company to any Noteholder prior to the indefeasible payment in full in cash
of all of the Senior Debt and termination of all financing arrangements among
Company, the Agent and the Senior Lenders, the Noteholders shall receive and
hold the same in a segregated account in trust, as trustee, for the benefit of
the Agent and the Senior Lenders, and shall forthwith deliver the same to the
Agent, in precisely the form received (except for the endorsement or assignment
of the Noteholders where necessary), for application on any of Senior Debt, due
or not due, and, until so delivered, the same shall be held in trust by such
Noteholder as the property of the Agent and the Senior Lenders. In the event of
the failure of any Noteholder to make any such endorsement or assignment to the
Agent, the Agent, or any of its officers or employees, is hereby irrevocably
authorized to make the same (which authorization, being coupled with an
interest, is irrevocable).
6.8 LEGEND ON NOTES; ASSIGNMENT OF CLAIMS. The Noteholders will cause all
Subordinated Debt to be evidenced by a note, debenture, instrument, or other
writing evidencing the Subordinated Debt and will inscribe a statement or legend
thereon to the effect that such note, debenture, instrument, or other writing is
subordinated to the Senior Debt in favor of the Senior Lenders in the manner and
to the extent set forth in this Note. None of the Noteholders shall assign or
otherwise transfer to any other person any interest in the Subordinated Debt
unless the Noteholder causes the assignee or other transferee to acknowledge to
the reasonable satisfaction of the Agent and the Senior Lenders the
subordination of the Subordinated Debt in accordance with this Note.
6.9 CONTINUING NATURE OF SUBORDINATION. The provisions of this Section 6
shall be effective and may not be terminated or otherwise revoked by any
Noteholder until the Senior Debt shall have been indefeasibly paid in full in
cash and satisfied and all financing arrangements among Company, the Agent and
the Senior Lenders have been terminated. Each Noteholder hereby waives to the
fullest extent permitted by applicable law any right it may have to terminate or
revoke this Section 6 or any of the provisions thereof. In the event the
Noteholders shall have any right under applicable law or otherwise to terminate
or revoke any of the provisions of this Section 6, which
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right cannot be waived, such termination or revocation shall not be effective
until written notice of such termination or revocation, signed by any such
Noteholder, is actually received by the Agent's officer responsible for such
matters. In the absence of the circumstances described in the immediately
preceding sentence, this is a continuing agreement of subordination and the
Agent and the Senior Lenders may continue, at any time and without notice to the
Noteholders, to extend credit or other financial accommodations and loan monies
to or for the benefit of Company and its affiliates on the faith hereof. Any
termination or revocation described hereinabove shall not affect this Section 6
in relation to (a) any of the Senior Debt which arose or was committed to prior
to receipt thereof, (b) any of the Senior Debt created after receipt thereof, if
such Senior Debt was incurred either through readvances by the Senior Lenders
pursuant to the Senior Lenders' financing arrangements with Company, including,
without limitation, advances or readvances, in an aggregate outstanding amount
not to exceed the sum of the "AGGREGATE COMMITMENT" (as defined in the Credit
Agreement as in effect on the date of receipt of any such notice), or (c) any of
the Senior Debt created after receipt thereof if such Senior Debt is disbursed
or advanced (including, without limitation, in connection with the provision of
any financing or other financial accommodations pursuant to Section 364 of the
Bankruptcy Code) by the Agent or the Senior Lenders or any one of them which the
Agent or any Senior Lender, in its good faith discretion, deems necessary or
desirable to preserve or protect any collateral for the Senior Debt or to
enhance the likelihood or maximize the amount of repayment of the Senior Debt,
including, but not limited to, all protective advances, costs, expenses, and
attorneys' and paralegals' fees, whensoever made, advanced or incurred by the
Agent or any Senior Lender in connection with the Senior Debt or the collateral
therefor. If, in reliance on this Section 6, any Senior Lender makes loans or
other advances to or for the benefit of Company or takes other action under the
Credit Agreement after such aforesaid termination or revocation by the
Noteholder but prior to the receipt by the Agent of said written notice as set
forth above, the rights of the Senior Lenders shall be the same as if such
termination or revocation had not occurred.
6.10 ADDITIONAL AGREEMENTS BETWEEN THE AGENT, THE SENIOR LENDERS AND
COMPANY. The Agent or any Senior Lender, at any time and from time to time,
either before or after any such aforesaid notice of termination or revocation,
may enter into such agreement or agreements with Company as the Agent or any
Senior Lender may deem proper, extending the time of payment of or renewing or
otherwise altering the terms, including, without limitation, increasing the
principal amount thereof, of all or any portion of the Senior Debt or affecting
any security underlying any or all of the Senior Debt, and may exchange, sell,
release, surrender or otherwise deal with any such security, without in any way
thereby impairing or affecting this Section 6. Without in any way limiting the
generality of the foregoing, the Senior Lenders, the Agent, and any of them,
may, at any time and from time to time, without the consent of, or notice to,
the Noteholders or any one of them, without incurring any liabilities to the
Noteholders and without impairing or releasing the subordination and other
benefits provided in this Section 6 (even if any right of subrogation or other
right or remedy of the Noteholders is affected, impaired or extinguished
thereby) do any one or more of the following:
(a) create Senior Debt by extending credit under the Credit
Agreement or otherwise, or change the manner, place or terms of payment or
change or extend the time of payment of, or renew, exchange, amend,
increase or alter, the terms of any of the Senior Debt
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<PAGE>
or any lien in any collateral or guaranty thereof or any liability of the
Company or any guarantor, or any liability incurred directly or indirectly
in respect thereof (including, without limitation, any extension of the
Senior Debt, without any restriction as to the tenor or terms of any such
extension), or otherwise amend, renew, exchange, extend, modify or
supplement in any manner the Senior Debt, the Credit Agreement or any of
the other documents, instruments or agreements executed in connection
therewith;
(b) sell, exchange, release, surrender, realize on, enforce or
otherwise deal with in any manner and in any order with any part of any
collateral or other property securing the Senior Debt or any liability of
the Company or any guarantor to such holder, or any liability incurred
directly or indirectly in respect thereof;
(c) settle or compromise any Senior Debt or any other liability of
the Company or any guarantor or any security therefor or any liability
incurred directly or indirectly in respect thereof and apply any sums by
whomsoever paid and however realized to any liability (including, without
limitation, the Senior Debt) in any manner or order;
(d) exercise or delay in or refrain from exercising any right or
remedy against the Company or any security or any guarantor or any other
person, elect any remedy and otherwise deal freely with the Company and
any collateral and any security and any guarantor or any liability of the
Company or any guarantor to such holder or any liability incurred directly
or indirectly in respect thereof; and
(e) release anyone, including the Company or any guarantor, liable
in any manner for the payment or collection of any Senior Debt.
The Senior Lenders and the Agent shall have no duty to the Noteholders with
respect to the preservation or maintenance of any collateral or the manner in
which Agent or the Senior Lenders enforce their rights in such collateral or to
preserve or maintain the rights of any person in any collateral, and the
Noteholders hereby waive any and all claims which the Noteholders may now or
hereafter have against the Agent and/or the Senior Lenders or any one of them
which relate to such preservation, maintenance or enforcement.
6.11 NOTEHOLDERS' WAIVERS. All of the Senior Debt shall be deemed to have
been made or incurred in reliance on this Section 6. The Noteholders expressly
waive all notice of the acceptance by the Agent or any Senior Lender of the
subordination and other provisions of this Section 6 and all other notices not
specifically required pursuant to the terms of this Section 6 whatsoever, and
the Noteholders expressly waive reliance by the Agent and the Senior Lenders on
the subordination and other agreements as herein provided. The Noteholders agree
that neither the Agent nor any Senior Lender has made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Credit Agreement, or the collectibility of
the Senior Debt, that the Agent and the Senior Lenders shall be entitled to
manage and supervise their loans to Company in accordance with applicable law
and their usual practices, modified from time to time as deemed appropriate
under the circumstances, without regard to the existence of any rights that any
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Noteholder may now or hereafter have in or to any of the assets of Company, and
that Agent and the Senior Lenders shall have no liability to the Noteholders
for, and waive any claim which the Noteholders may now or hereafter have
against, the Agent or any Senior Lender arising out of any and all actions which
the Agent or any Senior Lender, in good faith, takes or omits to take
(including, without limitation, actions with respect to the creation, perfection
or continuation of liens or security interests in the collateral and other
security for the Senior Debt, actions with respect to the occurrence of a
Default, actions with respect to the foreclosure on, sale, release, or
depreciation of, or failure to realize on, any collateral and actions with
respect to the collection of any claim for all or any part of the Senior Debt
from any account debtor, guarantor or any other party) with respect to the
Credit Agreement or any other agreement related thereto or to the collection of
the Senior Debt or the valuation, use, protection or release of any security for
the Senior Debt. In addition, each of the Noteholders agrees not to assert and
hereby waives, to the fullest extent permitted by law: any right to demand,
request, plead or otherwise assert or otherwise claim the benefit of, any
marshaling, appraisement, valuation or other similar right that may otherwise be
available under applicable law or any other similar rights a junior creditor may
have under applicable law.
6.12 INVALIDATED PAYMENTS. To the extent that the Senior Lenders receive
payments on, or proceeds of collateral for, the Senior Debt which are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
avoided and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause,
then, to the extent of such payment or proceeds received, the Senior Debt, or
part thereof, intended to be satisfied shall be revived and continue in full
force and effect as if such payments or proceeds had not been received by the
Senior Lenders.
6.13 AGENT'S AND SENIOR LENDERS' RIGHT TO ENFORCE; AGENT'S AND SENIOR
LENDERS' WAIVERS. The provisions contained in this Section 6 will be enforceable
against each of the Noteholders, by or on behalf of the Senior Lenders or any
one of them. No right of the Agent or the Senior Lenders or any of them to
enforce the subordination or other terms as provided in this Section 6 shall at
any time or in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act by any Senior Lender or
the Agent, or by any noncompliance by the Company with the terms, provisions and
covenants of this Section 6, or the Note, regardless of any knowledge thereof
which the Senior Lenders, or any of them, or the Agent may have or be otherwise
charged with. No waiver shall be deemed to be made by the Agent or any Senior
Lender of any of the Agent's or the Senior Lenders' rights hereunder, unless the
same shall be in writing signed on behalf of the Agent or the Senior Lenders, as
applicable, and each waiver, if any, shall be a waiver only with respect to the
specific instance involved and shall in no way impair the rights of the Agent or
any Senior Lender or the obligations of the Noteholders to the Agent and the
Senior Lenders in any other respect at any other time. The failure of the Agent
or any Senior Lender to enforce at any time any provision of this Section 6
shall not be construed to be a waiver of such provisions, nor in any way to
affect the validity of this Section 6 or any part hereof or the right of the
Agent or the Senior Lenders thereafter to enforce each and every such provision.
No waiver by the Agent and the Senior Lenders of any breach of this Section 6
shall be held to constitute a waiver of any other or subsequent breach.
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7. GENERAL.
7.1 SUCCESSORS AND ASSIGNS OF COMPANY. All the covenants, stipulations,
promises and agreements of the Company contained in this Note shall bind the
successors and assigns of the Company, whether so expressed or not.
7.2 NOTICES. Except as otherwise provided for herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served on the Company, or any
Noteholder, Agent or Senior Lender with respect to this Note, such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing (including, but not limited to, facsimile communication), and shall
either be delivered in person, telecopied, telegraphed, sent by reputable
overnight courier or mailed by first class mail, or registered or certified
mail, return receipt requested, postage prepaid or provided for, addressed as
follows:
(a) If to the Company:
LandCARE USA, Inc.
Three Riverway
Suite 630
Houston, Texas 77056
Attn: Law Department
(b) If to the Agent or any Senior Lender:
c/o The First National Bank of Chicago, as Agent
One First National Plaza
Chicago, Illinois 60670
Attn:
(c) If to any Noteholder:
_______________________________
_______________________________
_______________________________
Attn: _________________________
or to such other address as any party designates to the other parties in the
manner herein prescribed.
7.3 TEXAS CONTRACT. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF TEXAS, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
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7.4 LEGAL HOLIDAYS. In any case where the date of maturity of principal
of, or interest on, this Note or the date fixed for redemption of this Note
shall not be a Business Day, then payment of principal of, or interest on, this
Note need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Maturity Date or
the date fixed for redemption, and no interest shall accrue for the period after
such prior date.
7.5 SEVERABILITY. In the event that any provision of this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by a
duly authorized officer as of the date first above written.
LANDCARE USA, INC.
By_________________________________
William L. Fiedler
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
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EXHIBIT A
CONVERSION NOTICE
To LandCARE USA, Inc.:
The undersigned registered holder of this Note (the "NOTEHOLDER") hereby
irrevocably exercises the option to convert this Note, or the portion hereof
(which portion is $25,000 or greater) designated below, into shares of Common
Stock of LandCARE USA, Inc. (the "COMMON STOCK") in accordance with the terms of
this Note, and directs that the shares of Common Stock issuable and deliverable
on such conversion, together with a check in payment for any fractional shares
of Common Stock, be issued and delivered to the Noteholder, unless a different
name has been indicated below. Unless otherwise directed by the Noteholder, the
Company shall deliver to the Noteholder a new Note representing any unconverted
principal amount of this Note. If shares are to be issued in the name of a
person other than the Noteholder, this Note must be duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to LandCARE USA,
Inc. duly executed by, the Noteholder, and the Noteholder will pay all transfer
taxes payable with respect thereto.
Dated:_______________ ___________________________________
Signature of Noteholder
Principal amount to be converted if less than all: $_______________
If different from that of the Noteholder, print the name, address (including zip
code) and social security or other taxpayer identification number of the person
in whose name the Common Stock will be issued:
____________________________________
Name
____________________________________
Address (including zip code)
____________________________________
Social Security or other Taxpayer
Identification Number of Noteholder
-23-
EXHIBIT 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 3, 1998
by and among
LANDCARE USA, INC.,
DESERT CARE LANDSCAPING, INC.,
CONTINENTAL LANDSCAPE MANAGEMENT, INC.
and
Aaron Eubank
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation, By-laws, Directors and Officers
of Surviving Corporation........................................2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................3
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................4
2.1 Due Organization.................................................4
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................5
2.5 Financial Statements.............................................5
2.6 Liabilities and Obligations......................................5
2.7 Accounts and Notes Receivable....................................6
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................6
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........8
2.12 Real Property....................................................8
2.13 Insurance........................................................9
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans..........................................10
2.16 Conformity with Law; Litigation.................................11
2.17 Taxes...........................................................11
2.18 No Violations; All Required Consents Obtained...................13
2.19 Absence of Changes..............................................13
2.20 Powers of Attorney..............................................15
2.21 Competing Lines of Business; Related-party Transactions.........15
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2.22 Disclosure......................................................15
2.23 Certain Business Practices......................................15
2.24 Notice to Bargaining Agents.....................................16
2.25 Notices and Consents............................................16
2.26 Inventory; Working Capital; Other Financial Matters.............16
2.27 Reliance Upon Oral Representations..............................16
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 Due Organization................................................16
3.2 Authorization...................................................16
3.3 No Violations...................................................17
3.4 Validity of Obligations.........................................17
3.5 Reliance upon Oral Representations..............................17
4. DELIVERIES............................................................17
4.1 Instruments of Transfer.........................................17
4.2 Certificate of Merger...........................................17
4.3 Employment Agreement............................................17
4.4 Opinion of Counsel..............................................17
4.5 Good Standing Certificates......................................17
4.6 Lease...........................................................17
4.7 Indebtedness to Company.........................................18
4.8 Consents........................................................18
4.9 Resignations of Directors and Officers..........................18
4.10 Deliveries by LandCare..........................................18
4.11 Environmental Indemnity.........................................18
4.12 Agreement Regarding SBA Loan....................................18
5. POST-CLOSING COVENANTS................................................18
5.1 Future Cooperation; Further Assurances..........................19
5.2 Expenses........................................................19
5.3 Certain Agreements..............................................19
5.4 Preparation and Filing of Tax Returns...........................19
6. INDEMNIFICATION.......................................................20
6.1 Survival of Stockholder's Representations and Warranties. .....20
6.2 General Indemnification by the Stockholder......................21
6.3 Indemnification by LandCARE.....................................21
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6.4 Third Person Claims.............................................21
6.5 Method of Payment...............................................22
6.6 Limitations on Indemnification..................................22
6.7 Insurance.......................................................22
7. NONCOMPETITION........................................................22
7.1 Prohibited Activities...........................................22
7.2 Equitable Relief................................................23
7.3 Reasonable Restraint............................................23
7.4 Severability; Reformation.......................................24
7.5 Independent Covenant............................................24
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................24
8.1 General.........................................................24
8.2 Equitable Relief................................................25
8.3 Survival........................................................25
9 INTENDED TAX TREATMENT
.....................................................................25
9.1 Tax-Free Reorganization.........................................25
9.2 Restrictions on Resale..........................................26
10 SECURITIES LAW MATTERS................................................26
10.1 Economic Risk; Sophistication...................................26
10.2 Compliance with Law.............................................26
11. GENERAL...............................................................26
11.1 Successors and Assigns..........................................26
11.2 Entire Agreement................................................26
11.3 Counterparts....................................................27
11.4 Brokers and Agents..............................................27
11.5 Notices.........................................................27
11.6 Governing Law...................................................28
11.7 Survival of Representations and Warranties......................28
11.8 Exercise of Rights and Remedies.................................28
11.9 Time............................................................28
11.10 Reformation and Severability....................................28
11.11 Remedies Cumulative.............................................28
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11.12 Schedules & Captions............................................28
11.13 Press Releases and Public Announcements.........................28
11.14 No Third-Party Beneficiaries....................................29
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.6A. Tangible Net Worth Adjustments
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and
Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor
Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.17 Taxes
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.5. Leases
SCHEDULE 6.3. Guaranteed Indebtedness
SCHEDULE 9.2. Summary of Liquidity Plan
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 3, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), Desert Care Landscaping, Inc., an Arizona corporation
and wholly owned subsidiary of LandCARE ("Desert Care"), Continental Landscape
Management, Inc., an Arizona corporation (the "Company" or "CLM"), and Aaron
Eubank (the "Stockholder"). The Stockholder is the only holder of capital stock
of the Company.
WHEREAS, the respective Boards of Directors of Desert Care and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Desert Care pursuant to this
Agreement and the applicable provisions of the laws of the State of Arizona (the
"State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Desert Care (the "Merger") and the separate existence of the
Company shall cease, all in accordance with the provisions of the law of the
State of Incorporation. Desert Care shall be the surviving corporation in the
Merger and is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as articles of merger, in a form appropriate for filing, are
filed with the Arizona Corporation
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Commission (the "Merger Filing"). The Merger Filing shall be made simultaneously
with or as soon as practicable after the execution and delivery of this
Agreement.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Desert Care then in effect shall be the Articles of Incorporation of the
Surviving Corporation, and the By-laws of Desert Care then in effect shall be
By-laws of the Surviving Corporation. The directors and officers of Desert Care
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of Desert Care shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the Company shall be merged with and into Desert Care, and Desert
Care, as the Surviving Corporation, shall be fully vested therewith. At the
Effective Time, the separate existence of the Company shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public, as
well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
taxes, including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company and Desert Care shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Company and Desert Care; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the State of Incorporation vested in the Company and Desert Care, shall not
revert or be in any way impaired by reason of the Merger. Except as otherwise
provided herein, the Surviving Corporation shall thenceforth be responsible and
liable for all the liabilities and obligations of the Company and Desert Care
and any claim existing, or action or proceeding pending, by or against the
Company or Desert Care may be prosecuted as if the Merger had not taken place,
or the Surviving Corporation may be substituted in their place. Neither the
rights of creditors nor any liens upon the property of the Company or Desert
Care shall be impaired by the Merger, and all debts, liabilities and duties of
the Company and Desert Care shall attach to the Surviving Corporation, and may
be enforced against the Surviving Corporation to the same extent as if said
debts, liabilities and duties had been incurred or contracted by such Surviving
Corporation.
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1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Desert Care ("Desert Care Stock") shall be as follows:
As of the Effective Time:
1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive at Closing, in the aggregate, (i) 103,704 shares of common stock, par
value $.01 per share, of LandCARE ("LandCARE Stock") (such number being equal to
$962,500 divided by the average of the closing prices of LandCARE Stock on the
New York Stock Exchange for the ten consecutive business days beginning on the
fifteenth business day prior to the date hereof) and (ii) an aggregate of
$962,500 in cash (the "Cash Consideration"), less an aggregate of $167,157.22 to
be withhold by LandCare, with the balance of $795,342.78 being paid by wire
transfer.
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. As of the Effective Time, each outstanding share of Desert
Care Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholder, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholder certificates representing the
LandCARE Stock as described above. The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
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2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $ 1.00 per
share, of which 100 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholder and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which
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<PAGE>
obligates the Company to issue any additional shares of its capital stock or
obligates the Stockholder to transfer any of the Shares to any person except
pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of January 31, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of May 31, 1998 and the related statements of operations for the
four-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company and present fairly in all material respects the financial position
and results of operations of the Company as of the dates of such statements and
for the periods covered thereby. Said Financial Statements are in the form of
Accountants' Compilation Reports. The books of account of the Company have been
kept accurately in all material respects in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of
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the Company listed on SCHEDULE 2.6 are covered by the Company's insurance
policies, and no such liability will exceed the policy limits of such insurance
policies. SCHEDULE 2.6 contains a reasonable estimate of the maximum amount
which may be payable with respect to known liabilities which are not fixed. For
each such known liability for which the amount is not fixed, SCHEDULE 2.6
includes a summary description of each known liability, together with copies of
all relevant documentation relating thereto. The Company's total
interest-bearing debt as of the Closing Date, calculated using the
average-month-end balance for August 1997-July 1998 for the Company's line of
credit, does not exceed $210,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing accounts receivable
amounts due in 30-day aging categories. Except to the extent reflected on
SCHEDULE 2.7, all such accounts receivable were incurred in the ordinary course
of business and are collectible in the amounts shown on SCHEDULE 2.7, net of
reserves reflected in (a) the balance sheet as of the Balance Sheet Date and/or
(b) on Schedule 2.6.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list of all such licenses, franchises, permits and other
governmental authorizations. The Company holds no patents, patent applications
or copyrights. The software utilized by the Company is believed to be licensed
to it by various licensors. It is agreed that a list of all environmental
permits and other environmental approvals is set forth on SCHEDULE 2.9). The
governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid except as
otherwise stated in said Schedules, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the governmental authorizations listed on SCHEDULES 2.8 and 2.9 and is not,
to the best of Stockholder's knowledge, in violation of any of the foregoing.
Except as specifically set forth on SCHEDULE 2.8 or 2.9, the transactions
contemplated by this Agreement will not, to the best of Stockholder's knowledge,
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such governmental
authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating
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to air, water, land and the generation, storage, use, handling, transportation,
treatment or disposal of Hazardous Wastes, Hazardous Materials and Hazardous
Substances (including petroleum and petroleum products) (as such terms are
defined in any applicable Environmental Law) except to the extent that
noncompliance with any Environmental Laws, either singly or in the aggregate,
has not had and will not have a Material Adverse Effect on the Company or any of
its operations. The Company has obtained and adhered to all necessary permits
and other approvals necessary to treat, transport, store, dispose of and
otherwise handle Hazardous Wastes, Hazardous Materials and Hazardous Substances,
a list of all of which permits and approvals is set forth on SCHEDULE 2.9, and
have reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances which is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company or LandCARE for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with any release of any Hazardous Waste, Hazardous Material or Hazardous
Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. None of said assets is currently owned, or was
formerly owned, by the Stockholder or any affiliate of the Company or the
Stockholder. Except as set forth on SCHEDULE 2.10, (i) all material personal
property used by the Company in its business is either owned by the Company or
leased by the Company pursuant to a lease included on SCHEDULE 2.10, (ii) the
personal property listed on SCHEDULE 2.10 is generally in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on SCHEDULE 2.10 are (subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to creditors' rights; and the availability of equitable remedies,
including specific performance and injunctive relief, is subject to the
discretion of the court before which any
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proceeding therefor may be brought) in full force and effect and constitute
valid and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms. Except as set forth on SCHEDULE 2.10,
the Company has good and marketable title to the tangible and intangible
personal property it purports to own, subject to no security interest, pledge,
lien, claim, conditional sales agreement, encumbrance, charge or restriction on
transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). Except as described in Schedule 2.11,
true, complete and correct copies of such agreements have been delivered to
LandCARE. Except as described on SCHEDULE 2.11, (i) none of the Significant
Customers have canceled or substantially reduced or, to the knowledge of the
Company, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company, and
(ii) the Company has complied with all commitments and obligations pertaining to
it, and is not in default under any contracts or agreements listed on SCHEDULE
2.11 and no notice of default under any such contract or agreement has been
received. The transactions contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company by, any such contracts or agreements. There are
no plans or projects relating to the Company's business involving the opening of
new operations, expansion of existing operations, the acquisition of any
property, business or assets requiring, in any event, the payment of more than $
5,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right,
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title or interest in or to the Real Property or any portion thereof or any
interest therein; no party other than the Company occupies or possesses the Real
Property or any portion thereof; there is legal and adequate ingress and egress
between each tract of Real Property and an adjacent (or, if none, the closest)
public roadway; the Real Property is properly zoned in order to allow its
current use in the Company's businesses; and there are no claims or demands
pending or threatened by any party against the Real Property which, if valid,
would create in, or confer on, any party other than the Company, any right,
title or interest in or to the Real Property or any portion thereof. None of the
buildings, structures or improvements described on SCHEDULE 2.12, or the
operation or maintenance thereof as now operated or maintained, contravenes any
zoning ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholder has furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company. True, complete and
correct copies of all insurance policies currently in effect have been delivered
to LandCARE. Such insurance policies evidence all of the insurance that the
Company is required to carry pursuant to all of its contracts and other
agreements and pursuant to all applicable laws. Except as set forth on SCHEDULE
2.13, none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other non-Schedule 2.15
compensation, respectively) of each of such persons as of May 31, 1998. Except
as set forth on SCHEDULE 2.14, since May 31, 1998, there have been no increases
in the base compensation payable or any special bonuses to any officer,
director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
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2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto as of May 31, 1998. Except for
the employee benefit plans, if any, described on SCHEDULE 2.15, the Company does
not sponsor, maintain or contribute to any plan, program, fund or arrangement
that constitutes an "employee pension benefit plan," nor does the Company have
any obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions of employment of any of the Company's employees other than the plans
set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are, except as otherwise set forth on SCHEDULE 2.15, in
substantial compliance with their terms and all applicable provisions of ERISA
and the regulations issued thereunder, as well as with all other applicable
federal, state and local statutes, ordinances and regulations. All accrued
contribution obligations of the Company with respect to any plan listed on
SCHEDULE 2.15 have either been fulfilled in their entirety or are fully
reflected on the balance sheet of the Company as of the Balance Sheet Date. All
plans listed on SCHEDULE 2.15 that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), are, and have been, so qualified and have been determined by the
Internal Revenue Service to be so qualified. Except as disclosed on SCHEDULE
2.15, all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed or distributed, and the most recent copies thereof, if any, are included
as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed in
SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service
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or any liability to the PBGC. There have been no terminations, partial
terminations or discontinuance of contributions to any such Qualified Plan
intended to qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service; no plan listed on SCHEDULE 2.15
subject to the provisions of Title IV of ERISA has been terminated; there have
been no "reportable events" (as that phrase is defined in Section 4043 of ERISA)
with respect to any such plan listed on SCHEDULE 2.15; the Company has not
incurred liability under Section 4062 of ERISA; and no circumstances exist
pursuant to which the Company could have any direct or indirect liability
whatsoever (including, but not limited to, any liability to any multi employer
plan or the PBGC under Title IV of ERISA or to the Internal Revenue Service for
any excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any unresolved claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the best knowledge of the Stockholder, there is no basis therefor. Except as set
forth on SCHEDULE 2.16, there are no outstanding judgments, orders, writs,
injunctions or decrees against the Company. Except as set forth on SCHEDULE
2.16, the Company has conducted and now conducts its business in material
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets. The Company is not in material
violation of any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them. The Company has conducted
and is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
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any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
Except as set forth on SCHEDULE 2.17, all Tax returns ("Returns") required
to be filed with respect to any Tax for which any of the Company and the Company
Subsidiaries (if any) is liable have been duly and timely filed with the
appropriate Taxing Authority, each Tax shown to be payable on each such Return
has been paid, each Tax payable by the Company or a Company Subsidiary by
assessment has been timely paid in the amount assessed, and adequate reserves
have been established on the consolidated books of the Company and the Company
Subsidiaries for all Taxes for which any of the Company and the Company
subsidiaries is liable, but the payment of which is not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, liable for any Tax
payable by reason of the income or property of a person or entity other than the
Company or a Company Subsidiary. Each of the Company and the Company
Subsidiaries has timely filed true, correct and complete declarations of
estimated Tax in each jurisdiction in which any such declaration is required to
be filed by it. No Liens for Taxes exist upon the assets of the Company or any
Company Subsidiary except Liens for Taxes which are not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, subject to Tax in any
jurisdiction outside the United States. No litigation with respect to any Tax
for which the Company or any Company Subsidiary is asserted to be liable is
pending or, to the knowledge of the Company or the Stockholder, threatened, and
no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the
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Code or any comparable provision of any other Tax statute apply to any
disposition of an asset. The Company has not made, is not obligated to make and
is not a party to any agreement that could require it to make any payment that
is not deductible under Section 280G of the Code. Except as otherwise disclosed
to LandCARE, no accounting method changes of the Company or of any Company
Subsidiary exist or are proposed or threatened which could give rise to an
adjustment under Section 481 of the Code. The Company uses the cash method of
accounting for income tax purposes, and the Company's methods of accounting have
not changed in the past five years. The Company is not an investment company as
defined in Section 351(e)(1) of the Code. The Company has a taxable year ended
January 31. The Company is not party to any joint venture, partnership, or other
arrangement that is treated as a partnership for federal income tax purposes.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
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(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) since May 31, 1998, any increase or commitment to increase the
compensation, bonus, sales commissions or fee arrangement payable or to
become payable by the Company to any of its officers, directors,
stockholders, employees, consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of $
1,000.00 and in an aggregate amount not in excess of $ 5,000.00; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. No representation or warranty of the Stockholder
contained in this Agreement contains any untrue statement or omits to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. There is
no fact which has specific application to the Company or its business or assets
(other than general economic or industry conditions) which would have a Material
Adverse Effect or, so far as the Stockholder can reasonably foresee, threatens
to have a Material Adverse Effect, on the Company or its business or assets, or
the condition (financial or otherwise), results of operations or prospects of
the Company, which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
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2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. Except as set forth in Schedule 2.18, the
Company has given any notices to third parties and has obtained any third party
consents that may be necessary to consummate the transactions contemplated
hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof.
2.27 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently-retained attorneys, is fully satisfied with the
terms and effects of this Agreement; (d) that no promise or inducement has been
offered or made to him or it except as expressly stated in this Agreement; and
(e) that this Agreement is executed without reliance on any oral statement or
oral representation by any other party or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 RELIANCE UPON ORAL REPRESENTATIONS. This Agreement is executed without
reliance on any oral statement or oral representation by any other party or any
other party's agent or attorney. No promise or inducement has been made or
offered to LandCARE except as expressly stated in this Agreement.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities Articles of Merger
for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. Desert Care and Mr. Aaron Eubank are entering
into an Employment Agreement in the form of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 LEASE. The Stockholder, in his capacity as the lessor under the lease
of the property utilized by the Company, hereby consents to the Merger and
agrees that such lease shall be terminated effective upon the later of (a)
LandCARE having delivered, on behalf of the Stockholder,
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to the entit(ies) entitled thereto the portion of the cash funds otherwise
payable to, and withheld from, Stockholder at Closing that are necessary to pay
off the "Loan" described in Schedule 2.12 and (b) Desert Care having fully
vacated the premises that served as the principal collateral securing repayment
of said Loan.
4.7 INDEBTEDNESS TO COMPANY. The Stockholder is repaying any outstanding
indebtedness he has to the Company, said repayment to take the form of
LandCARE's withholding $90,557.22 at the Closing from the Cash Consideration and
then immediately remitting same, on behalf of the Stockholder, to the Company.
4.8 CONSENTS. The Stockholder is, subject to Schedule 2.18, delivering to
LandCARE copies of any third party consents required in connection with the
consummation of the transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.10 DELIVERIES BY LANDCARE. LandCare is delivering to the Stockholder the
Cash Consideration (less amounts being paid on behalf of the Stockholder as
described elsewhere herein) and stock certificates representing the shares of
LandCare Stock being issued to the Stockholder pursuant to this Agreement (or,
if such certificates are not available on the Closing Date, a copy of an
irrevocable letter to LandCare's stock transfer agent authorizing and directing
the issuance of such certificates to the Stockholder), which shares of LandCare
Stock are free and clear of all liens, restrictions and encumbrances except as
otherwise provided herein or as may be imposed by law.
4.11 ENVIRONMENTAL INDEMNITY. The Stockholder is delivering to LandCare an
Environmental Indemnification Agreement in form and substance reasonably
satisfactory to LandCare and the Stockholder.
4.12 AGREEMENT REGARDING SBA LOAN. The Stockholder and the Company are
executing and delivering an Agreement relating to the repayment of the
Stockholder's SBA loan.
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5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the Stockholder
reasonable access to the books and records of the Surviving Corporation after
the Closing Date for purposes of tax compliance and any other reasonable
purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger except to the
extent any such Transfer Tax is imposed solely as a result of the Closing being
deemed to have occurred, in part, in the State of Texas. The Stockholder shall
file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise,
but excluding any Transfer Taxes imposed by the State of Texas, as described
above), if any, due upon the Stockholder's receipt of the consideration payable
pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. Such
consent shall not be unreasonably delayed or withheld.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
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(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto; the representations and
warranties of the Stockholder made in Section 2.9 (Environmental Matters) of
this Agreement shall survive the Closing for a period of five years after the
Closing Date; and all other representations and warranties of the Stockholder
made in this Agreement shall survive the Closing for a period of one year
following the Closing Date; provided, however, that representations and
warranties and indemnification provisions with respect to which a claim is made
within the survival period shall survive until such claim is finally determined
and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
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6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement and/or any
instrument delivered by Stockholder as a part of the Closing.
6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until (a) the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement
and/or any instrument delivered by LandCARE as a part of the Closing and/or (b)
the Surviving Corporation's failure to timely perform any duty or obligation
identified on SCHEDULE 6.3 hereto (for which Stockholder has previously given
any third party a Guaranty, whether styled as such or as a co-lessee).
6.4 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act
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upon the Indemnified Party's request for consent to such settlement (which
request shall include a statement as to why expeditious settlement is desirable,
if such be the case) within five business days of the Indemnifying Party's
receipt of notice thereof from the Indemnified Party shall be deemed to
constitute consent by the Indemnifying Party of such settlement for purposes of
this Section.
6.5 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
6.6 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons
indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholder until such time as, the
aggregate of all uninsured potential Damages resulting from claims such persons
may have against the Stockholder shall exceed $50,000 (the "Indemnification
Threshold") and then only to the extent that such amounts exceed the
Indemnification Threshold. The Stockholder shall not assert any claim for
indemnification hereunder until such time as the aggregate of all claims the
Stockholder may have hereunder shall exceed the Indemnification Threshold, and
then only to the extent that such claims exceed the Indemnification Threshold.
The aggregate liability of the Stockholder hereunder shall not exceed
$1,000,000. The aggregate liability of LandCARE hereunder shall not exceed
$1,000,000.
6.7 INSURANCE. To the extent that, prior to the Merger, the Company has
paid premiums for insurance coverage that may give the Company a claim for
matters as to which the Stockholder may be obligated to provide indemnification
under this Agreement, (a) the Company agrees to use reasonable good faith
efforts and diligence to pursue any such claim it may have under any such
insurance policy or policies corresponding with such premiums, and (b) the
amount of each such insurance recovery (net of the related direct cost to the
Company of advancing the claim), if any, shall be applied toward satisfaction of
Stockholder's indemnity obligations hereunder. The parties acknowlege that the
Company shall have no such obligation with respect to insurance policies, if
any, implemented after the Closing Date.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or
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derive any benefit whatever from, any business offering services or
products in direct competition with the Surviving Corporation within 100
miles of where the Company conducted business at any time within one year
prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is known by the
Stockholder to be, at that time or within one year prior to the Closing
Date, a customer of LandCARE, the Company or any of LandCARE's
subsidiaries (including the Surviving Corporation) for the purpose of
soliciting or selling products or services in direct competition with
LandCARE or any of its subsidiaries (including the Company) within the
Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
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7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled
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to injunctive or other equitable relief restraining the Stockholder from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting LandCARE from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of two years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholder and LandCare will not take any actions that disqualify the
Merger for such treatment. The Stockholder represents, warrants and covenants
that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) immediately after the Merger, the Surviving Corporation will
hold "substantially all of its properties" within the meaning of Section
368(a)(2)(D) of the Code (that is, immediately after the Effective Time, the
Surviving Corporation will hold at least 90% of the fair market value of the net
assets, and at least 70% of the gross assets, held by the Company immediately
prior to the Effective Time). For purposes of the preceding sentence, amounts
paid by the Company to shareholders who receive cash or other property and the
Company assets used to pay reorganization expenses and all stock redemptions and
distributions (except for normal dividends) made by the Company immediately
preceding the Effective Time, pursuant to this Agreement or otherwise as part of
the plan of Merger provided for herein, will be considered assets of the Company
held immediately prior to the Effective Time.
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9.2 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. Beginning one year after the Closing Date, the Stockholder
shall be permitted to sell shares of such LandCARE Stock pursuant to the
LandCARE Liquidity Plan, a summary of which is attached hereto as SCHEDULE 9.2.
LandCare represents and warrants to the Stockholder that the LandCare Liquidity
Plan, as implemented, comports with all applicable securities laws.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of LandCARE Stock, (B) fully understands the nature, scope and
duration of any limitations on transfer of LandCARE Stock described in this
Agreement and (C) can bear the economic risk of an investment in the shares of
LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company, Desert Care and LandCARE, and supersede any
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prior or contemporaneous agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution, constitutes a valid
and binding agreement of the parties hereto, enforceable in accordance with its
terms, and may be modified or amended only by a written instrument executed by
the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Continental Landscape Management
Attn: Aaron C. Eubank, President
508 West Watkins
Phoenix, Arizona 85003
Facsimile No. (602) 252-3514
If to the Stockholder, addressed to him at the Company's address,
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or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Arizona without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.9 TIME. Time is of the essence with respect to this Agreement.
11.10 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.11 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.12 SCHEDULES & CAPTIONS. The headings of this Agreement are inserted
for convenience only, and shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof. Any liability or obligation
disclosed on any Schedule to this Agreement shall be deemed to have been
disclosed on all other Schedules to this Agreement requiring disclosure of such
liability or obligation.
11.13 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior
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written approval of the other party; provided, however, that LandCARE may issue
a press release in accordance with its customary practices without such approval
and any party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities.
11.14 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
DESERT CARE LANDSCAPING, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Secretary
CONTINENTAL LANDSCAPE MANAGEMENT, INC.
By: /s/ AARON CULBERTSON EUBANK
Name: AARON CULBERTSON EUBANK
Title: President
/s/ AARON EUBANK
Aaron Eubank
EXHIBIT 10.2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 4, 1998
by and among
LANDCARE USA, INC.,
LW ACQUISITION CORP.,
LANDSCAPE WEST, INC.
and
Barry Konier
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TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 THE MERGER.......................................................1
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1.2 EFFECTIVE TIME...................................................1
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1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION.........................................2
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1.4 EFFECT OF MERGER.................................................2
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1.5 MANNER OF CONVERSION.............................................3
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1.6 DELIVERY OF CERTIFICATES.........................................3
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1.7 CLOSING..........................................................3
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2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................4
2.1 DUE ORGANIZATION.................................................4
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2.2 AUTHORIZATION....................................................4
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2.3 CAPITAL STOCK OF THE COMPANY.....................................4
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2.4 SUBSIDIARIES.....................................................4
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2.5 FINANCIAL STATEMENTS.............................................5
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2.6 LIABILITIES AND OBLIGATIONS......................................5
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2.7 ACCOUNTS AND NOTES RECEIVABLE....................................6
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2.8 PERMITS AND INTANGIBLES..........................................6
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2.9 ENVIRONMENTAL MATTERS............................................6
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2.10 PERSONAL PROPERTY................................................7
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2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........8
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2.12 REAL PROPERTY....................................................8
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2.13 INSURANCE........................................................9
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2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....9
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2.15 EMPLOYEE BENEFIT PLANS...........................................9
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2.16 CONFORMITY WITH LAW; LITIGATION.................................11
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2.17 TAXES...........................................................11
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2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED...................13
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2.19 ABSENCE OF CHANGES..............................................13
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2.20 POWERS OF ATTORNEY..............................................15
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2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........15
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2.22 DISCLOSURE......................................................15
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2.23 CERTAIN BUSINESS PRACTICES......................................15
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2.24 NOTICE TO BARGAINING AGENTS.....................................15
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2.25 NOTICES AND CONSENTS............................................16
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2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS.............16
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2.27 YEAR 2000 COMPLIANCE............................................16
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2.28 RELIANCE UPON ORAL REPRESENTATIONS..............................16
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3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 DUE ORGANIZATION................................................16
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3.2 AUTHORIZATION...................................................16
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3.3 NO VIOLATIONS...................................................17
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3.4 VALIDITY OF OBLIGATIONS.........................................17
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3.5 PROSPECTUS......................................................17
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3.6 REGISTRATION....................................................17
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4. DELIVERIES............................................................17
4.1 INSTRUMENTS OF TRANSFER.........................................17
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4.2 CERTIFICATE OF MERGER...........................................17
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4.3 EMPLOYMENT AGREEMENT............................................17
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4.4 OPINION OF COUNSEL..............................................17
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4.5 GOOD STANDING CERTIFICATES......................................18
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4.6 LEASE...........................................................18
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4.7 INDEBTEDNESS TO COMPANY.........................................18
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4.8 CONSENTS........................................................18
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4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS..........................18
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4.10 CERTAIN INDEBTEDNESS............................................18
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4.11 INDEMNIFICATION AGREEMENT.......................................18
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5. POST-CLOSING COVENANTS................................................18
5.1 FUTURE COOPERATION; FURTHER ASSURANCES..........................18
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5.2 EXPENSES........................................................19
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5.3 CERTAIN AGREEMENTS..............................................19
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5.4 PREPARATION AND FILING OF TAX RETURNS...........................19
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5.5 ADDITIONAL AGREEMENTS...........................................20
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6. INDEMNIFICATION.......................................................20
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES. .....20
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6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER......................20
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6.3 INDEMNIFICATION BY LANDCARE.....................................21
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6.4 THIRD PERSON CLAIMS.............................................21
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6.5 METHOD OF PAYMENT...............................................21
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7. NONCOMPETITION........................................................21
7.1 PROHIBITED ACTIVITIES...........................................21
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7.2 EQUITABLE RELIEF................................................22
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7.3 REASONABLE RESTRAINT............................................22
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7.4 SEVERABILITY; REFORMATION.......................................22
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7.5 INDEPENDENT COVENANT............................................23
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 GENERAL.........................................................23
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8.2 EQUITABLE RELIEF................................................24
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8.3 SURVIVAL........................................................24
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9 INTENDED TAX TREATMENT................................................24
9.1 TAX-FREE REORGANIZATION.........................................24
9.2 RESTRICTIONS ON RESALE..........................................24
10 SECURITIES LAW MATTERS................................................25
10.1 ECONOMIC RISK; SOPHISTICATION...................................25
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10.2 COMPLIANCE WITH LAW.............................................25
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11. GENERAL...............................................................25
11.1 SUCCESSORS AND ASSIGNS..........................................25
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11.2 ENTIRE AGREEMENT................................................25
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11.3 COUNTERPARTS....................................................26
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11.4 BROKERS AND AGENTS..............................................26
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11.5 NOTICES.........................................................26
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11.6 GOVERNING LAW...................................................26
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11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................26
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11.8 EFFECT OF INVESTIGATION.........................................27
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11.9 EXERCISE OF RIGHTS AND REMEDIES.................................27
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11.10 TIME............................................................27
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11.11 REFORMATION AND SEVERABILITY....................................27
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11.12 REMEDIES CUMULATIVE.............................................27
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11.13 CAPTIONS........................................................27
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11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................27
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11.15 NO THIRD-PARTY BENEFICIARIES....................................28
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3 Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
SCHEDULE 4.10. Certain Indebtedness
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
Annex III - Form of Lease
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 4, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), LW Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of LandCARE ("Newco"), Landscape West, Inc., a
California corporation (the "Company"), and Barry Konier (the "Stockholder").
The Stockholder is the only holder of capital stock of the Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco pursuant to this
Agreement and the applicable provisions of the laws of the State of California
(the "State of Incorporation") and of the State of Delaware; and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Newco (the "Merger") and the separate existence of the Company
shall cease, all in accordance with the provisions of the laws of the State of
Incorporation and of the State of Delaware. Newco shall be the surviving
corporation in the Merger and is sometimes hereinafter called the "Surviving
Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in form appropriate for filing, is
filed with the Secretary of State (or other appropriate authority) of the State
of Delaware (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the execution and delivery
of this
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Agreement. A copy of the Merger Filing, together with such other documents as
may be necessary or appropriate, shall be filed with the appropriate authorities
of the State of California promptly, and in any case within six months, after
the Closing.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Newco then in effect shall be the Articles of Incorporation of the Surviving
Corporation, and the By-laws of Newco then in effect shall be By-laws of the
Surviving Corporation. As part of the Merger Filing, or at any time thereafter,
the Surviving Corporation shall have the right to change its name to "Landscape
West, Inc." The directors and officers of Newco immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation and the State of
California. Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities of
Newco shall continue unaffected and unimpaired by the Merger and the corporate
franchises, existence and rights of the Company shall be merged with and into
Newco, and Newco, as the Surviving Corporation, shall be fully vested therewith.
At the Effective Time, the separate existence of the Company shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public, as
well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
taxes, including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company and Newco shall be taken and deemed to be transferred to, and vested in,
the Surviving Corporation without further act or deed; and all property, rights
and privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation or
otherwise vested in the Company and Newco, shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the Company and Newco and any claim existing, or
action or proceeding pending, by or against the Company or Newco may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger, and
all debts, liabilities and duties of the Company and Newco shall attach to the
Surviving Corporation, and may be enforced against the Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
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1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Newco ("Newco Stock") shall be as follows:
As of the Effective Time:
1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive, in the aggregate, (i) 456,683 shares of common stock, par value $.01
per share, of LandCARE ("LandCARE Stock") (such number being equal to $4,250,000
divided by the average of the closing prices of LandCARE Stock on the New York
Stock Exchange for the ten consecutive business days beginning on the fifteenth
business day prior to the date hereof) and (ii) an aggregate of $4,125,000 (such
number being equal to $4,425,000 less $300,000 of Accumulated Adjustment Account
("AAA") distributions made by the Company to the Stockholder) in cash paid by
wire transfer.
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. As of the Effective Time, each outstanding share of Newco
Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholder or accompanied by a stock transfer
endorsement separate from certificate together with an Affidavit of Lost
Certificate and Indemnification Agreement satisfactory to LandCare, and with all
necessary transfer tax and other revenue stamps, acquired at the Stockholder's
expense, affixed and canceled, and (ii) LandCARE shall cause its stock transfer
agent to deliver to the Stockholder certificates representing the LandCARE Stock
as described above (or shall deliver to the Stockholder a copy of an irrevocable
authorization to such transfer agent authorizing the issuance of such
certificates to the Stockholder). The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
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2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all states in which the Company is authorized
or qualified to do business. True, complete and correct copies of the Articles
of Incorporation and By-laws, each as amended, of the Company (the "Charter
Documents") are all attached to SCHEDULE 2.1. All records of all proceedings of
the Board of Directors and stockholders of the Company have been made available
to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 750 shares of common stock, par value $ 100.00 per
share, of which 30 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholder and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholder to transfer any of the Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set
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forth in its Charter Documents. Except as set forth in SCHEDULE 2.4, the Company
does not own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or other business entity, and the
Company is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity. Prior to the Closing, the Company
distributed to the Stockholder for no additional consideration all shares of
Oakwood Insurance Co., LTD. held by the Company immediately prior to such
distribution.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of May 31, 1998 and the related statements of operations for the
five-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly in all material respects the financial position and
results of operations of the Company as of the dates of such statements and for
the periods covered thereby. The books of account of the Company have been kept
accurately in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on SCHEDULE 2.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any material claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on SCHEDULE 2.6, all of the contingent liabilities of the
Company listed on SCHEDULE 2.6 are covered by the Company's insurance policies,
and no such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for
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which the amount is not fixed, SCHEDULE 2.6 includes a summary description of
each known liability, together with copies of all relevant documentation
relating thereto. The Company's total debt as of the Closing Date does not
exceed $2,500,000. As of the Closing Date the Company's tangible net worth is at
least $1,500,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all material licenses,
franchises, permits and other governmental authorizations required or necessary
in connection with the conduct of the Company's business. SCHEDULE 2.8 sets
forth an accurate list and summary description of all such material licenses,
franchises, permits and other governmental authorizations, including permits,
titles (including licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) (collectively, the "Intangible Assets") (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
material compliance with the requirements, standards, criteria and conditions
set forth in the Intangible Assets and other governmental authorizations listed
on SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except
as specifically set forth on SCHEDULE 2.8 or 2.9 or in SECTION 2.18, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations. Any interest of the Company with respect to the trade name and
mark "Landscape West" may be limited to the extent provided by California law.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and
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petroleum products) (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Laws, either
singly or in the aggregate, has not had and will not have a Material Adverse
Effect on the Company or any of its operations. The Company has obtained and
adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes, Hazardous
Materials and Hazardous Substances, a list of all of which permits and approvals
is set forth on SCHEDULE 2.9, and have reported to the appropriate authorities,
to the extent required by all Environmental Laws, all past and present sites
owned and operated by the Company where Hazardous Wastes, Hazardous Materials or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled. There have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in, under or on any property owned or operated by
the Company except as permitted by Environmental Laws. There is no on-site or
off-site location to which the Company has transported or disposed of Hazardous
Wastes, Hazardous Materials or Hazardous Substances or arranged for the
transportation of Hazardous Wastes, Hazardous Materials or Hazardous Substances
which is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the Company or
LandCARE for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, as
amended, (iii) the Hazardous Materials Transportation Act, as amended, or (iv)
comparable state or local statutes and regulations. The Company has no
contingent liability in connection with any release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10 or as disclosed in the Financial Statements of the Company, the
Company has good and marketable title to the tangible and intangible personal
property it purports to own, subject to no security interest, pledge, lien,
claim, conditional sales agreement, encumbrance, charge or restriction on
transfer.
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2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied with all
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on SCHEDULE 2.11 and no notice of default under
any such contract or agreement has been received. Except as described on
SCHEDULE 2.11, the transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the Company by, any such contracts or agreements.
SCHEDULE 2.11 also includes a summary description of all plans or projects
relating to the Company's business involving the opening of new operations,
expansion of existing operations, the acquisition of any property, business or
assets requiring, in any event, the payment of more than $50,000 in the
aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the
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buildings, structures or improvements described on SCHEDULE 2.12, or the
operation or maintenance thereof as now operated or maintained, contravenes any
zoning ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholder has furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan,
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program, fund or arrangement that constitutes an "employee pension benefit
plan," nor does the Company have any obligation to contribute to or accrue or
pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), or any non-qualified
deferred compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan and is not required to
contribute to any retirement plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of the Company's employees other than the plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service
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for any excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
The Company has distributed to the Stockholder for no separate
consideration the Minnesota Mutual life insurance benefit plan and policy
insuring the life of the Stockholder, including the cash surrender value from
invested premiums.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any material unresolved claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the best knowledge of the Stockholder, there is no basis therefor. Except as set
forth on SCHEDULE 2.16, there are no outstanding judgments, orders, writs,
injunctions or decrees against the Company. Except as set forth on SCHEDULE
2.16, the Company has conducted and now conducts its business in material
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets. The Company is not in violation of any
material law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them. The Company has conducted
and is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
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All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. Except as
disclosed to LandCare, no accounting method changes of the Company or of any
Company Subsidiary exist or are proposed or threatened which could give rise to
an adjustment under Section 481 of the Code. The Company uses the accrual method
of accounting for income tax purposes, and the Company's methods of accounting
have not changed in the past five years. The Company is not
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an investment company as defined in Section 351(e)(1) of the Code. The Company
has a taxable year ended December 31 and has not made an election to retain a
fiscal year other than December 31 under Code Section 444. The Company is not a
party to any joint venture, partnership, or other arrangement that is treated as
a partnership for federal income tax purposes
The Stockholder made a valid election under the provisions of Subchapter S
of the Code, and the Company has not, since its formation, been subject to
taxation under the provisions of Subchapter C of the Code or under Section 11 or
Section 1374 of the Code. Neither the Stockholder nor the Company has taken any
action that terminated the Subchapter S election, which remains in effect on the
date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
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(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company
(except for distributions in an amount equal to the income taxes payable
by the Stockholder based solely on the Company's S corporation earnings
during the period from the Balance Sheet Date to the date hereof and
except for AAA distributions of which the Stockholder has provided notice
to LandCARE);
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. There is no fact known to the Stockholder on
the date hereof which has specific application to the Company or its business or
assets (other than general economic or industry conditions) which would have a
Material Adverse Effect on the Company or its business or assets, or the
condition (financial or otherwise), results of operations or prospects of the
Company, which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
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2.25 NOTICES AND CONSENTS. Except as set forth on SCHEDULE 2.11 or
SCHEDULE 2.18, the Company has given any notices to third parties and has
obtained any third party consents that may be necessary to consummate the
transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels (including financing in the ordinary course
of business) are adequate to successfully operate the business, and there has
been no unusual build-up of cash needs at the date hereof.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has
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the full legal right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 PROSPECTUS. LandCare's Prospectus dated July 14, 1998, a copy of which
have been delivered to the Stockholder, does not contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, and may be relied upon by the Stockholder in connection
with the transactions contemplated by this Agreement.
3.6 REGISTRATION. The offer and sale of the shares of LandCare Stock being
issued to the Stockholder pursuant to this Agreement have been duly registered
under the Securities Act of 1933, as amended, and except as provided in Section
9.2 of this Agreement or as otherwise provided by law, the subsequent reoffer
and resale of such shares is not restricted.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities certificates of
merger or similar documents for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. The Surviving Corporation and the persons
identified in SCHEDULE 4.3 are entering into Employment Agreements in the form
of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
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4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 LEASE. The Surviving Corporation is entering into leases of the
properties identified on SCHEDULE 4.5 in the form attached hereto as Annex III,
and the Stockholder is delivering to LandCARE evidence of the termination of all
leases relating to such properties. The Company is delivering to LandCare
consents to the Merger of the lessors of the other properties leased by the
Company.
4.7 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.8 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.10 CERTAIN INDEBTEDNESS. LandCare or the Surviving Corporation is
refinancing or agreeing to refinance promptly after the Closing the Company debt
listed on SCHEDULE 4.10 and is agreeing to secure full and unconditional
releases of the Stockholder from his personal guaranties of the Company debts
identified on SCHEDULE 4.10 as being guaranteed by the Stockholder. Such debts
are being refinanced or paid and such releases of such guaranties are being
secured concurrently with the Closing to the extent practicable, and to the
extent not paid or secured concurrently with the Closing, shall be refinanced,
paid or secured, as appropriate, promptly after the Closing, and within two
weeks in any case.
4.11 INDEMNIFICATION AGREEMENT. The stockholder is delivering to LandCare
and the surviving corporation an Indemnification Agreement in form and substance
satisfactory to LandCare.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting
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the Merger and fully carrying out the intent of this Agreement. LandCARE shall
provide the Stockholder reasonable access to the books and records of the
Surviving Corporation after the Closing Date for purposes of tax compliance and
any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholder
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise),
if any, due upon receipt of the consideration payable pursuant to this
Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholder shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
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Subject to the preceding sentence, each party required to file tax returns
pursuant to this Agreement shall bear all costs of filing such tax returns.
5.5 ADDITIONAL AGREEMENTS. The Stockholder shall take the actions set
forth in the letter agreement dated the date hereof between the Stockholder and
LandCare.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
this Agreement herewith shall survive the Closing until the expiration of the
periods prescribed by the applicable statutes of limitations (including any
extensions thereof) relating thereto; provided, however, that representations
and warranties and indemnification provisions with respect to which a claim is
made within the survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement.
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6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.4 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.5 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct
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competition with the Surviving Corporation within 200 miles of where the
Company conducted business at any time within one year prior to the
Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from (i) acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any
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other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
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8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholder will not take any actions that disqualify the Merger for such
treatment. The Stockholder represents, warrants and covenants that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Effective Time, the Company will hold at least 90% of the fair market value of
the net assets and at least 70% of the gross assets held by the Company
immediately prior to the Effective Time.) For purposes of the preceding
sentence, amounts paid by the Company to dissenters, amounts paid by the Company
to shareholders who receive cash or other property and the Company assets used
to pay its reorganization expenses and all redemptions and distributions (except
for normal dividends) made by the Company immediately preceding the Effective
Time, pursuant to this Agreement or otherwise as part of the plan of Merger
provided for herein, will be included as assets of the Company held immediately
prior to the Merger."
9.2 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
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Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. After the date one year after the Closing Date the Stockholder
may sell such shares pursuant to the LandCARE Liquidity Plan. After the date two
years after the Closing Date, neither the restrictions set forth herein nor the
provisions of the LandCare Liquidity Plan shall restrict the Stockholder from
selling or otherwsie disposing of any of such shares of LandCare Stock.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of LandCARE Stock, (B) fully understands the nature, scope and
duration of any limitations on transfer of LandCARE Stock described in this
Agreement and (C) can bear the economic risk of an investment in the shares of
LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
(including the letter agreement dated the date hereof between the Stockholder
and LandCare) constitute the entire agreement and understanding among the
Stockholder, the Company and LandCARE, and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
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11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Landscape West
950 North Tustin Avenue
Anaheim, California 92807
If to the Stockholder, addressed to him at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing
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delivered pursuant to the provisions of this Agreement shall survive the
consummation of the transactions contemplated hereby and any examination on
behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
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11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
LW ACQUISITION CORP.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: President
LANDSCAPE WEST
By: /s/ BARRY L. KONIER
Name: BARRY L. KONIER
Title: President
/s/ BARRY KONIER
Barry Konier
_______________ (spouse of Barry Konier)
EXHIBIT 10.3
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 4, 1998
by and among
LANDCARE USA, INC.,
GROUND CONTROL LANDSCAPING, INC.,
GATOR & GATOR LANDSCAPING COMPANY
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation, By-laws, Directors and Officers
of Surviving Corporation........................................2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................3
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
1.8 Stockholders' Rights.............................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................4
2.1 Due Organization.................................................4
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................5
2.5 Financial Statements.............................................5
2.6 Liabilities and Obligations......................................5
2.7 Accounts and Notes Receivable....................................6
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................7
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........8
2.12 Real Property....................................................8
2.13 Insurance........................................................9
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans..........................................10
2.16 Conformity with Law; Litigation.................................11
2.17 Taxes...........................................................11
2.18 No Violations; All Required Consents Obtained...................13
2.19 Absence of Changes..............................................13
2.20 Powers of Attorney..............................................15
2.21 Competing Lines of Business; Related-party Transactions.........15
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2.22 Disclosure......................................................15
2.23 Certain Business Practices......................................15
2.24 Notice to Bargaining Agents.....................................16
2.25 Notices and Consents............................................16
2.26 Inventory; Working Capital; Other Financial Matters.............16
2.27 Year 2000 Compliance............................................16
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 Due Organization................................................16
3.2 Authorization...................................................16
3.3 No Violations...................................................17
3.4 Validity of Obligations.........................................17
3.5 Prospectus and the Absence of Certain Changes...................17
3.6 Issuance of LandCARE Stock......................................17
3.7 Listing.........................................................18
3.8 Compliance with Law and Applicable Government Relations.........18
3.9 Improper and Other Payments.....................................18
3.10 Disclosure......................................................18
4. DELIVERIES............................................................18
4.1 Instruments of Transfer.........................................18
4.2 Certificate of Merger...........................................19
4.3 Employment Agreement............................................19
4.4 Opinion of Counsel..............................................19
4.5 Good Standing Certificates......................................19
4.6 Indebtedness to Company.........................................19
4.7 Consents........................................................19
4.8 Resignations of Directors and Officers..........................19
4.9 Accounting Treatment............................................19
5. POST-CLOSING COVENANTS................................................19
5.1 Future Cooperation; Further Assurances..........................19
5.2 Expenses........................................................20
5.3 Certain Agreements..............................................20
5.4 Preparation and Filing of Tax Returns...........................20
6. INDEMNIFICATION.......................................................21
6.1 Survival of Stockholders' Representations and Warranties. .....21
6.2 General Indemnification by the Stockholders.....................21
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6.3 Indemnification by LandCARE.....................................21
6.4 Third Person Claims.............................................22
6.5 Method of Payment...............................................22
7. NONCOMPETITION........................................................22
7.1 Prohibited Activities...........................................22
7.2 Equitable Relief................................................23
7.3 Reasonable Restraint............................................23
7.4 Severability; Reformation.......................................24
7.5 Independent Covenant............................................24
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................24
8.1 General.........................................................24
8.2 Equitable Relief................................................25
8.3 Survival........................................................25
9 INTENDED TAX TREATMENT................................................25
9.1 Tax-Free Reorganization.........................................25
9.2 Restrictions on Resale..........................................25
10 SECURITIES LAW MATTERS................................................26
10.1 Economic Risk; Sophistication...................................26
10.2 Compliance with Law.............................................26
11. GENERAL...............................................................26
11.1 Successors and Assigns..........................................26
11.2 Entire Agreement................................................26
11.3 Counterparts....................................................27
11.4 Brokers and Agents..............................................27
11.5 Notices.........................................................27
11.6 Governing Law...................................................28
11.7 Survival of Representations and Warranties......................28
11.8 Effect of Investigation.........................................28
11.9 Exercise of Rights and Remedies.................................28
11.10 Time............................................................28
11.11 Reformation and Severability....................................28
11.12 Remedies Cumulative.............................................28
11.13 Captions........................................................28
11.14 Press Releases and Public Announcements.........................29
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11.15 No Third-Party Beneficiaries....................................29
11.16 Reliance Upon Oral Representations..............................29
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 3.5. Prospectus
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholders
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 4, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), Ground Control Landscaping, Inc., a Florida
corporation and wholly owned subsidiary of LandCARE ("Ground Control"), Gator &
Gator Landscaping Company, a Florida corporation (the "Company"), and the
persons listed on the signature pages of this Agreement as the stockholders of
the Company (the "Stockholders"). The Stockholders are the only holders of
capital stock of the Company.
WHEREAS, the respective Boards of Directors of Ground Control and the
Company (collectively called the "Constituent Corporations") deem it advisable
and in the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Ground Control pursuant to
this Agreement and the applicable provisions of the laws of the State of Florida
(the "State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Ground Control (the "Merger") and the separate existence of the
Company shall cease, all in accordance with the provisions of the law of the
State of Incorporation. Ground Control shall be the surviving corporation in the
Merger and is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State (or other appropriate authority) of the
State of Incorporation (the "Merger Filing"). The Merger
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Filing shall be made simultaneously with or as soon as practicable after the
execution and delivery of this Agreement.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Ground Control then in effect shall be the Articles of Incorporation of the
Surviving Corporation, and the By-laws of Ground Control then in effect shall be
By-laws of the Surviving Corporation. At the Effective Time, the officers of the
Surviving Corporation shall consist of (a) the officers of Ground Control
immediately prior to the Effective Time and (b) Scott L. Annan and Charles
Richardson. At the Effective Time, William L. Fiedler and William F. Murdy shall
become the directors of the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of Ground Control shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of the Company shall be merged with and into Ground Control, and
Ground Control, as the Surviving Corporation, shall be fully vested therewith.
At the Effective Time, the separate existence of the Company shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public, as
well as of a private, nature, and all property, real, personal and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
taxes, including those due and owing and those accrued, and all other choses in
action, and all and every other interest of or belonging to or due to the
Company and Ground Control shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Company and Ground Control; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the State of Incorporation vested in the Company and Ground Control, shall
not revert or be in any way impaired by reason of the Merger. Except as
otherwise provided herein, the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of the Company
and Ground Control and any claim existing, or action or proceeding pending, by
or against the Company or Ground Control may be prosecuted as if the Merger had
not taken place, or the Surviving Corporation may be substituted in their place.
Neither the rights of creditors nor any liens upon the property of the Company
or Ground Control shall be impaired by the Merger, and all debts, liabilities
and duties of the Company and Ground Control shall attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
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1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Ground Control ("Ground Control Stock") shall be as follows:
As of the Effective Time:
1. Each share of Company Stock issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, automatically shall be converted into
the right to immediately receive the corresponding pro rata interest in the
aggregate consideration payable to all holders of Company Stock, which
consideration shall consist of an aggregate of 222,222 shares of validly issued,
voting common stock, par value $.01 per share, of LandCARE ("LandCARE Stock")
(such number of shares being equal to $2,000,000 divided by $9.00);
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. As of the Effective Time, each outstanding share of Ground
Control Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholders shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholders, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholders' expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholders certificates representing
the LandCARE Stock as described above free of any restrictions or encumbrances
except as provided in Section 9.2 below. The Stockholders and LandCARE agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such Company Stock
and/or LandCARE Stock, as applicable, or with respect to the stock powers
accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
1.8 STOCKHOLDERS' RIGHTS. The Stockholders who, except for the
applicability of Section 607.1104 of the Florida Statutes, would be entitled to
vote and who dissent from the Merger of the Company with and into Ground Control
may, pursuant to Section 607.1320 of the Florida Statute, be entitled, if they
comply with the provisions of the General Corporation Act of Florida regarding
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the rights of dissenting stockholders, to be paid the fair value of their
shares. However, the holders of one hundred percent (100%) of the Company Stock
(defined below) have voted in favor of the Merger, and there are and can be no
dissenters.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally hereby represent and warrant to
LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 7,500 shares of common stock, par value $ 1.00 per
share, of which 1000 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholders and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of
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securities. None of the Shares were issued in violation of any preemptive rights
or similar rights of any person. No option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company to issue any
additional shares of its capital stock or obligates the Stockholders to transfer
any of the Shares to any person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or fictitious names and has not conducted business under any other
name except its legal name as set forth in its Charter Documents. Except as set
forth in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of February 28, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998 and the related statements of operations for the
four-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Year-end Financial Statements have been prepared from the books and
records of the Company in conformity with generally accepted accounting
principles applied on a basis consistent with preceding years and throughout the
periods involved ("GAAP") and present fairly the financial position and results
of operations of the Company as of the dates of such statements and for the
periods covered thereby. The Interim Financial Statements present fairly the
financial position and results of operations of the Company as of the dates of
such statements and for the periods covered thereby. The books of account of the
Company have been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities
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or obligations of any kind, whether accrued, absolute, secured or unsecured,
contingent or otherwise. Except and to the extent disclosed on SCHEDULE 2.6,
there are no claims, liabilities or obligations, nor any reasonable basis for
assertion against the Company, of any claim, liability or obligation, of any
nature whatsoever. Except as expressly set forth on SCHEDULE 2.6, all of the
contingent liabilities of the Company listed on SCHEDULE 2.6 are covered by the
Company's insurance policies, and no such liability will exceed the policy
limits of such insurance policies. SCHEDULE 2.6 contains a reasonable estimate
of the maximum amount which may be payable with respect to known liabilities
which are not fixed. For each such known liability for which the amount is not
fixed, SCHEDULE 2.6 includes a summary description of each known liability,
together with copies of all relevant documentation relating thereto. The
Company's total interest bearing debt as of the Closing Date, calculated using
the twelve-month average balance for the Company's line of credit, does not
exceed $255,000. As of the Closing Date the Company's tangible net worth is at
least $90,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business and are collectible in the amounts shown on SCHEDULE 2.7, in
accordance with the Company's prior history, provided that Stockholders
represent and warrant that the reserves reflected in the balance sheet as of the
Balance Sheet Date are reasonable.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Wastes, Hazardous Materials and
Hazardous Substances, a list of all of which permits and approvals is set forth
on SCHEDULE 2.9, and have reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes, Hazardous Materials or Hazardous
Substances have been treated, stored, disposed of or otherwise handled. There
have been no releases or threats of releases (as defined in Environmental Laws)
at, from, in, under or on any property owned or operated by the Company except
as permitted by Environmental Laws. There is no on-site or off-site location to
which the Company has transported or disposed of Hazardous Wastes, Hazardous
Materials or Hazardous Substances or arranged for the transportation of
Hazardous Wastes, Hazardous Materials or Hazardous Substances which is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company or LandCARE for
any clean-up cost, remedial work, damage to natural resources, property damage
or personal injury, including, but not limited to, any claim under (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) the Resource Conservation and Recovery Act, as amended, (iii) the
Hazardous Materials Transportation Act, as amended, or (iv) comparable state or
local statutes and regulations. The Company has no contingent liability in
connection with any release of any Hazardous Waste, Hazardous Material or
Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the Interim Balance Sheet of the Company with a fair market value of
$100 or more, (b) all other personal property owned by the Company with a fair
market value in excess of $5,000, and (c) all leases and agreements with respect
to personal property, copies of which have been delivered to LandCARE. SCHEDULE
2.10 indicates which of such assets are currently owned, or were formerly owned,
by the Stockholders or any affiliate of the Company or the Stockholders. Except
as set forth on SCHEDULE 2.10, (i) all material personal property used by the
Company in its business is either owned by the
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Company or leased by the Company pursuant to a lease included on SCHEDULE 2.10,
(ii) all of the personal property listed on SCHEDULE 2.10 is in good working
order and condition, ordinary wear and tear excepted and (iii) all leases and
agreements included on SCHEDULE 2.10 are in full force and effect and constitute
valid and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms. Except as set forth on SCHEDULE 2.10,
the Company has good and valid title to the tangible and intangible personal
property it purports to own, subject to no security interest, pledge, lien,
claim, conditional sales agreement, encumbrance, charge or restriction on
transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year, provided that Schedule 2.11
shall include no more than those 25 customers most contributing to such revenues
on an individual basis ("Significant Customers"), and (ii) all material
contracts, commitments and similar agreements to which the Company is a party or
by which it or any of its properties are bound (including, but not limited to,
contracts with Significant Customers, joint venture or partnership agreements,
contracts with any labor organizations, strategic alliances and options to
purchase land). True, complete and correct copies of such agreements have been
delivered to LandCARE. Except as described on SCHEDULE 2.11, (i) none of the
Significant Customers have canceled or substantially reduced or, to the
knowledge of the Company, are currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by the
Company, and (ii) the Company has complied with all commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on SCHEDULE 2.11 and no notice of default under any such contract or agreement
has been received. Except as described in Schedule 2.11, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
Company by, any such contracts or agreements. SCHEDULE 2.11 also includes a
summary description of all plans or projects relating to the Company's business
involving the opening of new operations, expansion of existing operations, the
acquisition of any property, business or assets requiring, in any event, the
payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from any of the Stockholders or any affiliate of any of
the Stockholders has been terminated. Except as set forth on SCHEDULE 2.12, all
of such leases included on SCHEDULE 2.12 are in full force and effect and
constitute valid and
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binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. To the best knowledge of the Stockholders, there
are no leases, tenancy agreements, easements, covenants, restrictions or any
other instruments, agreements or arrangements which create in or confer on any
party, other than the Company, the right to occupy or possess all or any portion
of the Real Property or create in or confer on any such party any right, title
or interest in or to the Real Property or any portion thereof or any interest
therein; no party other than the Company occupies or possesses the Real Property
or any portion thereof; there is legal and adequate ingress and egress between
each tract of Real Property and an adjacent (or, if none, the closest) public
roadway; the Real Property is properly zoned in order to allow its current use
in the Company's businesses; and there are no claims or demands pending or
threatened by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on SCHEDULE 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such
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representation is in progress and (iv) there is no pending or, to the best of
the Company's knowledge, threatened, labor dispute involving the Company and any
group of its employees. The Company has not experienced any labor interruptions
over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions of employment of any of the Company's employees other than the plans
set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholders, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction
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prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on SCHEDULE 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against the Company. Except as set forth on SCHEDULE 2.16, the
Company has conducted and now conducts its business in material compliance with
all laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts,
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excise, property, sales, withholding, social security, unemployment, occupation,
use, service, license, payroll, franchise, transfer and recording taxes, fees
and charges, imposed by the United States or any state, local or foreign
government or subdivision or agency thereof ("Taxing Authority"), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest, fines, penalties or additional amounts
attributable to or imposed with respect to any such taxes, charges, fees, levies
or other assessments. As used herein, the term "Company Subsidiaries" means the
subsidiaries, if any, of the Company; it being understood that there may be no
such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or any Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor any Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section
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341 (f)(2) of the Code or any comparable provision of any other Tax statute
apply to any disposition of an asset. The Company has not made, is not obligated
to make and is not a party to any agreement that could require it to make any
payment that is not deductible under Section 280G of the Code. No asset of the
Company or of any Company Subsidiary is subject to any provision of applicable
law which eliminates or reduces the allowance for depreciation or amortization
with respect to that asset below the allowance generally available to an asset
of its type. Except as previously disclosed to LandCARE, no accounting method
changes of the Company or of any Company Subsidiary exist or are proposed or
threatened which could give rise to an adjustment under Section 481 of the Code.
The Company uses the accrual method of accounting for income tax purposes, and
the Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code. The Company has a taxable year ended February 28. The Company is not party
to any joint venture, partnership, or other arrangement that is treated as a
partnership for federal income tax purposes.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Company or will prevent or restrict the Surviving Corporation or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
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(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of $
20,000.00 and in an aggregate amount not in excess of $ 150,000.00; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
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2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof. The parties hereto acknowledge, however, that the Company's cash needs
are comparatively higher during the summer months than during the other months
of the year.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company (apart
from the Company's computer software), including, but not limited to, computer
hardware, microprocessor driven equipment, and data, owned or used by the
Company will accurately process date and time data after December 31, 1999, and
the Company will suffer no loss of functional ability when processing dates and
related data outside the 1900-1999 year range with the proper software update.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, all of which have been approved by the Board of Directors of LandCARE
and no other corporate proceeding on the part of LandCARE and/or Ground Control
is necessary to authorize this Agreement and the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE. Except as described in Schedule
3.3, the execution, performance and delivery by LandCARE of this Agreement, and
any and all other agreements contemplated hereby, and the fulfillment of and
compliance with the respective terms hereof and thereof by LandCARE do not and
will not:
(a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with
due notice, lapse of time or both) (c) result in the creation of any lien
upon the capital stock or assets of LandCARE pursuant
to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent,
approval, exemption or other action by or notice
to any court or governmental authority pursuant to
any law, regulation, order, contract or agreement to which LandCARE is subject.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 PROSPECTUS AND THE ABSENCE OF CERTAIN CHANGES. Attached as Exhibit 3.5
hereto is a copy of the Prospectus (the "Prospectus") LandCARE has delivered to
the Stockholders. The Prospectus delivered to the Stockholders, receipt of which
is hereby acknowledged, does not contain a misrepresentation of a material fact
or omit to state a material fact necessary to make statements made therein, in
light of the circumstances under which they were made, not misleading. There has
been no material adverse change in the business or affairs of LandCARE since the
date of the Prospectus.
3.6 ISSUANCE OF LANDCARE STOCK. The LandCARE Stock to be issued by
LandCARE to the Stockholders, in accordance with the terms and subject to the
conditions set forth in this Agreement, shall, upon issuance and delivery, be
duly authorized, validly issued, fully paid, nonassessable, and shall be free
and clear of all liens, encumbrances, charges, and restrictions of any kind
except as described in Subparagraph 9.2 below. The offer and sale of such shares
have been registered under the Securities act of 1933, as amended (the
"Securities Act").
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3.7 LISTING. The LandCARE Stock to be issued to the Stockholders has been
or will be approved for listing on the New York Stock Exchange.
3.8 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT RELATIONS. LandCARE is
in material compliance with all applicable federal, state, local and
administrative laws, regulations and orders. There are no material claims with
respect to any such laws, regulations or orders pending, nor to the best
knowledge of LandCARE threatened, nor has LandCARE received any written notice
regarding any such violation.
3.9 IMPROPER AND OTHER PAYMENTS. (a) Neither LandCARE, any director,
officer, employee thereof, nor to LandCARE's knowledge any agent or
representative of LandCARE nor any individual or entity acting on behalf of any
of them has made, paid or received any unlawful bribes, kickbacks or other
similar payments to or from any person or authority; (b) no improper
contributions have been directly or indirectly made to a domestic or foreign
political party or candidate; (c) no improper foreign payment (as defined in the
Foreign Corrupt Practices Act) has been made; and (d) the internal accounting
controls of LandCARE are believed by LandCARE's management to be adequate to
detect any of the foregoing under current circumstances.
3.10 DISCLOSURE. LandCARE has provided the Stockholders with all the
information that the Stockholders have requested in writing analyzing whether to
consummate the transactions contemplated hereby. None of the information so
provided nor any representation or warranty of LandCARE contained in this
Agreement contains any untrue statement or omits to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact which
has specific application to LandCARE or its business or assets (other than
general economic or industry conditions) which would have a Material Adverse
Effect or, so far as LandCARE can reasonably foresee, threatens to have a
Material Adverse Effect, on LandCARE or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of LandCARE, which
has not been described in the Schedules hereto.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers). LandCARE is delivering to the Shareholders stock
certificates representing 222,222 shares of LandCARE voting common stock or a
copy of an irrevocable instruction letter to its transfer agent authorizing the
issuance of such certificate.
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4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. Ground Control and the persons identified in
SCHEDULE 4.3 are entering into Employment Agreements in the form of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.5 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than ten days prior to the
date hereof, duly issued by the appropriate governmental authority in the State
of Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 INDEBTEDNESS TO COMPANY. The Stockholders and their affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.7 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
4.9 ACCOUNTING TREATMENT. LandCARE is receiving advice from its
independent accountants that the transactions contemplated hereby may be
accounted for by LandCARE as a pooling of interests.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the
Surviving Corporation and LandCARE shall each deliver or cause to be delivered
to the other following the date hereof such additional instruments as the other
may reasonably request for the purpose of effecting the Merger and fully
carrying out the intent of this Agreement. LandCARE shall provide the
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Stockholders reasonable access to the books and records of the Surviving
Corporation after the Closing Date for purposes of tax compliance and any other
reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company will pay the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Company shall pay any sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the Merger. The Stockholders shall
file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholders acknowledge that the Stockholders, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise),
if any, due upon receipt of the consideration payable pursuant to this
Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Surviving Corporation shall terminate any
existing agreements between the Company and any of the Stockholders or their
affiliates are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
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Subject to the preceding sentence, each party required to file tax returns
pursuant to this Agreement shall bear all costs of filing such tax returns.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
this Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages in excess of $500 incurred by the Stockholders as a result
of or incident to (i) any breach of any representation or warranty of
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LandCARE set forth herein; (ii) any breach or nonfulfillment of any covenant or
agreement by LandCARE under this Agreement; (iii) the operation of the Surviving
Corporation from and after the Closing Date, except to the extent any such
Damages are attributable to the actions of any of the Stockholders, in their
capacities as such or otherwise; and (iv) any debt or liability of the Surviving
Corporation arising on or after the Closing Date.
6.4 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.5 METHOD OF PAYMENT. All claims for indemnification shall be paid in
LandCARE Stock valued at $ 9.00 per share.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or
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derive any benefit whatever from, any business offering services or
products in direct competition with the Surviving Corporation within 100
miles of where the Company conducted business at any time within one year
prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit any Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCARE in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
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7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCARE's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCARE or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCARE of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholders agree that they will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by any Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation or LandCARE and (c) to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section, unless (i) such information becomes known to the public generally
through no fault of the Stockholder, or (ii) disclosure is required by law or
the order of any governmental authority, provided, that prior to disclosing any
information pursuant to this clause (ii), the Stockholder shall give prior
written notice thereof to LandCARE and provide LandCARE with the opportunity to
contest such disclosure. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section, LandCARE shall be entitled to
injunctive or other equitable relief restraining such Stockholder from
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disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting LandCARE from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholders will not take any actions that disqualify the Merger for such
treatment. The Stockholders represent, warrant and covenant that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Closing, the Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the gross assets held by the Company immediately
prior to the Closing). For purposes of the preceding sentence, amounts paid by
the Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property and the Company assets used to pay its
reorganization expenses and all redemptions and distributions (except for normal
dividends) made by the Company immediately preceding the Closing, pursuant to
this Agreement or otherwise as part of the plan of Merger provided for herein,
will be included as assets of the Company held immediately prior to the Merger.
9.2 RESTRICTIONS ON RESALE. LandCARE has informed the Stockholders that it
intends to account for the transactions contemplated by this Agreement as a
pooling of interests. LandCARE has also informed the Stockholders that its
ability to account for the transactions contemplated hereby as a pooling of
interests was a material factor considered by LandCARE in its decision to enter
into this Agreement. Therefore, pursuant to the rules of the Securities and
Exchange Commission
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relating to pooling of interests transactions, prior to the publication and
dissemination by LandCARE of consolidated financial results which include
results of the combined operations of the Company and LandCARE for at least
thirty days on a consolidated basis following the Effective Time, the
Stockholders shall not sell, offer to sell or otherwise transfer or dispose of,
any shares of the LandCARE Stock received by Stockholders, engage in put, call,
short-sale, straddle or similar transactions, or in any other way reduce the
Stockholders' risk of owning shares of LandCARE Stock. The certificates
evidencing the LandCARE Stock to be received by the Stockholders will bear a
legend to that effect. LandCARE will publish quarterly financial results in
accordance with applicable laws and regulations.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder acknowledges and
confirms that he or she has received and reviewed a Prospectus from LandCARE
relating to his or her acquisition of shares of LandCARE Stock hereunder. Each
Stockholder (A) has such knowledge, sophistication and experience in business
and financial matters that he is capable of evaluating the merits and risks of
an investment in the shares of LandCARE Stock, (B) fully understands the nature,
scope and duration of any limitations on transfer of LandCARE Stock described in
this Agreement and (C) can bear the economic risk of an investment in the shares
of LandCARE Stock.
10.2 COMPLIANCE WITH LAW. Each Stockholder covenants that none of the
LandCARE Stock acquired by such Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by such Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in
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accordance with its terms, and may be modified or amended only by a written
instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
Houston, Texas 77056
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Gator & Gator Landscape Co., Inc.
910 Charles Street
Longwood, Florida 32750
with copy to:
Frank L. Pohl, Esq.
280 W. Canton Avenue, Suite 410
Winter Park, Florida 32789
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If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
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11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
11.16 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
and each other party hereto hereby represents and warrants: (a) that each has
been fully informed by his or its legal counsel and by his or its own
independent judgment of the terms, conditions and effects of this Agreement; (b)
that each has been represented by independent legal counsel of his or its choice
throughout all negotiations preceding the execution of this Agreement and has
received the advice of his or its attorney in entering into this Agreement; (c)
that each, both personally and through his or its independently-retained
attorneys, is fully satisfied with the terms and effects of this Agreement; (d)
that no promise or inducement has been offered or made to him or it except as
expressly stated in this Agreement; and (e) that this Agreement is executed
without reliance on any oral statement or oral representation by any other party
or any other party's agent or attorney.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
GROUND CONTROL LANDSCAPING, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Secretary
GATOR & GATOR LANDSCAPING COMPANY
By: /s/ SCOTT L. ANNAN
Name: SCOTT L. ANNAN
Title: President
<PAGE>
Stockholders and Spouses:
/s/ SCOTT L. ANNAN
Scott L. Annan
/s/ TRACEY ANNAN (spouse of Scott L. Annan)
/s/CHARLES RICHARDSON
Charles Richardson
/s/AMY RICHARDSON (spouse of Charles Richardson)
EXHIBIT 10.4
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 5, 1998
by and among
LANDCARE USA, INC.
CCI ACQUISITION CORP.
CLEAN CUT, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation and By-laws of Surviving Corporation...2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................2
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................3
2.1 Due Organization.................................................4
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................5
2.5 Financial Statements.............................................5
2.6 Liabilities and Obligations......................................6
2.7 Accounts and Notes Receivable....................................6
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................7
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........8
2.12 Real Property....................................................8
2.13 Insurance.......................................................10
2.14 Compensation; Employment Agreements; Organized Labor Matters....10
2.15 Employee Benefit Plans..........................................10
2.16 Conformity with Law; Litigation.................................12
2.17 Taxes...........................................................12
2.18 No Violations; All Required Consents Obtained...................14
2.19 Absence of Changes..............................................14
2.20 Powers of Attorney..............................................16
2.21 Competing Lines of Business; Related-party Transactions.........16
2.22 Disclosure......................................................16
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2.23 Certain Business Practices......................................16
2.24 No Notice to Bargaining Agents..................................16
2.25 Notices and Consents............................................16
2.26 Year 2000 Compliance............................................17
2.27 Reliance Upon Oral Representations..............................17
2.28 Software........................................................17
3. REPRESENTATIONS OF LANDCARE AND NEWCO.................................17
3.1 Due Organization................................................17
3.2 Authorization...................................................18
3.3 Capital Stock of LandCARE and Newco.............................18
3.5 Reports; Financial Statements...................................20
3.6 Absence of Certain Changes or Events............................20
3.7 Absence of Litigation...........................................20
3.8 Tax Matters; Pooling............................................21
3.9 Vote Required...................................................21
3.10 Newco...........................................................21
4. DELIVERIES............................................................21
4.1 Instruments of Transfer.........................................21
4.2 Certificate of Merger...........................................21
4.3 Employment Agreement............................................21
4.4 Opinion of Counsel..............................................21
4.5 Good Standing Certificates......................................21
4.6 Indebtedness to Company.........................................22
4.7 Consents........................................................22
4.8 Resignations of Directors and Officers..........................22
4.9 Accounting Treatment............................................22
5. POST-CLOSING COVENANTS................................................22
5.1 Future Cooperation; Further Assurances..........................22
5.2 Expenses........................................................22
5.3 Certain Agreements..............................................23
5.4 Preparation and Filing of Tax Returns...........................23
5.5 Stock Options...................................................24
5.6 Stockholder Guarantees..........................................24
5.7 Bank Indebtedness...............................................24
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6. INDEMNIFICATION.......................................................25
6.1 Survival of Stockholders' Representations and Warranties. .....25
6.2 General Indemnification by the Stockholders.....................25
6.3 Indemnification by LandCARE.....................................26
6.4 Third Person Claims.............................................26
6.5 Method of Payment...............................................26
6.6 Limitations on Indemnification..................................27
6.7 Exclusive Remedy................................................27
7. NONCOMPETITION........................................................27
7.1 Prohibited Activities...........................................27
7.2 Equitable Relief................................................28
7.3 Reasonable Restraint............................................28
7.4 Severability; Reformation.......................................28
7.5 Independent Covenant............................................28
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................29
8.1 General.........................................................29
8.2 Equitable Relief................................................29
8.3 Survival........................................................29
9 INTENDED TAX AND ACCOUNTING TREATMENT
.....................................................................29
9.1 Tax-Free Reorganization.........................................30
9.2 Restrictions on Resale..........................................30
10 SECURITIES LAW MATTERS................................................31
10.1 Economic Risk; Sophistication...................................31
10.2 Compliance with Law.............................................31
11. GENERAL...............................................................31
11.1 Successors and Assigns..........................................31
11.2 Entire Agreement................................................31
11.3 Counterparts....................................................31
11.4 Brokers and Agents..............................................32
11.5 Notices.........................................................32
11.6 Governing Law...................................................33
11.7 Survival of Representations and Warranties......................33
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11.8 Effect of Investigation.........................................33
11.9 Exercise of Rights and Remedies.................................33
11.10 Time............................................................33
11.11 Reformation and Severability....................................33
11.12 Remedies Cumulative.............................................33
11.13 Captions........................................................34
11.14 Press Releases and Public Announcements.........................34
11.15 No Third-Party Beneficiaries....................................34
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 2.25. Notices and Consents
SCHEDULE 2.26. Pro Forma Adjustments
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
SCHEDULE 5.3. Certain Agreements
ANNEXES
Annex I - Certificate of Merger
Annex II - Form of Employment Agreement
Annex III - Form of Opinion of Counsel to Company and
Stockholders
Annex IV - Form of Opinion of Counsel to LandCARE
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 5, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), CCI Acquisition Corp., a Texas corporation ("Newco"),
Clean Cut, Inc., a Texas corporation (the "Company"), and the persons listed on
the signature pages of this Agreement as the stockholders of the Company (the
"Stockholders"). The Stockholders are the only holders of capital stock of the
Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company pursuant to this
Agreement and the applicable provisions of the laws of the State of Texas (the
"State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Newco shall be merged with
and into the Company (the "Merger") and the separate existence of Newco shall
cease, all in accordance with the provisions of the law of the State of
Incorporation. The Company shall be the surviving corporation in the Merger and
is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State
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(or other appropriate authority) of the State of Incorporation (the "Merger
Filing"). The Merger Filing shall be made simultaneously with or as soon as
practicable after the execution and delivery of this Agreement.
1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION. At the
Effective Time, the Articles of Incorporation of the Company then in effect
shall be the Articles of Incorporation of the Surviving Corporation, and the
By-laws of Newco then in effect shall become the By-laws of the Surviving
Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the Company shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of Newco shall be merged with and into the Company, and the Company,
as the Surviving Corporation, shall be fully vested therewith. At the Effective
Time, the separate existence of Newco shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and Newco
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation
vested in the Company and Newco, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of the Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in their place. Neither the rights of creditors nor any liens upon the property
of the Company or Newco shall be impaired by the Merger, and all debts,
liabilities and duties of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) issued and
outstanding capital stock of Newco ("Newco Stock") immediately prior to the
Effective Time, respectively, into shares of (x)
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LandCARE Stock (as defined below) and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time:
1. Each share of Company Stock issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, automatically shall be converted into
the right to receive its pro rata interest in the aggregate consideration
payable to all holders of Company Stock, which consideration shall consist
solely of an aggregate of One Million Six Hundred Eighty-Eight Thousand Five
Hundred Twenty-Seven (1,688,527) shares of common stock, par value $.01 per
share, of LandCARE ("LandCARE Stock");
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any action on the part of LandCARE, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, which shall constitute all of the issued and outstanding shares of
common stock of the Surviving Corporation, and shall be owned by LandCARE,
immediately after the Effective Time.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholders shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholders, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholders' expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholders certificates representing
the LandCARE Stock as described above. The Stockholders agree promptly to cure
any deficiencies with respect to the endorsement of the stock certificates or
other documents of conveyance with respect to such Company Stock or with respect
to the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally hereby represent and warrant to
LandCARE as follows:
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2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $1.00 per
share, of which 90 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholders and, except as set
forth on SCHEDULE 2.3, are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable, and were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws governing the issuance of securities. None of the Shares were issued in
violation of any preemptive rights or similar rights of any person. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any additional shares of its capital stock or obligates the
Stockholders to transfer any of the Shares to any person except pursuant to this
Agreement.
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2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
Except as set forth on SCHEDULE 2.5, the Year-end Financial Statements
have been prepared from the books and records of the Company in conformity with
generally accepted accounting principles applied on a basis consistent with
preceding years and throughout the periods involved ("GAAP"), and present fairly
in all material respects the financial position and results of operations of the
Company as of the dates of such statements and for the periods covered thereby.
The books of account of the Company have been kept accurately in all material
respects in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
Except as set forth on SCHEDULE 2.5, to the best knowledge of the
Stockholders, the Interim Financial Statements have been prepared from the books
and records of the Company in conformity with GAAP, subject to changes resulting
from normal period-end adjustments for recurring accruals (which will not be
material individually or in the aggregate) and to the absence of footnote
disclosure and other presentation items, and present fairly in all material
respects the financial position and results of operations of the Company as of
the dates of such statements and for the periods covered thereby. The
Stockholders do not represent or warrant, and the foregoing representation shall
not
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be deemed to constitute a representation or warranty, that any one or more of
the accruals, reserves or other adjustments to the Interim Financial Statements
made in connection with the recent review thereof are correct or appropriate;
however, to the best knowledge of the Stockholders, such accruals, reserves and
other adjustments, in the aggregate, are not inaccurate or inappropriate.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business and are collectible in the amounts shown on SCHEDULE 2.7, net of
reserves reflected in the balance sheet as of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business, except where the failure
to hold such would not have a Material Adverse Effect on the Company. SCHEDULE
2.8 sets forth an accurate list and summary description of all such licenses,
franchises, permits and other governmental authorizations, including permits,
titles (including licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) (collectively, the "Intangible Assets") (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on SCHEDULES 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on SCHEDULE 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a material
default under or a material breach or material violation of, or adversely affect
the rights and benefits afforded to the Company by, any such Intangible Assets
or other governmental authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to in all
material respects all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes, Hazardous
Materials and Hazardous Substances, a list of all of which permits and approvals
is set forth on SCHEDULE 2.9, and have reported to the appropriate authorities,
to the extent required by all Environmental Laws, all past and present sites
owned and operated by the Company where Hazardous Wastes, Hazardous Materials or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled. There have been no releases or threats of releases (as defined in
Environmental Laws) by the Company and, to the knowledge of the Stockholders, by
other parties, at, from, in, under or on any property owned or operated by the
Company except as permitted by Environmental Laws. There is no on-site or, to
the knowledge of the Stockholders, off-site location to which the Company has
transported or disposed of Hazardous Wastes, Hazardous Materials or Hazardous
Substances or arranged for the transportation of Hazardous Wastes, Hazardous
Materials or Hazardous Substances which is the subject of any federal, state,
local or foreign enforcement action or any other investigation which could lead
to any claim against the Company or LandCARE for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $10,000, and (c) all
leases and material agreements with respect to personal property, copies of
which have been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are
currently owned, or were formerly owned, by the Stockholders or any affiliate of
the Company or the Stockholders. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant
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to a lease included on SCHEDULE 2.10, (ii) all of the personal property listed
on SCHEDULE 2.10 is in good working order and condition, ordinary wear and tear
excepted and (iii) all leases and agreements included on SCHEDULE 2.10 are in
full force and effect and constitute valid and binding agreements of the Company
and, to the knowledge of the Stockholders, of the other parties thereto (and
their successors) in accordance with their respective terms. Except as set forth
on SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer that would have a Material Adverse Effect on the
Company.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 5% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all Material Contracts (as defined below) to which the Company is a party
or by which it or any of its properties are bound. For purposes of this
Agreement, the term "Material Contracts" mean any contracts between the Company
and its Significant Customers, joint venture or partnership agreements,
contracts with labor organizations, strategic alliances, options to purchase
land and other contracts which are not terminable on 60 days or less notice and
involve payments by the Company in any 12-month period in excess of $25,000.
True, complete and correct copies of such agreements have been delivered to
LandCARE. Except as described on SCHEDULE 2.11, (i) none of the Significant
Customers have canceled or substantially reduced or, to the knowledge of the
Stockholders, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company, and
(ii) the Company has complied in all material respects with all commitments and
obligations pertaining to it, and is not in material default under any contracts
or agreements listed on SCHEDULE 2.11 and no notice of default under any such
contract or agreement has been received. The transactions contemplated by this
Agreement will not result in a material default under or a material breach or
material violation of, or materially adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. SCHEDULE 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE
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2.12. The Company has good, marketable, and indefeasible title in fee simple to
the Real Property it purports to own, free and clear of all liens (except those
liens that will be released at or before the Closing Date, and except for (i)
liens for current taxes not yet payable and assessments not in default, (ii)
easements for utilities serving the Real Property, and (iii) easements,
covenants and restrictions and other exceptions to title that do not materially
and adversely affect the current use of the Real Property), and no party, except
as herein set forth, has or shall have any rights in, or to acquire, the Real
Property. All leases relating to Real Property leased by the Company from any of
the Stockholders or any affiliate of any of the Stockholders has been
terminated. Except as set forth on SCHEDULE 2.12, all of such leases included on
SCHEDULE 2.12 are in full force and effect and constitute valid and binding
agreements of the Company and, to the knowledge of the Stockholders, of the
parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all or any portion of the Real Property or create in or confer on any
such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein except where such would not have a
Material Adverse Effect on the Company's use of such Real Property; no party
other than the Company occupies or possesses the Real Property or any portion
thereof; there is legal and adequate ingress and egress between each tract of
Real Property and an adjacent (or, if none, the closest) public roadway; the
Real Property is properly zoned in order to allow its current use in the
Company's businesses; and there are no claims or demands pending or, to the
knowledge of the Stockholders, threatened by any party against the Real Property
which, if valid, would create in, or confer on, any party other than the
Company, any material right, title or interest in or to the Real Property or any
portion thereof. None of the buildings, structures or improvements described on
SCHEDULE 2.12, or the operation or maintenance thereof as now operated or
maintained, contravenes, in any material respect, any zoning ordinance or other
administrative regulation or violates any restrictive covenant or any provision
of law, the effect of which would materially interfere with or prevent their
continued use for the purposes for which they are now being used or would
adversely affect the value thereof or the interest of the Company therein. The
buildings, structures, and improvements (i) have been constructed in a good and
workmanlike manner, free from material defects in workmanship and material and,
to the Stockholders' knowledge, do not require any repair or replacement other
than minor, routine maintenance; and (ii) have been constructed and are being
occupied, maintained, and operated in compliance in all material respects with
all applicable laws, regulations, insurance requirements, contracts, leases,
permits, licenses, ordinances, restrictions, building setback lines, covenants,
reservations, and easements, and the Company has received no notice, written or
oral, claiming any violation of any of the same or requesting or requiring the
performance of any repairs, alterations, or other work in order to so comply. A
certificate of occupancy has been duly issued to the Company (or to the
partnership from which the Company acquired the Real Property, in which case
such certificate of occupancy shall
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be transferred to the Company as promptly as may be practicable) with regard to
the improvements owned or occupied by the Company. The Stockholders have
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company to
the extent such exist.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
Except as set forth on SCHEDULE 2.13, none of such policies is a "claims made"
policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Stockholders, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
any Stockholder's knowledge, threatened, labor dispute involving the Company and
any group of its employees. The Company has not experienced any labor
interruptions over the past five years that have had a Material Adverse Effect
on the Company.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all "employee benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) of Company,
including all agreements or arrangements (other than agreements or arrangements
set forth on SCHEDULE 2.14) containing "golden parachute" or other similar
provisions, and deferred compensation agreements. With respect to each employee
benefit plan, the Company has furnished to LandCARE true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on SCHEDULE 2.15, the
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Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee pension benefit plan," as such term is
defined in Section 3(2) of ERISA, a defined benefit plan (as defined in section
3(35) of ERISA), a multiemployer plan (as defined in section 3(37)(A) of ERISA),
nor does the Company have any obligation to contribute to or accrue or pay any
benefits under any deferred compensation or retirement funding arrangement on
behalf of any employee or employees (such as, for example, and without
limitation, any individual retirement account or annuity, any "excess benefit
plan" (within the meaning of Section 3(36) of ERISA), or any non-qualified
deferred compensation arrangement). The Company has not sponsored, maintained or
contributed to any employee pension benefit plan and is not required to
contribute to any retirement plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of the Company's employees other than the plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code, are, and have been, so
qualified and have been determined by the Internal Revenue Service to be so
qualified. Except as disclosed on SCHEDULE 2.15, all reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries have been timely filed or distributed, and the
most recent copies thereof are included as part of SCHEDULE 2.15. Neither the
Stockholders, nor any plan listed in SCHEDULE 2.15 nor the Company has engaged
in any transaction prohibited under the provisions of Section 4975 of the Code
or Section 406 of ERISA. No plan listed on SCHEDULE 2.15 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service or any liability to
the PBGC. There have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to qualify
under Section 401(a) of the Code without notice to and approval by the Internal
Revenue Service; no plan listed on SCHEDULE 2.15 subject to the provisions of
Title IV of ERISA has been terminated; there have been no "reportable events"
(as that phrase is defined in Section 4043 of ERISA) with respect to any such
plan listed on SCHEDULE 2.15; the Company has not incurred liability under
Section 4062 of ERISA; and no circumstances exist pursuant to which the Company
could have any direct or indirect liability
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whatsoever (including, but not limited to, any liability to any multi employer
plan or the PBGC under Title IV of ERISA or to the Internal Revenue Service for
any excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any unresolved claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the knowledge of the Stockholders, there is no basis for any such claim, action,
suit or proceeding that would have a Material Adverse Effect on the Company.
Except as set forth on SCHEDULE 2.16, there are no outstanding judgments,
orders, writs, injunctions or decrees against the Company. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any material law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them. The Company has conducted
and is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
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All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. Except as set forth on
SCHEDULE 2.17, no litigation with respect to any Tax for which the Company or
any Company Subsidiary is asserted to be liable is pending or, to the knowledge
of the Company or any Stockholder, threatened, and no basis which the Company or
any Stockholder believes to be valid exists on which any claim for any such Tax
can be asserted against the Company or any Company Subsidiary. There are no
requests for rulings or determinations in respect of any Taxes pending between
the Company or any Company Subsidiary and any Taxing Authority. No extension of
any period during which any Tax may be assessed or collected and for which the
Company or any Company Subsidiary is or may be liable has been granted to any
Taxing Authority. Neither the Company nor any Company Subsidiary is or has been
party to any tax allocation or sharing agreement. All amounts required to be
withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. Except as previously disclosed to LandCARE, no
accounting method changes of the Company or of any Company Subsidiary exist or
are proposed or threatened which could give
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rise to an adjustment under Section 481 of the Code. The Company uses the cash
method of accounting for income tax purposes, and the Company's methods of
accounting have not changed in the past five years. The Company is not an
investment company as defined in Section 351(e)(1) of the Code. The Company has
a taxable year ended December 31 and has not made an election to retain a fiscal
year other than December 31 under Section 444 of the Code. The Company is not
party to any joint venture, partnership, or other arrangement that is treated as
a partnership for federal income tax purposes.
The Stockholders made a valid election under the provisions of Subchapter
S of the Code, and the Company has not, since its formation, been subject to
taxation under the provisions of Subchapter C of the Code or under Section 11 or
Section 1374 of the Code. Neither any of the Stockholders nor the Company has
taken any action that terminated the Subchapter S election, which remains in
effect on the date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto is in material default
under any material lease, instrument, license, permit or agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits under the Material Documents
to which the Company is entitled immediately prior to the Closing. Except as set
forth on SCHEDULE 2.18 (and except for consents already obtained), none of the
Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on SCHEDULE 2.18, none of the Material Documents
prohibits or restricts the Company or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
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(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, that would have a Material
Adverse Effect on the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii) any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii) any contract, commitment or liability entered into or
incurred or any capital expenditures made except in the normal course of
business consistent with past practice in an aggregate amount not in
excess of $100,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
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2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other Affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact known to the
Stockholders at the date hereof which has specific application to the Company or
its business or assets (other than general economic or industry conditions)
which, within one year after the Closing Date, would have a Material Adverse
Effect on the Company or its business or assets, or the condition (financial or
otherwise) or results of operations of the Company, which has not been described
in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NO NOTICE TO BARGAINING AGENTS. The Company has no collective
bargaining agreements.
2.25 NOTICES AND CONSENTS. Except as set forth on SCHEDULE 2.25, no
material agreement to which the Company is a party requires the Company to
either give notices to third parties or obtain any third party consents in order
to consummate the transactions contemplated hereby.
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2.26 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process in all material respects date and time data after December 31, 1999, and
the Company will suffer no material loss of functional ability when processing
dates and related data outside the 1900-1999 year range.
2.27 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
2.28 SOFTWARE. The Stockholders have delivered to the Company all right,
title and interest in the software owned by the Stockholders or an affiliate of
the Stockholders so that the Company shall be entitled to use such software
perpetually at no cost whatsoever. LandCare and the Company understand that
vendors may offer upgrades to such software from time to time, and that the
Company may elect to acquire such upgrades at the Company's expense.
3. REPRESENTATIONS OF LANDCARE AND NEWCO
Each of LandCARE and Newco represents and warrants as follows:
3.1 DUE ORGANIZATION. Each of LandCARE and Newco is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
the State of Incorporation, respectively, and has all requisite corporate power
and authority to carry on its business as it is now being conducted. Each of
LandCARE and Newco is duly qualified and is in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect on LandCARE.
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3.2 AUTHORIZATION. (i) The representatives of each of LandCARE and Newco
executing this Agreement has the authority to enter into and bind each of
LandCARE and Newco, respectively, to the terms of this Agreement and (ii) each
of LandCARE and Newco has the full legal right, power and authority to enter
into this Agreement and the transactions contemplated hereby, all of which have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of either of LandCARE or Newco is necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been validly executed and delivered by each of LandCARE and Newco
and constitutes the legal, valid and binding obligation of each of the them,
enforceable in accordance with its terms.
3.3 CAPITAL STOCK OF LANDCARE AND NEWCO.
(a) The authorized capital stock of LANDCARE consists solely of
107,000,000 shares of capital stock, including (i) 100,000,000 shares of
LandCARE Stock, of which, as of July 14, 1998, 13,381,943 shares were issued and
outstanding and constituted all of the issued and outstanding shares of LandCARE
Common Stock; (ii) 2,000,000 shares of Restricted Voting Common Stock, of which,
as of July 14, 1998, 1,296,408 shares were issued and outstanding and are
included in the 13,381,943 figure set forth above, and (iii) 5,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares are issued and
outstanding. The outstanding shares of capital stock of LandCARE are duly
authorized and validly issued, are fully paid and nonassessable, and have not
been issued in violation of (nor are any of the authorized shares of capital
stock of LandCARE subject to) any preemptive or similar rights created by
statute, the charter or bylaws of LandCARE, or any agreement to which LandCARE
is a party or bound. LandCARE owns all the outstanding capital stock of Newco
and all of the outstanding capital stock of each of its subsidiaries, free and
clear of all security interests, liens, claims, pledges, agreements, charges or
other encumbrances of any nature whatsoever.
(b) Except pursuant to the LandCARE Option Plans (collectively, the
"LandCARE Option Plans"), or as set forth in or contemplated by the SEC Reports
(as defined below), as of July 31, 1998 there are no options, warrants or other
rights, agreements, arrangements or commitments of any character to which
LandCARE is a party relating to the issued or unissued capital stock of LandCARE
or obligating LandCARE to grant, issue or sell any shares of its capital stock,
by sale, lease, license or otherwise. As contemplated by the SEC Reports,
LandCare is a party to a number of letters of intent relating to potential
transactions involving potential issuances of capital stock of LandCare, and may
be a party to one or more definitive agreements relating to such potential
transactions, any or all of which may involve LandCare's intention, whether or
not reduced to binding commitments, to issue shares of capital stock of LandCare
or to grant options to acquire shares of capital stock of
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LandCare. Except as set forth in the SEC Reports (as defined below), there are
no obligations, contingent or otherwise, of LandCARE to repurchase, redeem or
otherwise acquire any of either of their shares of stock. There are no voting
trusts, proxies or other agreements or understandings to which LandCARE is a
party or by which LandCARE is bound with respect to the voting of any shares of
its capital stock.
(c) The shares of LandCARE Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, LandCARE's charter or bylaws or
any agreement to which LandCARE is a party or is bound.
(d) The shares of LandCARE Stock to be issued in the Merger will be
at the Effective Time, approved for listing on the New York Stock Exchange
("NYSE") and duly registered or qualified under federal and applicable state
securities laws.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by each of LandCARE
and Newco does not, and the consummation by LandCARE and Newco of the
transactions contemplated hereby will not (i) conflict with or violate the
charter or bylaws, in each case as amended or restated, of LandCARE or any of
LandCARE's subsidiaries, (ii) conflict with or violate any laws, regulations, or
any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over and applicable to LandCARE or any of LandCARE's subsidiaries
or by which any of their properties is bound or subject, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of LandCARE
or any of LandCARE's subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which LandCARE or any of LandCARE's subsidiaries is
a party or by or to which LandCARE or any of LandCARE's subsidiaries or any of
their respective properties is bound or subject, except in the case of clauses
(ii) and (iii) above, any conflict, violation, breach, default, lien or
encumbrance that would not have a Material Adverse Effect on LandCARE or any of
its operations.
(b) The execution and delivery of this Agreement by each of LandCARE
and Newco does not, and the consummation of the transactions contemplated hereby
will not, require LandCARE or any of its subsidiaries to obtain any consent,
license, permit, approval, waiver,
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authorization or order of, or to make any filing with or notification to, any
federal, state, municipal or other governmental entity, except for the filing
and recordation of appropriate merger documents as required by the State of
Texas, any filings that may be required as a result of the legal or regulatory
status of LandCARE or Newco, consents already obtained, and any consent,
license, permit, approval, authorization, order, filing or notification that if
not obtained or made would not have a Material Adverse Effect.
3.5 REPORTS; FINANCIAL STATEMENTS. LandCARE and its subsidiaries have
filed all forms, reports, statements and other documents required to be filed
with the Securities and Exchange Commission ("SEC") pursuant to the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended,
including, without limitation, (i) all filings made in connection with its
initial public offering, the Registration Statement No. 333-58487 on Form S-1
(the "Shelf S-1"), or otherwise, (ii) all Annual Reports on Form l0-K, (iii) all
Quarterly Reports on Form 10-Q, (iv) all proxy statements relating to meetings
of stockholders (whether annual or special), and (v) all Current Reports on Form
8-K (collectively, the "SEC Reports"). LandCARE has made available to the
Company complete and correct copies of all SEC Reports filed by LandCARE. The
SEC Reports, (x) were prepared, as of the time they were filed, in all material
respects in accordance with the requirements of applicable laws and regulations
and (y) did not at the time they were filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the SEC
Reports or as contemplated by this Agreement, (a) neither LandCARE nor any of
its subsidiaries has any liabilities or obligations of any kind which would have
a Material Adverse Effect on LandCARE or any of its operations and (b) since May
6, 1998, there has not been any Material Adverse Effect on LandCARE or any of
its operations.
3.7 ABSENCE OF LITIGATION. Except as set forth in the SEC Reports, there
are no claims, actions, suits, or proceedings pending, or, to the knowledge of
LandCARE, threatened, against or affecting LandCARE (or any of its officers or
directors in their capacities as such), at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over LandCARE that would
have a Material Adverse Effect on LandCARE or any of its operations.
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3.8 TAX MATTERS; POOLING. None of LandCARE nor any of its subsidiaries has
knowingly taken or agreed to take any action that would prevent the Merger (a)
from constituting a reorganization qualifying under the provisions of section
368(a) of the Code or (b) from being treated as a pooling transaction for
financial accounting purposes.
3.9 VOTE REQUIRED. No vote of the holders of any class or series of
LandCARE capital stock is required to approve the Merger and adopt this
Agreement. LandCARE, as the sole stockholder of Newco, has approved the Merger
and adopted this Agreement.
3.10 NEWCO. Except for liabilities incurred in connection with its
organization, the Merger and the negotiation and consummation of the
transactions contemplated by this Agreement, Newco has not incurred any
liabilities or obligations of any kind nor engaged in any material business
activities or entered into any material agreement or arrangements.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger for purposes of effecting the Merger in the form of Annex I.
4.3 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.3 are entering into Employment Agreements in the form of Annex II.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex III. Counsel to LandCARE is delivering an opinion to the
Stockholders dated the date hereof in the form attached hereto as Annex IV.
4.5 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than ten days prior to the
date hereof, duly issued by the appropriate governmental authority in the State
of Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
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4.6 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.7 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
4.9 ACCOUNTING TREATMENT. LandCARE is receiving advice from its
independent accountants that the transactions contemplated hereby may be
accounted for by LandCARE as a pooling of interests.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCARE shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company will pay the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholders shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholders
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholders acknowledge that the Stockholders, and not
the Company or LandCARE, will pay all taxes (income or otherwise), if any, due
upon receipt of the consideration payable pursuant to this Agreement.
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5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and any of the Stockholders or any of their
affiliates are parties, except for this Agreement and the agreements set forth
on SCHEDULE 5.3.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholders shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) LandCARE will prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company for taxable periods which begin
before the Closing Date and end after the Closing Date. The Stockholders will
pay to the Company within 15 days of the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such taxable period ending on the Closing Date. For
purposes of this section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such taxable period ending on the Closing Date will (x) in the case of any
Taxes other than Taxes measured with respect to income (whether or not
denominated income taxes), be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case of
any Tax measured with respect to income (whether or not denominated an income
tax), be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Closing Date. For purposes of this section, in the
case of any Tax credit relating to a taxable period that begins before and ends
after the Closing Date, the portion of such Tax credit which relates to the
portion of such taxable period ending on the Closing Date will be the amount
which bears the same relationship to the total amount of such Tax credit as the
amount of Taxes described in (y) above bears to the total amount of Taxes for
such taxable period. All determinations necessary to give effect to the
foregoing allocations will be made in a manner consistent with prior practice of
the Company.
(d) Any Tax refunds that are received by LandCARE or the Company
relating to any Tax period of the Company ending on or prior to the Closing Date
will belong to the Stockholders. The LandCARE and the Company agree to promptly
pay the Stockholders any refunds received by LandCARE or the Company that belong
to the Stockholders pursuant to the preceding sentence.
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(e) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 STOCK OPTIONS. The Compensation Committee of the Board of Directors of
LandCARE has approved the grant of a pool of stock options to purchase an
aggregate of 168,852 shares of LandCARE Stock, which stock options are to be
granted to certain key management and supervisory employees of the Company in
increments of not less than 500 shares. The Stockholder hereby covenants and
agrees to provide to LandCARE the allocation of such options among such key
management and supervisory employees of the Company as soon as reasonably
practicable after the Closing, and LandCARE hereby covenants and agrees to
recommend the approval of the specific allocated stock option grants to the
Compensation Committee of its Board of Directors. The options shall be issued
pursuant to the LandCare 1998 Long-Term Incentive Plan; the date of grant shall
be the date hereof; and the options shall have exercise prices per share of
LandCare common stock covered thereby equal to the fair market value of such
shares at the date of grant. LandCare has filed or will file a Registration
Statement on Form S-8 relating to such options.
5.6 STOCKHOLDER GUARANTEES Notwithstanding anything else herein, LandCARE
agrees to hold harmless and to indemnify each of the Stockholders or their
affiliates from any loss, damage, claim, liability or obligation arising from
any guarantee (personal or otherwise) by either of the Stockholders of any
liability or obligation of the Company (contingent or otherwise), and agrees to
cause the unconditional release of the Stockholders and their affiliates from
such guarantees and all the obligations thereunder within ninety (90) days after
the Effective Time. The obligations of LandCare under this Section 5.6 shall not
be subject to the limitations set forth in Section 6.6 of this Agreement, and
shall survive the consummation of the transactions contemplated hereby.
5.7 BANK INDEBTEDNESS. The Stockholders hereby represent to LandCare that
the aggregate outstanding balance of the Company's indebtedness to NationsBank
as of July 31, 1998 was not more than $1,678,000 (the "NationsBank Debt"). As
promptly as practicable after the
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Closing, and in any case within three business days after Closing, LandCare
shall cause the Company to repay the NationsBank Debt, plus any and all costs,
expenses and fees associated with the termination of such credit facility, and
shall cause the prompt release of any and all liens and guaranties securing such
debt.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
this Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties and
indemnification provisions with respect to which a claim is made within the
applicable survival period shall survive until such claim is finally determined
and paid or resolved.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid or resolved.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on actual fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
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LandCARE and Newco acknowledge and agree that other than the
representations and warranties of the Stockholders specifically contained in
this Agreement, there are no representations or warranties of the Stockholders,
either express or implied, with respect to the transactions contemplated by this
Agreement, the Company or its assets, liabilities and business.
6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders and all of
their agents, representatives and affiliates at all times from and after the
date of this Agreement until the Expiration Date from and against all Damages
incurred by such indemnified person as a result of or incidental to (i) any
breach of any representation or warranty of LandCARE set forth herein; and (ii)
any breach or nonfulfillment of any covenant or agreement by LandCARE under this
Agreement.
6.4 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received written notice of or has actual knowledge of any claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or proceeding by a Third Person that may give rise to a right of
indemnification hereunder, such Indemnified Party shall give to the party
obligated to provide indemnification hereunder (an "Indemnifying Party") written
notice of such claim or the commencement of such action or proceeding; provided,
however, that the failure to give such notice will not relieve such Indemnifying
Party from liability under this Section with respect to such claim, action or
proceeding, except to the extent that the Indemnifying Party has been actually
prejudiced as a result of such failure. The Indemnifying Party (at its own
expense) shall have the right and shall be given the opportunity to associate
with the Indemnified Party in the defense of such claim, suit or proceedings,
and may select counsel for the Indemnified Party, such counsel to be reasonably
satisfactory to the Indemnified Party. The Indemnified Party shall not, except
at its own cost, make any settlement with respect to any such claim, suit or
proceeding without the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed. All settlements hereunder shall
effect a complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds and tax benefits in determining the amount of
any Damages.
6.5 METHOD OF PAYMENT. Any indemnity obligation LandCare is required to
make hereunder shall be paid in LandCARE Stock valued at $9.00 per share. Any
indemnity obligation the Stockholders are required to make hereunder may be paid
either in cash or in shares of LandCare Stock. In the event the Stockholders are
required to make any such indemnification payment, and elect to make such
payment in LandCare Stock, such LandCare Stock shall be valued based on the
average of the closing prices of LandCare Stock on the New York Stock Exchange
for the 60 trading days ending ten days prior to the date such payment is to be
made, unless the parties otherwise agree.
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6.6 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $150,000 (the "Indemnification Threshold") and then
only to the extent that such claims exceed the Indemnification Threshold. The
Stockholders shall not assert any claim for indemnification hereunder against
LandCARE until such time as the aggregate of all claims which the Stockholders
may have against LandCARE shall exceed the Indemnification Threshold and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Article 6 shall not exceed
$1,500,000 (the "Liability Limit"); the aggregate liability of LANDCARE
hereunder shall not exceed the Liability Limit.
6.7 EXCLUSIVE REMEDY. The indemnification provided for in this Section 6
shall be the exclusive remedy in any action seeking damages or any other form of
monetary relief brought by any party to this Agreement against another party
with respect to the matters set forth herein except in cases of actual fraud.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) Except on behalf of LandCARE or its
affiliates (including the Company), the Stockholders will not, for a period of
five years following the Closing Date, for any reason whatsoever, directly or
indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 100 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE or any of its subsidiaries
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<PAGE>
(including the Company) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit any Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCARE in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCARE's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCARE or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCARE of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
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<PAGE>
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCARE after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCARE to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCARE, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any governmental authority,
provided, that prior to disclosing any information pursuant to this clause (ii),
the Stockholders shall give prior written notice thereof to LandCARE and provide
LandCARE with reasonable opportunity to contest such disclosure. In the event of
a breach or threatened breach by any Stockholder of the provisions of this
Section, LandCARE shall be entitled to injunctive or other equitable relief
restraining such Stockholder from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement.
9 INTENDED TAX AND ACCOUNTING TREATMENT
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<PAGE>
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholders will not take any actions that disqualify the Merger for such
treatment. The Stockholders represent, warrant and covenant that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Closing, the Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the gross assets held by the Company immediately
prior to the Closing). For purposes of the preceding sentence, amounts paid by
the Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property and the Company assets used to pay its
reorganization expenses and all redemptions and distributions (except for normal
dividends) made by the Company immediately preceding the Closing, pursuant to
this Agreement or otherwise as part of the plan of Merger provided for herein,
will be included as assets of the Company held immediately prior to the Merger.
9.2 RESTRICTIONS ON RESALE. (a) LandCARE has informed the Stockholders
that it intends to account for the transactions contemplated by this Agreement
as a pooling of interests. LandCARE has also informed the Stockholders that its
ability to account for the transactions contemplated hereby as a pooling of
interests was a material factor considered by LandCARE in its decision to enter
into this Agreement. Therefore, pursuant to the rules of the Securities and
Exchange Commission relating to pooling of interests transactions, prior to the
publication and dissemination by LandCARE of consolidated financial results
which include results of the combined operations of the Company and LandCARE for
at least thirty days on a consolidated basis following the Effective Time (the
"Publication"), the Stockholders shall not sell, offer to sell or otherwise
transfer or dispose of, any shares of the LandCARE Stock received by
Stockholders, engage in put, call, short-sale, straddle or similar transactions,
or in any other way reduce the Stockholders' risk of owning shares of LandCARE
Stock; provided, however, that this restriction shall not prohibit the
Stockholders from pledging any such shares to secure full-recourse indebtedness.
The certificates evidencing the LandCARE Stock to be received by the
Stockholders will bear a legend stating:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT, PRIOR TO THE PUBLICATION AND
DISSEMINATION OF FINANCIAL STATEMENTS BY THE ISSUER WHICH INCLUDE THE
RESULTS OF AT LEAST THIRTY (30) DAYS OF COMBINED OPERATIONS OF THE ISSUER
AND THE COMPANY ACQUIRED BY THE
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<PAGE>
ISSUER IN THE TRANSACTION IN WHICH THE SHARES REPRESENTED HEREBY WERE
ISSUED. THE FOREGOING RESTRICTION SHALL NOT PREVENT OR RESTRICT THE HOLDER
HEREOF FROM PLEDGING THE SHARES REPRESENTED HEREBY TO SECURE FULL-RECOURSE
INDEBTEDNESS OF THE HOLDER HEREOF.
(b) LandCARE shall cause the Publication to occur no later than November
14, 1998.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder acknowledges and
confirms that he or she has received and reviewed a Shelf S-1 from LandCARE
relating to his or her acquisition of shares of LandCARE Stock hereunder.
10.2 COMPLIANCE WITH LAW. Each Stockholder covenants that none of the
LandCARE Stock acquired by such Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by such Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy
-31-
<PAGE>
of this Agreement, and may be facsimiles rather than originals, and shall be
fully as effective as though all signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Clean Cut, Inc.
8711 Burnett Road, Suite F73
Austin, Texas 78757
Facsimile No. 512-452-2378
Attention: President
With a copy to:
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attention: James E. Cahill, III
Facsimile No. 214-939-5849
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<PAGE>
If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date or as
otherwise provided herein.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
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<PAGE>
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns, except as set forth in Section 6 of this
Agreement. The Stockholders are hereby authorized to institute and maintain any
legal action or proceeding they deem necessary in the event LandCare fails to
grant the stock options contemplated by Section 5.5 hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
CCI ACQUISITION CORP.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: President
CLEAN CUT, INC.
By: /s/ REX GORE
Name: REX GORE
Title: President
<PAGE>
Stockholders and Spouses:
Spouse, if applicable:
/s/ DENNIS DAUTEL
/s/ CINDY DAUTEL Dennis Dautel
CINDY DAUTEL
/s/ REX GORE
/s/ DEBRA GORE Rex Gore
DEBRA GORE
EXHIBIT 10.5
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 5, 1998
by and among
LANDCARE USA, INC.,
HI ACQUISITION CORP.,
HORTICULTURE INDUSTRIES, INC.,
and
William H. Davoli
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 THE MERGER.......................................................1
----------
1.2 EFFECTIVE TIME...................................................1
--------------
1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION...2
--------------------------------------------------------------
1.4 EFFECT OF MERGER.................................................2
----------------
1.5 MANNER OF CONVERSION.............................................2
--------------------
1.6 DELIVERY OF CERTIFICATES.........................................3
------------------------
1.7 CLOSING..........................................................3
-------
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................3
2.1 DUE ORGANIZATION.................................................3
----------------
2.2 AUTHORIZATION....................................................4
-------------
2.3 CAPITAL STOCK OF THE COMPANY.....................................4
----------------------------
2.4 SUBSIDIARIES.....................................................4
------------
2.5 FINANCIAL STATEMENTS.............................................4
--------------------
2.6 LIABILITIES AND OBLIGATIONS......................................5
---------------------------
2.7 ACCOUNTS AND NOTES RECEIVABLE....................................5
-----------------------------
2.8 PERMITS AND INTANGIBLES..........................................6
-----------------------
2.9 ENVIRONMENTAL MATTERS............................................6
---------------------
2.10 PERSONAL PROPERTY................................................7
-----------------
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........7
---------------------------------------------------------
2.12 REAL PROPERTY....................................................8
-------------
2.13 INSURANCE........................................................9
----------
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....9
------------------------------------------------------------
2.15 EMPLOYEE BENEFIT PLANS...........................................9
----------------------
2.16 CONFORMITY WITH LAW; LITIGATION.................................10
-------------------------------
2.17 TAXES...........................................................11
-----
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED...................12
---------------------------------------------
2.19 ABSENCE OF CHANGES..............................................13
------------------
2.20 POWERS OF ATTORNEY..............................................14
------------------
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........14
-------------------------------------------------------
2.22 DISCLOSURE......................................................14
----------
2.23 CERTAIN BUSINESS PRACTICES......................................15
--------------------------
2.24 NOTICE TO BARGAINING AGENTS.....................................15
---------------------------
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2.25 NOTICES AND CONSENTS............................................15
--------------------
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS.............15
---------------------------------------------------
2.27 YEAR 2000 COMPLIANCE............................................15
--------------------
2.28 RELIANCE UPON ORAL REPRESENTATIONS..............................15
----------------------------------
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 DUE ORGANIZATION................................................16
----------------
3.2 AUTHORIZATION...................................................16
-------------
3.3 NO VIOLATIONS...................................................16
-------------
3.4 VALIDITY OF OBLIGATIONS.........................................16
-----------------------
3.5 REGISTRATION STATEMENT..........................................16
----------------------
4. DELIVERIES............................................................16
4.1 INSTRUMENTS OF TRANSFER.........................................16
-----------------------
4.2 CERTIFICATE OF MERGER...........................................16
---------------------
4.3 EMPLOYMENT AGREEMENT............................................17
--------------------
4.4 OPINION OF COUNSEL..............................................17
------------------
4.5 GOOD STANDING CERTIFICATES......................................17
--------------------------
4.6 LEASE...........................................................17
-----
4.7 INDEBTEDNESS TO COMPANY.........................................17
-----------------------
4.8 CONSENTS........................................................17
--------
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS..........................17
--------------------------------------
4.10 SATISFACTION OF CERTAIN DEBTS...................................17
-----------------------------
4.11 ENVIRONMENTAL INDEMNITY AGREEMENT...............................17
---------------------------------
5. POST-CLOSING COVENANTS................................................17
5.1 FUTURE COOPERATION; FURTHER ASSURANCES..........................17
--------------------------------------
5.2 EXPENSES........................................................18
--------
5.3 CERTAIN AGREEMENTS..............................................18
------------------
5.4 PREPARATION AND FILING OF TAX RETURNS...........................18
-------------------------------------
5.5 STOCK OPTIONS...................................................19
-------------
6. INDEMNIFICATION.......................................................19
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES. .....19
--------------------------------------------------------
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER......................19
------------------------------------------
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDER.....................20
-------------------------------------------
6.4 INDEMNIFICATION BY LANDCARE.....................................20
---------------------------
6.5 THIRD PERSON CLAIMS.............................................20
-------------------
6.6 METHOD OF PAYMENT...............................................21
-----------------
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7. NONCOMPETITION........................................................21
7.1 PROHIBITED ACTIVITIES...........................................21
---------------------
7.2 EQUITABLE RELIEF................................................22
----------------
7.3 REASONABLE RESTRAINT............................................22
--------------------
7.4 SEVERABILITY; REFORMATION.......................................22
-------------------------
7.5 INDEPENDENT COVENANT............................................22
--------------------
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 GENERAL.........................................................23
-------
8.2 EQUITABLE RELIEF................................................23
----------------
8.3 SURVIVAL........................................................24
--------
9 INTENDED TAX TREATMENT
.....................................................................24
9.1 TAX-FREE REORGANIZATION.........................................24
9.2 RESTRICTIONS ON RESALE..........................................24
10 SECURITIES LAW MATTERS................................................24
10.1 ECONOMIC RISK; SOPHISTICATION...................................24
-----------------------------
10.2 COMPLIANCE WITH LAW.............................................25
-------------------
11. GENERAL...............................................................25
11.1 SUCCESSORS AND ASSIGNS..........................................25
----------------------
11.2 ENTIRE AGREEMENT................................................25
----------------
11.3 COUNTERPARTS....................................................25
------------
11.4 BROKERS AND AGENTS..............................................25
------------------
11.5 NOTICES.........................................................25
-------
11.6 GOVERNING LAW...................................................26
-------------
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................26
------------------------------------------
11.8 EXERCISE OF RIGHTS AND REMEDIES.................................26
-------------------------------
11.9 TIME............................................................26
----
11.10 REFORMATION AND SEVERABILITY....................................27
----------------------------
11.11 REMEDIES CUMULATIVE.............................................27
-------------------
11.12 CAPTIONS........................................................27
--------
11.13 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................27
---------------------------------------
11.14 NO THIRD-PARTY BENEFICIARIES....................................27
----------------------------
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<PAGE>
SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
SCHEDULE 6.3. Specific Indemnification
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
Annex III - Form of Lease
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 5, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), HI Acquisition Corp., a Florida corporation and wholly
owned subsidiary of LandCARE ("Newco"), Horticulture Industries, Inc., a Florida
corporation (the "Company"), and William H. Davoli (the "Stockholder"). The
Stockholder is the only holder of capital stock of the Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company pursuant to this
Agreement and the applicable provisions of the laws of the State of Florida (the
"State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Newco shall be merged with
and into the Company (the "Merger") and the separate existence of Newco shall
cease, all in accordance with the provisions of the law of the State of
Incorporation. The Company shall be the surviving corporation in the Merger and
is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State (or other appropriate authority) of the
State of Incorporation (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the execution and delivery
of this Agreement.
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<PAGE>
1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION. At the
Effective Time, the Articles of Incorporation of Newco then in effect shall be
the Articles of Incorporation of the Surviving Corporation, and the By-laws of
Newco then in effect shall be By-laws of the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the Company shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of Newco shall be merged with and into the Company, and the Company,
as the Surviving Corporation, shall be fully vested therewith. At the Effective
Time, the separate existence of Newco shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and Newco
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation
vested in the Company and Newco, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of the Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in their place. Neither the rights of creditors nor any liens upon the property
of the Company or Newco shall be impaired by the Merger, and all debts,
liabilities and duties of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Newco ("Newco Stock") shall be as follows:
As of the Effective Time:
1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive, in the aggregate, (i) 333,333 shares of
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<PAGE>
common stock, par value $.01 per share, of LandCARE ("LandCARE Stock"), valued
at $9.00 per share, and (ii) an aggregate of $750,000 in cash paid by wire
transfer (it being agreed that a portion of such shares of LandCare Stock shall
not be delivered at the Cosing and shall be held by LandCare as described in
Section 6.6 hereof).
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. Each outstanding share of Newco Stock shall, by virtue of
the Merger and without any action on the part of LandCARE, automatically be
converted into one fully paid and non-assessable share of Common Stock of the
Surviving Corporation, which shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation, and shall be owned by
LandCARE, immediately after the Effective Time.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholder, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholder certificates representing the
LandCARE Stock as described above. The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. Except as set forth on SCHEDULE 2.1, the Company is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary, except where the failure to be so authorized or
qualified would not have a material adverse effect on the business, assets,
operations or condition (financial or otherwise) of the Company (as used herein
with respect to the Company, or with respect to any other person, a "Material
Adverse Effect"). SCHEDULE 2.1 sets forth a list of all jurisdictions in which
the Company
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is authorized or qualified to do business. True, complete and correct copies of
the Articles of Incorp oration and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, copies of which have previously been delivered to LandCare, are correct
and complete in all material respects. All records of all proceedings of the
Board of Directors and stockholders of the Company have been made available to
LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100 shares of common stock, par value $0.01 per
share, of which 40 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholder and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholder to transfer any of the Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows
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for the three-year period then ended, together with any related notes and
schedules (the "Year-end Financial Statements"); and
(ii) The balance sheet attached hereto (the "Interim Balance Sheet")
of the Company as of June 30, 1998 and the related audited statements of
operations for the six-month period then ended (the "Interim Financial
Statements"). (The Year-end Financial Statements and the Interim Financial
Statements are herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company. The Year-end Financial Statements have been prepared in conformity
with generally accepted accounting principles applied on a basis consistent with
preceding years and throughout the periods involved ("GAAP") and present fairly
the financial position and results of operations of the Company as of the dates
of such statements and for the periods covered thereby. The Interim Financial
Statements have not been prepared in conformity with GAAP, but do present fairly
the financial position and results of operations of the Company as of the dates
of such statements and for the periods covered thereby. The books of account of
the Company have been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. SCHEDULE 2.6 contains
a reasonable estimate of the maximum amount which may be payable with respect to
known liabilities which are not fixed. For each such known liability for which
the amount is not fixed, SCHEDULE 2.6 includes a summary description of each
known liability, together with copies of all relevant documentation relating
thereto. The Company's total debt (not including leases or contingent
liabilities identified on SCHEDULE 2.6) as of the Closing Date does not exceed
$6,700,000. As of the Closing Date the Company's tangible net worth is at least
$1,300,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
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2.8 PERMITS AND INTANGIBLES. The Company, or its employees, as
appropriate, hold all material licenses, franchises, permits and other
governmental authorizations required or necessary in connection with the conduct
of the Company's business. SCHEDULE 2.8 sets forth an accurate list and summary
description of all such licenses, franchises, permits and other governmental
authorizations, including permits, titles (including licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by the Company or any of its employees (including
interests in software or other technology systems, programs and intellectual
property; provided, however, that SCHEDULE 2.8 need not individually list each
of the individual software licenses for wordprocessing and similar software
loaded on the Company's personal computers, it being understood that the Company
holds licenses for such software) (collectively, the "Intangible Assets") (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. Except to the extent that noncompliance with
any Environmental Laws, either singly or in the aggregate, has not had and will
not have a Material Adverse Effect on the Company or any of its operations and
will not necessitate any material expenditure by the Company in the future:
(i) the Company has complied with and is in compliance with all federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to any of them or any of their respective properties, assets, operations and
businesses relating to environmental protection (collectively "Environmental
Laws"), including, without limitation, Environmental Laws relating to air,
water, land and the generation, storage, use, handling, transportation,
treatment or disposal of Hazardous Wastes, Hazardous Materials and Hazardous
Substances (including petroleum and petroleum products) (as such terms are
defined in any applicable Environmental Law);
(ii) the Company has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of
all of which permits and approvals is set forth on SCHEDULE 2.9, and have
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where
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Hazardous Wastes, Hazardous Materials or Hazardous Substances have been treated,
stored, disposed of or otherwise handled;
(iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in, under or on any property owned or operated by
the Company except as permitted by Environmental Laws;
(iv) there is no on-site or, to the knowledge of the Stockholder, off-site
location to which the Company has transported or disposed of Hazardous Wastes,
Hazardous Materials or Hazardous Substances or arranged for the transportation
of Hazardous Wastes, Hazardous Materials or Hazardous Substances which is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company or LandCARE for
any clean-up cost, remedial work, damage to natural resources, property damage
or personal injury, including, but not limited to, any claim under (a) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (b) the Resource Conservation and Recovery Act, as amended, (c) the
Hazardous Materials Transportation Act, as amended, or (d) comparable state or
local statutes and regulations; and
(v) to the knowledge of the Stockholder, the Company has no contingent
liability in connection with any release of any Hazardous Waste, Hazardous
Material or Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership
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agreements, contracts with any labor organizations, strategic alliances and
options to purchase land). True, complete and correct copies of such agreements
have been made available to LandCARE. Except as described on SCHEDULE 2.11, (i)
none of the Significant Customers have canceled or substantially reduced or, to
the knowledge of the Company, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
Company, and (ii) the Company has complied with all commitments and obligations
pertaining to it, and is not in material default under any contracts or
agreements listed on SCHEDULE 2.11 and no notice of default under any such
contract or agreement has been received. The transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
contracts or agreements. SCHEDULE 2.11 also includes a summary description of
all plans or projects relating to the Company's business involving the opening
of new operations, expansion of existing operations, the acquisition of any
property, business or assets requiring, in any event, the payment of more than
$50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
leased by the Company at the date hereof (the "Real Property"), and all other
real property, if any, used by the Company in the conduct of its business. The
Company owns no real property. True, complete and correct copies of all leases
and agreements with respect to Real Property leased by the Company have been
delivered to LandCARE, and an indication as to which such properties, if any,
were formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
have been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein.
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2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. Such insurance policies evidence all of the insurance that
the Company is required to carry pursuant to all of its contracts and other
agreements and pursuant to all applicable laws, and, to the knowledge of the
Stockholder, provide adequate coverage against the risks involved in the
Company's business. Except as set forth on SCHEDULE 2.13, none of such policies
is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to
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any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions of employment of any of the
Company's employees other than the plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. The Company has no plans that are intended to qualify under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and has never
been required to file reports or other documents with any governmental agency or
required to distribute reports or plans to plan participants or beneficiaries.
Neither the Stockholder, nor any plan listed in SCHEDULE 2.15 nor the Company
has engaged in any transaction prohibited under the provisions of Section 4975
of the Code or Section 406 of ERISA. No plan listed on SCHEDULE 2.15 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company has not incurred any liability
for excise tax or penalty due to the Internal Revenue Service or any liability
to the PBGC. No plan listed on SCHEDULE 2.15 subject to the provisions of Title
IV of ERISA has been terminated; there have been no "reportable events" (as that
phrase is defined in Section 4043 of ERISA) with respect to any such plan listed
on SCHEDULE 2.15; the Company has not incurred liability under Section 4062 of
ERISA; and no circumstances exist pursuant to which the Company could have any
direct or indirect liability whatsoever (including, but not limited to, any
liability to any multi employer plan or the PBGC under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty, or being subject to
any statutory lien to secure payment of any such liability) with respect to any
plan now or heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no
unresolved notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the best knowledge of the Stockholder, there is no basis therefor. Except as set
forth on SCHEDULE 2.16, there are no outstanding judgments, orders, writs,
injunctions or decrees against
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the Company. Except as set forth on SCHEDULE 2.16, the Company has conducted and
now conducts its business in material compliance with all laws, regulations,
writs, injunctions, decrees and orders applicable to the Company or its assets.
The Company is not in violation of any material law or regulation or any order
of any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them. The Company has conducted and is conducting its business in
substantial compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
SCHEDULES 2.1, 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
Except as set forth on SCHEDULE 2.17, all Tax returns ("Returns") required
to be filed with respect to any Tax for which any of the Company and the Company
Subsidiaries (if any) is liable have been duly and timely filed with the
appropriate Taxing Authority, each Tax shown to be payable on each such Return
has been paid, each Tax payable by the Company or a Company Subsidiary by
assessment has been timely paid in the amount assessed, and adequate reserves
have been established on the consolidated books of the Company and the Company
Subsidiaries for all Taxes for which any of the Company and the Company
subsidiaries is liable, but the payment of which is not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, liable for any Tax
payable by reason of the income or property of a person or entity other than the
Company or a Company Subsidiary. Each of the Company and the Company
Subsidiaries has timely filed true, correct and complete declarations of
estimated Tax in each jurisdiction in which any such declaration is required to
be filed by it. No Liens for Taxes exist upon the assets of the Company or any
Company Subsidiary except Liens for Taxes which are not yet due. Neither the
Company nor any Company Subsidiary is, or ever has been, subject to Tax in any
jurisdiction outside the United States. No litigation with respect to any Tax
for which the Company or any Company Subsidiary is asserted to be liable is
pending or, to the knowledge of the Company or the Stockholder, threatened, and
no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company
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Subsidiary. There are no requests for rulings or determinations in respect of
any Taxes pending between the Company or any Company Subsidiary and any Taxing
Authority. No extension of any period during which any Tax may be assessed or
collected and for which the Company or any Company Subsidiary is or may be
liable has been granted to any Taxing Authority. Neither the Company nor any
Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. The
Company uses the accrual method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code. The Company has a taxable year ended December 31 and has not made an
election to retain a fiscal year other than December 31 under Code Section 444.
The Company is not party to any joint venture, partnership, or other arrangement
that is treated as a partnership for federal income tax purposes.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of
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the transactions contemplated hereby will not give rise to any right to
termination, cancellation or acceleration or loss of any right or benefit.
Except as set forth on SCHEDULE 2.18, none of the Material Documents prohibits
the use or publication of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts the Company or will
prevent or restrict the Company or LandCARE from freely providing services to
any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. To the knowledge of the Stockholder, except as set forth
on SCHEDULE 2.22, the Stockholder has provided LandCARE with all the information
that LandCARE has requested in analyzing whether to consummate the transactions
contemplated hereby. None of the information so provided nor any representation
or warranty of the Stockholder contained in this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact known to the
Stockholder which has specific application to the Company or its business or
assets (other than general economic or industry conditions) which would have a
Material Adverse Effect or, so far as the Stockholder can reasonably foresee,
threatens to have
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a Material Adverse Effect, on the Company or its business or assets, or the
condition (financial or otherwise), results of operations or prospects of the
Company, which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof.
2.27 YEAR 2000 COMPLIANCE. Except as set forth on SCHEDULE 2.27, the
properties and assets of the Company, including, but not limited to, computer
hardware, microprocessor driven equipment, software and data, owned or used by
the Company will accurately process date and time data after December 31, 1999,
and the Company will suffer no loss of functional ability when processing dates
and related data outside the 1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that no promise or inducement
has been offered or made to him or it except as expressly stated in this
Agreement or in any Employment Agreement and other written agreements entered
into pursuant to this Agreement; and (d) that this Agreement is executed without
reliance on any oral statement or oral representation by any other party or any
other party's agent or attorney.
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3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 REGISTRATION STATEMENT. The Prospectus dated July 14, 1998 delivered
to the Stockholder, receipt of which is hereby acknowledged by the Stockholder,
and a copy of which is attached hereto, does not contain a misrepresentation of
a material fact or omit to state a material fact necessary to make statements
made therein, in light of the circumstances under which they were made, not
misleading.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
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4.3 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.3 are entering into Employment Agreements in the form of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 LEASE. The Company is entering into leases of the properties
identified on SCHEDULE 4.6 in the form attached hereto as Annex III. The
Stockholder is delivering to LandCARE evidence of the termination of all leases
relating to Real Property leases by the Company from the Stockholder or any
affiliate of the Stockholder.
4.7 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.8 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.10 SATISFACTION OF CERTAIN DEBTS. At the Closing, LandCare shall cause
the Surviving Corporation to satisfy in full the obligations of the Company set
forth on SCHEDULE 4.10.
4.11 ENVIRONMENTAL INDEMNITY AGREEMENT. The Stockholder and LandCare are
entering into an Environmental Indemnity Agreement dated the date hereof.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting
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the Merger and fully carrying out the intent of this Agreement. LandCARE shall
provide the Stockholder reasonable access to the books and records of the
Surviving Corporation after the Closing Date for purposes of tax compliance and
any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholder
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise),
if any, due upon receipt of the consideration payable pursuant to this
Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder or any affiliates
of the Stockholder are parties, except the agreements set forth on SCHEDULE 5.3.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
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Subject to the preceding sentence, each party required to file tax returns
pursuant to this Agreement shall bear all costs of filing such tax returns.
5.5 STOCK OPTIONS. As promptly as practicable after the Closing, LandCare
shall cause its Compensation Committee to grant options to acquire an aggregate
of 33,334 shares of LandCare Stock to key employees of the Company designated by
the Stockholder. Such options shall be granted pursuant to and in accordance
with the LandCare 1998 Long-Term Incentive Plan, and shall have exercise prices
equal to the closing price of LandCare shares on the New York Stock Exchange on
the Closing Date (as reported in the Wall Street Journal).
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto; the representations and
warranties of the Stockholder made in Section 2.9 (Environmental Matters) shall
survive the Closing for a period of five years after the Closing Date; and the
other representations and warranties of the Stockholder made herein shall
survive the Closing for a period of one year after the Closing Date; provided,
however, that representations and warranties and indemnification provisions with
respect to which a claim is made within the survival period shall survive until
such claim is finally determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation,
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LandCARE and its subsidiaries and all of their officers, directors, employees,
stockholders, agents, representatives and affiliates at all times from and after
the date of this Agreement until the Expiration Date from and against all
claims, damages actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively "Damages") incurred
by such indemnified person as a result of or incident to (i) any breach of any
representation or warranty of the Stockholder set forth herein, and (ii) any
breach or nonfulfillment of any covenant or agreement by the Company or the
Stockholder under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that he will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against any taxes due and penalties, interest, assessments,
adjustments, costs, and expenses arising out of any matter described on SCHEDULE
6.3.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the
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Indemnifying Party's receipt of notice thereof from the Indemnified Party shall
be deemed to constitute consent by the Indemnifying Party of such settlement for
purposes of this Section.
6.6 METHOD OF PAYMENT. Claims for indemnification may be paid in cash or
shares of LandCare Stock. The Stockholder hereby authorizes LandCare to withhold
delivery of an aggregate of One Hundred Eleven Thousand, One Hundred and Eleven
(111,111) shares of LandCare Stock otherwise deliverable to the Stockholder
pursuant to this Agreement for a period of one year following the Closing Date,
which shares shall be used to satisfy any indemnification obligation the
Stockholder may have to LandCare, unless the Stockholder elects to pay any such
amount in cash. In the event any such claim is paid by the delivery of any of
such shares, such shares shall be valued based on the closing prices of LandCare
shares on the New York Stock Exchange for the 60 trading days ending ten days
prior to the date any such payment is to be made unless the parties otherwise
agree. In the event that the Stockholder becomes liable to LandCare for a claim
for indemnification pursuant to this Agreement that cannot be satisfied by the
delivery of such shares, the Stockholder shall be permitted to sell any or all
of the shares of LandCare Stock received pursuant to this Agreement without
restriction, including the restrictions set forth in Section 9.2, beginning on
the date one year after the Closing Date.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation at the date hereof (the "Business") within 100 miles of where
the Company conducted business at any time within one year prior to the
Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory; provided that such restriction shall apply only to the Business
and any incidental expansions thereto;
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(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this
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Section shall be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of the
Stockholder against LandCARE or any subsidiary thereof, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by LandCARE of such covenants. It is specifically agreed that the period of five
years stated at the beginning of this Section, during which the agreements and
covenants of the Stockholder made in this Section shall be effective, shall be
computed by excluding from such computation any time during which the
Stockholder is in violation of any provision of this Section. The covenants
contained in Section shall not be affected by any breach of any other provision
hereof by any party hereto. Not withstanding any other provision hereof, no
action shall be initiated for breach of Section 7.1 after the date five years
after the Closing Date.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
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8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholder will not take any actions that disqualify the Merger for such
treatment. The Stockholder represents, warrants and covenants that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) immediately after the Merger, the Company will hold
"substantially all of its properties" within the meaning of Section 368(a)(2)(E)
of the Code (that is, after the Merger, the Company will hold at least 90% of
the fair market value of the net assets, and at least 70% of the gross assets,
held by the Company immediately prior to the Merger.) For purposes of the
preceding sentence, amounts paid by the Company to dissenters, amounts paid by
the Company to shareholders who receive cash or other property and Company
assets used to pay reorganization expenses and all redemptions and distributions
(except for normal dividends) made by the Company immediately preceding the
Effective Time, pursuant to this Agreement or otherwise as part of the plan of
Merger provided for herein, will be included as assets of the Company held
immediately prior to the Merger.
9.2 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. Beginning on the date one year after the Closing Date, the
Stockholder may sell shares of LandCARE Stock received pursuant to this
Agreement pursuant to the LandCARE Liquidity Plan, a summary of which is
attached hereto as SCHEDULE 9.2.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience
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in business and financial matters that he is capable of evaluating the merits
and risks of an investment in the shares of LandCARE Stock, (B) fully
understands the nature, scope and duration of any limitations on transfer of
LandCARE Stock described in this Agreement and (C) can bear the economic risk of
an investment in the shares of LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to
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be notified, postage prepaid and registered or certified with return receipt
requested, or by delivering the same in person to an officer or agent of such
party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Horticulture Industries, Inc.
4824 Ashton Road
Sarasota, Florida 34233
If to the Stockholder, addressed to him at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the applicable Expiration
Date or as otherwise provided herein.
11.8 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.9 TIME. Time is of the essence with respect to this Agreement.
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11.10 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.11 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.12 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.13 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.14 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
HI ACQUISITION CORP.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: President
HORTICULTURE INDUSTRIES, INC.
By: /s/ WILLIAM H. DAVOLI
Name: WILLIAM L. DAVOLI
Title: President
/s/ WILLIAM H. DAVOLI
William H. Davoli
EXHIBIT 10.6
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of August 10, 1998
by and among
LANDCARE USA, INC.
LANDSCAPE RESOURCES, INC.
and
Stephen W. Barley
and
the other parties hereto
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 PURCHASE AND SALE................................................2
-----------------
1.2 PURCHASE PRICE...................................................2
--------------
1.3 THE CLOSING......................................................2
-----------
2. REPRESENTATIONS AND WARRANTIES OF STEPHEN W. BARLEY....................2
2.1 DUE ORGANIZATION.................................................2
----------------
2.2 AUTHORIZATION....................................................3
-------------
2.3 CAPITAL STOCK OF THE COMPANY AND RELATED MATTERS.................3
------------------------------------------------
2.4 SUBSIDIARIES; AFFILIATES.........................................4
------------------------
2.5 FINANCIAL STATEMENTS.............................................4
--------------------
2.6 LIABILITIES AND OBLIGATIONS......................................5
---------------------------
2.7 ACCOUNTS AND NOTES RECEIVABLE....................................6
-----------------------------
2.8 PERMITS AND INTANGIBLES..........................................6
-----------------------
2.9 ENVIRONMENTAL MATTERS............................................6
---------------------
2.10 PERSONAL PROPERTY................................................7
-----------------
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........8
---------------------------------------------------------
2.12 REAL PROPERTY....................................................8
-------------
2.13 INSURANCE........................................................9
----------
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....9
------------------------------------------------------------
2.15 EMPLOYEE BENEFIT PLANS...........................................9
----------------------
2.16 CONFORMITY WITH LAW; LITIGATION.................................11
-------------------------------
2.17 TAXES...........................................................11
-----
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED.......13
---------------------------------------------
2.19 ABSENCE OF CHANGES..............................................13
------------------
2.20 POWERS OF ATTORNEY..............................................14
------------------
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........14
-------------------------------------------------------
2.22 DISCLOSURE......................................................15
----------
2.23 CERTAIN BUSINESS PRACTICES......................................15
--------------------------
2.24 NOTICE TO BARGAINING AGENTS.....................................15
---------------------------
2.25 RELIANCE UPON ORAL REPRESENTATIONS..............................15
----------------------------------
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2.26 NO FEDERAL CONTRACTS............................................15
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 DUE ORGANIZATION................................................16
----------------
3.2 AUTHORIZATION...................................................16
-------------
3.3 NO VIOLATIONS...................................................16
-------------
3.4 VALIDITY OF OBLIGATIONS.........................................16
-----------------------
3.5 DISCLOSURE......................................................16
----------
3.6 RELIANCE UPON ORAL REPRESENTATIONS..............................17
----------------------------------
4. DELIVERIES............................................................17
4.1 INSTRUMENTS OF TRANSFER.........................................17
-----------------------
4.2 EMPLOYMENT AGREEMENT............................................17
--------------------
4.3 OPINION OF COUNSEL..............................................17
------------------
4.4 GOOD STANDING CERTIFICATES......................................17
--------------------------
4.5 SUBLEASE........................................................18
--------
4.6 INDEBTEDNESS TO COMPANY.........................................18
-----------------------
4.7 CONSENTS........................................................18
--------
5. POST-CLOSING COVENANTS................................................18
5.1 FUTURE COOPERATION; FURTHER ASSURANCES..........................18
--------------------------------------
5.2 EXPENSES........................................................18
--------
5.3 CERTAIN AGREEMENTS..............................................19
------------------
5.4 PREPARATION AND FILING OF TAX RETURNS...........................19
-------------------------------------
6. INDEMNIFICATION.......................................................20
6.1 SURVIVAL OF STOCKHOLDER'S AND LANDCARE'S REPRESENTATIONS AND
WARRANTIES.....................................................20
----------
6.2 GENERAL INDEMNIFICATION BY STEPHEN W. BARLEY ...................21
---------------------------------------------
6.3 INDEMNIFICATION BY LANDCARE.....................................21
---------------------------
6.4 CLAIMS..........................................................21
------
6.5 THIRD PERSON CLAIMS.............................................21
-------------------
6.6 METHOD OF PAYMENT...............................................22
-----------------
6.7 LIMITATIONS ON INDEMNIFICATION..................................22
------------------------------
7. NONCOMPETITION........................................................22
7.1 PROHIBITED ACTIVITIES...........................................22
7.2 EQUITABLE RELIEF................................................23
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7.3 REASONABLE RESTRAINT............................................23
--------------------
7.4 SEVERABILITY; REFORMATION.......................................23
-------------------------
7.5 INDEPENDENT COVENANT............................................24
--------------------
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................24
8.1 GENERAL.........................................................24
-------
8.2 EQUITABLE RELIEF................................................25
----------------
8.3 SURVIVAL........................................................25
--------
9. GENERAL...............................................................25
9.1 SUCCESSORS AND ASSIGNS..........................................25
----------------------
9.2 ENTIRE AGREEMENT................................................25
----------------
9.3 COUNTERPARTS....................................................25
------------
9.4 BROKERS AND AGENTS..............................................25
------------------
9.5 NOTICES.........................................................25
-------
9.6 GOVERNING LAW...................................................26
-------------
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................26
------------------------------------------
9.8 EFFECT OF INVESTIGATION.........................................27
-----------------------
9.9 EXERCISE OF RIGHTS AND REMEDIES.................................27
-------------------------------
9.10 TIME............................................................27
----
9.11 REFORMATION AND SEVERABILITY....................................27
----------------------------
9.12 REMEDIES CUMULATIVE.............................................27
-------------------
9.13 ARBITRATION.....................................................27
-----------
9.14 CAPTIONS........................................................28
--------
9.15 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................28
---------------------------------------
9.16 NO THIRD-PARTY BENEFICIARIES....................................28
----------------------------
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<PAGE>
SCHEDULES
SCHEDULE 2.1 Allocation of Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.17. Accounting Methods
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.5. Sublease
SCHEDULE 4.7. Consents
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and Stockholder
Annex III - Form of Opinion of Counsel to LandCARE
Annex IV - Form of SubLease
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 10, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Landscape Resources, Inc., a Texas corporation (the "Company"),
Stephen W. Barley (sometimes referred to herein as the "Stockholder"), Bruce A.
Sifford ("Sifford") and Shaun L. Barley ("Shaun Barley") . Stephen W. Barley is
the only holder of capital stock of the Company.
WHEREAS, the Stockholder desire to sell, and LandCARE desires to purchase,
all of the issued and outstanding capital stock of the Company (the "Shares") on
the terms and conditions set forth in this Agreement; and
WHEREAS, the Company owns a 51% membership interest in Select Landscape
L.L.C., a Texas limited liability company ("Select Landscape"), and Sifford owns
the remaining 49% membership interest in Select Landcape; and
WHEREAS, Sifford desires to sell and assign all of his interest in Select
Landscape to the Company, and Sifford and the Company desire to substitute the
Company for Sifford as a member of Select Landscape, so that after such transfer
and assignment the Company shall be the sole member of Select Landscape; and
WHEREAS, Stephen W. Barley owns a 99% membership interest in Southwest
Irrigation L.L.C., a Texas limited liability company ("Southwest Irrigation"),
and Shaun Barley owns the remaining 1% membership interest in Southwest
Irrigation; and
WHEREAS, Stephen W. Barley and Shaun Barley each desires to sell and
assign all of his or her interest in Southwest Irrigation to the Company, and
each desires to substitute the Company as the sole member of Southwest
Irrigation; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
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1.1 PURCHASE AND SALE. On the terms set forth in this Agreement:
(a) the Stockholder hereby sells, conveys, transfers, assigns and delivers
to LandCARE, and LandCARE hereby purchases from the Stockholder, all of the
Shares;
(b) Sifford hereby sells and assigns all of his interest in Select
Landscape to the Company, and Sifford and the Company hereby agree that the
Company is hereby substituted for Sifford as a member of Select Landscape, and
is now therefore the sole member of Select Landscape;
(c) Stephen W. Barley and Shaun Barley each hereby sells and assigns all
of his or her interest in Southwest Irrigation to the Company, and each hereby
agrees that the Company is hereby substituted for such persons as the sole
member of Southwest Irrigation.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
payable by LandCare for the Shares and as consideration to Sifford and Stephen
W. Barley and Shaun Barley for the transfers to the Company of the interests in
Select Landscape and Southwest Irrigation made pursuant to this Agreement is
$6,250,000 in cash, which amount is being paid at Closing as set forth on
SCHEDULE 1.2 hereto by wire transfer of immediately available funds in
accordance with wiring instructions provided by the Stockholder, Sifford and
Shaun Barley.
1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF STEPHEN W. BARLEY
Stephen W. Barley hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas (the
"State of Incorporation") and has all requisite power and authority to carry on
its business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a material adverse effect on the business, assets, operations or condition
(financial or otherwise), of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
Schedule 2.1 sets forth a list of all jurisdictions in which the Company
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<PAGE>
is authorized or qualified to do business. True, complete and correct copies of
the Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to Schedule 2.1. The stock records of the
Company, a copy of which is attached to Schedule 2.1, are correct and complete
in all material respects. All records of proceedings of the Board of Directors
and Stockholder of the Company have been made available to LandCARE.
(b) Each of Select Landscape and Southwest Irrigation (which are herein
sometimes collectively called the "LLCs") is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of
Texas, and each has all requisite power and authority to carry on its business
as it is now being conducted. Each of the LLCs is duly qualified to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. Schedule 2.1 sets forth a list of all
jurisdictions in which either of the LLCs is authorized or qualified to do
business. True, complete and correct copies of the Articles of Organization,
Regulations or other charter documents, each as amended, of each of the LLCs
(the "LLC Charter Documents") are all attached to Schedule 2.1. All records of
proceedings of the members and managers of each of the LLCs have been made
available to LandCARE.
2.2 AUTHORIZATION. (i) Each of the persons and entities other than
LandCare (collectively, the "Barley Parties") executing this Agreement has the
authority to enter into and bind such person or entity to the terms of this
Agreement and (ii) each of the Barley Parties has the full legal right, power
and authority to enter into this Agreement and the transactions contemplated
hereby, all of which have been approved by each of the Barley Parties and the
Board of Directors of the Company. This Agreement has been validly executed and
delivered by each of the Barley Parties and constitutes the legal, valid and
binding obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY AND RELATED MATTERS. (a) The authorized
capital stock of the Company consists solely of 10,000 shares of common stock,
par value $ .01 per share, of which 800 shares are issued and outstanding and
constitute all of the Shares. All of the Shares are owned of record and
beneficially by Stephen W. Barley and are owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable, and were offered, issued, sold
and delivered by the Company in compliance with all applicable state and federal
laws governing the issuance of securities. None of the Shares were issued in
violation of any preemptive rights or similar rights of any person. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any
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<PAGE>
additional shares of its capital stock or obligates the Stockholder to transfer
any of the Shares to any person except pursuant to this Agreement.
(b) The membership interest owned by Sifford (the "Sifford Interest") is
the only equity interest of any nature whatsoever in Select Landscape other than
the membership interest owned by the Company. The membership interests owned by
Stephen W. Barley and Shaun Barley (collectively, the "Barley Interest") are the
only equity interests of any nature whatsoever in Southwest Irrigation. The
Sifford Interest is owned of record and beneficially by Sifford, and the Barley
Interest is owned by Stephen W. Barley and Shaun Barley as described above, and
the Sifford Interest and the Barley Interest (collectively, the "Interests") are
owned free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the
Interests were offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal laws governing the issuance of securities.
None of the Interests were issued in violation of any preemptive rights or
similar rights of any person. No option, warrant, call, conversion right or
commitment of any kind exists which obligates either of the LLCs to admit any
person as a member of permits any person to acquire any interest therein except
pursuant to this Agreement.
2.4 SUBSIDIARIES; AFFILIATES. Except as set forth on Schedule 2.4, and
except for Select Landscape, the Company and the LLCs have no subsidiaries,
affiliates or d/b/a names and have not conducted business under any other name
except their legal name as set forth in the Charter Documents or LLC Charter
Documents, as appropriate. Except as set forth in Schedule 2.4, the Company and
the LLCs do not own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or other business entity,
and except for Select Landscape, none of them is, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "CompanyYear-end
Financial Statements");
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of May 31, 1998 and the income statement for the five-month period then
ended (the "Company Interim Financial Statements").
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(iii) The balance sheets of Select Landscape as of the Balance Sheet
Date and any related statements of operations, stockholder's equity and
cash flows for the three-year period then ended, together with any related
notes and schedules (the "Select Landscape Year-end Financial
Statements");
(iv) The balance sheet of Select Landscape as of May 31, 1998 and
the income statement for the five-month period then ended (the "Select
Landscape Interim Financial Statements").
(v) The balance sheets of Southwest Irrigation as of the Balance
Sheet Date and any related statements of operations, stockholder's equity
and cash flows for the three-year period then ended, together with any
related notes and schedules (the "Southwest Irrigation Year-end Financial
Statements");
(vi) The balance sheet of Southwest Irrigation as of May 31, 1998
and the income statement for the five-month period then ended (the
"Southwest Irrigation Interim Financial Statements").
All of the financial statements described above are herein collectively called
the "Financial Statements". References in the remainder of this Section 2 to
"the Company" refer to Landscape Resources, Inc., Select Landscape and Southwest
Irrigation collectively or individually, as appropriate, mutatis mutandis,
except as the context otherwise requires.
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The Financial Statements as of May 31, 1998 are subject to normal
period- end adjustments, which in the aggregate will not be material. The books
of account of the Company have been kept accurately in all material respects and
in the ordinary course of business, the transactions entered therein represent
bona fide transactions, and the revenues, expenses, assets and liabilities of
the Company have been properly recorded therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements, on Schedule 2.6 hereto or
the other Schedules hereto, the Company has no material liabilities or material
obligations of any kind, whether accrued, absolute, secured or unsecured,
contingent or otherwise. Schedule 2.6 contains a reasonable estimate of the
maximum amount which may be payable with respect to known liabilities which are
not fixed. For
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<PAGE>
each such known liability for which the amount is not fixed, Schedule 2.6
includes a summary description of each known liability together with copies of
all relevant documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the date of the
Interim Balance Sheet, showing amounts due in 30-day aging categories. Except to
the extent reflected on Schedule 2.7, all such accounts, notes and other
receivables were incurred in the ordinary course of business, are stated in
accordance with GAAP and are collectible in the amounts shown on Schedule 2.7,
less $35,000 (in lieu of a reserve in the May 31, 1998 balance sheet).
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required in connection with the
conduct of the Company's business. Schedule 2.8 sets forth an accurate list and
summary description of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles (including licenses,
franchises, certificates, trademarks, trade names, patents, patent applications
and copyrights owned or held by the Company or any of its employees (including
interests in software or other technology systems, programs and intellectual
property) (collectively, the "Intangible Assets") (it being understood and
agreed that a list of all environmental permits and other environmental
approvals is set forth on Schedule 2.9). To Stephen W. Barley's actual
knowledge, the Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. To Stephen W. Barley's actual
knowledge, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on Schedule 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default, breach or violation of any rights
of the Company in such Intangible Assets which singly or in the aggregate will
have a material adverse effect on the operations of the Company.
2.9 ENVIRONMENTAL MATTERS. To Stephen W. Barley's actual knowledge, the
Company has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes, Hazardous Materials and Hazardous
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<PAGE>
Substances (including petroleum and petroleum products) (as such terms are
defined in any applicable Environmental Law) except to the extent that
noncompliance with any Environmental Laws, either singly or in the aggregate,
has not had and will not have a Material Adverse Effect on the Company or any of
its operations. To Stephen W. Barley's actual knowledge, the Company has
obtained and adhered to all necessary permits and other approvals necessary to
treat, transport, store, dispose of and otherwise handle Hazardous Wastes,
Hazardous Materials and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 2.9, and have reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. Except as set forth on Schedule 2.9, to Stephen W.
Barley's actual knowledge, there have been no releases or threats of releases
(as defined in Environmental Laws) at, from, in, under or on any property owned
or operated by the Company except as permitted by Environmental Laws. To Stephen
W. Barley's actual knowledge, there is no on-site or off-site location to which
the Company has transported or disposed of Hazardous Wastes, Hazardous Materials
or Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances which is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company or LandCARE for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations.
2.10 PERSONAL PROPERTY. Schedule 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. Schedule 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on Schedule 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on Schedule
2.10, (ii) all of the personal property listed on Schedule 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
Schedule 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
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2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
2.11 sets forth a list of (i) all customers of the Company as of the date hereof
or the most recent date practicable or such other recent date as may be set
forth on such list that represent (or are expected to represent) one percent
(1%) or more of the Company's revenues for the current year ("Significant
Customers"), and (ii) all material contracts (including, but not limited to,
construction-related agreements involving payments in excess of $50,000,
maintenance contracts involving $25,000 or more, and any other agreements
involving $25,000 or more), commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on Schedule
2.11, (i) to Stephen W. Barley's actual knowledge, none of the Significant
Customers have canceled or substantially reduced or, to the knowledge of Stephen
W. Barley, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company, and
(ii) the Company has complied in all material respects with all commitments and
obligations pertaining to it, and, to Stephen W. Barley's actual knowledge, is
not in default under any contracts or agreements listed on Schedule 2.11 and no
notice of default under any such contract or agreement has been received. Except
as listed in Schedule 2.11, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of any such contracts or
agreements which singly or in the aggregate will have a material adverse effect
on the operations of the Company. Schedule 2.11 also includes a summary
description of all plans or projects relating to the Company's business
involving the opening of new operations, expansion of existing operations, the
acquisition of any property, business or assets requiring, in any event, the
payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. Schedule 2.12 includes a list of all real property
leased by the Company at the date hereof (the "Real Property"), and all other
real property, if any, used by the Company in the conduct of its business. True,
complete and correct copies of all leases and agreements with respect to Real
Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in Schedule 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of any of the
Stockholder has been terminated. Except as set forth on Schedule 2.12, all of
such leases included on Schedule 2.12 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. To Stephen W. Barley's actual
knowledge, except as provided in the leases (or Subleases described under this
Agreement) applicable to the Real Property, there are no other leases, tenancy
agreements, covenants, restrictions or any other instruments or agreements which
create in or confer on any party,
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other than the Company, the right to occupy or possess all or any portion of the
Real Property; no party other than the Company occupies or possesses the Real
Property or any portion thereof; there is legal ingress and egress between each
tract of Real Property and an adjacent (or, if none, the closest) public
roadway; the Real Property is properly zoned in order to allow its current use
in the Company's business.
2.13 INSURANCE. Schedule 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on Schedule 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, or employee, except for regular compensation increases
consistent with the Company's historical compensation practices, which increases
are described generally on Schedule 2.14.
Except as set forth on Schedule 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any organized group of its employees. The Company has not
experienced any labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. Schedule 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 2.15, the Company does not sponsor,
maintain or contribute to any plan
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program, fund or arrangement that constitutes an "employee pension benefit
plan," nor does the Company have any obligation to contribute to or accrue or
pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or any non-qualified deferred
compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan and is not required to
contribute to any retirement plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of the Company's employees other than the plans set forth on Schedule 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on Schedule 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on Schedule 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on Schedule 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
Schedule 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed. Neither the Stockholder, nor any plan listed
in Schedule 2.15, nor the Company has engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA. No
plan listed on Schedule 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
Schedule 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and, to
Stephen W. Barley's actual knowledge, no circumstances exist pursuant to which
the Company
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could have any direct or indirect material liability whatsoever (including, but
not limited to, any liability to any multi employer plan or the PBGC under Title
IV of ERISA or to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory lien to secure payment of any such liability)
with respect to any plan now or heretofore maintained or contributed to by any
entity other than the Company that is, or at any time was, a member of a
"controlled group" (as defined in Section 412(n)(6)(B) of the Code) that
includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
2.16, there are no claims, actions, suits or proceedings, pending or, to Stephen
W. Barley's actual knowledge, threatened, against or affecting the Company (or
any of its officers or directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no
unresolved notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the actual knowledge of Stephen W. Barley, there is no basis therefor. Except as
set forth on Schedule 2.16, there are no outstanding judgments, orders, writs,
injunctions or decrees against or affecting the Company or its assets. Except as
set forth on SCHEDULE 2.16, after due inquiry, to Stephen W. Barley's actual
knowledge, the Company has conducted and now conducts its business in material
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets. The Company is in substantial
compliance with any material law or regulation or any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of them and has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedules 2.8 and
2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
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All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed. Each of the Company and the Company Subsidiaries has timely filed
true, correct and complete declarations of estimated Tax in each jurisdiction in
which any such declaration is required to be filed by it. No Liens for Taxes
exist upon the assets of the Company or any Company Subsidiary except Liens for
Taxes which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax in any jurisdiction outside the United States.
No litigation with respect to any Tax for which the Company or any Company
Subsidiary is asserted to be liable is pending or, after due inquiry, to the
actual knowledge of Stephen W. Barley, threatened. Stephen W. Barley knows of no
basis on which any claim for any such Tax can be asserted against the Company or
any Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor any Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. To the
actual knowledge of Stephen W. Barley, no accounting method changes of the
Company or of any Company Subsidiary exist which could give rise to an
adjustment under Section 481 of the Code. Except as provided in Schedule 2.17,
the Company uses the accrual method of accounting for income tax purposes, and
the Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code.
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The Stockholder made a valid election under the provisions of Subchapter S
of the Code effective 1/1/98. Neither the sole stockholder nor the Company has
taken any action that terminated the Subchapter S election, which remains in
effect on the date hereof but will terminate on the Closing Date.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of Stephen W. Barley, any other party thereto, is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on Schedule 2.18, the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
material breach or constitute a material default under, any of the terms or
provisions of the Material Documents or the Charter Documents which singly or in
the aggregate will have a material adverse effect on the operations of the
Company. Except as set forth on Schedule 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect. Except as set forth on Schedule 2.18, none of the Material Documents
prohibits the use or publication of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts the Company
or will prevent or restrict the Company or the LandCARE from freely providing
services to any person.
2.19 ABSENCE OF CHANGES. Since June 30, 1998, the Company has conducted
its operations in the ordinary course of business and, except as set forth on
Schedule 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock (except for distributions in an amount equal
to the income taxes payable to the Stockholder based solely on the
Company's S corporation earnings during the period from
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June 30, 1998 to the date hereof and the distribution of all of the
membership interest in Grassroots Floral, L.L.C. as contemplated by this
Agreement) or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or other similar
material claims filed;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person which
would have a material adverse effect on the Company;
(viii)any cancellation, or agreement to cancel, any material
indebtedness or other material obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business (excluding the transactions of the Company involving
Grassroots Floral L.L.C.).
(xv) any material transaction by the Company outside the ordinary
course of its business.
2.20 POWERS OF ATTORNEY. Schedule 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 2.21, neither Stephen W. Barley nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise
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receives remuneration from, any business which is a competitor, lessor, lessee,
customer or supplier of the Company. Except as set forth on Schedule 2.21, no
officer, director or stockholder of the Company has, nor during the period
beginning January 1, 1995 through the date hereof had, any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
Company's business.
2.22 DISCLOSURE. No representation or warranty of the Stockholder
contained in this Agreement contains any material untrue statement of fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
2.23 CERTAIN BUSINESS PRACTICES. To the actual knowledge of Stephen W.
Barley, neither the Company nor any person acting on behalf of the Company has
given or offered anything of value to any governmental official, political party
or candidate for government office nor has it or any of them otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has no collective bargaining
agreements.
2.25 RELIANCE UPON ORAL REPRESENTATIONS. Stephen W. Barley represents and
warrants: (a) that he has been fully informed by his legal counsel and by his
own independent judgment of the terms, conditions and effects of this Agreement;
(b) that he has been represented by independent legal counsel of his or its
choice throughout all negotiations preceding the execution of this Agreement and
has received the advice of his or its attorney in entering into this Agreement;
(c) that he is fully satisfied with the terms of this Agreement; (d) that no
promise or inducement has been offered or made to him except as expressly stated
in this Agreement and the agreements to be entered into connection with this
Agreement, including without limitation the Employment Agreement, stock options
and the Sublease described in Article 4 below; and (e) that this Agreement is
executed without reliance on any oral statement or oral representation by any
other party or any other party's agent or attorney.
2.26 NO FEDERAL CONTRACTS. None of the Company, Select Landscape or
Southwest Irrigation is a party to any federal contract awarded pursuant to any
small business or other set aside program. The Company, Select Landscape and
Southwest Irrigation, and the affiliates of each, are each in full compliance
with all applicable laws, rules and regulations relating to federal contracts to
the extent applicable to any of them.
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3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, including, without limitation, all other agreements to be executed by
LandCARE hereunder.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby, including, without limitation, all other agreements to be executed by
LandCARE hereunder, will not result in any violation or breach or constitute a
default under any of the terms or provisions of the Restated Certificate of
Incorporation, as amended, or Bylaws, as amended, of LandCARE or any other
contract, agreement, restriction, regulation, note or judgment affecting or
binding LandCARE. There are no outstanding orders, writs, judgments, decrees,
proceedings or investigations of any court, governmental agency or arbitration
tribunal against, involving or affecting LandCARE or its ability to enter into
this Agreement or carry out the transactions contemplated hereby, and LandCARE
has no knowledge that any of such actions is threatened.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby,
including, without limitation, all other agreements to be executed by LandCARE
hereunder, have been duly and validly authorized by the Board of Directors of
LandCARE and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of
LandCARE, enforceable in accordance with its terms.
3.5 DISCLOSURE. No representation or warranty of LandCare contained in
this Agreement contains any materially untrue statement of fact or omits to
state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
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3.6 RELIANCE UPON ORAL REPRESENTATIONS. LandCare represents and warrants:
(a) that it has been fully informed by its legal counsel and by its own
independent judgment of the terms, conditions and effects of this Agreement; (b)
that it has been represented by independent legal counsel of its choice
throughout all negotiations preceding the execution of this Agreement and has
received the advice of its attorney in entering into this Agreement; (c) that it
is fully satisfied with the terms of this Agreement; (d) that no promise or
inducement has been offered or made to it except as expressly stated in this
Agreement and the agreements to be entered into connection with this Agreement,
including without limitation the Employment Agreement and the Sublease described
in Article 4 below; and (e) that this Agreement is executed without reliance on
any oral statement or oral representation by any other party or any other
party's agent or attorney.
4. DELIVERIES
In addition to the cash delivered by LandCare pursuant to Section 1.2, the
following deliveries are being made at Closing.
4.1 INSTRUMENTS OF TRANSFER . The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers). The parties hereto are also executing and
delivering instruments effecting the transfers of the LLC Interests as described
herein, and agree to execute and deliver such further instruments and other
documents as may be reasonably necessary to effectuate the transactions
described herein.
4.2 EMPLOYMENT AGREEMENT. The Company and Stephen W. Barley are entering
into an Employment Agreement in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and Stephen W. Barley is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II. Counsel to LandCARE is delivering an opinion to the
Stockholder dated the date hereof in the form attached hereto as Annex III.
4.4 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
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4.5 SUBLEASE. The Company is entering into a sublease of the property
identified on Schedule 4.5 in the form attached hereto as Annex IV.
4.6 INDEBTEDNESS TO COMPANY. The Stockholder and his Affiliates (excluding
Select Landscape and Southwest Irrigation) are repaying any outstanding
indebtedness they may have to the Company.
4.7 CONSENTS. Except as set forth on Schedule 4.7, Stephen W. Barley is
delivering to LandCARE copies of any third party consents required in connection
with the consummation of the transactions contemplated hereby.
4.8 RESIGNATION OF DIRECTORS AND OFFICERS. Stephen W. Barley is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.9 DIVESTITURE OF CERTAIN ASSETS. The Company is delivering to LandCARE
evidence of its divestiture (concurrently with or immediately prior to the
Closing) of all of its interest in its "Grass Roots" and greenhouse operations
on terms reasonably acceptable to LandCARE.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the transactions contemplated hereby and fully
carrying out the intent of this Agreement. LandCARE shall provide the
Stockholder reasonable access to the books and records of the Company after the
Closing Date for purposes of tax compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and his agents, representatives, financial advisors, accountants
and counsel incurred following the date of the letter of intent with LandCare in
connection with the execution, delivery and performance of this Agreement. The
Stockholder, and not the Company or LandCARE, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
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5.3 CERTAIN AGREEMENTS. Except for any agreements to be entered into in
connection with the transactions contemplated hereunder (including the
Employment Agreement described in Section 4.2), upon the request of LandCARE at
any time after the Closing, the Stockholder and the Company shall terminate any
existing agreements to which the Company and any of the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all tax returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. Stephen W.
Barley shall pay, and Stephen W. Barley hereby indemnifies the Company and
LandCARE against any and all liability for, all Tax liabilities for all periods
ending on or prior to the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date. LandCARE shall not file or amend
any Tax Return, or apply for any refund or take any other action relating to the
Company's Tax Return for the Company's "short period" for the period from
January 1, 1998 through the Closing Date without the consent of Mr. Barley,
which consent shall not be unreasonably withheld. No Section 338(h)(10) election
shall be made. Further, without Stephen W. Barley's consent, LandCARE shall
request no audits, and shall file no amended Tax Returns or claims for refund,
or take any other action relating to the Company's Tax Returns for tax years or
periods prior to (or including) the Company's short period beginning January 1,
1998 which would, or could reasonably be expected to result in tax adjustments,
claims, penalties, interest or related costs, which would subject Stephen W.
Barley to indemnity claims hereunder.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
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5.5 STOCK OPTIONS. Within 30 days after Closing, LandCARE shall issue
options to purchase an aggregate of 30,000 shares of LandCARE common stock to
key employees of the Company to be identified by Mr. Barley at his sole
discretion. Such options shall have an exercise price per share of LandCARE
common stock equal to the closing price of LandCARE common stock on the New York
Stock Exchange on the Closing Date, and shall be issued pursuant to and in
accordance with the LandCARE USA, Inc. 1998 Long-Term Incentive Plan.
6. INDEMNIFICATION
Stephen W. Barley and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S AND LANDCARE'S REPRESENTATIONS AND
WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company and Related Matters) and 2.17 (Taxes) of this Agreement shall survive
the Closing until the expiration of the periods prescribed by the applicable
statutes of limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholder made in Section 2.9
(Environmental Matters) shall survive the Closing for a period of three years
after the Closing Date; and the other representations and warranties of the
Stockholder made herein shall survive the Closing for a period of two years
after the Closing Date; provided, however, that representations and warranties
and indemnification provisions with respect to which a claim is made within the
survival period shall survive until such claim is finally determined and paid.
(b) The representations and warranties of LandCARE made in Sections
3.1 and 3.2 of this Agreement shall survive the Closing until the expiration of
the periods prescribed by the applicable statutes of limitation (including any
extensions thereof) relating thereto; the other representations and warranties
of LandCare made herein shall survive the Closing for a period of two years
following the Closing Date; provided, however, that representations and
warranties with respect to which a claim is made within such one-year period
shall survive until such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
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6.2 GENERAL INDEMNIFICATION BY STEPHEN W. BARLEY . Stephen W. Barley
covenants and agrees that he will indemnify, defend, protect, and hold harmless
LandCARE and its subsidiaries and all of their officers, directors, employees,
stockholders, agents, representatives and affiliates at all times from and after
the date of this Agreement until the Expiration Date from and against all
claims, damages actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively "Damages") incurred
by such indemnified person as a result of or incident to (i) any breach of any
representation or warranty of Stephen W. Barley set forth herein, and (ii) any
breach or nonfulfillment of any covenant or agreement by Stephen W. Barley under
this Agreement.
6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE or the Company
following Closing under this Agreement. LandCARE covenants and agrees (and
agrees to cause the Company after the Closing) to indemnify the Owners for any
claims arising out of or in connection with the operation of the Company or its
business after Closing.
6.4 CLAIMS. In the event a party hereto proposes to make any indemnity
claim hereunder (other than based on a third-party claim addressed in Section
6.5 below), such party shall deliver a notice to the other party stating the
nature of such claim and the amount claimed, if known. The parties shall have 30
days from the reciept of such notice to determine whether a dispute exists as to
liability hereunder with respect to such claim. The liability for
indemnification shall be determined by the mutual agreement of the parties; but
if no such agreement can be reached within such 30-day period, by arbitration as
hereinafter provided.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall
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<PAGE>
be given the opportunity to associate with the Indemnified Party in the defense
of such claim, suit or proceedings, and may select counsel for the Indemnified
Party, such counsel to be reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall not, except at its own cost, make any settlement with
respect to any such claim, suit or proceeding without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
6.7 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified by Stephen W. Barley pursuant to this Agreement shall not
assert any claim for indemnification hereunder against Stephen W. Barley until
such time as the aggregate of all claims which such persons may have against
Stephen W. Barley exceed $100,000 (the "Indemnification Threshold") and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholder under this Article 6 shall not exceed $
2,000,000 (the "Liability Limit"). The aggregate liability of LandCARE hereunder
shall not exceed the Liability Limit, except such Liability Limit shall not
apply to claims described in the last sentence of Section 6.3 above.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, Stephen W. Barley hereby
agrees that he will not, for a period of five years following the Closing Date,
for any reason whatsoever, directly or indirectly, for himself or on behalf of
or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering landscape or interior plant services or products in direct
competition with the Company anywhere within the Texas counties of Dallas,
Tarrant, Collin, Denton, Parker or Kaufman (the "Territory").
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company);
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<PAGE>
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE or any of its subsidiaries (including the Company) for the
purpose of soliciting or selling products or services in direct
competition with LandCARE or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, (a) the foregoing covenants of subparagraphs
(i), (ii) and (iv) shall not be deemed to prohibit or to apply to the following
activities (the "Excluded Activities"): (x) work or consulting services Stephen
W. Barley may perform for or render to golf courses (including the club house
and grounds associated with any such golf course; (y) sod production and sales;
and (zi) consulting relationships with and/or employment by developers, owners
or managers for the management of landscape projects, including administering
construction bids, contracts, renovations and designs; and (b) all of the
foregoing covenants shall not prohibit the Stockholder from acquiring as a
passive investor with no involvement in the operations or management of the
business, not more than two percent (2%) of the capital stock of a competing
business whose stock is publicly traded on a national securities exchange or
over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, Stephen W. Barley agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by
Stephen W. Barley by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on Stephen W.
Barley.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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<PAGE>
7.5 INDEPENDENT COVENANT. Stephen W. Barley acknowledges that his
covenants set forth in this Section are material conditions to LandCARE's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCARE or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCARE of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholder made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. Stephen W. Barley recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCARE after
the Closing Date. Stephen W. Barley agrees that he will not disclose such
confidential information, or any confidential information of the Company or
LandCARE to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCARE, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any court or governmental
authority, provided, that prior to disclosing any information pursuant to this
clause (ii), the Stockholder shall give prior written notice thereof to LandCARE
and provide LandCARE with the opportunity to contest such disclosure. In the
event of a breach or threatened breach by any Stockholder of the provisions of
this Section, LandCARE shall be entitled to injunctive or other equitable relief
restraining such Stockholder from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. Notwithstanding the foregoing,
information, including customer names, customary practices and pricing methods,
that is known generally by persons in management in other companies in the
business or industry of the Company shall not be deemed confidential
information.
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<PAGE>
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for five years.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to
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<PAGE>
be notified, postage prepaid and registered or certified with return receipt
requested, or by delivering the same in person to an officer or agent of such
party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Landscape Resources, Inc.
1870 Crown Drive, Suite 1500
Farmers Branch, Texas 75234
Facsimile No. 972-869-4475
If to Stephen W. Barley, addressed to him at the Company's address,
with copies to:
Mr. James Mincey, Esq.
Kroney Silverman Mincey, Inc.
1210 Three Forest Plaza
12221 Merit Drive
Dallas, Texas 75251
Facsimile No. 972-701-0307
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Texas without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the
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transactions contemplated hereby (subject to the applicable time limitations)
and any examination on behalf of the parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation (subject to the applicable time
limitations).
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 ARBITRATION. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in either of Houston or
Dallas, Texas in acordance with rules of the American Arbitration Association
except to the extent the parties otherwise agree. The arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof not to
award punitive damages to any injured party. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company.
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9.14 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.15 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.16 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title:Sr. Vice President
LANDSCAPE RESOURCES, INC.
By:/s/ STEPHEN W. BARLEY
Name: STEPHEN W. BARLEY
Title: President
/s/ STEPHEN W. BARLEY
------------------------------
Stephen W. Barley
/s/ SHAUN L. BARLEY By: STEPHEN W. BARLEY
-----------------------------------------------
Shaun L. Barley Attorney-in-fact under
Power of Attorney
/s/ BRUCE A. SIFFORD By: STEPHEN W. BARLEY
-----------------------------------------------
Bruce A. Sifford Attorney-in-fact under
Power of Attorney
EXHIBIT 10.7
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of August 14, 1998
by and among
LANDCARE USA, INC.,
RLC ACQUISITION CORP.,
R. L. COMPANY, INC.
and
Lebo Newman
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 THE MERGER.......................................................1
----------
1.2 EFFECTIVE TIME...................................................1
--------------
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION........................................2
------------------------
1.4 EFFECT OF MERGER.................................................2
----------------
1.5 MANNER OF CONVERSION.............................................2
--------------------
1.6 DELIVERY OF CERTIFICATES.........................................3
------------------------
1.7 CLOSING..........................................................3
-------
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................3
2.1 DUE ORGANIZATION.................................................3
----------------
2.2 AUTHORIZATION....................................................4
-------------
2.3 CAPITAL STOCK OF THE COMPANY.....................................4
----------------------------
2.4 SUBSIDIARIES.....................................................4
------------
2.5 FINANCIAL STATEMENTS.............................................5
--------------------
2.6 LIABILITIES AND OBLIGATIONS......................................5
---------------------------
2.7 ACCOUNTS AND NOTES RECEIVABLE....................................5
-----------------------------
2.8 PERMITS AND INTANGIBLES..........................................6
-----------------------
2.9 ENVIRONMENTAL MATTERS............................................6
---------------------
2.10 PERSONAL PROPERTY................................................7
-----------------
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........7
---------------------------------------------------------
2.12 REAL PROPERTY....................................................8
-------------
2.13 INSURANCE........................................................9
----------
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....9
------------------------------------------------------------
2.15 EMPLOYEE BENEFIT PLANS...........................................9
----------------------
2.16 CONFORMITY WITH LAW; LITIGATION.................................11
-------------------------------
2.17 TAXES...........................................................11
-----
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED...................12
---------------------------------------------
2.19 ABSENCE OF CHANGES..............................................13
------------------
2.20 POWERS OF ATTORNEY..............................................14
------------------
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........14
-------------------------------------------------------
2.22 DISCLOSURE......................................................15
----------
2.23 CERTAIN BUSINESS PRACTICES......................................15
--------------------------
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2.24 NOTICE TO BARGAINING AGENTS.....................................15
---------------------------
2.25 NOTICES AND CONSENTS............................................15
--------------------
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS.............15
---------------------------------------------------
2.27 YEAR 2000 COMPLIANCE............................................15
--------------------
2.28 RELIANCE UPON ORAL REPRESENTATIONS..............................16
----------------------------------
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 DUE ORGANIZATION................................................16
----------------
3.2 AUTHORIZATION...................................................16
-------------
3.3 NO VIOLATIONS...................................................16
-------------
3.4 VALIDITY OF OBLIGATIONS.........................................16
-----------------------
3.5 TAX REORGANIZATION REPRESENTATIONS.
(i) Prior to the Merger...........................17
3.7 INVESTIGATION OF THE COMPANY....................................18
-----------------------------
3.8 DISCLOSURE......................................................18
-----------
4. DELIVERIES............................................................18
4.1 INSTRUMENTS OF TRANSFER.........................................18
-----------------------
4.2 CERTIFICATE OF MERGER...........................................18
---------------------
4.3 EMPLOYMENT AGREEMENT............................................18
--------------------
4.4 OPINION OF COUNSEL..............................................18
------------------
4.5 GOOD STANDING CERTIFICATES......................................18
--------------------------
4.6 INDEBTEDNESS TO COMPANY.........................................19
-----------------------
4.7 TAX MATTERS.....................................................19
-----------
4.8 CONSENTS........................................................19
--------
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS..........................19
--------------------------------------
5. POST-CLOSING COVENANTS................................................19
5.1 FUTURE COOPERATION; FURTHER ASSURANCES..........................19
--------------------------------------
5.2 EXPENSES........................................................19
--------
5.3 CERTAIN AGREEMENTS..............................................20
------------------
5.4 PREPARATION AND FILING OF TAX RETURNS...........................20
-------------------------------------
5.5 STOCK OPTIONS...................................................20
-------------
6. INDEMNIFICATION.......................................................21
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES. .....21
--------------------------------------------------------
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER......................21
------------------------------------------
6.3 INDEMNIFICATION BY LANDCARE.....................................22
---------------------------
6.4 THIRD PERSON CLAIMS.............................................22
-------------------
6.5 METHOD OF PAYMENT...............................................23
-----------------
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6.6 LIMITATIONS ON INDEMNIFICATION..................................23
------------------------------
7. NONCOMPETITION........................................................23
7.1 PROHIBITED ACTIVITIES...........................................23
---------------------
7.2 EQUITABLE RELIEF................................................24
----------------
7.3 REASONABLE RESTRAINT............................................24
--------------------
7.4 SEVERABILITY; REFORMATION.......................................24
-------------------------
7.5 INDEPENDENT COVENANT............................................25
--------------------
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................25
8.1 GENERAL.........................................................25
-------
8.2 EQUITABLE RELIEF................................................25
----------------
8.3 SURVIVAL........................................................26
--------
9 INTENDED TAX TREATMENT
.....................................................................26
9.1 TAX-FREE REORGANIZATION.........................................26
9.2 RESTRICTIONS ON RESALE..........................................26
10 SECURITIES LAW MATTERS................................................27
10.1 ECONOMIC RISK; SOPHISTICATION...................................27
-----------------------------
10.2 COMPLIANCE WITH LAW.............................................27
-------------------
11. GENERAL...............................................................27
11.1 SUCCESSORS AND ASSIGNS..........................................27
----------------------
11.2 ENTIRE AGREEMENT................................................27
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11.3 COUNTERPARTS....................................................27
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11.4 BROKERS AND AGENTS..............................................27
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11.5 NOTICES.........................................................28
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11.6 GOVERNING LAW...................................................29
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11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................29
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11.8 EFFECT OF INVESTIGATION.........................................29
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11.9 EXERCISE OF RIGHTS AND REMEDIES.................................29
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11.10 TIME............................................................29
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11.11 REFORMATION AND SEVERABILITY....................................30
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11.12 REMEDIES CUMULATIVE.............................................30
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11.13 CAPTIONS........................................................30
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11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................30
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11.15 NO THIRD-PARTY BENEFICIARIES....................................30
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
ANNEXES
Annex I - Form of Employment Agreement
Annex IA - Form of Employment Agreement (Key Employees)
Annex II - Form of Opinion of Counsel to Company and
Stockholder
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August 14, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), RLC Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of LandCARE ("Newco"), R. L. Company, Inc., a California
corporation (the "Company"), and Lebo Newman (the "Stockholder"). The
Stockholder is the only holder of capital stock of the Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco pursuant to this
Agreement and the applicable provisions of the laws of the State of California
(the "State of Incorporation") and of the State of Delaware; and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Newco (the "Merger") and the separate existence of the Company
shall cease, all in accordance with the provisions of the law of the State of
Incorporation and of the State of Delaware. Newco shall be the surviving
corporation in the Merger and is sometimes hereinafter called the "Surviving
Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State (or other appropriate authority) of the
State of Delaware (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the execution and delivery
of this Agreement. A copy of the Merger Filing, together with such other
documents as may be appropriate
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or advisable, shall be filed with the Office of the Secretary of State of the
State of California as soon as may be practicable, and in any case within six
months, after the Closing.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Newco then in effect shall be the Articles of Incorporation of the Surviving
Corporation, and the By-laws of Newco then in effect shall be By-laws of the
Surviving Corporation. The directors and officers of Newco immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation and the law of the
State of Delaware. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of Newco shall continue unaffected and unimpaired by the Merger and
the corporate franchises, existence and rights of the Company shall be merged
with and into Newco, and Newco, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time, the separate existence of the Company
shall cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all the rights, privileges, immunities and franchises,
of a public, as well as of a private, nature, and all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions to
shares, and all taxes, including those due and owing and those accrued, and all
other choses in action, and all and every other interest of or belonging to or
due to the Company and Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Company and Newco; and the title to any real
estate, or interest therein, whether by deed or otherwise, under the laws of the
State of Incorporation vested in the Company and Newco, shall not revert or be
in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the Company and Newco and any claim
existing, or action or proceeding pending, by or against the Company or Newco
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the Company or Newco shall be impaired by the
Merger, and all debts, liabilities and duties of the Company and Newco shall
attach to the Surviving Corporation, and may be enforced against the Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Newco ("Newco Stock") shall be as follows:
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As of the Effective Time:
1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive, in the aggregate, (i) 297,177 shares of common stock, par value $.01
per share, of LandCARE ("LandCARE Stock") (such number being equal to $2,500,000
divided by the average of the closing prices of LandCARE Stock on the New York
Stock Exchange for the ten consecutive business days beginning on the 15th
business day prior to the date hereof) and (ii) an aggregate of $2,500,000 in
cash paid by wire transfer. The offer and sale of such shares of LandCare Stock
have been registered under the Securities Act of 1933, as amended, and will be
listed on the New York Stock Exchange.
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. As of the Effective Time, each outstanding share of Newco
Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholder, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholder certificates representing the
LandCARE Stock as described above. The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
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ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 7,500 shares of common stock, par value $10.00 per
share, of which 348 shares are issued and outstanding and constitute all of the
issued and outstanding shares of Company Stock (the "Shares"). All of the Shares
are owned of record and beneficially by the Stockholder and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholder to transfer any of the Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
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<PAGE>
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of October 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of May 31, 1998 and the related statements of operations for the
seven-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles as
currently applied by the Company on a basis consistent with preceding years and
throughout the periods involved ("GAAP") and present fairly the financial
position and results of operations of the Company as of the dates of such
statements and for the periods covered thereby. The books of account of the
Company have been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of the Company
listed on SCHEDULE 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto. The Company has no interest-bearing
debt as of the Closing Date. As of the Closing Date, the Company's tangible net
worth is at least $1,300,000, and the Company's net working capital is at least
$570,000 including at least $150,000 in cash.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date
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<PAGE>
is set forth thereon), showing amounts due in 30-day aging categories. Except to
the extent reflected on SCHEDULE 2.7, all such accounts, notes and other
receivables were incurred in the ordinary course of business, are stated in
accordance with GAAP and are collectible in the amounts shown on SCHEDULE 2.7,
net of reserves reflected in the balance sheet as of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Wastes, Hazardous Materials and
Hazardous Substances, a list of all of which permits and approvals is set forth
on SCHEDULE 2.9, and have reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes, Hazardous
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Materials or Hazardous Substances have been treated, stored, disposed of or
otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in, under or on any property owned or
operated by the Company except as permitted by Environmental Laws. There is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCARE for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, as amended, (iii) the Hazardous Materials
Transportation Act, as amended, or (iv) comparable state or local statutes and
regulations. The Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property with a fair market value in excess of $5,000 included in
"plant, property and equipment" or any similar category on the balance sheet of
the Company, (b) all other personal property owned by the Company with a fair
market value in excess of $5,000, and (c) all leases and agreements with respect
to personal property, copies of which have been delivered to LandCARE. SCHEDULE
2.10 indicates which assets are currently owned by the Stockholder or any
affiliate of the Company or the Stockholder. Except as set forth on SCHEDULE
2.10, (i) all material personal property used by the Company in its business is
either owned by the Company or leased by the Company pursuant to a lease
included on SCHEDULE 2.10, (ii) all of the personal property listed on SCHEDULE
2.10 is in good working order and condition, ordinary wear and tear excepted and
(iii) all leases and agreements included on SCHEDULE 2.10 are in full force and
effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms. Except as set
forth on SCHEDULE 2.10, the Company has good and marketable title to the
tangible and intangible personal property it purports to own, subject to no
security interest, pledge, lien, claim, conditional sales agreement,
encumbrance, charge or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 5% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
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reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied with all
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on SCHEDULE 2.11 and no notice of default under
any such contract or agreement has been received. The transactions contemplated
by this Agreement will not result in a default under or a breach or violation
of, or adversely affect the rights and benefits afforded to the Company by, any
such contracts or agreements. SCHEDULE 2.11 also includes a summary description
of all plans or projects relating to the Company's business involving the
opening of new operations, expansion of existing operations, the acquisition of
any property, business or assets requiring, in any event, the payment of more
than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholder has
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
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2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and, to the knowledge of the Stockholder, provide adequate coverage against the
risks involved in the Company's business. Except as set forth on SCHEDULE 2.13,
none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Stockholder after due
inquiry, no campaign to establish such representation is in progress and (iv)
there is no pending or, to the knowledge of the Stockholder after due inquiry,
threatened, labor dispute involving the Company and any group of its employees.
The Company has not experienced any labor interruptions over the past five
years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same
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meaning as is given that term in Section 3(2) of ERISA. The Company has not
sponsored, maintained or contributed to any employee pension benefit plan and is
not required to contribute to any retirement plan pursuant to the provisions of
any collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
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2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. SCHEDULE 2.16 also indicates which of such
claims, actions, suits and proceedings are covered by insurance. Except as set
forth on SCHEDULE 2.16, no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received by the Company during the last
five years and, to the best knowledge of the Stockholder, there is no basis
therefor. Except as set forth on SCHEDULE 2.16, there are no outstanding
judgments, orders, writs, injunctions or decrees against the Company. Except as
set forth on SCHEDULE 2.16, the Company has conducted and now conducts its
business in material compliance with all laws, regulations, writs, injunctions,
decrees and orders applicable to the Company or its assets. The Company is not
in violation of any material law or regulation or any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of them. The
Company has conducted and is conducting its business in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on SCHEDULES 2.8 and
2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor
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any Company Subsidiary is, or ever has been, liable for any Tax payable by
reason of the income or property of a person or entity other than the Company or
a Company Subsidiary. Each of the Company and the Company Subsidiaries has
timely filed true, correct and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be filed by it. No
Liens for Taxes exist upon the assets of the Company or any Company Subsidiary
except Liens for Taxes which are not yet due. Neither the Company nor any
Company Subsidiary is, or ever has been, subject to Tax in any jurisdiction
outside the United States. No litigation with respect to any Tax for which the
Company or any Company Subsidiary is asserted to be liable is pending or, to the
knowledge of the Company or the Stockholder, threatened, and no basis which the
Company or any Stockholder believes to be valid exists on which any claim for
any such Tax can be asserted against the Company or any Company Subsidiary.
There are no requests for rulings or determinations in respect of any Taxes
pending between the Company or any Company Subsidiary and any Taxing Authority.
No extension of any period during which any Tax may be assessed or collected and
for which the Company or any Company Subsidiary is or may be liable has been
granted to any Taxing Authority. Neither the Company nor any Company Subsidiary
is or has been party to any tax allocation or sharing agreement. All amounts
required to be withheld by any of the Company and the Company Subsidiaries and
paid to governmental agencies for income, social security, unemployment
insurance, sales, excise, use and other Taxes have been collected or withheld
and paid to the proper Taxing Authority. The Company and each Company Subsidiary
have made all deposits required by law to be made with respect to employees'
withholding and other employment Taxes. Neither the Company nor the Stockholder
is a "foreign person," as that term is referred to in Section 1445(f)(3) of the
Code. The Company has not filed a consent pursuant to Section 341 (f) of the
Code or any comparable provision of any other tax statute and has not agreed to
have Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. The Company uses the cash method of accounting for
income tax purposes and the accrual method of accounting for financial reporting
purposes, and the Company's methods of accounting have not changed in the past
five years. The Company is not an investment company as defined in Section
351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the
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Company and the Stockholder and the performance by the Company and the
Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
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(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii) any contract, commitment or liability entered into or
incurred or any capital expenditures made except in the normal course of
business consistent with past practice in an individual amount not in
excess of $25,000 and in an aggregate amount not in excess of $100,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company
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has, nor during the period beginning January 1, 1995 through the date hereof
had, any interest in any property, real or personal, tangible or intangible,
used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholder contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. To the knowledge of the Stockholder,
there is no fact which has specific application to the Company or its business
or assets (other than general economic or industry conditions) which would have
a Material Adverse Effect or, so far as the Stockholder can reasonably foresee,
threatens to have a Material Adverse Effect, on the Company or its business or
assets, or the condition (financial or otherwise), results of operations or
prospects of the Company, which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
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2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
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3.5 TAX REORGANIZATION REPRESENTATIONS.
(i) Prior to the Merger, LandCARE will be in control of Newco within
the meaning of Section 368(c) of the Code.
(ii) LandCARE has no plan or intention to cause the Surviving
Corporation to issue additional shares of its stock that would result in
LandCARE losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
(iii) LandCARE has no plan or intention to reacquire any of its
stock issued in the Merger.
(iv) LandCARE has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to another corporation
controlled by LandCARE; or to cause the Surviving Corporation to sell or
otherwise dispose of any of its assets, except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
controlled by LandCARE.
(v) Following the Closing, LandCARE's intention is that the
Surviving Corporation will continue the historic business of the Company
or use a significant portion of the historic business assets of the
Company in a business, all as required to satisfy the "continuity of
business enterprise" requirement under Section 368 of the Code.
(vi) LandCARE does not own, nor has it owned during the past five
years, any shares of the stock of the Company.
(vii) Each of LandCARE and Newco is undertaking the Merger for a
bona fide business purpose and not merely for the avoidance of federal
income tax.
(viii) Neither LandCARE nor Newco is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(ix) As of the Closing Date, the fair market value of the assets of
Newco will exceed the sum of Newco's liabilities plus the amount of other
liabilities, if any, to which Newco's assets are subject.
3.6 SEC FILINGS; DISCLOSURE. LandCARE has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents required to be filed by
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it prior to the date hereof under each of the Securities Act of 1933, as amended
(the "1933 ACT"), the Securities Exchange Act of 1934, as amended (the "1934
ACT"), and the respective rules and regulations thereunder, (a) all of which, as
amended, if applicable, complied when filed in all material respects with all
applicable requirements of the appropriate Act and the rules and regulations
thereunder, and (b) none of which, as amended, if applicable, contains any
untrue statement of material fact or omits to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
3.7 INVESTIGATION OF THE COMPANY. LandCARE is entering into this Agreement
voluntarily based upon its own investigation, judgment, and evaluation and not
upon any representations of the Stockholder or the Company other than those
specifically set forth in this Agreement.
3.8 DISCLOSURE. LandCARE has fully provided the Stockholder or his
representatives with all the information that the Stockholder has requested in
analyzing whether to consummate the Merger. None of the information so provided
nor any representation or warranty of LandCARE contained in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. Newco and the persons identified in SCHEDULE 4.3
are entering into Employment Agreements in the forms of Annexes I (Mr. Newman)
and IA (Key Employees).
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate
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governmental authority in the State of Incorporation and in each state in which
the Company is authorized to do business, showing the Company to be in good
standing and authorized to do business therein.
4.6 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.7 TAX MATTERS. Unless waived by the Stockholder, tax advisors to the
Stockholder are delivering an opinion to the Stockholder satisfactory to the
Stockholder regarding the tax consequences of the transactions contemplated
hereby. The Stockholder understands that neither LandCare nor its advisors are
advising the Stockholder with respect to the tax consequences of the
transactions contemplated by this Agreement.
4.8 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the Stockholder
reasonable access to the books and records of the Surviving Corporation after
the Closing Date for purposes of tax compliance and any other reasonable
purpose.
5.2 EXPENSES. LandCARE will pay all SEC filing fees and the fees, expenses
and disbursements of LandCARE and its agents, representatives, financial
advisors, accountants and counsel incurred in connection with the execution,
delivery and performance of this Agreement. The Stockholder will pay the fees,
expenses and disbursements of the Stockholder and its agents, representatives,
financial advisors, accountants and counsel incurred in connection with the
execution, delivery and performance of this Agreement. The Stockholder shall pay
any sales, use, transfer, real property transfer, recording, gains, stock
transfer and other similar taxes and fees ("Transfer Taxes") imposed in
connection with the Merger. The Stockholder shall file all necessary
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documentation and returns with respect to such Transfer Taxes. In addition, the
Stockholder acknowledges that the Stockholder, and not the Surviving Corporation
or LandCARE, will pay all taxes (income or otherwise), if any, due upon receipt
of the consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 STOCK OPTIONS. The Compensation Committee of the Board of Directors of
LandCARE has approved the grant of a pool of stock options to purchase an
aggregate of 29,718 shares of LandCARE Stock (such number being equal to
$250,000 divided by the average of the closing prices of LandCARE Stock on the
New York Stock Exchange for the ten consecutive business days beginning on the
15th business day prior to the date hereof), which stock options are to be
granted to certain key management and supervisory employees of the Company in
increments of not less than 500 shares. The Stockholder hereby covenants and
agrees to provide to LandCARE the allocation of such options among such key
management and supervisory employees of the Company
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as soon as reasonably practicable after the Closing, and LandCARE hereby
covenants and agrees to recommend the approval of the specific allocated stock
option grants to the Compensation Committee of its Board of Directors. The
options shall be issued pursuant to the LandCARE 1998 Long-Term Incentive Plan;
the date of grant shall be the date hereof; and the options shall have exercise
prices per share of LandCARE common stock covered thereby equal to the fair
market value of such shares at the date of grant. LandCARE has filed or will
file a Registration Statement on Form S-8 relating to such options.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement herewith shall survive the Closing
until the expiration of the periods prescribed by the applicable statutes of
limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholder made in Section 2.9
(Environmental Matters) of this Agreement shall survive the Closing for a period
of five years after the Closing Date; and the other representations and
warranties of the Stockholder made herein shall survive the Closing for a period
of two years after the Closing Date; provided, however, that representations and
warranties and indemnification provisions with respect to which a claim is made
within the survival period shall survive until such claim is finally determined
and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of two years following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such two-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that he will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the
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Expiration Date from and against all claims, damages actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively "Damages") incurred by such indemnified person as a
result of or incident to (i) any breach of any representation or warranty of the
Stockholder set forth herein, and (ii) any breach or nonfulfillment of any
covenant or agreement by the Company or the Stockholder under this Agreement. In
addition to the foregoing, the Stockholder covenants and agrees that he will
indemnify, defend, protect, and hold harmless the Surviving Corporation,
LandCARE and such other persons from and against all Damages incurred by any
such indemnified person as a result of or incident to any of the matters
described on SCHEDULE 6.2 hereto, which indemnification shall not be subject to
the limitations set forth in Section 6.6 hereof, but only to the extent that the
aggregate Damages resulting from or incident to such matters exceed $10,000.
6.3 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
LandCARE covenants and agrees that it will indemnify, defend, protect and hold
harmless the Stockholder at all times from and after the date of this Agreement
until the Expiration Date from and against all Damages incurred by the
activities or operations of the Surviving Corporation after Closing.
6.4 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act
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upon the Indemnified Party's request for consent to such settlement within five
business days of the Indemnifying Party's receipt of notice thereof from the
Indemnified Party shall be deemed to constitute consent by the Indemnifying
Party of such settlement for purposes of this Section.
6.5 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholder, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholder.
6.6 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholder until such time as the
aggregate of all claims which such persons may have against such the Stockholder
shall exceed $50,000 (the "Indemnification Threshold") and then only to the
extent that such claims exceed the Indemnification Threshold. The Stockholder
shall not assert any claim for indemnification hereunder against LandCARE until
such time as the aggregate of all claims which the Stockholder may have against
LandCARE shall exceed the Indemnification Threshold and then only to the extent
that such claims exceed the Indemnification Threshold. The aggregate liability
of the Stockholder under this Article 6 shall not exceed $5,000,000 (the
"Liability Limit"); the aggregate liability of LANDCARE hereunder shall not
exceed the Liability Limit.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation in the counties of Sonoma, Marin, Napa, Solano, Contra Costa,
Sacramento, Yolo, San Francisco, San Mateo, Santa Clara and Alameda (the
"Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant
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or advisor, or as a sales representative, in any business offering
services or products in direct competition with the Surviving Corporation
within the Territory;
(iii) call upon any person who is, at that time, an employee of the
Surviving Corporation for the purpose or with the intent of enticing such
employee away from or out of the employ of the Surviving Corporation;
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of the
Company or the Surviving Corporation for the purpose of soliciting or
selling products or services in direct competition with the Company or the
Surviving Corporation within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees
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that the foregoing covenants may be enforced against him by injunctions,
restraining orders and other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to all other
information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
neither LandCare nor the Stockholder will not take any actions that disqualify
the Merger for such treatment. The Stockholder represents that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Closing, the Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the gross assets held by the Company immediately
prior to the Closing). For purposes of the preceding sentence, amounts paid by
the Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property and the Company assets used to pay its
reorganization expenses and all redemptions and distributions (except for normal
dividends) made by the Company immediately preceding the Closing, pursuant to
this Agreement or otherwise as part of the plan of Merger provided for herein,
will be included as assets of the Company held immediately prior to the Merger.
9.2 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. After the date one year after the Closing Date the Stockholder
may sell such shares pursuant to the LandCARE Liquidity Plan. After the date two
years after the Closing Date, neither the restrictions set forth herein nor the
provisions of the LandCARE Liquidity Plan shall restrict the Stockholder from
selling or otherwise disposing of any of such shares of LandCARE Stock.
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10. SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of LandCARE Stock, (B) fully understands the nature, scope and
duration of any limitations on transfer of LandCARE Stock described in this
Agreement and (C) can bear the economic risk of an investment in the shares of
LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of brokers employed
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or alleged to have been employed by such indemnifying party. The parties
acknowledge that the Stockholder has employed a broker (the "Broker"), all fees
and commissions of which shall be paid by the Stockholder. Broker is acting as
an intermediary only. Broker has not provided legal or accounting advice to any
party, since Broker is neither an attorney or an accountant. LandCARE and Newco
are entering into this Agreement and shall satisfy themselves as to the
viability of the business of the Company on the basis of (i) their independent
assessment of each such business and the assets of the Company, (ii) the
information provided by the Company, and (iii), their physical inspection of the
assets of the Companies. LandCARE and Newco acknowledge that Broker shall not
verify the accuracy of the Stockholder's representations and warranties.
LandCARE and Newco specifically understand and acknowledge that marketing
flyers, brochures and packages concerning a business contain opinions,
speculations and projections as to the potential of the Company and other
matters. LandCARE and Newco acknowledge that they are not entering into this
Agreement on the basis of any representations, warranties or guarantees of
Broker. If any representations and warranties of either LandCARE, Newco or the
Stockholder are untrue, LandCARE, Newco, and/or the Stockholder shall look
solely to each other for relief and shall release and hold Broker harmless from
any claims arising out of any such misrepresentation. The Merger has been
structured as such to meet the needs of the parties hereto and not as a result
of the recommendation of Broker.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
R. L. Company, Inc.
2917 Petaluma Hill Road
Santa Rosa, California 95404
Attn: Mr. Lebo Newman
Facsimile No.
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If to the Stockholder, addressed to him at:
Mr. Lebo Newman
7250 Lynch Road
Sebastopol, California 95472
With copy, which shall not constitute notice, to:
Mr. Kevin J. McCullough
Spaulding McCullough & Tansil, LLP
3550 Round Barn Boulevard, Suite 306
Santa Rosa, California 95402
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
for the periods described in Section 6 of this Agreement and any examination on
behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
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11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
RLC ACQUISITION CORP.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: President
R. L. COMPANY, INC.
By: /s/ LEBO NEWMAN
Name: LEBO NEWMAN
Title: President
/s/ LEBO NEWMAN
------------------------
Lebo Newman
/s/ MERRILL H. NEWMAN
Consent of Spouse:------------------------
Merrill H. Newman
EXHIBIT 10.8
AGREEMENT AND PLAN OF MERGER
dated as of August __, 1998
by and among
LANDCARE USA, INC.,
ARTSE ACQUISITION CORP.,
ARTEKA SOUTHEAST CORPORATION
and
KAREN CORCORAN
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation and By-laws of Surviving Corporation...2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................2
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................3
2.1 Due Organization.................................................3
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................4
2.5 Financial Statements.............................................4
2.6 Liabilities and Obligations......................................5
2.7 Accounts and Notes Receivable....................................5
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................6
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........7
2.12 Real Property....................................................8
2.13 Insurance........................................................9
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans...........................................9
2.16 Conformity with Law; Litigation.................................10
2.17 Taxes...........................................................11
2.18 No Violations; All Required Consents Obtained...................12
2.19 Absence of Changes..............................................13
2.20 Powers of Attorney..............................................14
2.21 Competing Lines of Business; Related-party Transactions.........14
2.22 Disclosure......................................................15
2.23 Certain Business Practices......................................15
2.24 Notice to Bargaining Agents.....................................15
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2.25 Notices and Consents............................................15
2.26 Financial Matters...............................................15
2.27 Year 2000 Compliance............................................15
2.28 Reliance Upon Oral Representations..............................15
3. REPRESENTATIONS OF LANDCARE AND NEWCO.................................16
3.1 Due Organization................................................16
3.2 Authorization...................................................16
3.3 No Violations...................................................16
3.4 Validity of Obligations.........................................16
3.5 Prospectus......................................................17
3.6 Disclosure......................................................17
3.7 Reliance Upon Oral Representations..............................17
3.8 Liabilities.....................................................17
4. DELIVERIES............................................................17
4.1 Instruments of Transfer.........................................17
4.2 Certificate of Merger...........................................18
4.3 Good Standing Certificates......................................18
4.4 Indebtedness to Company.........................................18
4.5 Resignations of Directors and Officers..........................18
4.6 Employment Agreement............................................18
5. POST-CLOSING COVENANTS................................................18
5.1 Future Cooperation; Further Assurances..........................18
5.2 Expenses........................................................18
5.3 Certain Agreements..............................................19
5.4 Preparation and Filing of Tax Returns...........................19
5.5 Stockholder Guarantees..........................................19
5.6 Stock Options...................................................20
6. INDEMNIFICATION.......................................................20
6.1 Survival of Stockholder's Representations and Warranties. .....20
6.2 General Indemnification by the Stockholder......................20
6.3 Specific Indemnification by the Stockholder.....................20
6.4 Indemnification by LandCARE.....................................21
6.5 Third Person Claims.............................................21
6.6 Method of Payment...............................................22
7. NONCOMPETITION........................................................22
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7.1 Prohibited Activities...........................................22
7.2 Equitable Relief................................................23
7.3 Reasonable Restraint............................................23
7.4 Severability; Reformation.......................................23
7.5 Independent Covenant............................................23
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................24
8.1 General.........................................................24
8.2 Equitable Relief................................................24
8.3 Survival........................................................25
9 INTENDED TAX TREATMENT ...............................................25
9.1 Tax-Free Reorganization.........................................25
9.2 Restrictions on Resale..........................................25
10 SECURITIES LAW MATTERS................................................25
10.1 Economic Risk; Sophistication...................................25
10.2 Compliance with Law.............................................26
11. GENERAL...............................................................26
11.1 Successors and Assigns..........................................26
11.2 Entire Agreement................................................26
11.3 Counterparts....................................................26
11.4 Brokers and Agents..............................................26
11.5 Notices.........................................................26
11.6 Governing Law...................................................27
11.7 Survival of Representations and Warranties......................27
11.8 Effect of Investigation.........................................27
11.9 Exercise of Rights and Remedies.................................27
11.10 Time............................................................28
11.11 Reformation and Severability....................................28
11.12 Remedies Cumulative.............................................28
11.13 Captions........................................................28
11.14 Press Releases and Public Announcements.........................28
11.15 No Third-Party Beneficiaries....................................28
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.3. Capital Stock of the Company
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.17. Taxes
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 2.25. Notices and Consents
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.5. Leases
SCHEDULE 5.3. Certain Agreements
SCHEDULE 9.2. Restrictions on Resale
ANNEXES
Annex I - Form of Employment Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of August __, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), ARTSE Acquisition Corp., a Georgia corporation and
wholly owned subsidiary of LandCARE ("Newco"), Arteka Southeast Corporation, a
Georgia corporation (the "Company"), and Karen Corcoran (the "Stockholder"). The
Stockholder is the only holder of capital stock of the Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company pursuant to this
Agreement and the applicable provisions of the laws of the State of Georgia (the
"State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Newco shall be merged with
and into the Company (the "Merger") and the separate existence of Newco shall
cease, all in accordance with the provisions of the law of the State of
Incorporation. The Company shall be the surviving corporation in the Merger and
is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State (or other appropriate authority) of the
State of Incorporation (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the execution and delivery
of this Agreement.
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1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION. At the
Effective Time, the Articles of Incorporation of the Company then in effect
shall be the Articles of Incorporation of the Surviving Corporation, and the
By-laws of Newco then in effect shall become the By-laws of the Surviving
Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the Company shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of Newco shall be merged with and into the Company, and the Company,
as the Surviving Corporation, shall be fully vested therewith. At the Effective
Time, the separate existence of Newco shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and Newco
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation
vested in the Company and Newco, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of the Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in their place. Neither the rights of creditors nor any liens upon the property
of the Company or Newco shall be impaired by the Merger, and all debts,
liabilities and duties of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) issued and
outstanding capital stock of Newco ("Newco Stock") immediately prior to the
Effective Time, respectively, into shares of (x) LandCARE Stock (as defined
below) and (y) common stock of the Surviving Corporation, respectively, shall be
as follows:
As of the Effective Time:
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1. Each share of Company Stock issued and outstanding
immediately prior to the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, automatically shall be converted into
Three Thousand (3,000) shares of common stock, par value $.01 per share, of
LandCARE ("LandCARE Stock");
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any action on the part of LandCARE, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, which shall constitute all of the issued and outstanding shares of
common stock of the Surviving Corporation, and shall be owned by LandCARE,
immediately after the Effective Time.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholder, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholder certificates representing the
LandCARE Stock as described above. The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the
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Company (the "Charter Documents") are all attached to SCHEDULE 2.1. The stock
records of the Company, a copy of which is attached to SCHEDULE 2.1, are correct
and complete in all material respects. All records of all proceedings of the
Board of Directors and Stockholder of the Company have been made available to
LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, with no par value, of
which 1,000 shares are issued and outstanding and constitute all of the issued
and outstanding shares of Company Stock (the "Shares"). All of the Shares are
owned of record and beneficially by the Stockholder and are owned free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind except as set forth on SCHEDULE 2.3. All
of the Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable state and federal laws governing the issuance of
securities. None of the Shares were issued in violation of any preemptive rights
or similar rights of any person. Except as set forth on SCHEDULE 2.3, no option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any additional shares of its capital stock or obligates the
Stockholder to transfer any of the Shares to any person except pursuant to this
Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows
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for the three-year period then ended, together with any related notes and
schedules (the "Year-end Financial Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 (the "Interim Balance Sheet Date") and the related
statements of operations for the period then ended for 1998 (the "Interim
Financial Statements"). (The Year-end Financial Statements and the Interim
Financial Statements are herein collectively called the "Financial
Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept in a materially
accurate manner and in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor, to the Stockholder's knowledge after due inquiry, any
reasonable basis for assertion against the Company, of any claim, liability or
obligation, of any nature whatsoever. Except as expressly set forth on SCHEDULE
2.6, to the knowledge of the Stockholder upon due inquiry, all of the contingent
liabilities of the Company listed on SCHEDULE 2.6 are covered by the Company's
insurance policies, and no such liability will exceed the policy limits of such
insurance policies. SCHEDULE 2.6 contains a reasonable estimate of the maximum
amount which may be payable with respect to known liabilities which are not
fixed. For each such known liability for which the amount is not fixed, SCHEDULE
2.6 includes a summary description of each known liability, together with copies
of all material documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and, to the Stockholder's
knowledge upon due inquiry, are collectible in the amounts shown on SCHEDULE
2.7, net of reserves reflected in the balance sheet as of the Balance Sheet
Date.
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2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business, except where the failure
to hold such would not have a Material Adverse Effect on the Company. SCHEDULE
2.8 sets forth an accurate list and summary description of all such licenses,
franchises, permits and other governmental authorizations, including permits,
titles (including licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and registered copyrights owned or held by the
Company or any of its employees (including interests in software or other
technology systems, programs and intellectual property) (collectively, the
"Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on SCHEDULE
2.9). The Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in the Intangible
Assets and other governmental authorizations listed on SCHEDULES 2.8 and 2.9 and
is not in violation of any of the foregoing. Except as specifically set forth on
SCHEDULE 2.8 or 2.9, the transactions contemplated by this Agreement will not
result in a material default under or a material breach or material violation
of, or adversely affect the rights and benefits afforded to the Company by, any
such Intangible Assets or other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
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Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances which is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company or LandCARE for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with any release of any Hazardous Waste, Hazardous Material or Hazardous
Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other tangible personal
property items owned by the Company with an individualized fair market value in
excess of $5,000, and (c) all leases and agreements with respect to personal
property, copies of which have been delivered to LandCARE. SCHEDULE 2.10
indicates which of such Company-related assets are currently owned, or were
formerly owned, by the Stockholder or, to the knowledge of the Stockholder upon
due inquiry, any affiliate of the Company or the Stockholder. Except as set
forth on SCHEDULE 2.10, (i) all material personal property used by the Company
in its business is either owned by the Company or leased by the Company pursuant
to a lease included on SCHEDULE 2.10, (ii) all of the personal property listed
on SCHEDULE 2.10 is in good working order and condition, ordinary wear and tear
excepted and (iii) all leases and agreements included on SCHEDULE 2.10 are in
full force and effect and constitute valid and binding agreements of the parties
(and their successors) thereto in accordance with their respective terms. Except
as set forth on SCHEDULE 2.10, the Company has good and marketable title to said
personal property, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied in all
material respects with all commitments and obligations pertaining to
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it, and is not in material default under any contracts or agreements listed on
SCHEDULE 2.11 and no notice of default under any such contract or agreement has
been received. The transactions contemplated by this Agreement will not result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the Company by, any such contracts or agreements.
SCHEDULE 2.11 also includes a summary description of all plans or projects
relating to the Company's business involving the opening of new operations,
expansion of existing operations, the acquisition of any property, business or
assets requiring, in any event, the payment of more than $50,000 in the
aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or which such properties, to the knowledge of
the Stockholder upon due inquiry, are currently owned, or were formerly owned,
by any affiliate of the Company or the Stockholder is included in SCHEDULE 2.12.
All leases relating to Real Property leased by the Company from the Stockholder
or, to the knowledge of the Stockholder upon due inquiry, leased by the Company
from any affiliate of the Stockholder have been terminated. Except as set forth
on SCHEDULE 2.12, all of such leases included on SCHEDULE 2.12 are in full force
and effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms. Except as set
forth on SCHEDULE 2.12, there are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes, in any material respect, any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholder has furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
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2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored,
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maintained or contributed to any employee pension benefit plan and is not
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC by reason thereof. There
have been no terminations, partial terminations or discontinuance of
contributions to any such Qualified Plan intended to qualify under Section
401(a) of the Code without notice to and approval by the Internal Revenue
Service; no plan listed on SCHEDULE 2.15 subject to the provisions of Title IV
of ERISA has been terminated; there have been no "reportable events" (as that
phrase is defined in Section 4043 of ERISA) with respect to any such plan listed
on SCHEDULE 2.15; the Company has not incurred liability under Section 4062 of
ERISA; and no circumstances exist pursuant to which the Company could have any
direct or indirect liability whatsoever (including, but not limited to, any
liability to any multi employer plan or the PBGC under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty, or being subject to
any statutory lien to secure payment of any such liability) with respect to any
plan now or heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities
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as such), at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over the Company. Except as set forth on
SCHEDULE 2.16, no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company during the last five
years and, to the knowledge of the Stockholder, there is no basis for any such
claim, action, suit or proceeding that would have a Material Adverse Effect on
the Company. Except as set forth on SCHEDULE 2.16, there are no outstanding
judgments, orders, writs, injunctions or decrees against the Company. Except as
set forth on SCHEDULE 2.16, the Company has conducted and now conducts its
business in material compliance with all laws, regulations, writs, injunctions,
decrees and orders applicable to the Company or its assets. The Company is not
in violation of any material law or regulation or any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over any of them. The
Company has conducted and is conducting its business in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on SCHEDULES 2.8 and
2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax owing or owed by
the Company or a Company Subsidiary by assessment has been timely paid in the
amount assessed, and adequate reserves have been established on the consolidated
books of the Company and the Company Subsidiaries for all Taxes for which any of
the Company and the Company subsidiaries is liable, but the payment of which is
not yet due. Neither the Company nor any Company Subsidiary is, or ever has
been, liable for any Tax payable by reason of the income or property of a person
or entity other than the Company or a Company Subsidiary. Each of the Company
and the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for
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Taxes which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax in any jurisdiction outside the United States.
Except as set forth on SCHEDULE 2.17, no litigation with respect to any Tax for
which the Company or any Company Subsidiary is asserted to be liable is pending
or, to the knowledge of the Company or the Stockholder, threatened, and no basis
which the Company or any Stockholder believes to be valid exists on which any
claim for any such Tax can be asserted against the Company or any Company
Subsidiary. There are no requests for rulings or determinations in respect of
any Taxes pending between the Company or any Company Subsidiary and any Taxing
Authority. No extension of any period during which any Tax may be assessed or
collected and for which the Company or any Company Subsidiary is or may be
liable has been granted to any Taxing Authority. Neither the Company nor any
Company Subsidiary is or has been party to any tax allocation or sharing
agreement other than by virtue of premises leases, through which real property
taxes may be effectively shared among tenants of the building of which the
Company's premises is a part. All amounts required to be withheld by any of the
Company and the Company Subsidiaries and paid to governmental agencies for
income, social security, unemployment insurance, sales, excise, use and other
Taxes have been collected or withheld and paid to the proper Taxing Authority.
The Company and each Company Subsidiary have made all deposits required by law
to be made with respect to employees' withholding and other employment Taxes.
Neither the Company nor the Stockholder is a "foreign person," as that term is
referred to in Section 1445(f)(3) of the Code. The Company has not filed a
consent pursuant to Section 341 (f) of the Code or any comparable provision of
any other tax statute and has not agreed to have Section 341 (f)(2) of the Code
or any comparable provision of any other Tax statute apply to any disposition of
an asset. The Company has not made, is not obligated to make and is not a party
to any agreement that could require it to make any payment under Section 280G of
the Code that is not deductible. To the Stockholder's knowledge upon due
inquiry, no asset of the Company or of any Company Subsidiary is subject to any
provision of applicable law which eliminates or reduces the allowance for
depreciation or amortization with respect to that asset below the allowance
generally available to an asset of its type. No accounting method changes of the
Company or of any Company Subsidiary exist or are proposed or threatened which
could give rise to an adjustment under Section 481 of the Code. The Company uses
the accrual method of accounting for income tax purposes, and the Company's
methods of accounting have not changed in the past five years. The Company is
not an investment company as defined in Section 351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
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Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date, the Company
has conducted its operations in the ordinary course of business and, except as
set forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character that would have a Material Adverse
Effect on the business of the Company;
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(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights (other than to subcontractors in
the normal course of business) of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) except as contemplated in that certain Assignment and Assumption
Agreement by and between the Company and Arteka Natural Green Corporation
attached as part of SCHEDULE 2.6, any purchase or acquisition of, or
agreement, plan or arrangement to purchase or acquire, any property,
rights or assets outside of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor, to the knowledge of the
Stockholder upon due inquiry, any other affiliate of the Company owns, directly
or indirectly, any interest in, or is an officer, director, employee or
consultant of or otherwise receives remuneration from, any business which is a
competitor, lessor, lessee, customer or supplier of the Company. Except as set
forth on SCHEDULE 2.21, no officer, director or stockholder of the Company has,
nor during the period
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beginning January 1, 1995 through the date hereof had, any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
Company's business.
2.22 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholder contained in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading. There is no fact
known to the Stockholder at the date hereof which has specific application to
the Company or its business or assets (other than general economic or industry
conditions) which, within one year after the Closing Date, would have a Material
Adverse Effect on the Company or its business or assets, or the condition
(financial or otherwise) or results of operations of the Company, which has not
been specifically disclosed in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. Except as set forth on SCHEDULE 2.25, no
material agreement to which the Company is a party requires the Company to
either give notices to third parties or obtain any third party consents in order
to consummate the transactions contemplated hereby.
2.26 FINANCIAL MATTERS. Since the Interim Balance Sheet Date, there has
been no material increase in the Company's cash requirements.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each
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has been represented by independent legal counsel of his or its choice
throughout all negotiations preceding the execution of this Agreement and has
received the advice of his or its attorney in entering into this Agreement; (c)
that no promise or inducement has been offered or made to him or it except as
expressly stated in this Agreement; and (d) that this Agreement is executed
without reliance on any oral statement or oral representation by any other party
or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE AND NEWCO
Each of LandCARE and Newco represents and warrants as follows:
3.1 DUE ORGANIZATION. Each of LandCARE and Newco is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
the State of Incorporation, respectively, and has all requisite corporate power
and authority to carry on its business as it is now being conducted. Each of
LandCARE and Newco is duly qualified and is in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect on LandCARE.
3.2 AUTHORIZATION. (i) The representatives of each of LandCARE and Newco
executing this Agreement have the authority to enter into and bind each of
LandCARE and Newco, respectively, to the terms of this Agreement and (ii) each
of LandCARE and Newco has the full legal right, power and authority to enter
into this Agreement and the transactions contemplated hereby, all of which have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of either of LandCARE or Newco is necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE. The execution of this Agreement and
the performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Certificate of
Incorporation or Bylaws of Newco.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of LandCARE and Newco and the performance of the transactions
contemplated hereby have been duly and validly authorized by the respective
Board of Directors of each of LandCARE and Newco and this
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Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE and Newco.
3.5 PROSPECTUS. The Prospectus delivered to the Stockholder, receipt of
which is hereby acknowledged, does not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, and same may be relied upon by the Stockholder in connection with
the transactions contemplated by this Agreement.
3.6 DISCLOSURE. LandCARE has provided the Stockholder with all the
information that the Stockholder has requested in writing analyzing whether to
consummate the transactions contemplated hereby. None of the information so
provided nor any representation or warranty of LandCARE contained in this
Agreement contains any untrue statement or omits to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact which
has specific application to LandCARE or its business or assets (other than
general economic or industry conditions) which would have a Material Adverse
Effect or, so far as LandCARE can reasonably foresee, threatens to have a
Material Adverse Effect, on LandCARE or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of LandCARE, which
has not been described in the Schedules hereto.
3.7 RELIANCE UPON ORAL REPRESENTATIONS. Each of LandCARE and Newco
represents and warrants: (a) that it has been fully informed by its legal
counsel and by its own independent judgment of the terms, conditions and effects
of this Agreement; (b) that it has been represented by independent legal counsel
of its choice throughout all negotiations preceding the execution of this
Agreement and has received the advice of its attorney in entering into this
Agreement; (c) that it is fully satisfied with the terms of this Agreement; (d)
that no promise or inducement has been offered or made to it except as expressly
stated in this Agreement; and (e) that this Agreement is executed without
reliance on any oral statement or oral representation by any other party or any
other party's agent or attorney.
3.8 LIABILITIES. Each of LandCARE and Newco covenants and acknowledges
that the Surviving Corporation, not the Stockholder, shall be responsible for
any liabilities of the Company shown on the Financial Statements.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
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4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
4.3 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.4 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they have to the Company.
4.5 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of all directors and officers of the Company.
4.6 EMPLOYMENT AGREEMENT. The Company and the Stockholder are entering
into an Employment Agreement in the form attached hereto as Annex I.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the Stockholder
reasonable access to the books and records of the Surviving Corporation after
the Closing Date for purposes of tax compliance and any other reasonable
purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the Merger. The Stockholder shall
file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the
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Surviving Corporation or LandCARE, will pay all taxes (income or otherwise), if
any, due upon and solely by reason of the Stockholder's receipt of the
consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Company shall terminate any existing agreements
to which the Company and the Stockholder or any of her affiliates are parties,
except for this Agreement and the agreements set forth on SCHEDULE 5.3.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at the reasonable cost of the requesting party to assist in the
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file tax returns pursuant to this
Agreement shall bear all costs of filing such tax returns.
5.5 STOCKHOLDER GUARANTEES Notwithstanding anything else herein, LandCARE
agrees to hold harmless and to indemnify the Stockholder or her affiliates from
any loss, damage, claim, liability or obligation arising after the Effective
Time from any guarantee (personal or otherwise) by the Stockholder of any
liability or obligation of the Company (contingent or otherwise), and agrees to
cause the unconditional release of the Stockholder and her affiliates from such
guarantees and all the obligations thereunder within ninety (90) days after the
Effective Time.
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5.6 STOCK OPTIONS. LandCARE hereby covenants and agrees to recommend to
the Compensation Committee of its Board of Directors the issuance of 2,000 stock
options to Randy Huffman. The options shall be issued pursuant to the LandCARE
1998 Long-Term Incentive Plan.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
this Agreement herewith shall survive the Closing until the expiration of the
periods prescribed by the applicable statutes of limitations (including any
extensions thereof) relating thereto; provided, however, that representations
and warranties and indemnification provisions with respect to which a claim is
made within the survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDER. In addition to the
indemnification provided for in Section 6.2, the Stockholder covenants and
agrees that he will indemnify, defend, protect and hold harmless the Company and
LandCARE and each of their respective subsidiaries,
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officers, directors, employees, stockholders, agents, representatives and
affiliates from and against all Damages incurred by any of them in connection
with: (a) violations or alleged violations of any applicable federal, state,
local, or other laws, regulations, ordinances, or orders of any governmental
entity which govern the protection of the environment or human health and safety
("Environmental Laws") relating in any way to any action or omission of the
Company or any predecessor of the Company to the extent the facts, events, or
conditions giving rise to such violation or alleged violation occurred or
existed on or before the Effective Date; (b) the actual or alleged presence,
emanation, migration, disposal, release, or threatened release (collectively,
"Releases") of any oil, petroleum product, hazardous material, or hazardous
substance as such terms are defined by Environmental Laws (collectively,
"Hazardous Substances") at, under, to, or from any property or facility which
presently is or previously was owned, leased, operated, or otherwise used by the
Company or any predecessor of the Company to the extent that said actual or
alleged Release occurred or is alleged to have occurred on or before the
Effective Date; and (c) the actual or alleged Release of any Hazardous
Substances at any location or facility whatsoever to the extent such Hazardous
Substances were generated by, or were arranged for disposal at such location or
facility by, the Company or any predecessor of the Company on or before the
Effective Date.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein from and after the
date hereof until the Expiration Date; (ii) any breach or nonfulfillment of any
covenant or agreement by LandCARE under this Agreement from and after the date
hereof until the Expiration Date; (iii) the operation of the Surviving
Corporation from and after the Closing Date until the expiration of the periods
prescribed by the applicable statutes of limitations, except to the extent any
such Damages are attributable to the actions of the Stockholder, in her
capacities as such or otherwise; and (iv) any debt or liability of the Surviving
Corporation from and after the Closing Date until the expiration of the periods
prescribed by the applicable statutes of limitations (including, without
limitation, payment or performance bonds, guarantees, and Company debt to First
Minnetonka City Bank). LandCARE covenants and agrees that it will indemnify,
defend, protect and hold harmless Chris Hughan at all times from and after the
date of this Agreement until the expiration of the periods prescribed by the
applicable statutes of limitations from and against all Damages incurred by
Chris Hughan as a result of any debt or liability of the Surviving Corporation
(including, without limitation, payment or performance bonds, guarantees, and
Company debt to First Minnetonka City Bank).
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the
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commencement of such action or proceeding; provided, however, that the failure
to give such notice will not relieve such Indemnifying Party from liability
under this Section with respect to such claim, action or proceeding, except to
the extent that the Indemnifying Party has been actually prejudiced as a result
of such failure. The Indemnifying Party (at its own expense) shall have the
right and shall be given the opportunity to assume the defense of such claim,
suit or proceedings, and may select counsel for the Indemnified Party, such
counsel to be reasonably satisfactory to the Indemnified Party. The Indemnified
Party shall not, except at its own cost, make any settlement with respect to any
such claim, suit or proceeding without the prior consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed. It is
understood and agreed that in situations where failure of the Indemnifying Party
to settle a claim expeditiously could have an adverse effect on the Indemnified
Party, the failure of the Indemnifying Party to act upon the Indemnified Party's
request for consent to such settlement within ten business days of the
Indemnifying Party's receipt of notice thereof from the Indemnified Party shall
be deemed to constitute consent by the Indemnifying Party of such settlement for
purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholder, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholder.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of two years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation within 100 miles of where the Company conducted business at
any time within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
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(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this
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Section shall be construed as an agreement independent of any other provision in
this Agreement, and the existence of any claim or cause of action of the
Stockholder against LandCARE or any subsidiary thereof, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by LandCARE of such covenants. It is specifically agreed that the period of two
years stated at the beginning of this Section, during which the agreements and
covenants of the Stockholder made in this Section shall be effective, shall be
computed by excluding from such computation any time during which the
Stockholder is in violation of any provision of this Section. The covenants
contained in Section shall not be affected by any breach of any other provision
hereof by any party hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
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8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the parties will not take any actions that disqualify the Merger for such
treatment. The Stockholder represents, warrants and covenants that:
(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Stockholder has no present plan, intention or arrangement
to dispose of any of the LandCARE Stock to be received in the Merger that would
reduce the fair value of the LandCARE Stock (measured as of the Effective Time)
retained by the Stockholder to an amount less than 51% of the fair value of the
Company Stock held by the Stockholder immediately prior to the Effective Time.
9.2 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. After the date one year after the Closing Date the Stockholder
may sell such shares pursuant to the LandCARE Liquidity Plan attached hereto as
SCHEDULE 9.2. After the date two years after the Closing Date, neither the
restrictions set forth herein nor the provisions of the LandCARE Liquidity Plan
shall restrict the Stockholder from selling or otherwise disposing of any of
such shares of LandCARE Stock.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of LandCARE Stock, (B) fully understands the nature, scope and
duration
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of any limitations on transfer of LandCARE Stock described in this Agreement and
(C) can bear the economic risk of an investment in the shares of LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE and Newco, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company, Newco and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto as then constituted.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by confirmed facsimile, as
follows:
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If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Arteka Southeast Corporation
1285 Collier Road N.W.
Atlanta, Georgia 30318
If to the Stockholder, addressed to her at the Company's address, in
either such case with a copy to:
William D. Brunstad, Esq.
McCullough Sherrill, LLP
1409 Peachtree Street, N.E.
Atlanta, Georgia 30309
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Georgia without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or
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remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
ARTSE ACQUISITION CORP.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: President
ARTEKA SOUTHEAST CORPORATION
By: /s/ KAREN E. CORCORAN
Name: KAREN E. CORCORAN
Title: President
/s/ KAREN CORCORAN
-----------------------
Karen Corcoran
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
dated as of September 3, 1998
by and among
LANDCARE USA, INC.
GREENTREE INCORPORATED OF GEORGIA
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 The Closing......................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................2
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................14
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Reliance Upon Oral Representations..............................14
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3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................15
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Lease...........................................................15
4.6 Indebtedness to Company.........................................16
4.7 Consents........................................................16
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................17
5.4 Preparation and Filing of Tax Returns...........................17
5.5 Preparation and Filing of Tax Returns...........................18
5.6 Guaranties......................................................18
5.7 Bonuses.........................................................18
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholders' Representations and Warranties. .....19
6.2 General Indemnification by the Stockholders.....................19
6.3 Specific Indemnification by the Stockholders....................19
6.4 Indemnification by LandCare.....................................20
6.5 Third Person Claims.............................................20
6.6 Method of Payment...............................................21
7. NONCOMPETITION........................................................21
7.1 Prohibited Activities...........................................21
7.2 Equitable Relief................................................22
7.3 Reasonable Restraint............................................22
7.4 Severability; Reformation.......................................22
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7.5 Independent Covenant............................................22
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 General.........................................................23
8.2 Equitable Relief................................................23
8.3 Survival........................................................23
9. GENERAL...............................................................24
9.1 Successors and Assigns..........................................24
9.2 Entire Agreement................................................24
9.3 Counterparts....................................................24
9.4 Brokers and Agents..............................................24
9.5 Notices.........................................................24
9.6 Governing Law...................................................25
9.7 Survival of Representations and Warranties......................25
9.8 Effect of Investigation.........................................25
9.9 Exercise of Rights and Remedies.................................25
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................26
9.13 Captions........................................................26
9.14 Press Releases and Public Announcements.........................26
9.15 No Third-Party Beneficiaries....................................26
9.16 Dispute Resolution..............................................26
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SCHEDULES
SCHEDULE 1.2. Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.5. Leases
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholders
Annex III - Form of Lease
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 3, 1998 by and among LandCare USA, Inc., a Delaware corporation
("LandCare"), Greentree Incorporated of Georgia, a Georgia corporation (the
"Company"), and the persons listed on the signature pages of this Agreement as
the stockholders of the Company (the "Stockholders"). The Stockholders are the
only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCare desires to
purchase, all of the issued and outstanding capital stock of the Company (the
"Shares") on the terms and conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the owners of all of the outstanding shares of capital stock of each of Carolina
Landscape Management, Inc., a Georgia corporation ("Carolina"), Nashville
Landscape Management, LLC, a Georgia limited liability company ("Nashville"),
and Memphis Landscape Management, LLC, a Georgia limited liability company
("Memphis"), are selling all of such shares of capital stock to LandCare
pursuant to stock purchase agreements substantially similar to this Agreement
and disclosure schedules identical to those attached to this Agreement;
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby sell, convey, transfer, assign and deliver to
LandCare, and LandCare hereby purchases from the Stockholders, all of the
Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $3,608,629, which amount is being paid by wire transfer of
immediately available funds in accordance with wiring instructions provided by
the Stockholders. Each of the Stockholders is receiving its pro rata interest in
the Purchase Price as set forth on SCHEDULE 1.2 hereto.
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1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby jointly and severally represent and warrant to
LandCare as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia (the "State
of Incorporation") and has all requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect on the Company (it being agreed that a "Material
Adverse Effect" means an adverse effect (over time or otherwise) of more than 1%
of the Purchase Price on the business, assets, operations or condition
(financial or otherwise), of the Company). SCHEDULE 2.1 sets forth a list of all
jurisdictions in which the Company is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the Company (the "Charter Documents") are all attached to
SCHEDULE 2.1. The stock records of the Company, a copy of which is attached to
SCHEDULE 2.1, are correct and complete in all material respects. All records of
all proceedings of the Board of Directors and stockholders of the Company have
been made available to LandCare.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $1.00 per
share, of which 250 shares are issued and outstanding and constitute all of the
Shares. All of the Shares are owned of record and beneficially by the
Stockholders and are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were
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offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholders to transfer any of the Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of the Company
listed on SCHEDULE 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability together with copies of all relevant
documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. Except as set forth on SCHEDULE 2.8, the
Company holds all licenses, franchises, permits and other governmental
authorizations required in connection with the conduct of the Company's
business. SCHEDULE 2.8 sets forth an accurate list and summary description of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles (including licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the Company or any of its employees (including interests in software or
other technology systems, programs and intellectual property) (collectively, the
"Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on SCHEDULE
2.9). The Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on Schedules 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on Schedule 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required by any applicable Environmental
Laws, including, without limitation, such permits and approvals as may be
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes, Hazardous Materials and Hazardous Substances, a list of all of which
permits and approvals is set forth on SCHEDULE 2.9, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in, under or on any property owned or
operated by the Company except as permitted by Environmental Laws. There is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCare for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, as amended, (iii) the Hazardous Materials
Transportation Act, as amended, or (iv) comparable state or local statutes and
regulations. The Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCare. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders.
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Except as set forth on SCHEDULE 2.10, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on SCHEDULE 2.10, (ii) all of the personal
property listed on SCHEDULE 2.10 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
SCHEDULE 2.10 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms. Except as set forth on SCHEDULE 2.10, the Company has
good and marketable title to the tangible and intangible personal property it
purports to own, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
SCHEDULE 2.10(A) lists items of personal property that are owned by one or more
of the Stockholders or will be transferred from the Company to one or more of
the Stockholders prior to the Closing.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all (but not more than 25) customers representing
1% or more of the Company's revenues in its last full fiscal year ("Significant
Customers"), and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with Significant Customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements have been delivered to LandCare. Except as described
on SCHEDULE 2.11, (i) none of the Significant Customers have canceled or
substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied with all commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on SCHEDULE 2.11 and no notice
of default under any such contract or agreement has been received. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. SCHEDULE 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCare, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE
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2.12. All leases relating to Real Property leased by the Company from any of the
Stockholders or any affiliate of any of the Stockholders has been terminated.
Except as set forth on SCHEDULE 2.12, all of such leases included on SCHEDULE
2.12 are in full force and effect and constitute valid and binding agreements of
the parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all or any portion of the Real Property or create in or confer on any
such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's business; and
there are no claims or demands pending or, to the knowledge of the Stockholders,
threatened, by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on SCHEDULE 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCare. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE
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2.14, since the Balance Sheet Date, there have been no increases in the base
compensation payable or any special bonuses to any officer, director, key
employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan and is not
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been
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fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date. All plans listed on SCHEDULE 2.15 that are
intended to qualify (the "Qualified Plans") under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") are, and have been, so qualified
and have been determined by the Internal Revenue Service to be so qualified.
Except as disclosed on SCHEDULE 2.15, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of SCHEDULE 2.15. Neither the Stockholders, nor any
plan listed in SCHEDULE 2.15, nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on SCHEDULE 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings, pending or, to the
best knowledge of the Stockholders, threatened, against or affecting the Company
(or any of its officers or directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against or affecting the Company or its assets. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any material law or regulation or any order of any court or federal, state,
municipal or other
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governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or any Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for
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which the Company or any Company Subsidiary is or may be liable has been granted
to any Taxing Authority. Neither the Company nor any Company Subsidiary is or
has been party to any tax allocation or sharing agreement. All amounts required
to be withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. The Company uses the accrual method of accounting for
income tax purposes, and the Company's methods of accounting have not changed in
the past five years. The Company is not an investment company as defined in
Section 351(e)(1) of the Code. The Company has a taxable year ended December 31
and has not made an election to retain a fiscal year other than December 31
under IRC Section 444. The Company is not party to any joint venture,
partnership, or other arrangement that is treated as a partnership for federal
income tax purposes.
The Stockholders made a valid election under the provisions of Subchapter
S of the Code, and the Company has not, since its formation, been subject to
taxation under the provisions of Subchapter C of the Code or under Section 11 or
Section 1374 of the Code. Neither any of the Stockholders nor the Company has
taken any action that terminated the Subchapter S election, which remains in
effect on the date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto, is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be
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entitled to the rights and benefits the under the Material Documents to which
the Company is entitled immediately prior to the Closing. Except as set forth on
SCHEDULE 2.18 (and except for consents already obtained), none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on SCHEDULE 2.18, none of the Material Documents prohibits the use or
publication of the name of any other party to such Material Document, and none
of the Material Documents prohibits or restricts the Company or will prevent or
restrict the Company or the LandCare from freely providing services to any
person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in excess of $50,000 in the business, assets,
liabilities or financial condition of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an aggregate amount not in excess of
$50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCare with all the
information that LandCare has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
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2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel (except to the extent any such Stockholder has elected not to
retain legal counsel) and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement, or has made his or her own
decision not to retain legal counsel; (c) that each, personally or through his
or its independently-retained attorneys, is fully satisfied with the terms and
effects of this Agreement; (d) that no promise or inducement has been offered or
made to him or it except as expressly stated in this Agreement or any other
written agreement entered into in connection herewith; and (e) that this
Agreement is executed without reliance on any oral statement or oral
representation by any other party or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE
LandCare represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCare is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCare is qualified to do business and is in good
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standing in each jurisdiction in which the nature of its business makes such
qualification necessary, except where the failure to be so authorized or
qualified would not have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCare executing this
Agreement has the authority to enter into and bind LandCare to the terms of this
Agreement and (ii) LandCare has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCare.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCare and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCare and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCare.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER . The Stockholders are delivering to LandCare
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified on
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCare dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCare certificates, dated as of a date no earlier than twenty days prior to
the date hereof, duly issued by the appropriate governmental authority in the
State of Incorporation and in each state in which the Company is authorized to
do business, showing the Company to be in good standing and authorized to do
business therein.
4.5 LEASE. The Company is entering into leases of the properties
identified on SCHEDULE 4.5 in the form attached hereto as Annex III. The
Stockholders are delivering to LandCARE evidence
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of the termination of all leases relating to Real Property leases by the Company
from any of the Stockholders or any affiliate of any of the Stockholders.
4.6 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.7 CONSENTS. The Stockholders are delivering to LandCare copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATION OF DIRECTORS AND OFFICERS. The Stockholders are delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.9 CERTAIN DISTRIBUTIONS. The Company is distributing to the Stockholders
$54,500, which amount is equal to the estimated income taxes that will be
payable by the Stockholders based solely on the income of the Company prior to
the date hereof, as to which income the Stockholders have not already received
distributions.
4.10 CERTAIN LOANS. The Company is repaying to the Stockholders the loans
identified on SCHEDULE 4.10.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCare shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCare shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCare will pay the fees, expenses and disbursements of
LandCare and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company has paid the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this
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Agreement, and the purchase price has been reduced pursuant to the letter as of
the date hereof by and among the Company, LandCare and the Stockholders.
LandCare shall pay any sales, use, transfer, real property transfer, recording,
gains, stock transfer and other similar taxes and fees ("Transfer Taxes")
imposed by the State of Texas in connection with the transactions contemplated
hereby, and the Stockholders shall pay any Transfer Taxes imposed by the State
of Georgia in connection with the transactions contemplated hereby. In addition,
the Stockholders acknowledge that the Stockholders, and not the Company or
LandCare, will pay all taxes (income or otherwise), if any, due upon receipt of
the consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCare at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and any of the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all tax returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCare has reviewed such filings and consented thereto. If the
Company is an S corporation, the Stockholders shall pay all Tax liabilities for
all periods ending on or prior to the Closing Date, and, pursuant to Section
1377 of the Code, the Stockholders and LandCare shall elect to terminate the
Company's tax year at the Closing Date and to end the Company's following tax
year on the last day of the Company's regular tax year. Such two years
(including the short year) shall be treated as separate years for purposes of
allocating the Company's income, gain, loss, deduction and credit. The
Stockholder shall file the final S corporation return by its due date, which
will be 2 1/2 months after the Closing Date.
(b) LandCare shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
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Subject to the preceding sentence, each party required to file Tax Returns
pursuant to this Agreement shall bear all costs of filing such Tax Returns.
5.5 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. LandCare or the Company will pay (or reimburse the Stockholders for, as
such tax becomes due and payable, as requested by the Stockholders in writing)
any tax (including any state, local or foreign tax) attributable to the making
of the Section 338(h)(10) Election (or an election under state, local or foreign
law similar to the Section 338(h)(10) Election) and will indemnify the
Stockholders against any tax liabilities resulting therefrom. As a result of the
Section 338(h)(10) Election, the parties agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be allocated to the
assets of the Company for all purposes (including tax and financial accounting
purposes) as shown on SCHEDULE 5.5. Purchaser and the Company and the
Stockholders will file all tax returns (including amended returns and claims for
refund) and information reports in a manner consistent with such allocation.
5.6 GUARANTIES. As promptly as may be practicable after the Closing,
LandCare shall cause the release of the Stockholders' guaranties of indebtedness
of the Company, including but not limited to those guaranties listed on SCHEDULE
5.6.
5.7 BONUSES. The Company shall pay an aggregate amount of $362,000 in
bonuses to certain key employees as set forth on SCHEDULE 5.7, and any
unallocated portion of the aggregate amount shall be distributed to Steve Champ
as an employee of the Company.
6. INDEMNIFICATION
The Stockholders and LandCare each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto (whether three years, six
years or otherwise); the representations and warranties of the Stockholders made
in Section 2.9 (Environmental Matters) of this Agreement shall survive the
Closing for a period of five years
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after the Closing Date; and all other representations and warranties of the
Stockholders made in this Agreement shall survive the Closing for a period of
one year following the Closing Date; provided, however, that representations and
warranties and indemnification provisions with respect to which a claim is made
within the survival period shall survive until such claim is finally determined
and paid.
(b) The representations and warranties of LandCare made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCare and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that, for a period of five years after the Closing Date, they will indemnify,
defend, protect and hold harmless the Company and LandCARE and each of their
respective subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with: (a) violations or alleged violations of any applicable
federal, state, local, or other laws, regulations, ordinances, or orders of any
governmental entity which govern the protection of the environment or human
health and safety ("Environmental Laws") relating in any way to any action or
omission of the Company or any predecessor of the Company to the extent the
facts, events, or conditions giving rise to such violation or alleged violation
occurred or existed on or before the Effective Date; (b) the actual or alleged
presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material,
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or hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date. LandCARE and the other persons or entities
indemnified pursuant to this Section 6.3 shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $50,000 (the "Indemnification Threshold"), and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Section 6.3 and the aggregate
liability of the Stockholders of Carolina, Nashville and Memphis under Section
6.3 of the Stock Purchase Agreements relating to such companies dated the date
hereof, in the aggregate, shall not exceed $500,000.
6.4 INDEMNIFICATION BY LANDCARE. LandCare covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCare set forth herein; and (ii) any
breach or nonfulfillment of any covenant or agreement by LandCare under this
Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously
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could have an adverse effect on the Indemnified Party, the failure of the
Indemnifying Party to act upon the Indemnified Party's request for consent to
such settlement within five business days of the Indemnifying Party's receipt of
notice thereof from the Indemnified Party shall be deemed to constitute consent
by the Indemnifying Party of such settlement for purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 200 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCare within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCare or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCare or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCare or any of its subsidiaries (including the Company) for the
purpose of soliciting or selling products or services in direct
competition with LandCare or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit (a) Steve Champ from continuing his current ownership of and
involvement with Greentree Termite & Pest Control, Inc., or (b) any Stockholder
from acquiring as a passive investor with no involvement in
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the operations or management of the business, not more than two percent (2%) of
the capital stock of a competing business whose stock is publicly traded on a
national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCare as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCare
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCare in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCare's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCare or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCare of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCare after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCare to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCare, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any governmental authority or by
any taxing authority or in any tax litigation, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholder shall
give prior written notice thereof to LandCare and provide LandCare with the
opportunity to contest such disclosure. In the event of a breach or threatened
breach by any Stockholder of the provisions of this Section, LandCare shall be
entitled to injunctive or other equitable relief restraining such Stockholder
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting LandCare from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCare would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
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9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCare, and the heirs and legal representatives of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCare, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCare, addressed to it at:
LandCare USA, Inc.
5850 San Felipe Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
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If to the Company, addressed to it at:
Greentree Incorporated of Georgia
1640 Roadhaven Drive
Stone Mountain, Georgia 30083
If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Georgia without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. As set forth in Section
6.1 hereof, the representations, warranties, covenants and agreements of the
parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
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9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCare may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
9.16 DISPUTE RESOLUTION. Any dispute or controversy arising under this
Agreement shall be determined and settled by binding arbitration in Atlanta,
Georgia by an independent disinterested person agreed upon by the parties to the
dispute or controversy. If the parties to the dispute cannot agree (within 30
days after any party notifies the others in writing of that party's intention to
invoke this arbitration provision) upon an independent disinterested arbitrator,
each shall, within 30 days after the end of such first 30-day period, appoint
one independent disinterested person as an arbitrator, and the two arbitrators
so selected shall, within 30 days, appoint a third independent disinterested
person as a third arbitrator. In the event that the two arbitrators are unable
to agree upon a third arbitrator within such time period, the parties shall
cause the American Arbitration Association to appoint a third arbitrator. The
three arbitrators so selected shall resolve the dispute by majority vote. The
expenses of arbitration shall be shared equally by the parties thereto, but each
party shall bear the expenses of its legal counsel. The parties hereto hereby
agree to be bound by the results of any such arbitration.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
GREENTREE INCORPORATED OF GEORGIA
By:/s/ STEPHEN CHAMP
Name: Stephen Champ
Title: President
<PAGE>
Stockholders:
By:/s/ STEPHEN CHAMP
Stephen Champ
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
dated as of September 3, 1998
by and among
LANDCARE USA, INC.
CAROLINA LANDSCAPE MANAGEMENT, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 The Closing......................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................2
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................14
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Reliance Upon Oral Representations..............................14
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3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................15
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Indebtedness to Company.........................................15
4.6 Consents........................................................15
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................16
5.4 Preparation and Filing of Tax Returns...........................16
5.5 Preparation and Filing of Tax Returns...........................17
5.6 Guaranties......................................................18
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholders' Representations and Warranties. .....18
6.2 General Indemnification by the Stockholders.....................18
6.3 Specific Indemnification by the Stockholders....................19
6.4 Indemnification by LandCare.....................................19
6.5 Third Person Claims.............................................20
6.6 Method of Payment...............................................20
7. NONCOMPETITION........................................................20
7.1 Prohibited Activities...........................................20
7.2 Equitable Relief................................................21
7.3 Reasonable Restraint............................................21
7.4 Severability; Reformation.......................................21
7.5 Independent Covenant............................................22
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................22
8.1 General.........................................................22
8.2 Equitable Relief................................................23
8.3 Survival........................................................23
9. GENERAL...............................................................23
9.1 Successors and Assigns..........................................23
9.2 Entire Agreement................................................23
9.3 Counterparts....................................................23
9.4 Brokers and Agents..............................................23
9.5 Notices.........................................................23
9.6 Governing Law...................................................24
9.7 Survival of Representations and Warranties......................24
9.8 Effect of Investigation.........................................24
9.9 Exercise of Rights and Remedies.................................24
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................25
9.13 Captions........................................................25
9.14 Press Releases and Public Announcements.........................25
9.15 No Third-Party Beneficiaries....................................25
9.16 Dispute Resolution..............................................25
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SCHEDULES
SCHEDULE 1.2. Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholders
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 3, 1998 by and among LandCare USA, Inc., a Delaware corporation
("LandCare"), Carolina Landscape Management, Inc., a Georgia corporation (the
"Company"), and the persons listed on the signature pages of this Agreement as
the stockholders of the Company (the "Stockholders"). The Stockholders are the
only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCare desires to
purchase, all of the issued and outstanding capital stock of the Company (the
"Shares") on the terms and conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the owners of all of the outstanding shares of capital stock of each of
Greentree Incorporated of Georgia, a Georgia corporation ("Carolina"), Nashville
Landscape Management, LLC, a Georgia limited liability company ("Nashville"),
and Memphis Landscape Management, LLC, a Georgia limited liability company
("Memphis"), are selling all of such shares of capital stock to LandCare
pursuant to stock purchase agreements substantially similar to this Agreement;
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby sell, convey, transfer, assign and deliver to
LandCare, and LandCare hereby purchases from the Stockholders, all of the
Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $100,000, which amount is being paid by wire transfer of
immediately available funds in accordance with wiring instructions provided by
the Stockholders. Each of the Stockholders is receiving its pro rata interest in
the Purchase Price as set forth on SCHEDULE 1.2 hereto.
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1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby jointly and severally represent and warrant to
LandCare as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia (the "State
of Incorporation") and has all requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect on the Company (it being agreed that a "Material
Adverse Effect" means an adverse effect (over time or otherwise) of more than 1%
of the Purchase Price on the business, assets, operations or condition
(financial or otherwise), of the Company). Schedule 2.1 sets forth a list of all
jurisdictions in which the Company is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the Company (the "Charter Documents") are all attached to
Schedule 2.1. The stock records of the Company, a copy of which is attached to
Schedule 2.1, are correct and complete in all material respects. All records of
all proceedings of the Board of Directors and stockholders of the Company have
been made available to LandCare.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, no par value per
share, of which 900 shares are issued and outstanding and constitute all of the
Shares. All of the Shares are owned of record and beneficially by the
Stockholders and are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were offered, issued,
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sold and delivered by the Company in compliance with all applicable state and
federal laws governing the issuance of securities. None of the Shares were
issued in violation of any preemptive rights or similar rights of any person. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any additional shares of its capital stock or
obligates the Stockholders to transfer any of the Shares to any person except
pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on Schedule 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in Schedule 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on Schedule 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on Schedule 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on Schedule 2.6, all of the contingent liabilities of the Company
listed on Schedule 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
Schedule 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, Schedule 2.6 includes a
summary description of each known liability together with copies of all relevant
documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on Schedule 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on Schedule 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. Except as set forth on Schedule 2.8, the
Company holds all licenses, franchises, permits and other governmental
authorizations required in connection with the conduct of the Company's
business. Schedule 2.8 sets forth an accurate list and summary description of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles (including licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the Company or any of its employees (including interests in software or
other technology systems, programs and intellectual property) (collectively, the
"Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
2.9). The Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on Schedules 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on Schedule 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required by any applicable Environmental
Laws, including, without limitation, such permits and approvals as may be
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes, Hazardous Materials and Hazardous Substances, a list of all of which
permits and approvals is set forth on Schedule 2.9, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in, under or on any property owned or
operated by the Company except as permitted by Environmental Laws. There is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCare for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, as amended, (iii) the Hazardous Materials
Transportation Act, as amended, or (iv) comparable state or local statutes and
regulations. The Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. Schedule 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCare. Schedule 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders.
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Except as set forth on Schedule 2.10, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 2.10, (ii) all of the personal
property listed on Schedule 2.10 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
Schedule 2.10 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms. Except as set forth on Schedule 2.10, the Company has
good and marketable title to the tangible and intangible personal property it
purports to own, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
Schedule 2.10(a) lists items of personal property that are owned by one or more
of the Stockholders or will be transferred from the Company to one or more of
the Stockholders prior to the Closing.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
2.11 sets forth a list of (i) all (but not more than 25) customers representing
1% or more of the Company's revenues in its last full fiscal year ("Significant
Customers"), and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with Significant Customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements have been delivered to LandCare. Except as described
on Schedule 2.11, (i) none of the Significant Customers have canceled or
substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied with all commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on Schedule 2.11 and no notice
of default under any such contract or agreement has been received. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. Schedule 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. Schedule 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCare, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in Schedule
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2.12. All leases relating to Real Property leased by the Company from any of the
Stockholders or any affiliate of any of the Stockholders has been terminated.
Except as set forth on Schedule 2.12, all of such leases included on Schedule
2.12 are in full force and effect and constitute valid and binding agreements of
the parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all or any portion of the Real Property or create in or confer on any
such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's business; and
there are no claims or demands pending or, to the knowledge of the Stockholders,
threatened, by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on Schedule 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. Schedule 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCare. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on Schedule 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on Schedule
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2.14, since the Balance Sheet Date, there have been no increases in the base
compensation payable or any special bonuses to any officer, director, key
employee or other employee.
Except as set forth on Schedule 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. Schedule 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 2.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan and is not
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
Schedule 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on Schedule 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on Schedule 2.15 have either been
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fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date. All plans listed on Schedule 2.15 that are
intended to qualify (the "Qualified Plans") under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") are, and have been, so qualified
and have been determined by the Internal Revenue Service to be so qualified.
Except as disclosed on Schedule 2.15, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of Schedule 2.15. Neither the Stockholders, nor any
plan listed in Schedule 2.15, nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on Schedule 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on Schedule 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
2.16, there are no claims, actions, suits or proceedings, pending or, to the
best knowledge of the Stockholders, threatened, against or affecting the Company
(or any of its officers or directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on Schedule 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against or affecting the Company or its assets. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any material law or regulation or any order of any court or federal, state,
municipal or other
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governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or any Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for
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which the Company or any Company Subsidiary is or may be liable has been granted
to any Taxing Authority. Neither the Company nor any Company Subsidiary is or
has been party to any tax allocation or sharing agreement. All amounts required
to be withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. The Company uses the accrual method of accounting for
income tax purposes, and the Company's methods of accounting have not changed in
the past five years. The Company is not an investment company as defined in
Section 351(e)(1) of the Code. The Company has a taxable year ended December 31
and has not made an election to retain a fiscal year other than December 31
under IRC Section 444. The Company is not party to any joint venture,
partnership, or other arrangement that is treated as a partnership for federal
income tax purposes.
The Stockholders made a valid election under the provisions of Subchapter
S of the Code, and the Company has not, since its formation, been subject to
taxation under the provisions of Subchapter C of the Code or under Section 11 or
Section 1374 of the Code. Neither any of the Stockholders nor the Company has
taken any action that terminated the Subchapter S election, which remains in
effect on the date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto, is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on Schedule 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be
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entitled to the rights and benefits the under the Material Documents to which
the Company is entitled immediately prior to the Closing. Except as set forth on
Schedule 2.18 (and except for consents already obtained), none of the Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect, and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 2.18, none of the Material Documents prohibits the use or
publication of the name of any other party to such Material Document, and none
of the Material Documents prohibits or restricts the Company or will prevent or
restrict the Company or the LandCare from freely providing services to any
person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 2.19, there has not been:
(i) any change in excess of $50,000 in the business, assets,
liabilities or financial condition of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an aggregate amount not in excess of
$50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. Schedule 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on Schedule 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCare with all the
information that LandCare has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
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2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel (except to the extent any such Stockholder has elected not to
retain legal counsel) and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement, or has made his or her own
decision not to retain legal counsel; (c) that each, personally or through his
or its independently-retained attorneys, is fully satisfied with the terms and
effects of this Agreement; (d) that no promise or inducement has been offered or
made to him or it except as expressly stated in this Agreement or any other
written agreement entered into in connection herewith; and (e) that this
Agreement is executed without reliance on any oral statement or oral
representation by any other party or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE
LandCare represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCare is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCare is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
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3.2 AUTHORIZATION. (i) The representative of LandCare executing this
Agreement has the authority to enter into and bind LandCare to the terms of this
Agreement and (ii) LandCare has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCare.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCare and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCare and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCare.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER . The Stockholders are delivering to LandCare
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified on
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCare dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCare certificates, dated as of a date no earlier than twenty days prior to
the date hereof, duly issued by the appropriate governmental authority in the
State of Incorporation and in each state in which the Company is authorized to
do business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 CONSENTS. The Stockholders are delivering to LandCare copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
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4.7 RESIGNATION OF DIRECTORS AND OFFICERS. The Stockholders are delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.8 CERTAIN LOANS. The Company is repaying to the Stockholders the loans
identified on SCHEDULE 4.10.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCare shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCare shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCare will pay the fees, expenses and disbursements of
LandCare and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company has paid the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. LandCare shall pay any sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed by the State of Texas in connection with the
transactions contemplated hereby, and the Stockholders shall pay any Transfer
Taxes imposed by the State of Georgia in connection with the transactions
contemplated hereby. In addition, the Stockholders acknowledge that the
Stockholders, and not the Company or LandCare, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCare at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and any of the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
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(a) The Stockholders shall file or cause to be filed all tax returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCare has reviewed such filings and consented thereto. If the
Company is an S corporation, the Stockholders shall pay all Tax liabilities for
all periods ending on or prior to the Closing Date, and, pursuant to Section
1377 of the Code, the Stockholders and LandCare shall elect to terminate the
Company's tax year at the Closing Date and to end the Company's following tax
year on the last day of the Company's regular tax year. Such two years
(including the short year) shall be treated as separate years for purposes of
allocating the Company's income, gain, loss, deduction and credit. The
Stockholder shall file the final S corporation return by its due date, which
will be 2 1/2 months after the Closing Date.
(b) LandCare shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
5.5 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. LandCare or the Company will pay (or reimburse the Stockholders for, as
such tax becomes due and payable, as requested by the Stockholders in writing)
any tax (including any state, local or foreign tax) attributable to the making
of the Section 338(h)(10) Election (or an election under state, local or foreign
law similar to the Section 338(h)(10) Election) and will indemnify the
Stockholders against any tax liabilities resulting therefrom. As a result of the
Section 338(h)(10) Election, the parties agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be allocated to the
assets of the Company for all purposes (including tax and financial accounting
purposes) as shown on SCHEDULE 5.5. Purchaser and the Company and the
Stockholders will file all tax returns (including amended returns and claims for
refund) and information reports in a manner consistent with such allocation.
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5.6 GUARANTIES. As promptly as may be practicable after the Closing,
LandCare shall cause the release of the Stockholders' guaranties of indebtedness
of the Company, including but not limited to those guaranties listed on SCHEDULE
5.6.
6. INDEMNIFICATION
The Stockholders and LandCare each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto (whether three years, six
years or otherwise); the representations and warranties of the Stockholders made
in Section 2.9 (Environmental Matters) of this Agreement shall survive the
Closing for a period of five years after the Closing Date; and all other
representations and warranties of the Stockholders made in this Agreement shall
survive the Closing for a period of one year following the Closing Date;
provided, however, that representations and warranties and indemnification
provisions with respect to which a claim is made within the survival period
shall survive until such claim is finally determined and paid.
(b) The representations and warranties of LandCare made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCare and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation,
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reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such indemnified person as a result of or incident to (i)
any breach of any representation or warranty of the Stockholders set forth
herein, and (ii) any breach or nonfulfillment of any covenant or agreement by
the Company or the Stockholders under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that, for a period of five years after the Closing Date, they will indemnify,
defend, protect and hold harmless the Company and LandCARE and each of their
respective subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with: (a) violations or alleged violations of any applicable
federal, state, local, or other laws, regulations, ordinances, or orders of any
governmental entity which govern the protection of the environment or human
health and safety ("Environmental Laws") relating in any way to any action or
omission of the Company or any predecessor of the Company to the extent the
facts, events, or conditions giving rise to such violation or alleged violation
occurred or existed on or before the Effective Date; (b) the actual or alleged
presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material, or
hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date. LandCARE and the other persons or entities
indemnified pursuant to this Section 6.3 shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $50,000 (the "Indemnification Threshold"), and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Section 6.3 and the aggregate
liability of the Stockholders of Nashville, Memphis and Greentree under Section
6.3 of the Stock Purchase Agreements relating to such companies dated the date
hereof, in the aggregate, shall not exceed $500,000.
6.4 INDEMNIFICATION BY LANDCARE. LandCare covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCare set forth
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herein; and (ii) any breach or nonfulfillment of any covenant or agreement by
LandCare under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct
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competition with the Company within 200 miles of where the Company
conducted business at any time within one year prior to the Closing Date
(the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCare within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCare or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCare or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCare or any of its subsidiaries (including the Company) for the
purpose of soliciting or selling products or services in direct
competition with LandCare or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit (a) Steve Champ from continuing his current ownership of and
involvement with Greentree Termite & Pest Control, Inc., or (b) any Stockholder
from acquiring as a passive investor with no involvement in the operations or
management of the business, not more than two percent (2%) of the capital stock
of a competing business whose stock is publicly traded on a national securities
exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCare as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCare
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCare in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
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7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCare's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCare or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCare of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCare after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCare to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCare, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any governmental authority or by
any taxing authority or in any tax litigation, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholder shall
give prior written notice thereof to LandCare and provide LandCare with the
opportunity to contest such disclosure. In the event of a breach or threatened
breach by any Stockholder of the provisions of this Section, LandCare shall be
entitled
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to injunctive or other equitable relief restraining such Stockholder from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting LandCare from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCare would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against them by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCare, and the heirs and legal representatives of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCare, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against
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all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCare, addressed to it at:
LandCare USA, Inc.
5850 San Felipe Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Carolina Landscape Management, Inc.
1640 Roadhaven Drive
Stone Mountain, Georgia 30083
If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Georgia without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. As set forth in Section
6.1 hereof, the representations, warranties, covenants and agreements of the
parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
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9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCare may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
9.16 DISPUTE RESOLUTION. Any dispute or controversy arising under this
Agreement shall be determined and settled by binding arbitration in Atlanta,
Georgia by an independent disinterested person agreed upon by the parties to the
dispute or controversy. If the parties to the dispute cannot agree (within 30
days after any party notifies the others in writing of that party's intention to
invoke
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this arbitration provision) upon an independent disinterested arbitrator, each
shall, within 30 days after the end of such first 30-day period, appoint one
independent disinterested person as an arbitrator, and the two arbitrators so
selected shall, within 30 days, appoint a third independent disinterested person
as a third arbitrator. In the event that the two arbitrators are unable to agree
upon a third arbitrator within such time period, the parties shall cause the
American Arbitration Association to appoint a third arbitrator. The three
arbitrators so selected shall resolve the dispute by majority vote. The expenses
of arbitration shall be shared equally by the parties thereto, but each party
shall bear the expenses of its legal counsel. The parties hereto hereby agree to
be bound by the results of any such arbitration.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
CAROLINA LANDSCAPE MANAGEMENT, INC.
By:/s/ STEPHEN CHAMP
Stephen Champ
Title: President
STOCKHOLDERS:
By:/s/ STEPHEN CHAMP
Stephen Champ
EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
dated as of September 3, 1998
by and among
LANDCARE USA, INC.
NASHVILLE LANDSCAPE MANAGEMENT, LLC
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 The Closing......................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................2
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................13
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Reliance Upon Oral Representations..............................14
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3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................14
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Indebtedness to Company.........................................15
4.6 Consents........................................................15
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................16
5.4 Preparation and Filing of Tax Returns...........................16
5.5 Preparation and Filing of Tax Returns...........................17
5.6 Guaranties......................................................17
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholders' Representations and Warranties. .....18
6.2 General Indemnification by the Stockholders.....................18
6.3 Indemnification by LandCare.....................................19
6.4 Third Person Claims.............................................19
6.5 Method of Payment...............................................19
7. NONCOMPETITION........................................................19
7.1 Prohibited Activities...........................................19
7.2 Equitable Relief................................................20
7.3 Reasonable Restraint............................................21
7.4 Severability; Reformation.......................................21
7.5 Independent Covenant............................................21
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................21
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8.1 General.........................................................21
8.2 Equitable Relief................................................22
8.3 Survival........................................................22
9. GENERAL...............................................................22
9.1 Successors and Assigns..........................................22
9.2 Entire Agreement................................................22
9.3 Counterparts....................................................22
9.4 Brokers and Agents..............................................23
9.5 Notices.........................................................23
9.6 Governing Law...................................................25
9.7 Survival of Representations and Warranties......................25
9.8 Effect of Investigation.........................................25
9.9 Exercise of Rights and Remedies.................................25
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................26
9.13 Captions........................................................26
9.14 Press Releases and Public Announcements.........................26
9.15 No Third-Party Beneficiaries....................................26
9.16 Dispute Resolution..............................................26
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SCHEDULES
SCHEDULE 1.2. Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholders
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<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 3, 1998 by and among LandCare USA, Inc., a Delaware corporation
("LandCare"), Nashville Landscape Management, LLC, a Georgia limited liability
company (the "Company"), and the persons listed on the signature pages of this
Agreement as the stockholders of the Company (the "Stockholders"). The
Stockholders are the only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCare desires to
purchase, all of the issued and outstanding capital stock of the Company (the
"Shares") on the terms and conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the owners of all of the outstanding shares of capital stock of each of Carolina
Landscape Management, Inc., a Georgia corporation ("Carolina"), Greentree
Incorporated of Georgia, a Georgia corporation ("Greentree"), and Memphis
Landscape Management, LLC, a Georgia limited liability company ("Memphis"), are
selling all of such shares of capital stock to LandCare pursuant to stock
purchase agreements substantially similar to this Agreement;
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby sell, convey, transfer, assign and deliver to
LandCare, and LandCare hereby purchases from the Stockholders, all of the
Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $1,110,000, which amount is being paid by wire transfer of
immediately available funds in accordance with wiring instructions provided by
the Stockholders. Each of the Stockholders is receiving its pro rata interest in
the Purchase Price as set forth on SCHEDULE 1.2 hereto.
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1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby jointly and severally represent and warrant to
LandCare as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia (the "State
of Incorporation") and has all requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect on the Company (it being agreed that a "Material
Adverse Effect" means an adverse effect (over time or otherwise) of more than 1%
of the Purchase Price on the business, assets, operations or condition
(financial or otherwise), of the Company). Schedule 2.1 sets forth a list of all
jurisdictions in which the Company is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the Company (the "Charter Documents") are all attached to
Schedule 2.1. The stock records of the Company, a copy of which is attached to
Schedule 2.1, are correct and complete in all material respects. All records of
all proceedings of the Board of Directors and stockholders of the Company have
been made available to LandCare.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 10,000 shares of common stock, no par value per
share, of which 100 shares are issued and outstanding and constitute all of the
Shares. All of the Shares are owned of record and beneficially by the
Stockholders and are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were offered, issued,
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<PAGE>
sold and delivered by the Company in compliance with all applicable state and
federal laws governing the issuance of securities. None of the Shares were
issued in violation of any preemptive rights or similar rights of any person. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any additional shares of its capital stock or
obligates the Stockholders to transfer any of the Shares to any person except
pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on Schedule 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in Schedule 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on Schedule 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on Schedule 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on Schedule 2.6, all of the contingent liabilities of the Company
listed on Schedule 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
Schedule 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, Schedule 2.6 includes a
summary description of each known liability together with copies of all relevant
documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on Schedule 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on Schedule 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. Except as set forth on Schedule 2.8, the
Company holds all licenses, franchises, permits and other governmental
authorizations required in connection with the conduct of the Company's
business. Schedule 2.8 sets forth an accurate list and summary description of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles (including licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the Company or any of its employees (including interests in software or
other technology systems, programs and intellectual property) (collectively, the
"Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
2.9). The Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on Schedules 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on Schedule 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required by any applicable Environmental
Laws, including, without limitation, such permits and approvals as may be
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes, Hazardous Materials and Hazardous Substances, a list of all of which
permits and approvals is set forth on Schedule 2.9, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in, under or on any property owned or
operated by the Company except as permitted by Environmental Laws. There is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCare for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, as amended, (iii) the Hazardous Materials
Transportation Act, as amended, or (iv) comparable state or local statutes and
regulations. The Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. Schedule 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCare. Schedule 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders.
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Except as set forth on Schedule 2.10, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 2.10, (ii) all of the personal
property listed on Schedule 2.10 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
Schedule 2.10 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms. Except as set forth on Schedule 2.10, the Company has
good and marketable title to the tangible and intangible personal property it
purports to own, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
Schedule 2.10(a) lists items of personal property that are owned by one or more
of the Stockholders or will be transferred from the Company to one or more of
the Stockholders prior to the Closing.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
2.11 sets forth a list of (i) all (but not more than 25) customers representing
1% or more of the Company's revenues in its last full fiscal year ("Significant
Customers"), and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with Significant Customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements have been delivered to LandCare. Except as described
on Schedule 2.11, (i) none of the Significant Customers have canceled or
substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied with all commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on Schedule 2.11 and no notice
of default under any such contract or agreement has been received. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. Schedule 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. Schedule 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCare, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in Schedule
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2.12. All leases relating to Real Property leased by the Company from any of the
Stockholders or any affiliate of any of the Stockholders has been terminated.
Except as set forth on Schedule 2.12, all of such leases included on Schedule
2.12 are in full force and effect and constitute valid and binding agreements of
the parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all or any portion of the Real Property or create in or confer on any
such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's business; and
there are no claims or demands pending or, to the knowledge of the Stockholders,
threatened, by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on Schedule 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. Schedule 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCare. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on Schedule 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on Schedule
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2.14, since the Balance Sheet Date, there have been no increases in the base
compensation payable or any special bonuses to any officer, director, key
employee or other employee.
Except as set forth on Schedule 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. Schedule 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 2.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan and is not
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
Schedule 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on Schedule 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on Schedule 2.15 have either been
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fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date. All plans listed on Schedule 2.15 that are
intended to qualify (the "Qualified Plans") under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") are, and have been, so qualified
and have been determined by the Internal Revenue Service to be so qualified.
Except as disclosed on Schedule 2.15, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of Schedule 2.15. Neither the Stockholders, nor any
plan listed in Schedule 2.15, nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on Schedule 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on Schedule 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
2.16, there are no claims, actions, suits or proceedings, pending or, to the
best knowledge of the Stockholders, threatened, against or affecting the Company
(or any of its officers or directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on Schedule 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against or affecting the Company or its assets. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any material law or regulation or any order of any court or federal, state,
municipal or other
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governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or any Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for
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which the Company or any Company Subsidiary is or may be liable has been granted
to any Taxing Authority. Neither the Company nor any Company Subsidiary is or
has been party to any tax allocation or sharing agreement. All amounts required
to be withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. The Company uses the accrual method of accounting for
income tax purposes, and the Company's methods of accounting have not changed in
the past five years. The Company is not an investment company as defined in
Section 351(e)(1) of the Code. The Company has a taxable year ended December 31
and has not made an election to retain a fiscal year other than December 31
under IRC Section 444. The Company is not party to any joint venture,
partnership, or other arrangement that is treated as a partnership for federal
income tax purposes.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto, is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on Schedule 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits the under the Material
Documents to which the Company is entitled immediately prior to the Closing.
Except as set forth on Schedule 2.18 (and except for consents already obtained),
none of the Material Documents requires notice to, or the consent or approval
of, any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss
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of any right or benefit. Except as set forth on Schedule 2.18, none of the
Material Documents prohibits the use or publication of the name of any other
party to such Material Document, and none of the Material Documents prohibits or
restricts the Company or will prevent or restrict the Company or the LandCare
from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 2.19, there has not been:
(i) any change in excess of $50,000 in the business, assets,
liabilities or financial condition of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an aggregate amount not in excess of
$50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. Schedule 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on Schedule 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCare with all the
information that LandCare has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
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2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel (except to the extent any such Stockholder has elected not to
retain legal counsel) and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement, or has made his or her own
decision not to retain legal counsel; (c) that each, personally or through his
or its independently-retained attorneys, is fully satisfied with the terms and
effects of this Agreement; (d) that no promise or inducement has been offered or
made to him or it except as expressly stated in this Agreement or any other
written agreement entered into in connection herewith; and (e) that this
Agreement is executed without reliance on any oral statement or oral
representation by any other party or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE
LandCare represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCare is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCare is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCare executing this
Agreement has the authority to enter into and bind LandCare to the terms of this
Agreement and (ii) LandCare has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCare.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCare and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCare and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCare.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER . The Stockholders are delivering to LandCare
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified on
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCare dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCare certificates, dated as of a date no earlier than twenty days prior to
the date hereof, duly issued by the appropriate governmental authority in the
State of Incorporation and in each state in which the Company is authorized to
do business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 CONSENTS. The Stockholders are delivering to LandCare copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.7 RESIGNATION OF DIRECTORS AND OFFICERS. The Stockholders are delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
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4.8 CERTAIN LOANS. The Company is repaying to the Stockholders the loans
identified on SCHEDULE 4.10.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCare shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCare shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCare will pay the fees, expenses and disbursements of
LandCare and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company has paid the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. LandCare shall pay any sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed by the State of Texas in connection with the
transactions contemplated hereby, and the Stockholders shall pay any Transfer
Taxes imposed by the State of Georgia in connection with the transactions
contemplated hereby. In addition, the Stockholders acknowledge that the
Stockholders, and not the Company or LandCare, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCare at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and any of the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all tax returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCare has reviewed such filings and consented thereto. If the
Company is an S corporation, the Stockholders shall pay all Tax liabilities for
all periods ending on or prior to the Closing Date, and, pursuant to Section
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1377 of the Code, the Stockholders and LandCare shall elect to terminate the
Company's tax year at the Closing Date and to end the Company's following tax
year on the last day of the Company's regular tax year. Such two years
(including the short year) shall be treated as separate years for purposes of
allocating the Company's income, gain, loss, deduction and credit. The
Stockholder shall file the final S corporation return by its due date, which
will be 2 1/2 months after the Closing Date.
(b) LandCare shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
5.5 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. LandCare or the Company will pay (or reimburse the Stockholders for, as
such tax becomes due and payable, as requested by the Stockholders in writing)
any tax (including any state, local or foreign tax) attributable to the making
of the Section 338(h)(10) Election (or an election under state, local or foreign
law similar to the Section 338(h)(10) Election) and will indemnify the
Stockholders against any tax liabilities resulting therefrom. As a result of the
Section 338(h)(10) Election, the parties agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be allocated to the
assets of the Company for all purposes (including tax and financial accounting
purposes) as shown on SCHEDULE 5.5. Purchaser and the Company and the
Stockholders will file all tax returns (including amended returns and claims for
refund) and information reports in a manner consistent with such allocation.
5.6 GUARANTIES. As promptly as may be practicable after the Closing,
LandCare shall cause the release of the Stockholders' guaranties of indebtedness
of the Company, including but not limited to those guaranties listed on SCHEDULE
5.6.
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6. INDEMNIFICATION
The Stockholders and LandCare each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto (whether three years, six
years or otherwise); the representations and warranties of the Stockholders made
in Section 2.9 (Environmental Matters) of this Agreement shall survive the
Closing for a period of five years after the Closing Date; and all other
representations and warranties of the Stockholders made in this Agreement shall
survive the Closing for a period of one year following the Closing Date;
provided, however, that representations and warranties and indemnification
provisions with respect to which a claim is made within the survival period
shall survive until such claim is finally determined and paid.
(b) The representations and warranties of LandCare made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCare and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
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6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that, for a period of five years after the Closing Date, they will indemnify,
defend, protect and hold harmless the Company and LandCARE and each of their
respective subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with: (a) violations or alleged violations of any applicable
federal, state, local, or other laws, regulations, ordinances, or orders of any
governmental entity which govern the protection of the environment or human
health and safety ("Environmental Laws") relating in any way to any action or
omission of the Company or any predecessor of the Company to the extent the
facts, events, or conditions giving rise to such violation or alleged violation
occurred or existed on or before the Effective Date; (b) the actual or alleged
presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material, or
hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date. LandCARE and the other persons or entities
indemnified pursuant to this Section 6.3 shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $50,000 (the "Indemnification Threshold"), and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Section 6.3 and the aggregate
liability of the Stockholders of Carolina, Memphis and Greentree under Section
6.3 of the Stock Purchase Agreements relating to such companies dated the date
hereof, in the aggregate, shall not exceed $500,000.
6.4 INDEMNIFICATION BY LANDCARE. LandCare covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCare set forth herein; and (ii) any
breach or nonfulfillment of any covenant or agreement by LandCare under this
Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to
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a right of indemnification hereunder, such Indemnified Party shall give to the
party obligated to provide indemnification hereunder (an "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding;
provided, however, that the failure to give such notice will not relieve such
Indemnifying Party from liability under this Section with respect to such claim,
action or proceeding, except to the extent that the Indemnifying Party has been
actually prejudiced as a result of such failure. The Indemnifying Party (at its
own expense) shall have the right and shall be given the opportunity to
associate with the Indemnified Party in the defense of such claim, suit or
proceedings, and may select counsel for the Indemnified Party, such counsel to
be reasonably satisfactory to the Indemnified Party. The Indemnified Party shall
not, except at its own cost, make any settlement with respect to any such claim,
suit or proceeding without the prior consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. It is understood and
agreed that in situations where failure of the Indemnifying Party to settle a
claim expeditiously could have an adverse effect on the Indemnified Party, the
failure of the Indemnifying Party to act upon the Indemnified Party's request
for consent to such settlement within five business days of the Indemnifying
Party's receipt of notice thereof from the Indemnified Party shall be deemed to
constitute consent by the Indemnifying Party of such settlement for purposes of
this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 200 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCare within the Territory;
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(iii) call upon any person who is, at that time, an employee of
LandCare or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCare or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCare or any of its subsidiaries (including the Company) for the
purpose of soliciting or selling products or services in direct
competition with LandCare or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit (a) Steve Champ from continuing his current ownership of and
involvement with Greentree Termite & Pest Control, Inc., or (b) any Stockholder
from acquiring as a passive investor with no involvement in the operations or
management of the business, not more than two percent (2%) of the capital stock
of a competing business whose stock is publicly traded on a national securities
exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCare as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCare
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCare in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCare's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCare or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCare of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCare after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCare to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCare, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any governmental authority or by
any taxing authority or in any tax litigation, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholder shall
give prior written notice thereof to LandCare and provide LandCare with the
opportunity to contest such disclosure. In the event of a breach or threatened
breach by any Stockholder of the provisions of this Section, LandCare shall be
entitled to injunctive or other equitable relief restraining such Stockholder
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting LandCare from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that
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would be caused for which LandCare would have no other adequate remedy, the
Stockholders agree that the foregoing covenants may be enforced against them by
injunctions, restraining orders and other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCare, and the heirs and legal representatives of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCare, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
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If to LandCare, addressed to it at:
LandCare USA, Inc.
5850 San Felipe Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Nashville Landscape Management, LLC
3616 Central Pike Hermitage
Nashville, TN 37076
If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Georgia without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. As set forth in Section
6.1 hereof, the representations, warranties, covenants and agreements of the
parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCare may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
9.16 DISPUTE RESOLUTION. Any dispute or controversy arising under this
Agreement shall be determined and settled by binding arbitration in Atlanta,
Georgia by an independent disinterested person agreed upon by the parties to the
dispute or controversy. If the parties to the dispute cannot agree (within 30
days after any party notifies the others in writing of that party's intention to
invoke this arbitration provision) upon an independent disinterested arbitrator,
each shall, within 30 days after the end of such first 30-day period, appoint
one independent disinterested person as an arbitrator, and the two arbitrators
so selected shall, within 30 days, appoint a third independent disinterested
person as a third arbitrator. In the event that the two arbitrators are unable
to agree upon a third arbitrator within such time period, the parties shall
cause the American Arbitration Association to appoint a third arbitrator. The
three arbitrators so selected shall resolve the dispute by majority vote. The
expenses of arbitration shall be shared equally by the parties thereto, but each
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party shall bear the expenses of its legal counsel. The parties hereto hereby
agree to be bound by the results of any such arbitration.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
NASHVILLE LANDSCAPE MANAGEMENT, LLC
By:/s/ STEPHEN CHAMP
Stephen Champ
Title: President
STOCKHOLDERS:
By:/s/ STEPHEN CHAMP
Stephen Champ
By:/s/ FRANCES S. ORRIS
Frances S. Orris
By:/s/ KURT WATSON
Kurt Watson
EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
dated as of September 3, 1998
by and among
LANDCARE USA, INC.
MEMPHIS LANDSCAPE MANAGEMENT, LLC
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 The Closing......................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................2
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................13
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Reliance Upon Oral Representations..............................14
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3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................14
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Indebtedness to Company.........................................15
4.6 Consents........................................................15
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................16
5.4 Preparation and Filing of Tax Returns...........................16
5.5 Preparation and Filing of Tax Returns...........................17
5.6 Guaranties......................................................17
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholders' Representations and Warranties. .....18
6.2 General Indemnification by the Stockholders.....................18
6.3 Indemnification by LandCare.....................................19
6.4 Third Person Claims.............................................19
6.5 Method of Payment...............................................19
7. NONCOMPETITION........................................................19
7.1 Prohibited Activities...........................................19
7.2 Equitable Relief................................................20
7.3 Reasonable Restraint............................................21
7.4 Severability; Reformation.......................................21
7.5 Independent Covenant............................................21
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................21
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8.1 General.........................................................21
8.2 Equitable Relief................................................22
8.3 Survival........................................................22
9. GENERAL...............................................................22
9.1 Successors and Assigns..........................................22
9.2 Entire Agreement................................................22
9.3 Counterparts....................................................22
9.4 Brokers and Agents..............................................23
9.5 Notices.........................................................23
9.6 Governing Law...................................................25
9.7 Survival of Representations and Warranties......................25
9.8 Effect of Investigation.........................................25
9.9 Exercise of Rights and Remedies.................................25
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................26
9.13 Captions........................................................26
9.14 Press Releases and Public Announcements.........................26
9.15 No Third-Party Beneficiaries....................................26
9.16 Dispute Resolution..............................................26
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SCHEDULES
SCHEDULE 1.2. Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholders
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 3, 1998 by and among LandCare USA, Inc., a Delaware corporation
("LandCare"), Memphis Landscape Management, LLC, a Georgia limited liability
company (the "Company"), and the persons listed on the signature pages of this
Agreement as the stockholders of the Company (the "Stockholders"). The
Stockholders are the only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCare desires to
purchase, all of the issued and outstanding capital stock of the Company (the
"Shares") on the terms and conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
the owners of all of the outstanding shares of capital stock of each of Carolina
Landscape Management, Inc., a Georgia corporation ("Carolina"), Greentree
Incorporated of Georgia, a Georgia corporation ("Greentree"), and Nashville
Landscape Management, LLC, a Georgia limited liability company ("Memphis"), are
selling all of such shares of capital stock to LandCare pursuant to stock
purchase agreements substantially similar to this Agreement;
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby sell, convey, transfer, assign and deliver to
LandCare, and LandCare hereby purchases from the Stockholders, all of the
Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $1,000, which amount is being paid by wire transfer of
immediately available funds in accordance with wiring instructions provided by
the Stockholders. Each of the Stockholders is receiving its pro rata interest in
the Purchase Price as set forth on SCHEDULE 1.2 hereto.
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1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby jointly and severally represent and warrant to
LandCare as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia (the "State
of Incorporation") and has all requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect on the Company (it being agreed that a "Material
Adverse Effect" means an adverse effect (over time or otherwise) of more than 1%
of the Purchase Price on the business, assets, operations or condition
(financial or otherwise), of the Company). Schedule 2.1 sets forth a list of all
jurisdictions in which the Company is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the Company (the "Charter Documents") are all attached to
Schedule 2.1. The stock records of the Company, a copy of which is attached to
Schedule 2.1, are correct and complete in all material respects. All records of
all proceedings of the Board of Directors and stockholders of the Company have
been made available to LandCare.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 10,000 shares of common stock, no par value per
share, of which 100 shares are issued and outstanding and constitute all of the
Shares. All of the Shares are owned of record and beneficially by the
Stockholders and are owned free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the Shares have been duly authorized and validly issued, are fully
paid and nonassessable, and were offered, issued,
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sold and delivered by the Company in compliance with all applicable state and
federal laws governing the issuance of securities. None of the Shares were
issued in violation of any preemptive rights or similar rights of any person. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any additional shares of its capital stock or
obligates the Stockholders to transfer any of the Shares to any person except
pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on Schedule 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in Schedule 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as Schedule 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on Schedule 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on Schedule 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on Schedule 2.6, all of the contingent liabilities of the Company
listed on Schedule 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
Schedule 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, Schedule 2.6 includes a
summary description of each known liability together with copies of all relevant
documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on Schedule 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on Schedule 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. Except as set forth on Schedule 2.8, the
Company holds all licenses, franchises, permits and other governmental
authorizations required in connection with the conduct of the Company's
business. Schedule 2.8 sets forth an accurate list and summary description of
all such licenses, franchises, permits and other governmental authorizations,
including permits, titles (including licenses, franchises, certificates,
trademarks, trade names, patents, patent applications and copyrights owned or
held by the Company or any of its employees (including interests in software or
other technology systems, programs and intellectual property) (collectively, the
"Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
2.9). The Intangible Assets and other governmental authorizations listed on
Schedules 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on Schedules 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on Schedule 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required by any applicable Environmental
Laws, including, without limitation, such permits and approvals as may be
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes, Hazardous Materials and Hazardous Substances, a list of all of which
permits and approvals is set forth on Schedule 2.9, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by the Company where Hazardous Wastes,
Hazardous Materials or Hazardous Substances have been treated, stored, disposed
of or otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in, under or on any property owned or
operated by the Company except as permitted by Environmental Laws. There is no
on-site or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCare for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any claim under (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, as amended, (iii) the Hazardous Materials
Transportation Act, as amended, or (iv) comparable state or local statutes and
regulations. The Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. Schedule 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCare. Schedule 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders.
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Except as set forth on Schedule 2.10, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on Schedule 2.10, (ii) all of the personal
property listed on Schedule 2.10 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
Schedule 2.10 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms. Except as set forth on Schedule 2.10, the Company has
good and marketable title to the tangible and intangible personal property it
purports to own, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
Schedule 2.10(a) lists items of personal property that are owned by one or more
of the Stockholders or will be transferred from the Company to one or more of
the Stockholders prior to the Closing.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. Schedule
2.11 sets forth a list of (i) all (but not more than 25) customers representing
1% or more of the Company's revenues in its last full fiscal year ("Significant
Customers"), and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with Significant Customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements have been delivered to LandCare. Except as described
on Schedule 2.11, (i) none of the Significant Customers have canceled or
substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied with all commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on Schedule 2.11 and no notice
of default under any such contract or agreement has been received. The
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. Schedule 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. Schedule 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCare, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in Schedule
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2.12. All leases relating to Real Property leased by the Company from any of the
Stockholders or any affiliate of any of the Stockholders has been terminated.
Except as set forth on Schedule 2.12, all of such leases included on Schedule
2.12 are in full force and effect and constitute valid and binding agreements of
the parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all or any portion of the Real Property or create in or confer on any
such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's business; and
there are no claims or demands pending or, to the knowledge of the Stockholders,
threatened, by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on Schedule 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. Schedule 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCare. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on Schedule 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on Schedule
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2.14, since the Balance Sheet Date, there have been no increases in the base
compensation payable or any special bonuses to any officer, director, key
employee or other employee.
Except as set forth on Schedule 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. Schedule 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on Schedule 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on Schedule 2.15, the Company does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor does the Company have any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The Company has not sponsored,
maintained or contributed to any employee pension benefit plan and is not
required to contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
Schedule 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on Schedule 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on Schedule 2.15 have either been
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fulfilled in their entirety or are fully reflected on the balance sheet of the
Company as of the Balance Sheet Date. All plans listed on Schedule 2.15 that are
intended to qualify (the "Qualified Plans") under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") are, and have been, so qualified
and have been determined by the Internal Revenue Service to be so qualified.
Except as disclosed on Schedule 2.15, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of Schedule 2.15. Neither the Stockholders, nor any
plan listed in Schedule 2.15, nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on Schedule 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on Schedule 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed in Schedule 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule
2.16, there are no claims, actions, suits or proceedings, pending or, to the
best knowledge of the Stockholders, threatened, against or affecting the Company
(or any of its officers or directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on Schedule 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against or affecting the Company or its assets. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any material law or regulation or any order of any court or federal, state,
municipal or other
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governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or any Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for
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which the Company or any Company Subsidiary is or may be liable has been granted
to any Taxing Authority. Neither the Company nor any Company Subsidiary is or
has been party to any tax allocation or sharing agreement. All amounts required
to be withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor any Stockholder is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. The Company uses the accrual method of accounting for
income tax purposes, and the Company's methods of accounting have not changed in
the past five years. The Company is not an investment company as defined in
Section 351(e)(1) of the Code. The Company has a taxable year ended December 31
and has not made an election to retain a fiscal year other than December 31
under IRC Section 444. The Company is not party to any joint venture,
partnership, or other arrangement that is treated as a partnership for federal
income tax purposes.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto, is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on Schedule 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under, any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits the under the Material
Documents to which the Company is entitled immediately prior to the Closing.
Except as set forth on Schedule 2.18 (and except for consents already obtained),
none of the Material Documents requires notice to, or the consent or approval
of, any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss
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of any right or benefit. Except as set forth on Schedule 2.18, none of the
Material Documents prohibits the use or publication of the name of any other
party to such Material Document, and none of the Material Documents prohibits or
restricts the Company or will prevent or restrict the Company or the LandCare
from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on Schedule 2.19, there has not been:
(i) any change in excess of $50,000 in the business, assets,
liabilities or financial condition of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an aggregate amount not in excess of
$50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. Schedule 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on Schedule 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on Schedule 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCare with all the
information that LandCare has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
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2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel (except to the extent any such Stockholder has elected not to
retain legal counsel) and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement, or has made his or her own
decision not to retain legal counsel; (c) that each, personally or through his
or its independently-retained attorneys, is fully satisfied with the terms and
effects of this Agreement; (d) that no promise or inducement has been offered or
made to him or it except as expressly stated in this Agreement or any other
written agreement entered into in connection herewith; and (e) that this
Agreement is executed without reliance on any oral statement or oral
representation by any other party or any other party's agent or attorney.
3. REPRESENTATIONS OF LANDCARE
LandCare represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCare is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCare is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCare executing this
Agreement has the authority to enter into and bind LandCare to the terms of this
Agreement and (ii) LandCare has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCare.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCare and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCare and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCare.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER . The Stockholders are delivering to LandCare
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified on
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCare dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCare certificates, dated as of a date no earlier than twenty days prior to
the date hereof, duly issued by the appropriate governmental authority in the
State of Incorporation and in each state in which the Company is authorized to
do business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 CONSENTS. The Stockholders are delivering to LandCare copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.7 RESIGNATION OF DIRECTORS AND OFFICERS. The Stockholders are delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
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4.8 CERTAIN LOANS. The Company is repaying to the Stockholders the loans
identified on SCHEDULE 4.10.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCare shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCare shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCare will pay the fees, expenses and disbursements of
LandCare and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Company has paid the fees, expenses and disbursements of the
Stockholders and their agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. LandCare shall pay any sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed by the State of Texas in connection with the
transactions contemplated hereby, and the Stockholders shall pay any Transfer
Taxes imposed by the State of Georgia in connection with the transactions
contemplated hereby. In addition, the Stockholders acknowledge that the
Stockholders, and not the Company or LandCare, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCare at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and any of the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all tax returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCare has reviewed such filings and consented thereto. If the
Company is an S corporation, the Stockholders shall pay all Tax liabilities for
all periods ending on or prior to the Closing Date, and, pursuant to Section
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1377 of the Code, the Stockholders and LandCare shall elect to terminate the
Company's tax year at the Closing Date and to end the Company's following tax
year on the last day of the Company's regular tax year. Such two years
(including the short year) shall be treated as separate years for purposes of
allocating the Company's income, gain, loss, deduction and credit. The
Stockholder shall file the final S corporation return by its due date, which
will be 2 1/2 months after the Closing Date.
(b) LandCare shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Tax Returns pursuant to this Agreement shall bear all costs of filing
such Tax Returns.
5.5 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. LandCare or the Company will pay (or reimburse the Stockholders for, as
such tax becomes due and payable, as requested by the Stockholders in writing)
any tax (including any state, local or foreign tax) attributable to the making
of the Section 338(h)(10) Election (or an election under state, local or foreign
law similar to the Section 338(h)(10) Election) and will indemnify the
Stockholders against any tax liabilities resulting therefrom. As a result of the
Section 338(h)(10) Election, the parties agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be allocated to the
assets of the Company for all purposes (including tax and financial accounting
purposes) as shown on SCHEDULE 5.5. Purchaser and the Company and the
Stockholders will file all tax returns (including amended returns and claims for
refund) and information reports in a manner consistent with such allocation.
5.6 GUARANTIES. As promptly as may be practicable after the Closing,
LandCare shall cause the release of the Stockholders' guaranties of indebtedness
of the Company, including but not limited to those guaranties listed on SCHEDULE
5.6.
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6. INDEMNIFICATION
The Stockholders and LandCare each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company) and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto (whether three years, six
years or otherwise); the representations and warranties of the Stockholders made
in Section 2.9 (Environmental Matters) of this Agreement shall survive the
Closing for a period of five years after the Closing Date; and all other
representations and warranties of the Stockholders made in this Agreement shall
survive the Closing for a period of one year following the Closing Date;
provided, however, that representations and warranties and indemnification
provisions with respect to which a claim is made within the survival period
shall survive until such claim is finally determined and paid.
(b) The representations and warranties of LandCare made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCare and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
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6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that, for a period of five years after the Closing Date, they will indemnify,
defend, protect and hold harmless the Company and LandCARE and each of their
respective subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with: (a) violations or alleged violations of any applicable
federal, state, local, or other laws, regulations, ordinances, or orders of any
governmental entity which govern the protection of the environment or human
health and safety ("Environmental Laws") relating in any way to any action or
omission of the Company or any predecessor of the Company to the extent the
facts, events, or conditions giving rise to such violation or alleged violation
occurred or existed on or before the Effective Date; (b) the actual or alleged
presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material, or
hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date. LandCARE and the other persons or entities
indemnified pursuant to this Section 6.3 shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $50,000 (the "Indemnification Threshold"), and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Section 6.3 and the aggregate
liability of the Stockholders of Carolina, Nashville and Greentree under Section
6.3 of the Stock Purchase Agreements relating to such companies dated the date
hereof, in the aggregate, shall not exceed $500,000.
6.4 INDEMNIFICATION BY LANDCARE. LandCare covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCare set forth herein; and (ii) any
breach or nonfulfillment of any covenant or agreement by LandCare under this
Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to
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a right of indemnification hereunder, such Indemnified Party shall give to the
party obligated to provide indemnification hereunder (an "Indemnifying Party")
written notice of such claim or the commencement of such action or proceeding;
provided, however, that the failure to give such notice will not relieve such
Indemnifying Party from liability under this Section with respect to such claim,
action or proceeding, except to the extent that the Indemnifying Party has been
actually prejudiced as a result of such failure. The Indemnifying Party (at its
own expense) shall have the right and shall be given the opportunity to
associate with the Indemnified Party in the defense of such claim, suit or
proceedings, and may select counsel for the Indemnified Party, such counsel to
be reasonably satisfactory to the Indemnified Party. The Indemnified Party shall
not, except at its own cost, make any settlement with respect to any such claim,
suit or proceeding without the prior consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. It is understood and
agreed that in situations where failure of the Indemnifying Party to settle a
claim expeditiously could have an adverse effect on the Indemnified Party, the
failure of the Indemnifying Party to act upon the Indemnified Party's request
for consent to such settlement within five business days of the Indemnifying
Party's receipt of notice thereof from the Indemnified Party shall be deemed to
constitute consent by the Indemnifying Party of such settlement for purposes of
this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. (a) As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 200 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCare within the Territory;
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<PAGE>
(iii) call upon any person who is, at that time, an employee of
LandCare or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCare or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCare or any of its subsidiaries (including the Company) for the
purpose of soliciting or selling products or services in direct
competition with LandCare or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit (a) Steve Champ from continuing his current ownership of and
involvement with Greentree Termite & Pest Control, Inc., or (b) any Stockholder
from acquiring as a passive investor with no involvement in the operations or
management of the business, not more than two percent (2%) of the capital stock
of a competing business whose stock is publicly traded on a national securities
exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which any
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCare as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCare
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCare in the event of breach by
such Stockholders, by injunctions, restraining orders and other equitable
actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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<PAGE>
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCare's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Stockholder against
LandCare or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCare of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any such Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCare after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCare to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCare, (b) following the Closing,
such information may be disclosed by any Stockholder as may be required in the
course of performing his duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholder, or (ii)
disclosure is required by law or the order of any governmental authority or by
any taxing authority or in any tax litigation, provided, that prior to
disclosing any information pursuant to this clause (ii), the Stockholder shall
give prior written notice thereof to LandCare and provide LandCare with the
opportunity to contest such disclosure. In the event of a breach or threatened
breach by any Stockholder of the provisions of this Section, LandCare shall be
entitled to injunctive or other equitable relief restraining such Stockholder
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting LandCare from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that
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would be caused for which LandCare would have no other adequate remedy, the
Stockholders agree that the foregoing covenants may be enforced against them by
injunctions, restraining orders and other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCare, and the heirs and legal representatives of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCare, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
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If to LandCare, addressed to it at:
LandCare USA, Inc.
5850 San Felipe Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Memphis Landscape Management, LLC
925 Pilot Drive
Memphis, TN 38112
If to the Stockholders, addressed to them at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Georgia without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. As set forth in Section
6.1 hereof, the representations, warranties, covenants and agreements of the
parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCare may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
9.16 DISPUTE RESOLUTION. Any dispute or controversy arising under this
Agreement shall be determined and settled by binding arbitration in Atlanta,
Georgia by an independent disinterested person agreed upon by the parties to the
dispute or controversy. If the parties to the dispute cannot agree (within 30
days after any party notifies the others in writing of that party's intention to
invoke this arbitration provision) upon an independent disinterested arbitrator,
each shall, within 30 days after the end of such first 30-day period, appoint
one independent disinterested person as an arbitrator, and the two arbitrators
so selected shall, within 30 days, appoint a third independent disinterested
person as a third arbitrator. In the event that the two arbitrators are unable
to agree upon a third arbitrator within such time period, the parties shall
cause the American Arbitration Association to appoint a third arbitrator. The
three arbitrators so selected shall resolve the dispute by majority vote. The
expenses of arbitration shall be shared equally by the parties thereto, but each
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party shall bear the expenses of its legal counsel. The parties hereto hereby
agree to be bound by the results of any such arbitration.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
MEMPHIS LANDSCAPE MANAGEMENT, LLC
By:/s/ STEPHEN CHAMP
Stephen Champ
Title: President
STOCKHOLDERS:
By:/s/ STEVE CHAMP
Steve Champ
By:/s/ FRANCES S. ORRIS
Frances S. Orris
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
dated as of September 4, 1998
by and among
LANDCARE USA, INC.,
PACIFIC ENVIRONMENTAL LANDSCAPE MAINTENANCE, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE.
1.2 PURCHASE PRICE...................................................2
--------------
2.1 DUE ORGANIZATION.................................................2
----------------
2.2 AUTHORIZATION....................................................2
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2.3 CAPITAL STOCK OF THE COMPANY.....................................3
----------------------------
2.4 SUBSIDIARIES.....................................................3
------------
2.5 FINANCIAL STATEMENTS.............................................3
--------------------
2.6 LIABILITIES AND OBLIGATIONS......................................4
---------------------------
2.7 ACCOUNTS AND NOTES RECEIVABLE....................................4
-----------------------------
2.8 PERMITS AND INTANGIBLES..........................................4
-----------------------
2.9 ENVIRONMENTAL MATTERS............................................5
---------------------
2.10 PERSONAL PROPERTY................................................6
-----------------
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS........6
---------------------------------------------------------
2.12 REAL PROPERTY....................................................6
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2.13 INSURANCE........................................................7
----------
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.....7
------------------------------------------------------------
2.15 EMPLOYEE BENEFIT PLANS...........................................8
----------------------
2.16 CONFORMITY WITH LAW; LITIGATION..................................9
-------------------------------
2.17 TAXES...........................................................10
-----
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED...................11
---------------------------------------------
2.19 ABSENCE OF CHANGES..............................................11
------------------
2.20 POWERS OF ATTORNEY..............................................13
------------------
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.........13
-------------------------------------------------------
2.22 DISCLOSURE......................................................13
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2.23 CERTAIN BUSINESS PRACTICES......................................13
--------------------------
2.24 NOTICE TO BARGAINING AGENTS.....................................14
---------------------------
2.25 NOTICES AND CONSENTS............................................14
--------------------
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS.............14
---------------------------------------------------
2.27 YEAR 2000 COMPLIANCE............................................14
--------------------
2.28 RELIANCE UPON ORAL REPRESENTATIONS..............................14
----------------------------------
3. REPRESENTATIONS OF LANDCARE...........................................14
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3.1 DUE ORGANIZATION................................................14
----------------
3.2 AUTHORIZATION...................................................15
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3.3 NO VIOLATIONS...................................................15
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3.4 VALIDITY OF OBLIGATIONS.........................................15
-----------------------
4. DELIVERIES............................................................15
4.1 INSTRUMENTS OF TRANSFER.........................................15
-----------------------
4.2 EMPLOYMENT AGREEMENT............................................15
--------------------
4.3 OPINION OF COUNSEL..............................................15
------------------
4.4 GOOD STANDING CERTIFICATES......................................15
--------------------------
4.5 INDEBTEDNESS TO COMPANY.........................................15
-----------------------
4.6 CONSENTS........................................................15
--------
4.7 RESIGNATIONS OF DIRECTORS AND OFFICERS..........................16
--------------------------------------
5. POST-CLOSING COVENANTS................................................16
5.1 FUTURE COOPERATION; FURTHER ASSURANCES..........................16
--------------------------------------
5.2 EXPENSES........................................................16
--------
5.3 CERTAIN AGREEMENTS..............................................16
------------------
5.4 PREPARATION AND FILING OF TAX RETURNS...........................16
-------------------------------------
5.5 LEASE...........................................................17
-----
6. INDEMNIFICATION.......................................................17
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES. .....17
--------------------------------------------------------
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS.....................18
-------------------------------------------
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS....................18
--------------------------------------------
6.4 INDEMNIFICATION BY LANDCARE.....................................18
---------------------------
6.5 THIRD PERSON CLAIMS.............................................18
-------------------
6.6 METHOD OF PAYMENT...............................................19
-----------------
7. NONCOMPETITION........................................................19
7.1 PROHIBITED ACTIVITIES...........................................19
---------------------
7.2 EQUITABLE RELIEF................................................20
----------------
7.3 REASONABLE RESTRAINT............................................20
--------------------
7.4 SEVERABILITY; REFORMATION.......................................20
-------------------------
7.5 INDEPENDENT COVENANT............................................21
--------------------
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................21
8.1 GENERAL.........................................................21
-------
8.2 EQUITABLE RELIEF................................................22
----------------
8.3 SURVIVAL........................................................22
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9. GENERAL...............................................................22
9.1 SUCCESSORS AND ASSIGNS..........................................22
----------------------
9.2 ENTIRE AGREEMENT................................................22
----------------
9.3 COUNTERPARTS....................................................22
------------
9.4 BROKERS AND AGENTS..............................................22
------------------
9.5 NOTICES.........................................................22
-------
9.6 GOVERNING LAW...................................................23
-------------
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................23
------------------------------------------
9.8 EFFECT OF INVESTIGATION.........................................23
-----------------------
9.9 EXERCISE OF RIGHTS AND REMEDIES.................................24
-------------------------------
9.10 TIME............................................................24
----
9.11 REFORMATION AND SEVERABILITY....................................24
----------------------------
9.12 REMEDIES CUMULATIVE.............................................24
-------------------
9.13 CAPTIONS........................................................24
--------
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.........................24
---------------------------------------
9.15 NO THIRD-PARTY BENEFICIARIES....................................24
----------------------------
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 5.5. Leases
ANNEXES
Annex I - Form of Convertible Subordinated Note
Annex II - Form of Employment Agreement
Annex III - Form of Opinion of Counsel to Company and
Stockholders
Annex IV - Form of Lease
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 4, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Pacific Environmental Landscape Maintenance, Inc., a California
corporation (the "Company"), and George Nassios and Gary Plumley (the
"Stockholders"). The Stockholders are the only holders of capital stock of the
Company.
WHEREAS, the Stockholders desire to sell, and LandCare desires to
purchase, all of the issued and outstanding capital stock of the Company (the
"Shares") on the terms and conditions set forth in this Agreement; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
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1. PURCHASE AND SALE
1.1 PURCHASE AND SALE. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby sell, convey, transfer, assign and deliver to
LandCare, and LandCare hereby purchases from the Stockholders, all of the
Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares consists of (i) one or more convertible subordinated promissory
notes issed by LandCare in the form of Annex I hereto in the aggregate principal
amount of One Million Dollars ($1,000,000) and (ii) Three Million Five Hundred
Thirty-Three Thousand Two Hundred Dollars ($3,533,200) in cash, which amount is
being paid by wire transfer of immediately available funds in accordance with
wiring instructions provided by the Stockholders. Each of the Stockholders is
receiving its pro rata interest in the Purchase Price as set forth on SCHEDULE
1.2 hereto.
1.3 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") is taking place concurrently with the execution and
delivery of this Agreement, and the date hereof is sometimes herein called the
"Closing Date".
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the
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transactions contemplated hereby, all of which have been approved by the
Stockholders and the Board of Directors of the Company. This Agreement has been
validly executed and delivered by the Company and the Stockholders and
constitutes the legal, valid and binding obligation of each of them, enforceable
in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, no par value per
share, of which 7,104 shares are issued and outstanding and constitute all of
the issued and outstanding shares of Company Stock (the "Shares"). All of the
Shares are owned of record and beneficially by the Stockholders and are owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were offered, issued, sold and delivered by the Company in compliance with
all applicable state and federal laws governing the issuance of securities. None
of the Shares were issued in violation of any preemptive rights or similar
rights of any person. No option, warrant, call, conversion right or commitment
of any kind exists which obligates the Company to issue any additional shares of
its capital stock or obligates the Stockholders to transfer any of the Shares to
any person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of June 30, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholders' equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 and the related statements of operations for the
one-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
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The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects. The
Company regularly writes off uncollectible bad debts, and the debts not so
written off are believed to be fully collectible.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of the Company
listed on SCHEDULE 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto. The Company's total debt as of the
Closing Date does not exceed $750,000. As of the Closing Date the Company's
tangible net worth is at least $880,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other
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governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and the
Company has not received any notice that any person intends to cancel, terminate
or not renew any such Intangible Assets or other governmental authorization. The
Company has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Intangible
Assets and other governmental authorizations listed on SCHEDULES 2.8 and 2.9 and
is not in violation of any of the foregoing. Except as specifically set forth on
SCHEDULE 2.8 or 2.9, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such Intangible Assets or
other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances which is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company or LandCARE for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with
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any release of any Hazardous Waste, Hazardous Material or Hazardous Substance
into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied with all
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on SCHEDULE 2.11 and no notice of default under
any such contract or agreement has been received. The transactions contemplated
by this Agreement will not result in a default under or a breach or violation
of, or adversely affect the rights and benefits afforded to the Company by, any
such contracts or agreements. SCHEDULE 2.11 also includes a summary description
of all plans or projects relating to the Company's business involving the
opening of new operations, expansion of existing operations, the acquisition of
any property, business or assets requiring, in any event, the payment of more
than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the
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Company in the conduct of its business. True, complete and correct copies of all
leases and agreements with respect to Real Property leased by the Company have
been delivered to LandCARE, and an indication as to which such properties, if
any, are currently owned, or were formerly owned, by the Stockholders or any
affiliates of the Company or the Stockholders is included in SCHEDULE 2.12. All
leases relating to Real Property leased by the Company from the Stockholders or
any affiliate of the Stockholders has been terminated. Except as set forth on
SCHEDULE 2.12, all of such leases included on SCHEDULE 2.12 are in full force
and effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms. There are no
leases, tenancy agreements, easements, covenants, restrictions or any other
instruments, agreements or arrangements which create in or confer on any party,
other than the Company, the right to occupy or possess all or any portion of the
Real Property or create in or confer on any such party any right, title or
interest in or to the Real Property or any portion thereof or any interest
therein; no party other than the Company occupies or possesses the Real Property
or any portion thereof; there is legal and adequate ingress and egress between
each tract of Real Property and an adjacent (or, if none, the closest) public
roadway; the Real Property is properly zoned in order to allow its current use
in the Company's businesses; and there are no claims or demands pending or
threatened by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on SCHEDULE 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
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respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions of employment of any of the Company's employees other than the plans
set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance
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Sheet Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholders, nor any plan listed
in SCHEDULE 2.15 nor the Company have engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA. No
plan listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against the Company. Except as set forth on SCHEDULE 2.16, the
Company has conducted and now conducts its business in material compliance with
all laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local
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statutes, ordinances, permits, licenses, orders, approvals, variances, rules and
regulations, including all such permits, licenses, orders and other governmental
approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholders, threatened,
and no basis which the Company or any Stockholders believe to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and
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paid to the proper Taxing Authority. The Company and each Company Subsidiary
have made all deposits required by law to be made with respect to employees'
withholding and other employment Taxes. Neither the Company nor the Stockholders
are a "foreign person," as that term is referred to in Section 1445(f)(3) of the
Code. The Company has not filed a consent pursuant to Section 341 (f) of the
Code or any comparable provision of any other tax statute and has not agreed to
have Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is not
obligated to make and is not a party to any agreement that could require it to
make any payment that is not deductible under Section 280G of the Code. No asset
of the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation or
amortization with respect to that asset below the allowance generally available
to an asset of its type. No accounting method changes of the Company or of any
Company Subsidiary exist or are proposed or threatened which could give rise to
an adjustment under Section 481 of the Code. The Company uses the accrual method
of accounting for income tax purposes, and the Company's methods of accounting
have not changed in the past five years. The Company is not an investment
company as defined in Section 351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
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(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
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(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
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2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
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3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. Newco and the persons identified in SCHEDULE 4.2
are entering into Employment Agreements in the form of Annex II.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex III.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than ten days prior to the
date hereof, duly issued by the appropriate governmental authority in the State
of Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
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4.7 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the
Surviving Corporation and LandCARE shall each deliver or cause to be delivered
to the other following the date hereof such additional instruments as the other
may reasonably request for the purpose of effecting the transactions
contemplated hereby and fully carrying out the intent of this Agreement.
LandCARE shall provide the Stockholders reasonable access to the books and
records of the Surviving Corporation after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholders will pay the fees, expenses and disbursements
of the Stockholders and their agents, representatives, financial advisors,
accountants and counsel incurred in connection with the execution, delivery and
performance of this Agreement. The Stockholders shall pay any sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
transactions contemplated hereby. The Stockholders shall file all necessary
documentation and returns with respect to such Transfer Taxes. In addition, the
Stockholders acknowledge that the Stockholders, and not the Surviving
Corporation or LandCARE, will pay all taxes (income or otherwise), if any, due
upon receipt of the consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Surviving Corporation shall terminate any
existing agreements to which the Company and any Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholders shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
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(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 LEASE. The Company shall enter into leases of the properties
identified on Schedule 5.5 in the form attached hereto as Annex IV. The
Stockholders shall deliver to LandCARE evidence of the termination of all leases
relating to Real Property leases by the Company from any of the Stockholders or
any affiliate of any of the Stockholders.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
this Agreement herewith shall survive the Closing until the expiration of the
periods prescribed by the applicable statutes of limitations (including any
extensions thereof) relating thereto; provided, however, that representations
and warranties and indemnification provisions with respect to which a claim is
made within the survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
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6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders jointly
and severally covenant and agree that they will indemnify, defend, protect, and
hold harmless the Surviving Corporation, LandCARE and its subsidiaries and all
of their officers, directors, employees, stockholders, agents, representatives
and affiliates at all times from and after the date of this Agreement until the
Expiration Date from and against all claims, damages actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively "Damages") incurred by such indemnified person as a
result of or incident to (i) any breach of any representation or warranty of the
Stockholders set forth herein, and (ii) any breach or nonfulfillment of any
covenant or agreement by the Company or the Stockholders under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders jointly and
severally covenant and agree that they will indemnify, defend, protect and hold
harmless the Company and LandCARE and each of their respective subsidiaries,
officers, directors, employees, stockholders, agents, representatives and
affiliates from and against all Damages incurred by any of them in connection
with: (a) violations or alleged violations of any applicable federal, state,
local, or other laws, regulations, ordinances, or orders of any governmental
entity which govern the protection of the environment or human health and safety
("Environmental Laws") relating in any way to any action or omission of the
Company or any predecessor of the Company to the extent the facts, events, or
conditions giving rise to such violation or alleged violation occurred or
existed on or before the Effective Date; (b) the actual or alleged presence,
emanation, migration, disposal, release, or threatened release (collectively,
"Releases") of any oil, petroleum product, hazardous material, or hazardous
substance as such terms are defined by Environmental Laws (collectively,
"Hazardous Substances") at, under, to, or from any property or facility which
presently is or previously was owned, leased, operated, or otherwise used by the
Company or any predecessor of the Company to the extent that said actual or
alleged Release occurred or is alleged to have occurred on or before the
Effective Date; and (c) the actual or alleged Release of any Hazardous
Substances at any location or facility whatsoever to the extent such Hazardous
Substances were generated by, or were arranged for disposal at such location or
facility by, the Company or any predecessor of the Company on or before the
Effective Date.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third
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Person") or the commencement of any action or proceeding by a Third Person that
may give rise to a right of indemnification hereunder, such Indemnified Party
shall give to the party obligated to provide indemnification hereunder (an
"Indemnifying Party") written notice of such claim or the commencement of such
action or proceeding; provided, however, that the failure to give such notice
will not relieve such Indemnifying Party from liability under this Section with
respect to such claim, action or proceeding, except to the extent that the
Indemnifying Party has been actually prejudiced as a result of such failure. The
Indemnifying Party (at its own expense) shall have the right and shall be given
the opportunity to associate with the Indemnified Party in the defense of such
claim, suit or proceedings, and may select counsel for the Indemnified Party,
such counsel to be reasonably satisfactory to the Indemnified Party. The
Indemnified Party shall not, except at its own cost, make any settlement with
respect to any such claim, suit or proceeding without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
It is understood and agreed that in situations where failure of the Indemnifying
Party to settle a claim expeditiously could have an adverse effect on the
Indemnified Party, the failure of the Indemnifying Party to act upon the
Indemnified Party's request for consent to such settlement within five business
days of the Indemnifying Party's receipt of notice thereof from the Indemnified
Party shall be deemed to constitute consent by the Indemnifying Party of such
settlement for purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholders, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholders.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation within 100 miles of where the Company conducted business at
any time within one year prior to the Closing Date (the "Territory");
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(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholders from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholders may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCARE in the event of breach by any
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
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that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that their
covenants set forth in this Section are material conditions to LandCARE's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Stockholders against
LandCARE or any subsidiary thereof, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by LandCARE of such
covenants. It is specifically agreed that the period of five years stated at the
beginning of this Section, during which the agreements and covenants of the
Stockholders made in this Section shall be effective, shall be computed by
excluding from such computation any time during which any Stockholder is in
violation of any provision of this Section. The covenants contained in Section
shall not be affected by any breach of any other provision hereof by any party
hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholders agree that they will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholders as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholders, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholders shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholders of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholders from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
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8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
9.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
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If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Pacific Environmental, Inc.
20712 Indian Ocean Drive
Lake Forest, California 92630
If to Mr. Nassios, addressed to him at:
2175 Hillview Drive
Laguna Beach, California 92651
If to Mr. Plumley, addressed to him at such address as may be
provided by him to LandCare; or to such other address as any party hereto shall
specify pursuant to this Section from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
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9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By: /s/ WILLIAM L. FIEDLER
Name: WILLIAM L. FIEDLER
Title: Sr. Vice President
PACIFIC ENVIRONMENTAL LANDSCAPE
MAINTENANCE, INC.
By: /s/ GEORGE NASSIOS
Name: GEORGE NASSIOS
Title: President
/s/ GEORGE NASSIOS
---------------------------
George Nassios
_______________(spouse of George Nassios)
/s/ GARY PLUMLEY
---------------------------
Gary Plumley
_______________ (spouse of Gary Plumley)
EXHIBIT 10.14
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of September 18, 1998
by and among
LANDCARE USA, INC.,
LNI ACQUISITION CORP.,
LIGHTHOUSE NURSERY, INC.
and
KEN CLEGG
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation and By-laws of Surviving Corporation...2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................2
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................3
2.1 Due Organization.................................................3
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................4
2.5 Financial Statements.............................................4
2.6 Liabilities and Obligations......................................5
2.7 Accounts and Notes Receivable....................................5
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................6
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........7
2.12 Real Property....................................................8
2.13 Insurance........................................................8
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans...........................................9
2.16 Conformity with Law; Litigation.................................10
2.17 Taxes...........................................................11
2.18 No Violations; All Required Consents Obtained...................12
2.19 Absence of Changes..............................................13
2.20 Powers of Attorney..............................................14
2.21 Inventory; Working Capital; Other Financial Matters.............14
2.22 Competing Lines of Business; Related-party Transactions.........14
2.23 Disclosure......................................................14
2.24 Certain Business Practices......................................15
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2.25 Notice to Bargaining Agents.....................................15
2.26 Notices and Consents............................................15
2.27 Year 2000 Compliance............................................15
2.28 Reliance Upon Oral Representations..............................15
3. REPRESENTATIONS OF LANDCARE...........................................16
3.1 Due Organization................................................16
3.2 Authorization...................................................16
3.3 No Violations...................................................16
3.4 Validity of Obligations.........................................16
4. DELIVERIES............................................................16
4.1 Instruments of Transfer.........................................16
4.2 Certificate of Merger...........................................16
4.3 Employment Agreement............................................16
4.4 Opinion of Counsel..............................................16
4.5 Good Standing Certificates......................................17
4.6 Indebtedness to Company.........................................17
4.7 Tax Matters.....................................................17
4.8 Consents........................................................17
4.9 Resignations of Directors and Officers..........................17
5. POST-CLOSING COVENANTS................................................17
5.1 Future Cooperation; Further Assurances..........................17
5.2 Expenses........................................................17
5.3 Certain Agreements..............................................18
5.4 Preparation and Filing of Tax Returns...........................18
5.5 Stock Options...................................................18
5.6 Lease...........................................................18
6. INDEMNIFICATION.......................................................19
6.1 Survival of Stockholder's Representations and Warranties. .....19
6.2 General Indemnification by the Stockholder......................19
6.3 Specific Indemnification by the Stockholders....................19
6.4 Indemnification by LandCARE.....................................20
6.5 Third Person Claims.............................................20
6.6 Method of Payment...............................................21
7. NONCOMPETITION........................................................21
7.1 Prohibited Activities...........................................21
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7.2 Equitable Relief................................................22
7.3 Reasonable Restraint............................................22
7.4 Severability; Reformation.......................................22
7.5 Independent Covenant............................................22
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 General.........................................................23
8.2 Equitable Relief................................................23
8.3 Survival........................................................23
9 INTENDED TAX TREATMENT
.....................................................................23
9.1 Tax-Free Reorganization.........................................23
10 SECURITIES LAW MATTERS................................................24
10.1 Economic Risk; Sophistication...................................24
10.2 Compliance with Law.............................................24
10.3 Restrictions on Resale..........................................24
11. GENERAL...............................................................25
11.1 Successors and Assigns..........................................25
11.2 Entire Agreement................................................25
11.3 Counterparts....................................................25
11.4 Brokers and Agents..............................................25
11.5 Notices.........................................................25
11.6 Governing Law...................................................26
11.7 Survival of Representations and Warranties......................26
11.8 Effect of Investigation.........................................26
11.9 Exercise of Rights and Remedies.................................26
11.10 Time............................................................26
11.11 Reformation and Severability....................................26
11.12 Remedies Cumulative.............................................27
11.13 Captions........................................................27
11.14 Press Releases and Public Announcements.........................27
11.15 No Third-Party Beneficiaries....................................27
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
Annex III - Form of Lease
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of September 18, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), LNI Acquisition Corp., a South Carolina corporation
and wholly owned subsidiary of LandCARE ("Newco"), Lighthouse Nursery, Inc., a
South Carolina corporation (the "Company"), and Ken Clegg (the "Stockholder").
The Stockholder is the only holder of capital stock of the Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company pursuant to this
Agreement and the applicable provisions of the laws of the State of South
Carolina (the "State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), Newco shall be merged with
and into the Company (the "Merger") and the separate existence of Newco shall
cease, all in accordance with the provisions of the law of the State of
Incorporation. The Company shall be the surviving corporation in the Merger and
is sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in a form appropriate for filing,
is filed with the Secretary of State (or other appropriate authority) of the
State of Incorporation (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the execution and delivery
of this Agreement.
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1.3 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING CORPORATION. At the
Effective Time, the Articles of Incorporation of the Company then in effect
shall be the Articles of Incorporation of the Surviving Corporation, and the
By-laws of Newco then in effect shall become the By-laws of the Surviving
Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of the Company shall continue
unaffected and unimpaired by the Merger and the corporate franchises, existence
and rights of Newco shall be merged with and into the Company, and the Company,
as the Surviving Corporation, shall be fully vested therewith. At the Effective
Time, the separate existence of Newco shall cease and, in accordance with the
terms of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and Newco
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation
vested in the Company and Newco, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of the Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in their place. Neither the rights of creditors nor any liens upon the property
of the Company or Newco shall be impaired by the Merger, and all debts,
liabilities and duties of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against the Surviving Corporation to the same
extent as if said debts, liabilities and duties had been incurred or contracted
by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the Company ("Company Stock") and (ii) issued and
outstanding capital stock of Newco ("Newco Stock") immediately prior to the
Effective Time, respectively, into shares of (x) LandCARE Stock (as defined
below) and (y) common stock of the Surviving Corporation, respectively, shall be
as follows:
As of the Effective Time:
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1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive, in the aggregate, (i) 97,873 shares of common stock, par value $.01 per
share, of LandCARE ("LandCARE Stock") (such number being equal to $782,980
divided by the average of the closing prices of LandCARE Stock as reported in
the Wall Street Journal for the ten consecutive business days beginning on the
fifteenth business day prior to the date hereof) and (ii) an aggregate of
$260,994 in cash paid by wire transfer.
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. Each share of Newco Stock issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the Merger and
without any action on the part of LandCARE, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, which shall constitute all of the issued and outstanding shares of
common stock of the Surviving Corporation, and shall be owned by LandCARE,
immediately after the Effective Time.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholders, or accompanied by blank stock powers, and
with all necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled, and (ii) LandCARE shall cause its
stock transfer agent to deliver to the Stockholder certificates representing the
LandCARE Stock as described above. The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
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Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws, each as amended, of the Company (the
"Charter Documents") are all attached to SCHEDULE 2.1. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and stockholders of the Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 100,000 shares of common stock, par value $1.00 per
share, of which 25,000 shares are issued and outstanding and constitute all of
the issued and outstanding shares of Company Stock (the "Shares"). All of the
Shares are owned of record and beneficially by the Stockholder and are owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were offered, issued, sold and delivered by the Company in compliance with
all applicable state and federal laws governing the issuance of securities. None
of the Shares were issued in violation of any preemptive rights or similar
rights of any person. No option, warrant, call, conversion right or commitment
of any kind exists which obligates the Company to issue any additional shares of
its capital stock or obligates the Stockholder to transfer any of the Shares to
any person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
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(i) The balance sheets of the Company as of February 28, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 and the related statements of operations for the
five-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of the Company
listed on SCHEDULE 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto. The Company's total debt as of the
Closing Date does not exceed $556,026. As of the Closing Date the Company's
tangible net worth is at least $100,000.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
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2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous
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Substances or arranged for the transportation of Hazardous Wastes, Hazardous
Materials or Hazardous Substances which is the subject of any federal, state,
local or foreign enforcement action or any other investigation which could lead
to any claim against the Company or LandCARE for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with any release of any Hazardous Waste, Hazardous Material or Hazardous
Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied with all
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on SCHEDULE 2.11 and no notice of default under
any such contract or agreement has been received. The transactions contemplated
by this Agreement will not
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result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such contracts or
agreements. SCHEDULE 2.11 also includes a summary description of all plans or
projects relating to the Company's business involving the opening of new
operations, expansion of existing operations, the acquisition of any property,
business or assets requiring, in any event, the payment of more than $50,000 in
the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholder has
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage
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against the risks involved in the Company's business. Except as set forth on
SCHEDULE 2.13, none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions of employment of any of the Company's employees other than the plans
set forth on SCHEDULE 2.15.
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The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholder, there is no basis therefor. Except as set forth on
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SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions or
decrees against the Company. Except as set forth on SCHEDULE 2.16, the Company
has conducted and now conducts its business in material compliance with all
laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against
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the Company or any Company Subsidiary. There are no requests for rulings or
determinations in respect of any Taxes pending between the Company or any
Company Subsidiary and any Taxing Authority. No extension of any period during
which any Tax may be assessed or collected and for which the Company or any
Company Subsidiary is or may be liable has been granted to any Taxing Authority.
Neither the Company nor any Company Subsidiary is or has been party to any tax
allocation or sharing agreement. All amounts required to be withheld by any of
the Company and the Company Subsidiaries and paid to governmental agencies for
income, social security, unemployment insurance, sales, excise, use and other
Taxes have been collected or withheld and paid to the proper Taxing Authority.
The Company and each Company Subsidiary have made all deposits required by law
to be made with respect to employees' withholding and other employment Taxes.
Neither the Company nor the Stockholder is a "foreign person," as that term is
referred to in Section 1445(f)(3) of the Code. The Company has not filed a
consent pursuant to Section 341 (f) of the Code or any comparable provision of
any other tax statute and has not agreed to have Section 341 (f)(2) of the Code
or any comparable provision of any other Tax statute apply to any disposition of
an asset. The Company has not made, is not obligated to make and is not a party
to any agreement that could require it to make any payment that is not
deductible under Section 280G of the Code. No asset of the Company or of any
Company Subsidiary is subject to any provision of applicable law which
eliminates or reduces the allowance for depreciation or amortization with
respect to that asset below the allowance generally available to an asset of its
type. No accounting method changes of the Company or of any Company Subsidiary
exist or are proposed or threatened which could give rise to an adjustment under
Section 481 of the Code. The Company uses the accrual method of accounting for
income tax purposes, and the Company's methods of accounting have not changed in
the past five years. The Company is not an investment company as defined in
Section 351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or
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acceleration or loss of any right or benefit. Except as set forth on SCHEDULE
2.18, none of the Material Documents prohibits the use or publication of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Surviving Corporation or will prevent or
restrict the Company or LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof. The Company's pro forma net revenues for the 12-month period ended July
31, 1998 were at least $3,800,000. The Company's pro forma EBITDA (earnings
before interest, taxes, depreciation and amortization) for the 12-month period
ended July 31, 1998 was at least $290,000.
2.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.23 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby.
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None of the information so provided nor any representation or warranty of the
Stockholder contained in this Agreement contains any untrue statement or omits
to state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. There is no fact which has specific application to the Company or
its business or assets (other than general economic or industry conditions)
which would have a Material Adverse Effect or, so far as the Stockholder can
reasonably foresee, threatens to have a Material Adverse Effect, on the Company
or its business or assets, or the condition (financial or otherwise), results of
operations or prospects of the Company, which has not been described in the
Schedules hereto.
2.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.25 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.26 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
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3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. The Company and the person identified in
SCHEDULE 4.3 are entering into an Employment Agreement in the form of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
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4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.7 TAX MATTERS. Tax advisors to the Stockholder are delivering an opinion
to the Stockholder satisfactory to the Stockholder regarding the tax
consequences of the transactions contemplated hereby.
4.8 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the Stockholder
reasonable access to the books and records of the Surviving Corporation after
the Closing Date for purposes of tax compliance and any other reasonable
purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholder
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the
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Surviving Corporation or LandCARE, will pay all taxes (income or otherwise), if
any, due upon receipt of the consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholder shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 STOCK OPTIONS. LandCARE hereby covenants and agrees to recommend to
the Compensation Committee of its Board of Directors the issuance of stock
options to key management and supervisory employees of the Company identified by
the Stockholder. The options shall be issued pursuant to the LandCARE 1998
Long-Term Incentive Plan.
5.6 LEASE. The Stockholder and the Surviving Corporation shall enter into
a lease in the form attached hereto as Annex III of the property located at
22-22A Hawkes Road, Bluffton, South Carolina 29910. In addition, the Company
shall continue to lease the property located at 1117 Fording Island Road,
Bluffton, Sourth Carolina 29910.
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6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
this Agreement herewith shall survive the Closing until the expiration of the
periods prescribed by the applicable statutes of limitations (including any
extensions thereof) relating thereto; provided, however, that representations
and warranties and indemnification provisions with respect to which a claim is
made within the survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholder covenants and
agrees that he will indemnify, defend, protect and hold harmless the Company and
LandCARE and each of their respective subsidiaries, officers, directors,
employees, stockholders, agents, representatives and affiliates from and against
all Damages incurred by any of them in connection with: (a) violations or
alleged violations of any applicable federal, state, local, or other laws,
regulations, ordinances, or orders of any governmental entity which govern the
protection of the environment or human health and safety ("Environmental
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Laws") relating in any way to any action or omission of the Company or any
predecessor of the Company to the extent the facts, events, or conditions giving
rise to such violation or alleged violation occurred or existed on or before the
Effective Date; (b) the actual or alleged presence, emanation, migration,
disposal, release, or threatened release (collectively, "Releases") of any oil,
petroleum product, hazardous material, or hazardous substance as such terms are
defined by Environmental Laws (collectively, "Hazardous Substances") at, under,
to, or from any property or facility which presently is or previously was owned,
leased, operated, or otherwise used by the Company or any predecessor of the
Company to the extent that said actual or alleged Release occurred or is alleged
to have occurred on or before the Effective Date; and (c) the actual or alleged
Release of any Hazardous Substances at any location or facility whatsoever to
the extent such Hazardous Substances were generated by, or were arranged for
disposal at such location or facility by, the Company or any predecessor of the
Company on or before the Effective Date.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
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6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholder, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholder.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation within 100 miles of where the Company conducted business at
any time within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or
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management of the business, not more than one percent (1%) of the capital stock
of a competing business whose stock is publicly traded on a national securities
exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that his covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing his duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9 INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholder will not take any actions that disqualify the Merger for such
treatment. The Stockholder represents, warrants and covenants that:
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(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Closing, the Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the gross assets held by the Company immediately
prior to the Closing). For purposes of the preceding sentence, amounts paid by
the Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property and the Company assets used to pay its
reorganization expenses and all redemptions and distributions (except for normal
dividends) made by the Company immediately preceding the Closing, pursuant to
this Agreement or otherwise as part of the plan of Merger provided for herein,
will be included as assets of the Company held immediately prior to the Merger.
10 SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder. The Stockholder (A)
has such knowledge, sophistication and experience in business and financial
matters that he is capable of evaluating the merits and risks of an investment
in the shares of LandCARE Stock, (B) fully understands the nature, scope and
duration of any limitations on transfer of LandCARE Stock described in this
Agreement and (C) can bear the economic risk of an investment in the shares of
LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
10.3 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date except as set forth below, and agrees that the certificates evidencing the
LandCARE Stock to be received by the Stockholder will bear a legend evidencing
this restriction. After the date one year after the Closing Date the Stockholder
may sell such shares pursuant to the LandCARE Liquidity Plan. After the date two
years after the Closing Date, neither the restrictions set forth herein nor the
provisions of the LandCARE Liquidity Plan shall restrict the Stockholder from
selling or otherwsie disposing of any of such shares of LandCARE Stock.
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11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
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If to the Company, addressed to it at:
Lighthouse Nursery, Inc.
1117 Fording Island Road
Bluffton, South Carolina 29910
If to the Stockholder, addressed to him at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of South Carolina without regard to its principles
governing conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
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11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
LNI ACQUISITION CORP.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
President
LIGHTHOUSE NURSERY, INC.
By: /s/ B. K. CLEGG
Name: B. K. CLEGG
Title: President
/s/ KEN CLEGG
------------------------
Ken Clegg
EXHIBIT 10.15
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of September 22, 1998
by and among
LANDCARE USA, INC.,
SCHUMACHER LANDSCAPING, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 Noncompetition Consideration.....................................1
1.4 Delivery of Certificates.........................................2
1.5 Closing..........................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................3
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................6
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................7
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................13
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Inventory; Working Capital; Other Financial Matters.............14
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2.27 Year 2000 Compliance............................................14
2.28 Reliance Upon Oral Representations..............................14
3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................15
3.3 No Conflicts....................................................15
3.4 Validity of Obligations.........................................15
3.5 Prospectus; Absence of Certain Changes..........................15
3.6 Issuance of LandCARE Stock......................................15
3.7 Listing.........................................................16
3.8 Improper and Other Payments.....................................16
3.9 Litigation......................................................16
3.10 Disclosure......................................................16
3.11 Reliance Upon Oral Representation...............................16
4. DELIVERIES............................................................16
4.1 Instruments of Transfer.........................................17
4.2 Employment Agreement............................................17
4.3 Opinion of Counsel..............................................17
4.4 Good Standing Certificates......................................17
4.5 Consents........................................................17
4.6 Resignations of Directors and Officers..........................17
4.7 Cash and Convertible Notes......................................17
4.8 Indebtedness to Company.........................................17
4.9 Guaranties......................................................17
5. POST-CLOSING COVENANTS................................................18
5.1 Future Cooperation; Further Assurances..........................18
5.2 Expenses........................................................18
5.3 Certain Agreements..............................................18
5.4 Preparation and Filing of Tax Returns...........................18
5.5 Stock Options...................................................19
5.6 Guaranties......................................................19
6. INDEMNIFICATION.......................................................19
6.1 Survival of Stockholders' Representations and Warranties. .....19
6.2 General Indemnification by the Stockholders.....................20
6.3 Specific Indemnification by the Stockholders....................20
6.4 Indemnification by LandCARE.....................................20
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6.5 Third Person Claims.............................................21
6.6 Method of Payment...............................................21
6.7 Limitations on Indemnification..................................21
6.8 Insurance.......................................................22
7. NONCOMPETITION........................................................22
7.1 Prohibited Activities...........................................22
7.2 Event of Default................................................23
7.3 Equitable Relief................................................23
7.4 Reasonable Restraint............................................23
7.5 Severability; Reformation.......................................23
7.6 Independent Covenant............................................23
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................24
8.1 General.........................................................24
8.2 Event of Default................................................24
8.3 Equitable Relief................................................24
8.4 Survival........................................................24
9 SECURITIES LAW MATTERS................................................25
9.1 Economic Risk; Sophistication...................................25
9.2 Compliance with Law.............................................25
9.3 Restrictions on Resale..........................................25
10. GENERAL...............................................................25
10.1 Successors and Assigns..........................................25
10.2 Entire Agreement................................................25
10.3 Counterparts....................................................25
10.4 Brokers and Agents..............................................26
10.5 Notices.........................................................26
10.6 Governing Law...................................................27
10.7 Survival of Representations and Warranties......................27
10.8 Effect of Investigation.........................................27
10.9 Exercise of Rights and Remedies.................................27
10.10 Reformation and Severability....................................28
10.11 Remedies Cumulative.............................................28
10.12 Captions........................................................28
10.13 Press Releases and Public Announcements.........................28
10.14 No Third-Party Beneficiaries....................................28
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SCHEDULES
SCHEDULE 1.2. Purchase Price
SCHEDULE 1.3. Noncompetition Consideration
SCHEDULE 2.1. Due Organization
SCHEDULE 2.3. Capital Stock of the Company
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 2.27. Year 2000 Compliance
SCHEDULE 3.5. Prospectus; Absence of Certain Changes
SCHEDULE 4.2. Employment Agreement
SCHEDULE 4.8. Indebtedness to Company
SCHEDULE 4.9. Guaranties
SCHEDULE 5.2. Expenses
SCHEDULE 5.4. Preparation and Filing of Tax Returns
ANNEXES
Annex I - Form of Convertible Note
Annex II - Form of Employment Agreement
Annex III - Form of Opinion of Counsel to Company and Stockholder
Annex IV - Form of Opinion of Counsel to LandCARE
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of September 22, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Schumacher Landscaping, Inc., a Massachusetts corporation (the
"Company"), and the persons listed on the signature pages of this Agreement as
the stockholders of the Company (the "Stockholders"). The Stockholders are the
only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCARE desires to
purchase, all of the outstanding capital stock of the Company (the "Shares") on
the terms set forth in this Agreement; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE.On the terms set forth in this Agreement, the
Stockholders hereby sell, convey, transfer, assign and deliver to LandCARE, and
LandCARE hereby purchases from the Stockholders, all of the Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares consists of (i) one or more convertible subordinated notes issued
by LandCARE (the "Convertible Notes") in the form of Annex I hereto in the
aggregate principal amount of $5,351,385 and (ii) $7,616,819 (such number being
equal to $8,507,063 less $890,244 of Accumulated Adjustment Account ("AAA")
distributions made by the Company to the Stockholders) in cash, which amount is
being paid by wire transfer of immediately available funds in accordance with
wiring instructions provided by the Stockholders. Each of the Stockholders is
receiving his pro rata interest in the Purchase Price as set forth on SCHEDULE
1.2 hereto.
1.3 NONCOMPETITION CONSIDERATION. In addition to the Purchase Price,
LandCARE shall pay an aggregate amount of $100,000 in cash paid for by wire
transfer as consideration for the noncompetition provisions set forth in Section
7 herein. Each of the Stockholders is receiving its pro rata interest in the
$100,000 as set forth on SCHEDULE 1.3 hereto.
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1.4 DELIVERY OF CERTIFICATES. Concurrently with the execution and delivery
of this Agreement and consummation of the transactions described herein (the
"Closing"), (i) the Stockholders are delivering to LandCARE the certificates
representing the Shares, duly endorsed in blank by the Stockholders or
accompanied by a stock transfer endorsement separate from certificate together
with an Affidavit of Lost Certificate and Indemnification Agreement satisfactory
to LandCARE, and with all necessary transfer tax and other revenue stamps,
acquired at the Stockholders' expense, affixed and canceled, and (ii) LandCARE
is causing its stock transfer agent to deliver to the Stockholders certificates
representing the LandCARE Stock as described above (or is delivering to the
Stockholders a copy of an irrevocable authorization to such transfer agent
authorizing the issuance of such certificates to the Stockholders). The
Stockholders agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such Shares or with respect to the stock powers accompanying any
Shares.
1.5 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts (the "State of Incorporation"), and has all requisite power and
authority to carry on its business as it is now being conducted. The Company is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its properties
makes such qualification necessary, except where the failure to be so authorized
or qualified would not have a material adverse effect on the business, assets,
operations or condition (financial or otherwise) of the Company (as used herein
with respect to the Company, or with respect to any other person, a "Material
Adverse Effect"). SCHEDULE 2.1 sets forth a list of all jurisdictions in which
the Company is authorized or qualified to do business. True, complete and
correct copies of the Articles of Organization and By-laws, each as amended, of
the Company (the "Charter Documents") are all attached to SCHEDULE 2.1. All
records of all proceedings of the Board of Directors and stockholders of the
Company have been made available to LandCARE, except as set forth on SCHEDULE
2.1.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by
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the Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 1,000 shares of common stock, no par value per share,
of which 100 shares are issued and outstanding and constitute all of the issued
and outstanding Shares. All of the Shares are owned of record and beneficially
by the Stockholders and are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the Shares have been duly authorized and validly
issued, are fully paid and nonassessable, and were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws governing the issuance of securities. None of the Shares were issued in
violation of any preemptive rights or similar rights of any person. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any additional shares of its capital stock or obligates the
Stockholders to transfer any of the Shares to any person except pursuant to this
Agreement. The stock records of the Company, a copy of which is attached to
SCHEDULE 2.3, are correct and complete in all material respects, except as set
forth on SCHEDULE 2.3.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 and the related statements of operations for the
seven-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
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The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby, except that the Interim Balance Sheet is unaudited, contains no
footnotes and is subject to normal, immaterial year-end adustments. The books of
account of the Company have been kept accurately in the ordinary course of
business, the transactions entered therein represent bona fide transactions, and
the revenues, expenses, assets and liabilities of the Company have been properly
recorded therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or material obligations of any kind,
whether accrued, absolute, secured or unsecured, contingent or otherwise in an
amount more than $5,000. Except and to the extent disclosed on SCHEDULE 2.6,
there are no claims, liabilities or obligations, nor any reasonable basis for
assertion against the Company, of any claim, liability or obligation, of any
nature whatsoever. Except as expressly set forth on SCHEDULE 2.6, all of the
material contingent liabilities of the Company listed on SCHEDULE 2.6 are
covered by the Company's insurance policies, and no such liability will exceed
the policy limits of such insurance policies. SCHEDULE 2.6 contains a reasonable
estimate of the maximum amount which may be payable with respect to known
material liabilities which are not fixed. For each such known material liability
for which the amount is not fixed, SCHEDULE 2.6 includes a summary description
of each known liability, together with copies of all relevant documentation
relating thereto. The Company's total debt as of the Closing Date does not
exceed $3,377,396. As of the Closing Date the Company's tangible net worth is at
least $1,966,000, excluding therefrom accrued bonuses to any employees of the
Company, as reflected on the Interim Balance Sheets.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software
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or other technology systems, programs and intellectual property) (collectively,
the "Intangible Assets") (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on SCHEDULE
2.9). The Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 are valid, and the Company has not received any notice
that any person intends to cancel, terminate or not renew any such Intangible
Assets or other governmental authorization. The Company has conducted and is
conducting its business in compliance in all material respects with the
requirements, standards, criteria and conditions set forth in the Intangible
Assets and other governmental authorizations listed on SCHEDULES 2.8 and 2.9 and
is not in violation of any of the foregoing. Except as specifically set forth on
SCHEDULE 2.8 or 2.9, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such Intangible Assets or
other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. To the Stockholders' actual knowledge, the
Company has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"), including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes, Hazardous Materials and Hazardous Substances (including petroleum and
petroleum products) (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Laws, either
singly or in the aggregate, has not had and will not have a Material Adverse
Effect on the Company or any of its operations. To the Stockholders' actual
knowledge, the Company has obtained and adhered to all necessary permits and
other approvals required pursuant to any applicable Environmental Laws
including, without limitation, such permits or approvals as are necessary to
treat, transport, store, dispose of and otherwise handle Hazardous Wastes,
Hazardous Materials and Hazardous Substances, a list of all of which permits and
approvals is set forth on SCHEDULE 2.9. To the Stockholders' actual knowledge,
the Company has reported to the appropriate authorities, to the extent required
by all Environmental Laws, all past and present sites owned and operated by the
Company where Hazardous Wastes, Hazardous Materials or Hazardous Substances have
been treated, stored, disposed of or otherwise handled. There have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in,
under or on any property owned or operated by the Company except as permitted by
Environmental Laws. To the Stockholders' actual knowledge, there is no on-site
or off-site location to which the Company has transported or disposed of
Hazardous Wastes, Hazardous Materials or Hazardous Substances or arranged for
the transportation of Hazardous Wastes, Hazardous Materials or Hazardous
Substances which is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the Company or LandCARE for any clean-up cost, remedial work, damage to
natural resources, property damage or personal injury, including, but not
limited to, any
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claim under (i) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) the Resource Conservation and Recovery
Act, as amended, (iii) the Hazardous Materials Transportation Act, as amended,
or (iv) comparable state or local statutes and regulations. The Company has no
contingent liability in connection with any release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company with a per item value of more than
$1,000, (b) all other personal property owned by the Company with a fair market
value in excess of $5,000, and (c) all leases and agreements with respect to
personal property, copies of which have been delivered to LandCARE. SCHEDULE
2.10 indicates which assets are currently owned, or were formerly owned, by the
Stockholders or any affiliate of the Company or the Stockholders. Except as set
forth on SCHEDULE 2.10, (i) all material personal property used by the Company
in its business is either owned by the Company or leased by the Company pursuant
to a lease included on SCHEDULE 2.10, (ii) all of the personal property listed
on SCHEDULE 2.10 is in good working order and condition, ordinary wear and tear
excepted and (iii) all leases and agreements included on SCHEDULE 2.10 are in
full force and effect and constitute valid and binding agreements of the parties
(and their successors) thereto in accordance with their respective terms. Except
as set forth on SCHEDULE 2.10, the Company has good and marketable title to the
tangible and intangible personal property it purports to own, subject to no
security interest, pledge, lien, claim, conditional sales agreement,
encumbrance, charge or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the actual knowledge of the Company upon due inquiry, are
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied in all material respects with all commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on SCHEDULE 2.11 and no notice of default under any such contract or agreement
has been received. The transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or materially adversely
affect the rights and benefits afforded to the Company by, any such contracts or
agreements. SCHEDULE 2.11 also includes a summary description of all plans or
projects relating to the Company's business involving the opening of new
operations, expansion of
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existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholders or any affiliate of the Stockholders
have been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein except where such would not have a
Material Adverse Effect on the Company's use of such Real Property; no party
other than the Company occupies or possesses the Real Property or any portion
thereof; no party other than the Company occupies or possesses the Real Property
or any portion thereof; there is legal and adequate ingress and egress between
each tract of Real Property and an adjacent (or, if none, the closest) public
roadway; the Real Property is properly zoned in order to allow its current use
in the Company's businesses; and there are no claims or demands pending or
threatened by any party against the Real Property which, if valid, would create
in, or confer on, any party other than the Company, any right, title or interest
in or to the Real Property or any portion thereof. None of the buildings,
structures or improvements described on SCHEDULE 2.12, or the operation or
maintenance thereof as now operated or maintained, contravenes any zoning
ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the. True, complete and correct
copies of all insurance policies currently in effect have been delivered to
LandCARE. Such insurance policies evidence all of the insurance that the Company
is required to carry pursuant to all of its contracts and other agreements and
pursuant to all applicable laws. Except as set forth on SCHEDULE 2.13, none of
such policies is a "claims made" policy.
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2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Stockholders upon due
inquiry, no campaign to establish such representation is in progress and (iv)
there is no pending or, to the knowledge of the Stockholders upon due inquiry,
threatened, labor dispute involving the Company and any group of its employees.
The Company has not experienced any labor interruptions over the past five
years.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on SCHEDULE 2.15, the
Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee pension benefit plan," nor does the
Company have any obligation to contribute to or accrue or pay any benefits under
any deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA. The
Company has not sponsored, maintained or contributed to any employee pension
benefit plan and is not required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions of employment of any of the Company's employees other than the
plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other
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applicable federal, state and local statutes, ordinances and regulations. All
accrued contribution obligations of the Company as of the Balance Sheet Date
with respect to any plan listed on SCHEDULE 2.15 have either been fulfilled in
their entirety or are fully reflected on the balance sheet of the Company as of
the Balance Sheet Date. All plans listed on SCHEDULE 2.15 that are intended to
qualify (the "Qualified Plans") under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), are, and have been, so qualified and have
been determined by the Internal Revenue Service to be so qualified. Except as
disclosed on SCHEDULE 2.15, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of SCHEDULE 2.15. Neither the Stockholders, nor any
plan listed in SCHEDULE 2.15 nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on SCHEDULE 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any unresolved claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the best knowledge of the Stockholders, there is no reasonable basis therefor.
Except as set forth on SCHEDULE 2.16, there are no outstanding judgments,
orders, writs, injunctions or decrees against the Company. Except as set forth
on SCHEDULE 2.16, the Company has conducted and now conducts its business in
material compliance with all laws, regulations, writs, injunctions, decrees and
orders applicable to the Company or its assets. The Company is not in violation
of any
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material law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them. The Company has conducted
and is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns (" Tax Returns") required to be filed with respect to any
Tax for which any of the Company and the Company Subsidiaries (if any) is liable
as of the date hereof have been duly and timely filed with the appropriate
Taxing Authority, each Tax shown to be payable on each such Tax Return has been
paid, each Tax payable by the Company or a Company Subsidiary by assessment has
been timely paid in the amount assessed, and adequate reserves have been
established on the books of the Company and the Company Subsidiaries for all
Taxes for which any of the Company and the Company subsidiaries is liable, but
the payment of which is not yet due. Neither the Company nor any Company
Subsidiary is, or ever has been, liable for any Tax payable by reason of the
income or property of a person or entity other than the Company or a Company
Subsidiary. Each of the Company and the Company Subsidiaries has timely filed
true, correct and complete declarations of estimated Tax in each jurisdiction in
which any such declaration is required to be filed by it. No Liens for Taxes
exist upon the assets of the Company or any Company Subsidiary except Liens for
Taxes which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax in any jurisdiction outside the United States.
No litigation with respect to any Tax for which the Company or any Company
Subsidiary is asserted to be liable is pending or, to the knowledge of the
Company or the Stockholders, threatened, and no basis which the Company or any
Stockholder believes to be valid exists on which any claim for any such Tax can
be asserted against the Company or any Company Subsidiary. There are no requests
for rulings or determinations in respect of any Taxes pending between the
Company or any Company Subsidiary and any Taxing Authority. No extension of any
period during which any Tax may be assessed or collected and for which the
Company or any Company Subsidiary is or may be liable
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has been granted to any Taxing Authority. Neither the Company nor any Company
Subsidiary is or has been party to any tax allocation or sharing agreement. All
amounts required to be withheld by any of the Company and the Company
Subsidiaries and paid to governmental agencies for income, social security,
unemployment insurance, sales, excise, use and other Taxes have been collected
or withheld and paid to the proper Taxing Authority. The Company and each
Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholders is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. No
accounting method changes of the Company or of any Company Subsidiary exist or
are proposed or threatened which could give rise to an adjustment under Section
481 of the Code. The Company uses the accrual method of accounting for income
tax purposes, and the Company's methods of accounting have not changed in the
past five years. The Company is not an investment company as defined in Section
351(e)(1) of the Code.
The Stockholders made a valid election under the provisions of Subchapter
S of the Code, and the Company has not, since the effective date of the
Subchapter S election, been subject to taxation under the provisions of
Subchapter C of the Code or under Section 11 or Section 1374 of the Code.
Neither the Stockholders nor the Company has taken any action that terminated
the Subchapter S election, and such election remains in effect on the date
hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
actual knowledge of the Stockholders, any other party thereto is in material
default under any lease, instrument, license, permit or material agreement to
which the Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits under the Material Documents
to which the Company is entitled immediately prior to the Closing. Except as set
forth on SCHEDULE 2.18 (and except for consents already obtained), none of the
Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the
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transactions contemplated hereby in order to remain in full force and effect,
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition (except general economic or industry conditions) of
any character, materially adversely affecting the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or
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requiring consent of any party to the transfer and assignment of any such
assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$20,000 and in an aggregate amount not in excess of $100,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The representations, warranties, and statements of the
Stockholders in this Agreement and the Annexes and Schedules attached hereto do
not contain any untrue statement or omit to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would
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cause the Company to be in violation of the Foreign Corrupt Practices Act of
1977, as amended, or any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. Based on the
Company's past business practices and without regard to general economic and
industry conditions, the Stockholders reasonably believe that the Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof.
2.27 YEAR 2000 COMPLIANCE. Except as set forth on SCHEDULE 2.27, the
properties and assets of the Company, including, but not limited to, computer
hardware, microprocessor driven equipment, software and data, owned or used by
the Company will accurately process date and time data after December 31, 1999,
and the Company will suffer no loss of functional ability when processing dates
and related data outside the 1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
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3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO CONFLICTS. No consent, authorization, approval, order, license,
certificate, or permit of or forms, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by LandCARE for the execution, delivery, or performance of this
Agreement. No consent of any party to any material contract, agreement,
instrument lease, license arrangement, or understanding to which LandCARE is a
party, or to which any of its properties or assets are subject, is required for
the execution, delivery, and performance of this Agreement by LandCARE will not
violate, result in a breach of, conflict with, or (with or without the giving of
notice or the passage of time or both) entitle any party to terminate or call a
default under any material contract, agreement, instrument, lease, license,
arrangement, or understanding of LandCARE; or violate, result in a breach of, or
conflict with any law, rule, regulation, order, judgment, or decree binding on
LandCARE or to which any of its operations, business, properties or assets are
subject.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE, and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 PROSPECTUS; ABSENCE OF CERTAIN CHANGES. Attached as SCHEDULE 3.5
hereto is a copy of the Prospectus (the "Prospectus") LandCARE has delivered to
the Stockholders. The Prospectus delivered to the Stockholders, receipt of which
is hereby acknowledged, does not contain a misrepresentation of a material fact
or omit to state a material fact necessary to make statements made herein, in
light of the circumstances under which they were made, not misleading. There has
been no material adverse change in the business or affairs of LandCARE since the
date of the Prospectus.
3.6 ISSUANCE OF LANDCARE STOCK. The LandCARE Stock subject to be issued by
LandCARE to the Stockholders in accordance with the terms and subject to the
conditions set forth in this Agreement and the Convertible Notes, shall, upon
issuance and delivery, be duly authorized, validly
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issued, fully paid, nonassessable, and shall be free and clear of all liens,
encumbrances, charges, and restrictions of any kind except as described in the
Convertible Notes, this Agreement or as provided by law. The Stockholders
understand that the offer and sale of such shares will have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and will
not be registered thereunder.
3.7 LISTING. The LandCARE Stock to be issued, subject to the terms and
conditions of the Convertible Notes, to the Stockholders has been approved for
listing on the New York Stock Exchange.
3.8 IMPROPER AND OTHER PAYMENTS. (a) Neither LandCARE, nor any director,
officer, employee thereof, nor to LandCARE's knowledge, any agent or
representative of LandCARE, nor any individual or entity acting on behalf of any
of them, has made, paid or received any unlawful bribes, kickbacks or other
similar payments to or from any person or authority; (b) no improper
contributions have been directly or indirectly made to a domestic or foreign
political party or candidate; (c) no improper foreign payment (as defined in the
Foreign Corrupt Practices Act) has been made; and (d) the internal accounting
controls of LandCARE are believed by LandCARE's management to be adequate to
detect any of the foregoing under current circumstances.
3.9 LITIGATION. No action, suit, claim, arbitration, proceedings or
investigation is pending or, to the knowledge of LandCARE, threatened which
questions or challenges the validity of this Agreement or any other agreement
identified herein or any action taken or to be taken in connection with the
transaction contemplated hereby or thereby.
3.10 DISCLOSURE. The representations, warranties and statements contained
in this Agreement and in the certificate, annexes and schedules delivered by
LandCARE to the Stockholders pursuant to this Agreement do not contain any
untrue statements of a material fact or omit any material facts the omission of
which would be misleading.
3.11 RELIANCE UPON ORAL REPRESENTATION. LandCARE represents and warrants:
(a) that it has been fully informed by its legal counsel and by its own
independent judgment of the terms, conditions and effects of this Agreement; (b)
that it has been represented by independent legal counsel of its choice
throughout all negotiations preceding the execution of this Agreement and has
received the advice of its attorney in entering into this Agreement; (c) that
it, through its independently-retained attorneys, has reviewed the terms and
effects of this Agreement; (d) that no promise or inducement has been offered or
made to it except as expressly stated in this Agreement and Employee Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
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4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex II.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex III. Counsel to LandCARE is delivering an opinion to the
Stockholders dated the date hereof in the form attached hereto as Annex IV.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than ten days prior to the
date hereof, duly issued by the appropriate governmental authority in the State
of Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein. LandCARE is delivering to Stockholders certificates, dated as
a date no earlier than ten days prior to the date hereof, duly issued by the
appropriate governmental authority in the respective state of incorporation
4.5 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.6 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
4.7 CASH AND CONVERTIBLE NOTES. LandCARE is delivering to the Stockholders
the cash and Convertible Notes set forth in Section 1.5 herein.
4.8 INDEBTEDNESS TO COMPANY. The Stockholders and their Affiliates are
repaying any outstanding indebtedness they may have to the Company, including
but not limited to those notes listed on SCHEDULE 4.8. The Stockholders are
delivering evidence of such repayment to LandCARE at the Closing.
4.9 GUARANTIES. As soon as practicable but in no event later than 30 days
after the Closing, the Stockholders shall cause the release, through payment or
otherwise, of the Company's guaranties of indebtedness of third parties and
Affiliates, including but not limited to those guaranties listed on SCHEDULE
4.9, and the Stockholders shall deliver evidence thereof to LandCARE.
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5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the transactions contemplated hereby and fully
carrying out the intent of this Agreement. LandCARE shall provide the
Stockholders reasonable access to the books and records of the Company after the
Closing Date for purposes of tax compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. Except as specifically set forth on SCHEDULE 5.2, the
Stockholders will pay the fees, expenses and disbursements of the Stockholders
and its agents, representatives, financial advisors, accountants and counsel
incurred in connection with the execution, delivery and performance of this
Agreement. The Stockholders shall pay any sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") imposed in connection with the transactions contemplated
hereby. The Stockholders shall file all necessary documentation and returns with
respect to such Transfer Taxes. In addition, the Stockholders acknowledge that
the Stockholders, and not the Company or LandCARE, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. LandCARE or the Company will pay (or reimburse the Stockholders for, as
such tax becomes due and payable, as requested by the Stockholders in writing)
any tax (including any state, local or foreign tax) attributable to the making
of the Section 338(h)(10) Election (or an election under state, local or foreign
law similar to the Section 338(h)(10) Election) and will indemnify the
Stockholders against any tax liabilities resulting therefrom. As a result of the
Section 338(h)(10) Election, the parties agree that the Purchase Price and the
liabilities of the Company (plus other relevant items) will be allocated to the
assets of the Company for all purposes (including tax and financial accounting
purposes) as shown on SCHEDULE 5.4. Purchaser and the
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Company and the Stockholders will file all tax returns (including amended
returns and claims for refund) and information reports in a manner consistent
with such allocation.
5.5 STOCK OPTIONS. LandCARE hereby covenants and agrees to recommend to
the Compensation Committee of its Board of Directors the issuance of stock
options to purchase an aggregate of 66,893 shares of LandCARE Stock, which stock
options are to be granted to certain key management and supervisory employees of
the Company identified by the Stockholders. The options shall be issued pursuant
to the LandCARE 1998 Long-Term Incentive Plan.
5.6 GUARANTIES. As soon as practicable but in no event later than 30 days
after the Closing, LandCARE shall cause the release, through payment or
otherwise, of the Stockholders' guaranties of indebtedness of the Company,
including but not limited to those guaranties or other obligations, contingent
or otherwise, listed on SCHEDULE 5.6.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company and Related Matters) and 2.17 (Taxes) of this Agreement shall survive
the Closing until the expiration of the periods prescribed by the applicable
statutes of limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholders made in Section 2.9
(Environmental Matters) shall survive the Closing for a period of three years
after the Closing Date; and the other representations and warranties of the
Stockholders made herein shall survive the Closing for a period of two years
after the Closing Date; provided, however, that representations and warranties
and indemnification provisions with respect to which a claim is made within the
survival period shall survive until such claim is finally determined and paid.
The limitation periods referred to in this subparagraph (a) are not intended to
limit any of the remedies available to LandCARE for causes of action arising out
of fraud by the Stockholders.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid. The one-year limitation referred to
in this subparagraph (b) is not intended to limit any of the statutory remedies
available to the Stockholder pursuant to applicable securities laws.
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(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Company , LandCARE and its subsidiaries and all of their officers, directors,
employees, stockholders, agents, representatives and affiliates at all times
from and after the date of this Agreement until the Expiration Date from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such indemnified person as a result of or incident to (i)
any breach of any representation or warranty of the Stockholders set forth
herein, and (ii) any breach or nonfulfillment of any covenant or agreement by
the Company or the Stockholders under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that, for a period of three years after the Closing Date, they will indemnify,
defend, protect and hold harmless the Company and LandCARE and each of their
respective subsidiaries, officers, directors, employees, stockholders, agents,
representatives and affiliates from and against all Damages incurred by any of
them in connection with: (a) violations or alleged violations of any applicable
federal, state, local, or other laws, regulations, ordinances, or orders of any
governmental entity which govern the protection of the environment or human
health and safety ("Environmental Laws") relating in any way to any action or
omission of the Company or any predecessor of the Company to the extent the
facts, events, or conditions giving rise to such violation or alleged violation
occurred or existed on or before the Effective Date; (b) the actual or alleged
presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material, or
hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCARE set forth
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herein; (ii) any breach or nonfulfillment of any covenant or agreement by
LandCARE under this Agreement; (ii) the operation of the Company from and after
the Closing Date, except to the extent any such Damages are attributable to the
actions of any of the Stockholders, in their capacities as such or otherwise;
and (iv) any debt or liability of the Company arising on or after the Closing
Date.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
6.7 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $150,000 (the "Indemnification Threshold") and then
only to the extent that such claims exceed the Indemnification Threshold. The
Stockholders shall not assert any claim for indemnification hereunder against
LandCARE until such time as the aggregate of all claims which the Stockholders
may have against LandCARE shall exceed the Indemnification Threshold and then
only to the extent that such claims exceed the Indemnification Threshold. The
aggregate liability of the Stockholders under this Article 6 shall not exceed
$2,500,000 (the "Liability Limit"); the aggregate liability of LandCARE
hereunder shall not exceed the Liability Limit. It is agreed that the exclusive
remedy of the parties to this Agreement shall be pursuant to Section 6 hereof.
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6.8 INSURANCE. To the extent that, prior to the Closing Date, the Company
has paid premiums for insurance coverage that may give the Company a claim for
matters as to which the Stockholders may be obligated to provide indemnification
under this Agreement, (i) LandCARE agrees to use reasonable good faith efforts
and diligence to pursue any such claim it may have under any such insurance
policy or policies corresponding with such premiums, and (b) the amount of each
such insurance recovery (net of the related direct cost of the Company of
advancing the claim), if any, shall be applied toward satisfaction of the
Stockholders' indemnity obligations hereunder.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 100 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company ) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company
);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Company ) for the purpose of soliciting or selling products or services in
direct competition with LandCARE or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholders from acquiring as a passive investor with no
involvement in the operations or
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management of the business, not more than two percent (2%) of the capital stock
of a competing business whose stock is publicly traded on a national securities
exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholders may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EVENT OF DEFAULT. On the occurrence of an Event of Default (as defined
in Annex I) where such Event of Default is not cured within ten days of such
occurrence, the terms of this Section 7 shall be null and void and without
effect.
7.3 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholders, by injunctions, restraining orders and other equitable actions.
7.4 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.5 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.6 INDEPENDENT COVENANT. The Stockholders acknowledge that the covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholders against LandCARE
or any subsidiary thereof, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by LandCARE of such covenants.
It is specifically agreed that the period of five years stated at the beginning
of this Section, during which the agreements and covenants of the Stockholders
made in this Section shall be effective, shall be computed by excluding from
such computation any time during which the Stockholders are in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCARE after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCARE to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCARE, (b) following the Closing,
such information may be disclosed by the Stockholders as may be required in the
course of performing their duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholders, or (ii)
disclosure is required by law or the order of any governmental authority,
provided, that prior to disclosing any information pursuant to this clause (ii),
the Stockholders shall give prior written notice thereof to LandCARE and provide
LandCARE with the opportunity to contest such disclosure. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
Section, LandCARE shall be entitled to injunctive or other equitable relief
restraining the Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
8.2 EVENT OF DEFAULT. On the occurrence of an Event of Default (as defined
in Annex I) where such Event of Default is not cured within ten days of such
occurrence, the terms of this Section 8 shall be null and void and without
effect with respect to confidential information of the Company, but the
Stockholders agree that they will not disclose any confidential information of
LandCARE.
8.3 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.4 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
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9 SECURITIES LAW MATTERS
9.1 ECONOMIC RISK; SOPHISTICATION. The Stockholders acknowledge and
confirm that they have received and reviewed a Prospectus from LandCARE relating
to their potential acquisition of shares of LandCARE Stock under the Convertible
Notes, but the Stockholders understand that the shares issuable on conversion of
the Convertible Notes have not been and will not be registered under the
Securities Act. The Stockholders (A) have such knowledge, sophistication and
experience in business and financial matters that they are capable of evaluating
the merits and risks of an investment in the Convertible Notes, (B) fully
understand the nature, scope and duration of any limitations on transfer of
LandCARE Stock described in this Agreement and (C) can bear the economic risk of
an investment in the shares of LandCARE Stock.
9.2 COMPLIANCE WITH LAW. The Stockholders covenant that none of the
LandCARE Stock acquired by the Stockholders under the Convertible Notes will be
offered, sold, assigned, hypothecated, transferred or otherwise disposed of by
the Stockholders except in full compliance with all applicable securities laws.
9.3 RESTRICTIONS ON RESALE. The Stockholders agree that they will not
sell, offer to sell, or otherwise transfer or dispose of, any shares of the
LandCARE Stock received by the Stockholders under the Convertible Notes, except
in accordance with the terms and conditions set forth in the Convertible Notes.
10. GENERAL
10.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
10.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
10.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute
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but one and the same instrument. The signatures to this Agreement need not all
be on a single copy of this Agreement, and may be facsimiles rather than
originals, and shall be fully as effective as though all signatures were
originals on the same copy.
10.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
10.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Schumacher Landscaping, Inc.
17 Electric Avenue
Boston, Massachusetts 02135
With a copy to:
Peabody & Arnold LLP
50 Rowes Wharf
Boston, Massachusetts 12210
Attn: Gregory L. White, Esq.
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If to the Stockholders, addressed to them at the Company's address,
with a copy to:
Peabody & Arnold LLP
50 Rowes Wharf
Boston, Massachusetts 12210
Attn: Gregory L. White, Esq.
and copies to:
John J. Schumacher
c/o Schumacher Landscaping, Inc.
17 Electric Avenue
Boston, Massachusetts 02135
Peter P. DiDomenico
c/o Schumacher Landscaping, Inc.
17 Electric Avenue
Boston, Massachusetts 02135
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
10.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts without regard to its principles
governing conflicts of laws.
10.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
10.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
10.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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10.10 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
10.11 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
10.12 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
10.13 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
10.14 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
SCHUMACHER LANDSCAPING, INC.
By: /s/ PETER P. DIDOMENICO
Peter P. DiDomenico
President
By:/s/ JOHN J. SCHUMACHER
John J. Schumacher
Treasurer
<PAGE>
STOCKHOLDERS:
/s/ JOHN J. SCHUMACHER
John J. Schumacher
/s/ PETER P. DIDOMENICO
Peter P. DiDomenico
EXHIBIT 10.16
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of October 25, 1998
by and among
LANDCARE USA, INC.,
LANDTRENDS, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 Delivery of Certificates.........................................1
1.4 Closing..........................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................3
2.3 Capital Stock of the Company.....................................3
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................4
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................6
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................7
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....8
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................14
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Inventory; Working Capital; Other Financial Matters.............14
2.27 Year 2000 Compliance............................................14
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2.28 Reliance Upon Oral Representations..............................14
3. REPRESENTATIONS OF LANDCARE...........................................15
3.1 Due Organization................................................15
3.2 Authorization...................................................15
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Indebtedness to Company.........................................16
4.6 Tax Matters.....................................................16
4.7 Consents........................................................16
4.8 Resignations of Directors and Officers..........................16
4.9 Cash............................................................16
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................17
5.4 Preparation and Filing of Tax Returns...........................17
5.5 Guaranties......................................................17
5.6 Other Financial Matters.........................................17
5.7 Department of Navy Lease .......................................18
5.8 Licenses........................................................18
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholder's Representations and Warranties. .....18
6.2 General Indemnification by the Stockholder......................19
6.3 Specific Environmental Indemnification by the Stockholder......19
6.4 Specific Tax Indemnification by the Stockholder.................20
6.5 Indemnification by LandCARE.....................................20
6.6 Third Person Claims.............................................20
6.7 Limitations on Indemnification..................................21
6.8 Method of Payment...............................................21
7. NONCOMPETITION........................................................21
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7.1 Prohibited Activities...........................................21
7.2 Equitable Relief................................................22
7.3 Reasonable Restraint............................................22
7.4 Severability; Reformation.......................................22
7.5 Independent Covenant............................................22
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 General.........................................................23
8.2 Equitable Relief................................................23
8.3 Survival........................................................24
9. GENERAL...............................................................24
9.1 Successors and Assigns..........................................24
9.2 Entire Agreement................................................24
9.3 Counterparts....................................................24
9.4 Brokers and Agents..............................................24
9.5 Notices.........................................................24
9.6 Governing Law...................................................25
9.7 Survival of Representations and Warranties......................25
9.8 Effect of Investigation.........................................25
9.9 Exercise of Rights and Remedies.................................25
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................26
9.13 Captions........................................................26
9.14 Press Releases and Public Announcements.........................26
9.15 No Third-Party Beneficiaries....................................26
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.2. Persons Entering into Employment Agreements
SCHEDULE 5.8. Licenses
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of October 25, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Landtrends, Inc., a California corporation (the "Company"), the
Ewing Inter Vivos Trust dated March 25, 1997, and Jon R. Ewing.
WHEREAS, the Ewing Inter Vivos Trust is hereinafter referred to as the
Stockholder and Jon R. Ewing is hereinafter referred to as Mr. Ewing.
WHEREAS, the Stockholder is the only holder of capital stock of the
Company, which owns 10,250 shares of common stock of Miramar Wholesale
Nurseries, Inc., a California corporation (the "Subsidiary"); and
WHEREAS, the Stockholder desires to sell, and LandCARE desires to
purchase, all of the outstanding capital stock of the Company (the "Shares") on
the terms set forth in this Agreement; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE.On the terms set forth in this Agreement, the
Stockholder hereby sells, conveys, transfers, assigns and delivers to LandCARE,
and LandCARE hereby purchases from the Stockholder, all of the Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $9,081,770, consisting of $8,843,398 in cash at Closing, which
amount is being paid by wire transfer of immediately available funds in
accordance with wiring instructions provided by the Stockholder; and (ii)
$238,372 in cash or in immediately available funds (the "Holdback"), which
amount is being withheld by LandCARE and which shall be distributed as set forth
in Section 5.7 hereof.
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1.3 DELIVERY OF CERTIFICATES. Concurrently with the execution and delivery
of this Agreement and consummation of the transactions described herein (the
"Closing"), (i) the Stockholder is delivering to LandCARE the certificates
representing the Shares, duly endorsed in blank by the Stockholder or
accompanied by a stock transfer endorsement separate from certificate together
with an Affidavit of Lost Certificate and Indemnification Agreement satisfactory
to LandCARE, and with all necessary transfer tax and other revenue stamps,
acquired at the Stockholders' expense, affixed and canceled, and (ii) LandCARE
is causing its stock transfer agent to deliver to the Stockholder certificates
representing the LandCARE Stock as described above (or is delivering to the
Stockholder a copy of an irrevocable authorization to such transfer agent
authorizing the issuance of such certificates to the Stockholder). The
Stockholder agrees promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such Shares or with respect to the stock powers accompanying any
Shares.
1.4 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder and Mr. Ewing hereby represent and warrant to LandCARE
that all of the following representations and warranties are true and correct in
all material respects at the date of this Agreement. Except as the context
otherwise requires, the term "Company" includes Landtrends, Inc., the
Subsidiary, and any other direct or indirect subsidiary of Landtrends, Inc. As
used in the following representations, the term "material" or any variation
thereof shall mean any matter having an effect of $7,500 or more within any
twelve-month period on the revenues, expenses, assets, and liabilities of
Company.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of California, and has all
requisite power and authority to carry on its business as it is now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of the Company (as used herein with respect to the Company, or with respect to
any other person, a "Material Adverse Effect"). SCHEDULE 2.1 sets forth a list
of all jurisdictions in which the Company is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to SCHEDULE 2.1. The stock records of the Company, a copy of which is
attached to SCHEDULE 2.1, are correct and complete in all material respects. All
records of all
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proceedings of the Board of Directors and stockholder of the Company have been
made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. (a) The authorized capital stock of the
Landtrends, Inc. consists solely of 20,000 shares of common stock of which 1,000
shares are issued and outstanding and constitute all of the issued and
outstanding shares of Company stock (the "Shares"). All of the Shares are owned
of record and beneficially by the Stockholder and are owned free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the Shares have been duly
authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholder to transfer any of the Shares to any
person except pursuant to this Agreement.
(b) The authorized capital stock of the Subsidiary consists solely
of 1,000,000 shares of common stock of which 21,500 shares are issued and
outstanding and constitute all of the issued and outstanding shares of
Subsidiary stock. 10,250 shares of the Subsidiary (the "Subsidiary Shares") are
owned of record and beneficially by the Landtrends, Inc. and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Subsidiary
Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Subsidiary in
compliance with all applicable state and federal laws governing the issuance of
securities. None of the Subsidiary Shares were issued in violation of any
preemptive rights or similar rights of any person. No option, warrant, call,
conversion right or commitment of any kind exists which obligates the Subsidiary
to issue any additional shares of its capital stock or obligates the Stockholder
to transfer any of the Subsidiary Shares to any person except pursuant to this
Agreement.
2.4 SUBSIDIARIES. Except for the Subsidiary and as set forth on SCHEDULE
2.4, the Company has no subsidiaries or d/b/a names and has not conducted
business under any other name except its legal name as set forth in its Charter
Documents. Except as set forth in SCHEDULE 2.4, the Company does not own, of
record or beneficially, or control, directly or indirectly, any capital stock,
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securities convertible into capital stock or any other equity interest in any
corporation, association or other business entity, and the Company is not,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5: the balance sheets of the
Company as of June 30, 1998 (the "Balance Sheet Date") and any related
statements of operations, stockholder's equity and cash flows for the three-year
period then ended, together with any related notes and schedules (the "Year-end
Financial Statements"); and
Except as set forth on SCHEDULE 2.5, the Financial Statements have been
prepared from the books and records of the Company in conformity with generally
accepted accounting principles applied on a basis consistent with preceding
years and throughout the periods involved ("GAAP") and present fairly the
financial position and results of operations of the Company as of the dates of
such statements and for the periods covered thereby. The books of account of the
Company have been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on SCHEDULE 2.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any material claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on SCHEDULE 2.6, all of the contingent liabilities of the
Company listed on SCHEDULE 2.6 are covered by the Company's insurance policies,
and no such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
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2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. The Company does not have any knowledge that any on-site or
off-site location to which the Company has transported or disposed of Hazardous
Wastes,
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Hazardous Materials or Hazardous Substances or arranged for the transportation
of Hazardous Wastes, Hazardous Materials or Hazardous Substances is the subject
of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company or LandCARE for
any clean-up cost, remedial work, damage to natural resources, property damage
or personal injury, including, but not limited to, any claim under (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) the Resource Conservation and Recovery Act, as amended, (iii) the
Hazardous Materials Transportation Act, as amended, or (iv) comparable state or
local statutes and regulations. The Company has no contingent liability in
connection with any release of any Hazardous Waste, Hazardous Material or
Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, other than as specified in such agreement or
contract and (ii) the Company has complied with all commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on SCHEDULE 2.11 and no notice of default under any such contract or agreement
has been received. The
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transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such contracts or agreements. SCHEDULE 2.11 also
includes a summary description of all plans or projects relating to the
Company's business involving the opening of new operations, expansion of
existing operations, the acquisition of any property, business or assets
requiring, in any event, the payment of more than $50,000 in the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholder has
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its
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contracts and other agreements and pursuant to all applicable laws, and provide
adequate coverage against the risks involved in the Company's business. Except
as set forth on SCHEDULE 2.13, none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
SCHEDULE 2.14 sets forth an accurate schedule showing all bonus and other
incentive plans, agreements and arrangements of Company, written or unwritten
(the "Incentive Plans"), together with true, complete and correct copies of such
Incentive Plans (or in the event that the Incentive Plans are not in writing, a
true and complete summary of such Incentive Plans), and classifications of
employees covered thereby as of the Closing Date.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same
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meaning as is given that term in Section 3(2) of ERISA. The Company has not
sponsored, maintained or contributed to any employee pension benefit plan and is
not required to contribute to any retirement plan pursuant to the provisions of
any collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees other than the plans set forth on
SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder,
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threatened, against or affecting the Company (as any of its officers and
directors in their capacities as such), at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the Company. Except
as set forth on SCHEDULE 2.16, no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received by the Company
during the last five years and, to the best knowledge of the Stockholder, there
is no basis therefor. Except as set forth on SCHEDULE 2.16, there are no
outstanding judgments, orders, writs, injunctions or decrees against the
Company. Except as set forth on SCHEDULE 2.16, the Company has conducted and now
conducts its business in material compliance with all laws, regulations, writs,
injunctions, decrees and orders applicable to the Company or its assets. The
Company is not in violation of any material law or regulation or any order of
any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them. The Company has conducted and is conducting its business in
substantial compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Tax Returns") required to be filed with respect to any
Tax for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Tax Return has been paid, each Tax payable by
the Company or a Company Subsidiary by assessment has been timely paid in the
amount assessed, and adequate reserves have been established on the consolidated
books of the Company and the Company Subsidiaries for all Taxes for which any of
the Company and the Company subsidiaries is liable, but the payment of which is
not yet due. Each of the Company and the Company Subsidiaries has timely filed
true, correct and complete declarations of estimated Tax in each jurisdiction in
which any such declaration is required to be filed by it. No Liens for Taxes
exist upon the assets of the Company or any Company Subsidiary except Liens for
Taxes which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax
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in any jurisdiction outside the United States. No litigation with respect to any
Tax for which the Company or any Company Subsidiary is asserted to be liable is
pending or, to the knowledge of the Company or the Stockholder, threatened, and
no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. No
accounting method changes of the Company or of any Company Subsidiary exist or
are proposed or threatened which could give rise to an adjustment under Section
481 of the Code. The Company uses the cash method of accounting for income tax
purposes, and the Company's methods of accounting have not changed in the past
five years. The Company is not an investment company as defined in Section
351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits under the Material Documents
to which the Company is entitled immediately prior to the Closing. Except as set
forth on SCHEDULE 2.18 (and except for consents already obtained), none of the
Material Documents requires notice to, or the consent or approval of,
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any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect,
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on SCHEDULE 2.18, none of the Material Documents
prohibits the use or publication of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts the Company
or will prevent or restrict the Company or LandCARE from freely providing
services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
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(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect; or
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the ordinary course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholder contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholder can reasonably foresee, threatens to have a Material
Adverse
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Effect, on the Company or its business or assets, or the condition (financial or
otherwise), results of operations or prospects of the Company, which has not
been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof. Landtrends, Inc.'s total indebtedness on a pro forma basis as of the
date hereof does not exceed $750,000. Landtrends, Inc.'s pro forma net revenues
for the 12-month period ended June 30, 1998 were at least $10,000,000.
Landtrends, Inc.'s pro forma pre-tax earnings for the 12-month period ended June
30, 1998 were at least $900,000. Landtrends, Inc.'s tangible net worth as of the
date hereof is at least $1,550,000.
2.27 YEAR 2000 COMPLIANCE. The primary properties and assets of the
Company, including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no material loss of functional ability when processing dates and related data
outside the 1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represents and warrants: (a) that each has been fully informed by his or
its legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
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and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
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4.4 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than thirty days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 TAX MATTERS. Tax advisors to the Stockholder are delivering an opinion
to the Stockholder satisfactory to the Stockholder regarding the tax
consequences of the transactions contemplated hereby.
4.7 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.9 CASH. LandCARE is delivering to the Stockholder the cash set forth in
Section 1.2 herein.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the transactions contemplated hereby and fully
carrying out the intent of this Agreement. LandCARE shall provide the
Stockholder reasonable access to the books and records of the Company after the
Closing Date for purposes of tax compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with
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the transactions contemplated hereby. The Stockholder shall file all necessary
documentation and returns with respect to such Transfer Taxes. In addition, the
Stockholder acknowledges that the Stockholder, and not the Company or LandCARE,
will pay all taxes (income or otherwise), if any, due upon receipt of the
consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Company shall terminate any existing agreements
to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholder shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 GUARANTIES. As soon as practicable but in no event later than 30 days
after the Closing, LandCARE shall cause the release of the Stockholder's or Mr.
Ewing's guaranties of interest-bearing indebtedness of the Company, including
but not limited to those guaranties listed on SCHEDULE 5.5. LandCare shall
cooperate with the Stockholder and Mr. Ewing to release the Stockholder and Mr.
Ewing from guaranties of vendor accounts as specifically identified by the
Stockholder and Mr. Ewing on a case-by-case basis.
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5.6 OTHER FINANCIAL MATTERS. If the Company's total indebtedness on a pro
forma basis exceeds $750,000 at Closing, the Purchase Price shall be reduced on
a dollar-for-dollar basis, and, within 30 days of the date hereof, the
Stockholder shall remit such amount to LandCARE by wire transfer.
5.7 DEPARTMENT OF NAVY LEASE . The Subsidiary, following the Closing,
shall endeavor to obtain the right to continue to use that property subject to
that certain Lease for Agricultural or Grazing Purposes entered into between
Department of the Navy and Springtime Growers, Inc. on or about October 1, 1987
and assigned to the Subsidiary on August 2, 1992 (the "Navy Lease") by a written
renewal or extension or new lease agreement, upon such terms and conditions as
are commercially reasonable. The Subsidiary and LandCARE agree that Mr. Ewing,
in consultation with other Subsidiary representatives, including legal counsel,
shall be the sole representatives of the Subsidiary in the communications and
negotiations with the Department of Navy, including the Subsidiary's efforts to
obtain such extensions of time and usage, and the Subsidiary and LandCARE agree
that they shall not directly nor indirectly, through any action or lack of
action, in any manner: (i) interfere with any action reasonably taken or
proposed by Mr. Ewing or other Subsidiary representatives in the negotiations
and communications on behalf of the Subsidiary with the Department of Navy in
obtaining such extensions, or (ii) otherwise hinder, restrict or limit the
Subsidiary's lawful performance of any obligations of, or required to be taken
by the Subsidiary under the Navy Lease which would interfere with the obtaining
of such extensions. Upon the Subsidiary obtaining the right to continue to use
the property subject to the Navy Lease through at least March 31, 2001, LandCARE
shall release one-half of the Holdback, together with interest thereon at the
rate of 5.7% per annum, to the Stockholder within fifteen business days of
notification to LandCARE of satisfaction of such extension. Upon the Subsidiary
obtaining the right to continue to use the property subject to the Navy Lease
through at least March 31, 2002, LandCARE shall release the remaining one half
of the Holdback, together with interest thereon at the rate of 5.7% per annum,
to the Stockholder within fifteen business days of notification to LandCARE of
satisfaction of such extension.
5.8 LICENSES. LandCARE understands that, pursuant to applicable laws, the
licenses set forth on SCHEDULE 5.8 are held in the name of certain individual
employees of the Company, and not in the name of the Company itself. Such
employees shall not be required as a condition to their continued employment
with the Company subsequent to the Closing Date to continue to hold such
licenses on behalf of the Company.
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6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company and Related Matters) and 2.17 (Taxes) of this Agreement shall survive
the Closing until the expiration of the periods prescribed by the applicable
statutes of limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholder made in Section 2.9
(Environmental Matters) shall survive the Closing for a period of four years
after the Closing Date; and the other representations and warranties of the
Stockholder made herein shall survive the Closing for a period of two years
after the Closing Date; provided, however, that representations and warranties
and indemnification provisions with respect to which a claim is made within the
survival period shall survive until such claim is finally determined and paid.
The limitation periods referred to in this subparagraph (a) are not intended to
limit any of the remedies available to LandCARE for causes of action arising out
of fraud by the Stockholder.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that he will indemnify, defend, protect, and hold harmless the
Company, LandCARE and its subsidiaries and all of their officers, directors,
employees, stockholders, agents, representatives and affiliates at all times
from and after the date of this Agreement until the Expiration Date from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such indemnified person as a result of or incident to (i)
any breach of any representation or warranty of the Stockholder set forth
herein, and (ii) any breach or nonfulfillment of any covenant or agreement by
the Company or the Stockholder under this Agreement.
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6.3 SPECIFIC ENVIRONMENTAL INDEMNIFICATION BY THE STOCKHOLDER. In addition
to the indemnification provided for in Section 6.2, the Stockholder covenants
and agrees that, for a period of four years after the Closing Date, he will
indemnify, defend, protect and hold harmless the Company and LandCARE and each
of their respective subsidiaries, officers, directors, employees, stockholders,
agents, representatives and affiliates from and against all Damages incurred by
any of them in connection with: (a) violations or alleged violations of any
applicable federal, state, local, or other laws, regulations, ordinances, or
orders of any governmental entity which govern the protection of the environment
or human health and safety ("Environmental Laws") relating in any way to any
action or omission of the Company or any predecessor of the Company to the
extent the facts, events, or conditions giving rise to such violation or alleged
violation occurred or existed on or before the Effective Date; (b) the actual or
alleged presence, emanation, migration, disposal, release, or threatened release
(collectively, "Releases") of any oil, petroleum product, hazardous material, or
hazardous substance as such terms are defined by Environmental Laws
(collectively, "Hazardous Substances") at, under, to, or from any property or
facility which presently is or previously was owned, leased, operated, or
otherwise used by the Company or any predecessor of the Company to the extent
that said actual or alleged Release occurred or is alleged to have occurred on
or before the Effective Date; and (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Effective Date.
6.4 SPECIFIC TAX INDEMNIFICATION BY THE STOCKHOLDER. In addition to the
indemnification provided for in Section 6.2, the Stockholder covenants and
agrees that, for the periods prescribed by the applicable statute of
limitations, he will indemnify, defend, protect and hold harmless the Company
and LandCARE and each of their respective subsidiaries, officers, directors,
employees, stockholders, agents, representatives and affiliates from and against
all Damages, including but not limited to taxes, penalties and interest,
incurred by any of them in connection with the failure of the Company to timely
and accurately file the Tax Returns and remit the Taxes to any applicable taxing
authorities.
6.5 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.6 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received a written communication of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to
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provide indemnification hereunder (an "Indemnifying Party") written notice of
such claim or the commencement of such action or proceeding; provided, however,
that if the Indemnified Party is either LandCARE or the Company, such
Indemnified Party shall give the Indemnifying Party written notice of such claim
or the commencement of such action or proceeding promptly after an individual in
a senior management position at such Indemnified Party has received a written
communication of any claim by a Third Person or the commencement of any action
or proceeding by a Third Person that may give rise to a right of indemnification
hereunder. The Indemnifying Party (at its own expense) shall have the right and
shall be given the opportunity to associate with the Indemnified Party in the
defense of such claim, suit or proceedings, and may select counsel for the
Indemnified Party, such counsel to be reasonably satisfactory to the Indemnified
Party. The Indemnified Party shall not, except at its own cost, make any
settlement with respect to any such claim, suit or proceeding without the prior
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within ten business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.7 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholder until such time as the
aggregate of all claims which such persons may have against such the Stockholder
shall exceed $60,000 (the "Indemnification Threshold") and then only to the
extent that such claims exceed the Indemnification Threshold. The Stockholder
shall not assert any claim for indemnification hereunder against LandCARE until
such time as the aggregate of all claims which the Stockholder may have against
LandCARE shall exceed the Indemnification Threshold and then only to the extent
that such claims exceed the Indemnification Threshold. The aggregate liability
of the Stockholder under this Article 6 shall not exceed $1,500,000 (the
"Liability Limit"); the aggregate liability of LandCARE hereunder shall not
exceed the Liability Limit. It is agreed that the exclusive remedy of the
parties to this Agreement shall be pursuant to Section 6 hereof.
6.8 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash or such other form as mutually agreeable to the parties.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Mr. Ewing will not,
for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
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business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 75 miles of where the Company conducted business at any time within
one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Company) for the purpose of soliciting or selling products or services in
direct competition with LandCARE or any of its subsidiaries (including the
Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit Mr. Ewing from acquiring as a passive investor with no involvement in
the operations or management of the business, not more than one percent (1%) of
the capital stock of a competing business whose stock is publicly traded on a
national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which Mr.
Ewing may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, Mr. Ewing agrees that the
foregoing covenant may be enforced by LandCARE in the event of breach by Mr.
Ewing, by injunctions, restraining orders and other equitable actions.
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7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on Mr. Ewing.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. Mr. Ewing acknowledges that the covenants set
forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Mr. Ewing against LandCARE or any
subsidiary thereof, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of Mr. Ewing made in
this Section shall be effective, shall be computed by excluding from such
computation any time during which Mr. Ewing is in violation of any provision of
this Section. The covenants contained in Section shall not be affected by any
breach of any other provision hereof by any party hereto.
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder and Mr. Ewing recognize and acknowledge that
they have had access to certain customer lists, confidential information of the
Company, such as operational policies, pricing and cost policies, and other
information, that will be valuable, special and unique assets of the Company and
LandCARE after the Closing Date. The Stockholder and Mr. Ewing agree that they
will not disclose such confidential information, or any confidential information
of the Company or LandCARE to which they may have access in the future, to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of LandCARE, (b) following
the Closing, such information may be disclosed by the Stockholder or Mr. Ewing
as may be required in the course of performing his duties for the Company and
(c) to counsel and other advisers, provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section, unless (i)
such information becomes known to the public generally through no fault of the
Stockholder or Mr. Ewing, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder and Mr. Ewing shall give prior
written notice thereof to LandCARE and provide LandCARE with the opportunity to
contest such disclosure. In the event of a breach or threatened breach by the
Stockholder or Mr. Ewing of the provisions of this
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Section, LandCARE shall be entitled to injunctive or other equitable relief
restraining the Stockholder and Mr. Ewing from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder and Mr. Ewing agree that the
foregoing covenants may be enforced against him by injunctions, restraining
orders and other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
9.2 ENTIRE AGREEMENT. Except for the letter from LandCARe to the
Stockholder and Mr. Ewing dated as of the date hereof, this Agreement (including
the schedules, exhibits and annexes attached hereto) and the documents delivered
pursuant hereto constitute the entire agreement and understanding among the
Stockholder, the Company and LandCARE, and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against
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all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
If to the Company, addressed to it at:
Landtrends, Inc.
5248 Governor Drive
San Diego, California 92122
If to the Stockholder, addressed to him at the Company's address, or to
such other address as any party hereto shall specify pursuant to this Section
from time to time.
9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or
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remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
LANDTRENDS, INC.
By: /s/ JOHN R. EWING
John R. Ewing
President
/s/ JOHN R. EWING
------------------------------------------
Jon R. Ewing as Trustee of the Ewing Inter
Vivos Trust dated March 25, 1997
/s/ DANA P. EWING
------------------------------------------
Dana P. Ewing as Trustee of the Ewing Inter
Vivos Trust dated March 25, 1997
/s/ JOHN R. EWING
------------------------------------------
Jon R. Ewing, individually
EXHIBIT 10.17
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of October 25, 1998
by and among
LANDCARE USA, INC.,
MIRAMAR WHOLESALE NURSERIES, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 Delivery of Certificates.........................................1
1.4 Closing..........................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................3
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................11
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................13
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Inventory; Working Capital; Other Financial Matters.............14
2.27 Year 2000 Compliance............................................14
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2.28 Reliance Upon Oral Representations..............................14
3. REPRESENTATIONS OF LANDCARE...........................................14
3.1 Due Organization................................................14
3.2 Authorization...................................................15
3.3 No Violations...................................................15
3.4 Validity of Obligations.........................................15
4. DELIVERIES............................................................15
4.1 Instruments of Transfer.........................................15
4.2 Employment Agreement............................................15
4.3 Opinion of Counsel..............................................15
4.4 Good Standing Certificates......................................15
4.5 Indebtedness to Company.........................................15
4.6 Tax Matters.....................................................16
4.7 Consents........................................................16
4.8 Resignations of Directors and Officers..........................16
4.9 Cash............................................................16
5. POST-CLOSING COVENANTS................................................16
5.1 Future Cooperation; Further Assurances..........................16
5.2 Expenses........................................................16
5.3 Certain Agreements..............................................17
5.4 Preparation and Filing of Tax Returns...........................17
5.5 Guaranties......................................................17
5.6 Other Financial Matters.........................................17
5.7 Department of Navy Lease........................................17
5.8 Licenses........................................................18
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholder's Representations and Warranties. .....18
6.2 General Indemnification by the Stockholders.....................19
6.3 Specific Environmental Indemnification by the Stockholders......19
6.4 Specific Tax Indemnification by the Stockholder.................19
6.5 Indemnification by LandCARE.....................................20
6.6 Third Person Claims.............................................20
6.7 Limitations on Indemnification..................................20
6.8 Method of Payment...............................................21
7. NONCOMPETITION........................................................21
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7.1 Prohibited Activities...........................................21
7.2 Equitable Relief................................................22
7.3 Reasonable Restraint............................................22
7.4 Severability; Reformation.......................................22
7.5 Independent Covenant............................................22
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 General.........................................................23
8.2 Equitable Relief................................................23
8.3 Survival........................................................23
9. GENERAL...............................................................23
9.1 Successors and Assigns..........................................23
9.2 Entire Agreement................................................24
9.3 Counterparts....................................................24
9.4 Brokers and Agents..............................................24
9.5 Notices.........................................................24
9.6 Governing Law...................................................25
9.7 Survival of Representations and Warranties......................25
9.8 Effect of Investigation.........................................25
9.9 Exercise of Rights and Remedies.................................25
9.10 Time............................................................25
9.11 Reformation and Severability....................................25
9.12 Remedies Cumulative.............................................25
9.13 Captions........................................................25
9.14 Press Releases and Public Announcements.........................25
9.15 No Third-Party Beneficiaries....................................26
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SCHEDULES
SCHEDULE 1.2. Purchase Price
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.2. Persons Entering into Employment Agreements
SCHEDULE 5.5. Guaranties
SCHEDULE 5.7. Department of Navy Lease
SCHEDULE 5.8. Licenses
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of October 25, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Miramar Wholesale Nurseries, Inc., a California corporation (the
"Company"), Thomas C. Ewing (hereinafter referred to as "Mr. Ewing"), and the
persons listed on the signature pages of this Agreement as the stockholders of
the Company (the "Stockholders").
WHEREAS, the Stockholders desire to sell, and LandCARE desires to
purchase, all of the outstanding capital stock of the Company (the "Shares") on
the terms set forth in this Agreement; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE.On the terms set forth in this Agreement, the
Stockholders hereby sell, convey, transfer, assign and deliver to LandCARE, and
LandCARE hereby purchases from the Stockholders, all of the Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is $2,969,477 consisting of (i) $2,707,849 in cash at Closing,
which amount is being paid by wire transfer of immediately available funds in
accordance with wiring instructions provided by the Stockholder; and (ii)
$261,628 in cash or in immediately available funds (the "Holdback"), which
amount is being withheld by LandCARE on a pro rata basis as set forth on
SCHEDULE 1.2 and which shall be distributed to the Stockholders as set forth in
Section 5.7 hereof.
1.3 DELIVERY OF CERTIFICATES. Concurrently with the execution and delivery
of this Agreement and consummation of the transactions described herein (the
"Closing"), (i) the Stockholders are delivering to LandCARE the certificates
representing the Shares, duly endorsed in blank by the Stockholders or
accompanied by a stock transfer endorsement separate from certificate together
with an Affidavit of Lost Certificate and Indemnification Agreement satisfactory
to LandCARE, and with all necessary transfer tax and other revenue stamps,
acquired at the
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Stockholders' expense, affixed and canceled, and (ii) LandCARE is causing its
stock transfer agent to deliver to the Stockholders certificates representing
the LandCARE Stock as described above (or is delivering to the Stockholders a
copy of an irrevocable authorization to such transfer agent authorizing the
issuance of such certificates to the Stockholders). The Stockholders agree
promptly to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such Shares or
with respect to the stock powers accompanying any Shares.
1.4 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
As used in the following representations, the term "material" or any
variation thereof shall mean any matter having an effect of $7,500 or more
within any twelve-month period on the revenues, expenses, assets, and
liabilities of Company. The Stockholders and Mr. Ewing hereby represent and
warrant to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of California, and has all
requisite power and authority to carry on its business as it is now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of the Company (as used herein with respect to the Company, or with respect to
any other person, a "Material Adverse Effect"). SCHEDULE 2.1 sets forth a list
of all jurisdictions in which the Company is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to SCHEDULE 2.1. The stock records of the Company, a copy of which is
attached to SCHEDULE 2.1, are correct and complete in all material respects. All
records of all proceedings of the Board of Directors and stockholders of the
Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by
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the Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 1,000,000 shares of common stock of which 21,500
shares are issued and outstanding and constitute all of the issued and
outstanding shares of Company stock. 11,250 of the shares (the "Shares") are
owned of record and beneficially by the Stockholders and are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the Shares have been
duly authorized and validly issued, are fully paid and nonassessable, and were
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws governing the issuance of securities. None of
the Shares were issued in violation of any preemptive rights or similar rights
of any person. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any additional shares of its
capital stock or obligates the Stockholders to transfer any of the Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5: the balance sheets of the
Company as of June 30, 1998 (the "Balance Sheet Date") and any related
statements of operations, stockholder's equity and cash flows for the three-year
period then ended, together with any related notes and schedules (the "Year-end
Financial Statements").
Except as set forth on SCHEDULE 2.5, the Financial Statements have been
prepared from the books and records of the Company in conformity with generally
accepted accounting principles applied on a basis consistent with preceding
years and throughout the periods involved ("GAAP") and present fairly the
financial position and results of operations of the Company as of the dates of
such statements and for the periods covered thereby. The books of account of the
Company have been kept accurately in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the revenues,
expenses, assets and liabilities of the Company have been properly recorded
therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on SCHEDULE 2.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any material claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on SCHEDULE 2.6, all of the contingent liabilities of the
Company listed on SCHEDULE 2.6 are covered by the Company's insurance policies,
and no such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
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2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. The Company does not have any knowledge that any on-site or
off-site location to which the Company has transported or disposed of Hazardous
Wastes, Hazardous Materials or Hazardous Substances or arranged for the
transportation of Hazardous Wastes, Hazardous Materials or Hazardous Substances
is the subject of any federal, state, local or foreign enforcement action or any
other investigation which could lead to any claim against the Company or
LandCARE for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, as
amended, (iii) the Hazardous Materials Transportation Act, as amended, or (iv)
comparable state or local statutes and regulations. The Company has no
contingent liability in connection with any release of any Hazardous Waste,
Hazardous Material or Hazardous Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on
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SCHEDULE 2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, other than as specified in such agreement or
contract and (ii) the Company has complied with all commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on SCHEDULE 2.11 and no notice of default under any such contract or agreement
has been received. The transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such contracts or
agreements. SCHEDULE 2.11 also includes a summary description of all plans or
projects relating to the Company's business involving the opening of new
operations, expansion of existing operations, the acquisition of any property,
business or assets requiring, in any event, the payment of more than $50,000 in
the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholders or any affiliate of the Stockholders
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the
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right to occupy or possess all or any portion of the Real Property or create in
or confer on any such party any right, title or interest in or to the Real
Property or any portion thereof or any interest therein; no party other than the
Company occupies or possesses the Real Property or any portion thereof; there is
legal and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholders have
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge,
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threatened, labor dispute involving the Company and any group of its employees.
The Company has not experienced any labor interruptions over the past five
years.
SCHEDULE 2.14 sets forth an accurate schedule showing all bonus and other
incentive plans, agreements and arrangements of Company, written or unwritten
(the "Incentive Plans"), together with true, complete and correct copies of such
Incentive Plans (or in the event that the Incentive Plans are not in writing, a
true and complete summary of such Incentive Plans), and classifications of
employees covered thereby as of the Closing Date.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The Company has
not sponsored, maintained or contributed to any employee pension benefit plan
and is not required to contribute to any retirement plan pursuant to the
provisions of any collective bargaining agreement establishing the terms and
conditions of employment of any of the Company's employees other than the plans
set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified.
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Except as disclosed on SCHEDULE 2.15, all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries have been timely filed or distributed, and the most recent copies
thereof are included as part of SCHEDULE 2.15. Neither the Stockholders, nor any
plan listed in SCHEDULE 2.15 nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No plan listed on SCHEDULE 2.15 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and the Company has not incurred any liability for excise tax or penalty
due to the Internal Revenue Service or any liability to the PBGC. There have
been no terminations, partial terminations or discontinuance of contributions to
any such Qualified Plan intended to qualify under Section 401(a) of the Code
without notice to and approval by the Internal Revenue Service; no plan listed
on SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against the Company. Except as set forth on SCHEDULE 2.16, the
Company has conducted and now conducts its business in material compliance with
all laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
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2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Tax Returns") required to be filed with respect to any
Tax for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Tax Return has been paid, each Tax payable by
the Company or a Company Subsidiary by assessment has been timely paid in the
amount assessed, and adequate reserves have been established on the consolidated
books of the Company and the Company Subsidiaries for all Taxes for which any of
the Company and the Company subsidiaries is liable, but the payment of which is
not yet due. Each of the Company and the Company Subsidiaries has timely filed
true, correct and complete declarations of estimated Tax in each jurisdiction in
which any such declaration is required to be filed by it. No Liens for Taxes
exist upon the assets of the Company or any Company Subsidiary except Liens for
Taxes which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax in any jurisdiction outside the United States.
No litigation with respect to any Tax for which the Company or any Company
Subsidiary is asserted to be liable is pending or, to the knowledge of the
Company or the Stockholders, threatened, and no basis which the Company or any
Stockholder believes to be valid exists on which any claim for any such Tax can
be asserted against the Company or any Company Subsidiary. There are no requests
for rulings or determinations in respect of any Taxes pending between the
Company or any Company Subsidiary and any Taxing Authority. No extension of any
period during which any Tax may be assessed or collected and for which the
Company or any Company Subsidiary is or may be liable has been granted to any
Taxing Authority. Neither the Company nor any Company Subsidiary is or has been
party to any tax allocation or sharing agreement. All amounts required to be
withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the proper Taxing Authority. The Company and each Company Subsidiary have made
all deposits required by law to be made with respect to employees' withholding
and other employment Taxes. Neither the Company nor the Stockholders is a
"foreign person," as that term is referred to in Section 1445(f)(3) of the Code.
The Company has not filed a consent pursuant to Section 341 (f) of the Code or
any comparable provision of any other tax statute and has not agreed to have
Section 341 (f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The
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Company has not made, is not obligated to make and is not a party to any
agreement that could require it to make any payment that is not deductible under
Section 280G of the Code. No asset of the Company or of any Company Subsidiary
is subject to any provision of applicable law which eliminates or reduces the
allowance for depreciation or amortization with respect to that asset below the
allowance generally available to an asset of its type. No accounting method
changes of the Company or of any Company Subsidiary exist or are proposed or
threatened which could give rise to an adjustment under Section 481 of the Code.
The Company uses the cash method of accounting for income tax purposes, and the
Company's methods of accounting have not changed in the past five years. The
Company is not an investment company as defined in Section 351(e)(1) of the
Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits under the Material Documents
to which the Company is entitled immediately prior to the Closing. Except as set
forth on SCHEDULE 2.18 (and except for consents already obtained), none of the
Material Documents requires notice to, or the consent or approval of, any
governmental agency or other third party with respect to any of the transactions
contemplated hereby in order to remain in full force and effect, and
consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on SCHEDULE 2.18, none of the Material Documents
prohibits the use or publication of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts the Company
or will prevent or restrict the Company or LandCARE from freely providing
services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
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(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect; or
(xiii) any contract, commitment or liability entered into or
incurred or any capital expenditures made except in the ordinary course of
business consistent with past practice in an individual amount not in
excess of $10,000 and in an aggregate amount not in excess of $50,000.
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2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. There is no fact which has specific
application to the Company or its business or assets (other than general
economic or industry conditions) which would have a Material Adverse Effect or,
so far as the Stockholders can reasonably foresee, threatens to have a Material
Adverse Effect, on the Company or its business or assets, or the condition
(financial or otherwise), results of operations or prospects of the Company,
which has not been described in the Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no
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unusual build-up of cash needs at the date hereof. The Company's total
indebtedness as of the date hereof does not exceed $600,000. The Company's pro
forma net revenues for the 12-month period ended June 30, 1998 were at least
$4,700,000. The Company's pro forma pre-tax earnings for the 12-month period
ended June 30, 1998 were at least $750,000. The Company's tangible net worth as
of the date hereof is at least $890,000.
2.27 YEAR 2000 COMPLIANCE. The primary properties and assets of the
Company, including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no material loss of functional ability when processing dates and related data
outside the 1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than thirty days prior to
the date hereof, duly issued by the appropriate governmental authority in the
State of Incorporation and in each state in which the Company is authorized to
do business, showing the Company to be in good standing and authorized to do
business therein.
4.5 INDEBTEDNESS TO COMPANY. The Stockholders and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.6 TAX MATTERS. Tax advisors to the Stockholders are delivering an
opinion to the Stockholders satisfactory to the Stockholders regarding the tax
consequences of the transactions contemplated hereby.
4.7 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
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4.9 CASH. LandCARE is delivering to the Stockholders the cash set forth in
Section 1.2 herein.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the transactions contemplated hereby and fully
carrying out the intent of this Agreement. LandCARE shall provide the
Stockholders reasonable access to the books and records of the Company after the
Closing Date for purposes of tax compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholders will pay the fees, expenses and disbursements
of the Stockholders and its agents, representatives, financial advisors,
accountants and counsel incurred in connection with the execution, delivery and
performance of this Agreement. The Stockholders shall pay any sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the
transactions contemplated hereby. The Stockholders shall file all necessary
documentation and returns with respect to such Transfer Taxes. In addition, the
Stockholders acknowledge that the Stockholders, and not the Company or LandCARE,
will pay all taxes (income or otherwise), if any, due upon receipt of the
consideration payable pursuant to this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholders shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholders shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
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(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 GUARANTIES. As soon as practicable but in no event later than 30 days
after the Closing, LandCARE shall cause the release of the Stockholders' or Mr.
Ewing's guaranties of indebtedness of the Company, including but not limited to
those guaranties listed on SCHEDULE 5.5, and (ii) any liens on properties owned
by the Stockholders or Mr. Ewing securing such indebtedness.
5.6 OTHER FINANCIAL MATTERS. If the Company's total indebtedness on a pro
forma basis exceeds $600,000 at Closing, the Purchase Price shall be reduced on
a dollar-for-dollar basis, and, within 30 days of the date hereof, the
Stockholders shall remit such amount to LandCARE by wire transfer.
5.7 DEPARTMENT OF NAVY LEASE. The Company, following the Closing, shall
endeavor to obtain the right to continue to use that property subject to that
certain Lease for Agricultural or Grazing Purposes entered into between
Department of the Navy and Springtime Growers, Inc. on or about October 1, 1987
and assigned to the Subsidiary on August 2, 1992 (the "Navy Lease") by a written
renewal or extension or new lease agreement, upon such terms and conditions as
are commercially reasonable. The Company and LandCARE agree that Mr. Ewing, in
consultation with other Company representatives, including legal counsel, shall
be the sole representatives of the Company in the communications and
negotiations with the Department of Navy, including the Company's efforts to
obtain such extensions of time and usage, and the Company and LandCARE agree
that they shall not directly nor indirectly, through any action or lack of
action, in any manner: (i) interfere with any action reasonably taken or
proposed by Mr. Ewing or other Company representatives in the negotiations and
communications on behalf of the Company with the Department of Navy in obtaining
such extensions, or (ii) otherwise hinder, restrict or limit the Subsidiary's
lawful performance of any obligations of, or required to be taken by the Company
under the Navy Lease which would interfere with the obtaining of such
extensions. Upon the Company obtaining the right to continue to use the property
subject to the Navy Lease through at least March 31, 2001, LandCARE shall
release one-half of the Holdback, together with interest thereon at the rate
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of 5.7% per annum, to the Stockholders on a pro rata basis as set forth on
SCHEDULE 5.7 within fifteen business days of notification to LandCARE of
satisfaction of such extension. Upon the Company obtaining the right to continue
to use the property subject to the Navy Lease through at least March 31, 2002,
LandCARE shall release the remaining one half of the Holdback, together with
interest thereon at the rate of 5.7% per annum, to the Stockholders on a pro
rata basis as set forth on SCHEDULE 5.7 within fifteen business days of
notification to LandCARE of satisfaction of such extension.
5.8 LICENSES. LandCARE understands that, pursuant to applicable laws, the
licenses set forth on SCHEDULE 5.8 are held in the name of certain individual
employees of the Company, and not in the name of the Company itself. Such
employees shall not be required as a condition to their continued employment
with the Company subsequent to the Closing Date to continue to hold such
licenses on behalf of the Company.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholders made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company and Related Matters) and 2.17 (Taxes) of this Agreement shall survive
the Closing until the expiration of the periods prescribed by the applicable
statutes of limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholders made in Section 2.9
(Environmental Matters) shall survive the Closing for a period of four years
after the Closing Date; and the other representations and warranties of the
Stockholders made herein shall survive the Closing for a period of two years
after the Closing Date; provided, however, that representations and warranties
and indemnification provisions with respect to which a claim is made within the
survival period shall survive until such claim is finally determined and paid.
The limitation periods referred to in this subparagraph (a) are not intended to
limit any of the remedies available to LandCARE for causes of action arising out
of fraud by the Stockholders.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
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(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
severally covenant and agree that they will indemnify, defend, protect, and hold
harmless the Company, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholders
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholders under this Agreement.
6.3 SPECIFIC ENVIRONMENTAL INDEMNIFICATION BY THE STOCKHOLDERS. In
addition to the indemnification provided for in Section 6.2, the Stockholders
severally covenant and agree that, for a period of four years after the Closing
Date, they will indemnify, defend, protect and hold harmless the Company and
LandCARE and each of their respective subsidiaries, officers, directors,
employees, stockholders, agents, representatives and affiliates from and against
all Damages incurred by any of them in connection with: (a) violations or
alleged violations of any applicable federal, state, local, or other laws,
regulations, ordinances, or orders of any governmental entity which govern the
protection of the environment or human health and safety ("Environmental Laws")
relating in any way to any action or omission of the Company or any predecessor
of the Company to the extent the facts, events, or conditions giving rise to
such violation or alleged violation occurred or existed on or before the
Effective Date; (b) the actual or alleged presence, emanation, migration,
disposal, release, or threatened release (collectively, "Releases") of any oil,
petroleum product, hazardous material, or hazardous substance as such terms are
defined by Environmental Laws (collectively, "Hazardous Substances") at, under,
to, or from any property or facility which presently is or previously was owned,
leased, operated, or otherwise used by the Company or any predecessor of the
Company to the extent that said actual or alleged Release occurred or is alleged
to have occurred on or before the Effective Date; and (c) the actual or alleged
Release of any Hazardous Substances at any location or facility whatsoever to
the extent such Hazardous Substances were generated by, or were arranged for
disposal at such location or facility by, the Company or any predecessor of the
Company on or before the Effective Date.
6.4 SPECIFIC TAX INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders severally covenant
and agree that, for the periods prescribed by the applicable statute of
limitations, he will indemnify, defend, protect and hold harmless the Company
and LandCARE and each of their respective subsidiaries, officers,
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directors, employees, stockholders, agents, representatives and affiliates from
and against all Damages, including but not limited to taxes, penalties and
interest, incurred by any of them in connection with the failure of the Company
to timely and accurately file the Tax Returns and remit the Taxes to any
applicable taxing authorities.
6.5 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCARE set forth herein; and (ii) any
breach or nonfulfillment of any covenant or agreement by LandCARE under this
Agreement.
6.6 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that if the
Indemnified Party is either LandCARE or the Company, such Indemnified Party
shall give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding promptly after an individual in a
senior management position at such Indemnified Party has received a written
communication of any claim by a Third Person or the commencement of any action
or proceeding by a Third Person that may give rise to a right of indemnification
hereunder. The Indemnifying Party (at its own expense) shall have the right and
shall be given the opportunity to associate with the Indemnified Party in the
defense of such claim, suit or proceedings, and may select counsel for the
Indemnified Party, such counsel to be reasonably satisfactory to the Indemnified
Party. The Indemnified Party shall not, except at its own cost, make any
settlement with respect to any such claim, suit or proceeding without the prior
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within ten business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.7 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholders until such time as the
aggregate of all claims which such persons may have against such the
Stockholders shall exceed $60,000 (the "Indemnification Threshold") and then
only to the extent that such claims exceed the Indemnification Threshold. The
Stockholders shall not assert any
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claim for indemnification hereunder against LandCARE until such time as the
aggregate of all claims which the Stockholders may have against LandCARE shall
exceed the Indemnification Threshold and then only to the extent that such
claims exceed the Indemnification Threshold. The aggregate liability of the
Stockholders under this Article 6 shall not exceed $1,500,000 (the "Liability
Limit"); the aggregate liability of LandCARE hereunder shall not exceed the
Liability Limit. It is agreed that the exclusive remedy of the parties to this
Agreement shall be pursuant to Section 6 hereof.
6.8 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash or such other form as mutually agreeable to the parties.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders and Mr.
Ewing will not, for a period of five years following the Closing Date, for any
reason whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 75 miles of where the Company conducted business at any time within
one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory; and
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company).
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Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholders and Mr. Ewing from acquiring as a passive investor
with no involvement in the operations or management of the business, not more
than one percent (1%) of the capital stock of a competing business whose stock
is publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholders and Mr. Ewing may be or may become a party in connection with the
transactions contemplated hereby. All such provisions are intended to be
observed and enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders and Mr. Ewing
agree that the foregoing covenant may be enforced by LandCARE in the event of
breach by the Stockholders and Mr. Ewing, by injunctions, restraining orders and
other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders and Mr. Ewing.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders and Mr. Ewing acknowledge that
the covenants set forth in this Section are material conditions to LandCARE's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All of the covenants in this Section shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Stockholders and Mr.
Ewing against LandCARE or any subsidiary thereof, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
LandCARE of such covenants. It is specifically agreed that the period of five
years stated at the beginning of this Section, during which the agreements and
covenants of the Stockholders and Mr. Ewing made in this Section shall be
effective, shall be computed by excluding from such computation any time during
which the Stockholders and Mr. Ewing are in violation of any provision of this
Section. The covenants contained in Section shall not be affected by any breach
of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders and Mr. Ewing recognize and acknowledge that
they have had access to certain customer lists, confidential information of the
Company, such as operational policies, pricing and cost policies, and other
information, that will be valuable, special and unique assets of the Company and
LandCARE after the Closing Date. The Stockholders and Mr. Ewing agree that they
will not disclose such confidential information, or any confidential information
of the Company or LandCARE to which they may have access in the future, to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of LandCARE, (b) following
the Closing, such information may be disclosed by the Stockholders and Mr. Ewing
as may be required in the course of performing their duties for the Company and
(c) to counsel and other advisers, provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section, unless (i)
such information becomes known to the public generally through no fault of the
Stockholders and Mr. Ewing, or (ii) disclosure is required by law or the order
of any governmental authority, provided, that prior to disclosing any
information pursuant to this clause (ii), the Stockholders and Mr. Ewing shall
give prior written notice thereof to LandCARE and provide LandCARE with the
opportunity to contest such disclosure. In the event of a breach or threatened
breach by the Stockholders and Mr. Ewing of the provisions of this Section,
LandCARE shall be entitled to injunctive or other equitable relief restraining
the Stockholders and Mr. Ewing from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders and Mr. Ewing agree that the
foregoing covenants may be enforced against him by injunctions, restraining
orders and other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. GENERAL
9.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
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9.2 ENTIRE AGREEMENT. Except for the letter from LandCARe to the
Stockholders dated as of the date hereof, this Agreement (including the
schedules, exhibits and annexes attached hereto) and the documents delivered
pursuant hereto constitute the entire agreement and understanding among the
Stockholders, the Company and LandCARE, and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
9.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
9.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
If to the Company, addressed to it at:
Landtrends, Inc.
5248 Governor Drive
San Diego, California 92122
If to the Stockholders, addressed to them at the Company's address, or to
such other address as any party hereto shall specify pursuant to this Section
from time to time.
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9.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
9.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
9.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
9.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
9.10 TIME. Time is of the essence with respect to this Agreement.
9.11 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
9.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
9.13 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or be used to construe
or interpret any provision hereof.
9.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
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disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
9.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
MIRAMAR WHOLESALE NURSERIES, INC.
By: /s/ TOM EWING
Name: TOM EWING
President
<PAGE>
STOCKHOLDERS:
/s/ THOMAS C. EWING
-------------------------------------------
Thomas C. Ewing, Co-Trustee under the Ewing
Living Trust dated February 18, 1991
/s/ DEBORAH J. EWING
-------------------------------------------
Deborah J. Ewing, Co-Trustee under the Ewing
Living Trust dated February 18, 1991
/s/ SUZANNE WIEST
-----------------
Suzanne Wiest
/s/ THOMAS C. EWING
-------------------------------------------
Thomas C. Ewing, individually
EXHIBIT 10.18
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of October 26, 1998
by and among
LANDCARE USA, INC.,
REAL PROPERTY MAINTENANCE, INC.
and
the Stockholders named herein
<PAGE>
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE......................................................1
1.1 Purchase and Sale................................................1
1.2 Purchase Price...................................................1
1.3 Delivery of Certificates.........................................1
1.4 Closing..........................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.....................2
2.1 Due Organization.................................................2
2.2 Authorization....................................................2
2.3 Capital Stock of the Company.....................................2
2.4 Subsidiaries.....................................................3
2.5 Financial Statements.............................................3
2.6 Liabilities and Obligations......................................4
2.7 Accounts and Notes Receivable....................................4
2.8 Permits and Intangibles..........................................4
2.9 Environmental Matters............................................5
2.10 Personal Property................................................5
2.11 Significant Customers; Material Contracts and Commitments........6
2.12 Real Property....................................................6
2.13 Insurance........................................................7
2.14 Compensation; Employment Agreements; Organized Labor Matters.....7
2.15 Employee Benefit Plans...........................................8
2.16 Conformity with Law; Litigation..................................9
2.17 Taxes...........................................................10
2.18 No Violations; All Required Consents Obtained...................11
2.19 Absence of Changes..............................................12
2.20 Powers of Attorney..............................................13
2.21 Competing Lines of Business; Related-party Transactions.........13
2.22 Disclosure......................................................13
2.23 Certain Business Practices......................................14
2.24 Notice to Bargaining Agents.....................................14
2.25 Notices and Consents............................................14
2.26 Inventory; Working Capital; Other Financial Matters.............14
2.27 Year 2000 Compliance............................................14
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2.28 Reliance Upon Oral Representations..............................14
3. REPRESENTATIONS OF LANDCARE...........................................15
3.1 Due Organization................................................15
3.2 Authorization...................................................15
3.3 Capital Stock of LandCARE.......................................15
3.4 No Violations...................................................15
3.5 Validity of Obligations.........................................15
3.6 Reports; Financial Statements...................................15
4. DELIVERIES............................................................16
4.1 Instruments of Transfer.........................................16
4.2 Employment Agreement............................................16
4.3 Opinion of Counsel..............................................16
4.4 Good Standing Certificates......................................16
4.5 [Intentionally Omitted.]........................................16
4.6 Indebtedness to Company.........................................16
4.7 Consents........................................................16
4.8 Resignations of Directors and Officers..........................16
5. POST-CLOSING COVENANTS................................................17
5.1 Future Cooperation; Further Assurances..........................17
5.2 Expenses........................................................17
5.3 Certain Agreements..............................................17
5.4 Preparation and Filing of Tax Returns...........................17
5.5 Other Financial Matters.........................................17
5.6 Stockholder Guarantees..........................................18
5.7 Best Efforts....................................................18
6. INDEMNIFICATION.......................................................18
6.1 Survival of Stockholder's Representations and Warranties. .....18
6.2 General Indemnification by the Stockholders.....................19
6.3 Specific Indemnification by the Stockholders....................19
6.4 Indemnification by LandCARE.....................................20
6.5 Third Person Claims.............................................20
6.6 Limitations on Indemnification..................................20
6.7 Method of Payment...............................................21
7. NONCOMPETITION........................................................21
7.1 Prohibited Activities...........................................21
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7.2 Equitable Relief................................................22
7.3 Reasonable Restraint............................................22
7.4 Severability; Reformation.......................................22
7.5 Independent Covenant............................................22
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................23
8.1 General.........................................................23
8.2 Equitable Relief................................................23
8.3 Survival........................................................23
9. SECURITIES LAW MATTERS................................................23
9.1 Economic Risk; Sophistication...................................23
9.2 Compliance with Law.............................................24
9.3 Restrictions on Resale..........................................24
10. GENERAL...............................................................25
10.1 Successors and Assigns..........................................25
10.2 Entire Agreement................................................25
10.3 Counterparts....................................................25
10.4 Brokers and Agents..............................................25
10.5 Notices.........................................................25
10.6 Governing Law...................................................26
10.7 Survival of Representations and Warranties......................26
10.8 Effect of Investigation.........................................26
10.9 Exercise of Rights and Remedies.................................26
10.10 Time............................................................26
10.11 Reformation and Severability....................................27
10.12 Remedies Cumulative.............................................27
10.13 Captions........................................................27
10.14 Press Releases and Public Announcements.........................27
10.15 No Third-Party Beneficiaries....................................27
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SCHEDULES
SCHEDULE 1.2 Purchase Price
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 5.6. Stockholder Guarantees
SCHEDULE 9.3. Restrictions on Resale
SCHEDULE 10.4. Brokers and Agents
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of October 26, 1998 by and among LandCARE USA, Inc., a Delaware corporation
("LandCARE"), Real Property Maintenance, Inc., a Colorado corporation (the
"Company"), and the persons listed on the signature pages of this Agreement as
the stockholders of the Company (the "Stockholders"). The Stockholders are the
only holders of capital stock of the Company.
WHEREAS, the Stockholders desire to sell, and LandCARE desires to
purchase, all of the outstanding capital stock of the Company (the "Shares") on
the terms set forth in this Agreement; and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASE AND SALE.On the terms set forth in this Agreement, the
Stockholders hereby sell, convey, transfer, assign and deliver to LandCARE, and
LandCARE hereby purchases from the Stockholders, all of the Shares.
1.2 PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares consists of (i) 250,000 shares of common stock, par value $.01
per share, of LandCARE ("LandCARE Stock") and (ii) an aggregate of $2,000,000 in
cash paid by wire transfer. Each of the Stockholders is receiving his pro rata
interest in the Purchase Price as set forth on SCHEDULE 1.2 hereto.
1.3 DELIVERY OF CERTIFICATES. Concurrently with the execution and delivery
of this Agreement and consummation of the transactions described herein (the
"Closing"), (i) the Stockholders are delivering to LandCARE the certificates
representing the Shares, duly endorsed in blank by the Stockholders or
accompanied by a stock transfer endorsement separate from certificate together
with an Affidavit of Lost Certificate and Indemnification Agreement satisfactory
to LandCARE, and with all necessary transfer tax and other revenue stamps,
acquired at the Stockholders' expense, affixed and canceled, and (ii) LandCARE
is causing its stock transfer agent to deliver to the Stockholders certificates
representing the LandCARE Stock as described above (or is delivering to the
Stockholders a copy of an irrevocable authorization to such transfer agent
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authorizing the issuance of such certificates to the Stockholders). The
Stockholders agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such Shares or with respect to the stock powers accompanying any
Shares, and LandCARE agrees promptly to cure any deficiencies in the
certificates representing LandCARE Stock.
1.4 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders hereby represent and warrant to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Colorado, and has
all requisite power and authority to carry on its business as it is now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a material adverse
effect on the business, assets, operations or condition (financial or otherwise)
of the Company (as used herein with respect to the Company, or with respect to
any other person, a "Material Adverse Effect"). SCHEDULE 2.1 sets forth a list
of all jurisdictions in which the Company is authorized or qualified to do
business. True, complete and correct copies of the Articles of Incorporation and
By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to SCHEDULE 2.1. The stock records of the Company, a copy of which is
attached to SCHEDULE 2.1, are correct and complete in all material respects. All
records of all proceedings of the Board of Directors and stockholders of the
Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholders and the Board of Directors
of the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholders and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 1,000 shares of common stock, no par value per share,
of which 125 shares are issued and outstanding and constitute all of the issued
and outstanding Shares. All of the Shares are owned of record and beneficially
by the Stockholders and are owned free and clear of all liens,
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security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable, and were offered, issued, sold
and delivered by the Company in compliance with all applicable state and federal
laws governing the issuance of securities. None of the Shares were issued in
violation of any preemptive rights or similar rights of any person. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company to issue any additional shares of its capital stock or obligates the
Stockholders to transfer any of the Shares to any person except pursuant to this
Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 and the related statements of operations for the
seven-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
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2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Interim Financial Statements or on SCHEDULE 2.6
hereto, the Company has no liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor, to the knowledge of the Stockholders, any reasonable basis for
assertion against the Company, of any claim, liability or obligation, of any
nature whatsoever. Except as expressly set forth on SCHEDULE 2.6, all of the
contingent liabilities of the Company listed on SCHEDULE 2.6 are covered by the
Company's insurance policies, and, to the knowledge of the Stockholders, no such
liability will exceed the policy limits of such insurance policies. SCHEDULE 2.6
contains a reasonable estimate of the maximum amount which may be payable with
respect to known liabilities which are not fixed. For each such known liability
for which the amount is not fixed, SCHEDULE 2.6 includes a summary description
of each known liability, together with copies of all relevant documentation
relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all material licenses,
franchises, permits and other governmental authorizations required or necessary
in connection with the conduct of the Company's business. SCHEDULE 2.8 sets
forth an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the Intangible Assets and other governmental authorizations listed on
SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except as
specifically set forth on SCHEDULE 2.8 or 2.9, the transactions contemplated by
this Agreement will not result in a default under or a breach or violation of,
or adversely affect the rights and benefits afforded to the Company by, any such
Intangible Assets or other governmental authorizations.
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2.9 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 2.9, the
Company has complied with and is in compliance with all federal, state, local
and foreign statutes (civil and criminal), laws, ordinances, regulations, rules,
notices, permits, judgments, orders and decrees applicable to any of them or any
of their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"), including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes, Hazardous Materials and Hazardous Substances (including petroleum and
petroleum products) (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Laws, either
singly or in the aggregate, has not had and will not have a Material Adverse
Effect on the Company or any of its operations. The Company has obtained and
adhered to in all material respects all necessary permits and other approvals
required pursuant to any applicable Environmental Laws including, without
limitation, such permits or approvals as are necessary to treat, transport,
store, dispose of and otherwise handle Hazardous Wastes, Hazardous Materials and
Hazardous Substances, a list of all of which permits and approvals is set forth
on SCHEDULE 2.9. The Company has reported to the appropriate authorities, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the Company where Hazardous Wastes, Hazardous Materials or Hazardous
Substances have been treated, stored, disposed of or otherwise handled. Except
as set forth on SCHEDULE 2.9, to the knowledge of the Stockholders, there have
been no releases or threats of releases (as defined in Environmental Laws) at,
from, in, under or on any property owned or operated by the Company except as
permitted by Environmental Laws. There is no on-site or off-site location to
which the Company has transported or disposed of Hazardous Wastes, Hazardous
Materials or Hazardous Substances or arranged for the transportation of
Hazardous Wastes, Hazardous Materials or Hazardous Substances which is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the Company or LandCARE for
any clean-up cost, remedial work, damage to natural resources, property damage
or personal injury, including, but not limited to, any claim under (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) the Resource Conservation and Recovery Act, as amended, (iii) the
Hazardous Materials Transportation Act, as amended, or (iv) applicable,
comparable state or local statutes and regulations. To the knowledge of the
Stockholders, the Company has no contingent liability in connection with any
release of any Hazardous Waste, Hazardous Material or Hazardous Substance into
the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholders or any affiliate of the
Company or the Stockholders.
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Except as set forth on SCHEDULE 2.10, (i) all material personal property used by
the Company in its business is either owned by the Company or leased by the
Company pursuant to a lease included on SCHEDULE 2.10, (ii) all of the personal
property listed on SCHEDULE 2.10 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
SCHEDULE 2.10 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms. Except as set forth on SCHEDULE 2.10, the Company has
good and marketable title to the tangible and intangible personal property it
purports to own, subject to no security interest, pledge, lien, claim,
conditional sales agreement, encumbrance, charge or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied in all
material respects with all commitments and obligations pertaining to it, and is
not in default under any contracts or agreements listed on SCHEDULE 2.11 and no
notice of default under any such contract or agreement has been received.
SCHEDULE 2.11 also includes a summary description of all plans or projects
relating to the Company's business involving the opening of new operations,
expansion of existing operations, the acquisition of any property, business or
assets requiring, in any event, the payment of more than $50,000 in the
aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholders or any affiliates of the Company or the
Stockholders is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholders or any affiliate of the Stockholders
have been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the Company and, to the knowledge of the Stockholders, of
the parties (and their successors) thereto in accordance with their respective
terms. There are no leases, tenancy agreements, easements, covenants,
restrictions or any other instruments, agreements or arrangements which create
in or confer on any party, other than the Company, the right to occupy or
possess all
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or any portion of the Real Property or create in or confer on any such party any
right, title or interest in or to the Real Property or any portion thereof or
any interest therein; no party other than the Company occupies or possesses the
Real Property or any portion thereof; there is legal and adequate ingress and
egress between each tract of Real Property and an adjacent (or, if none, the
closest) public roadway; the Real Property is properly zoned in order to allow
its current use in the Company's businesses; and there are no claims or demands
pending or, to the knowledge of the Stockholders, threatened by any party
against the Real Property which, if valid, would create in, or confer on, any
party other than the Company, any right, title or interest in or to the Real
Property or any portion thereof. To the knowledge of the Stockholders, none of
the buildings, structures or improvements described on SCHEDULE 2.12, or the
operation or maintenance thereof as now operated or maintained, contravenes any
zoning ordinance or other administrative regulation or violates any restrictive
covenant or any provision of law, the effect of which would materially interfere
with or prevent their continued use for the purposes for which they are now
being used or would adversely affect the value thereof or the interest of the
Company therein. The Stockholders have furnished to LandCARE a true and correct
copy of all owner's policies of title insurance and surveys pertaining to the
real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and, to the knowledge of the Stockholders, provide adequate coverage against the
risks involved in the Company's business. Except as set forth on SCHEDULE 2.13,
none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Interim Balance Sheet Date.
Except as set forth on SCHEDULE 2.14, since the Interim Balance Sheet Date,
there have been no increases in the base compensation payable or any special
bonuses to any officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge,
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threatened, labor dispute involving the Company and any group of its employees.
The Company has not experienced any labor interruptions over the past five
years.
SCHEDULE 2.14 sets forth an accurate schedule showing all bonus and other
incentive plans, agreements and arrangements of Company, written or unwritten
(the "Incentive Plans"), together with true, complete and correct copies of such
Incentive Plans (or in the event that the Incentive Plans are not in writing, a
true and complete summary of such Incentive Plans), and classifications of
employees covered thereby as of the Closing Date. SCHEDULE 2.14 shall also
include the maximum aggregate annual amount payable to covered employees under
the Incentive Plans for the current fiscal year, including, but not limited to,
discretionary amounts, if any.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all material employee benefit plans of Company, including all agreements
or arrangements (other than agreements or arrangements set forth on SCHEDULE
2.14) containing "golden parachute" or other similar provisions, and deferred
compensation agreements. True, complete and correct copies of such plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date have been delivered to LandCARE.
Except for the employee benefit plans, if any, described on SCHEDULE 2.15, the
Company does not sponsor, maintain or contribute to any plan, program, fund or
arrangement that constitutes an "employee pension benefit plan," nor does the
Company have any obligation to contribute to or accrue or pay any benefits under
any deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA. The
Company has not sponsored, maintained or contributed to any employee pension
benefit plan and is not required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions of employment of any of the Company's employees other than the
plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans")
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under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), are, and have been, so qualified and have been determined by the
Internal Revenue Service to be so qualified. Except as disclosed on SCHEDULE
2.15, all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries have been timely
filed or distributed, and the most recent copies thereof are included as part of
SCHEDULE 2.15. Neither the Stockholders, nor any plan listed in SCHEDULE 2.15
nor the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA. No plan listed on SCHEDULE
2.15 has incurred an accumulated funding deficiency, as defined in Section
412(a) of the Code and Section 302(1) of ERISA; and the Company has not incurred
any liability for excise tax or penalty due to the Internal Revenue Service or
any liability to the PBGC. There have been no terminations, partial terminations
or discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by the
Internal Revenue Service; no plan listed on SCHEDULE 2.15 subject to the
provisions of Title IV of ERISA has been terminated; there have been no
"reportable events" (as that phrase is defined in Section 4043 of ERISA) with
respect to any such plan listed on SCHEDULE 2.15; the Company has not incurred
liability under Section 4062 of ERISA; and no circumstances exist pursuant to
which the Company could have any direct or indirect liability whatsoever
(including, but not limited to, any liability to any multi employer plan or the
PBGC under Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory lien to secure payment of any
such liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the Company that is, or at any time was,
a member of a "controlled group" (as defined in Section 412(n)(6)(B) of the
Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholders, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholders, there is no basis therefor. Except as set forth
on SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions
or decrees against the Company. Except as set forth on SCHEDULE 2.16, the
Company has conducted and now conducts its business in material compliance with
all laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including
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all such permits, licenses, orders and other governmental approvals set forth on
SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the Company and
the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholders, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all
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deposits required by law to be made with respect to employees' withholding and
other employment Taxes. Neither the Company nor the Stockholders is a "foreign
person," as that term is referred to in Section 1445(f)(3) of the Code. The
Company has not filed a consent pursuant to Section 341 (f) of the Code or any
comparable provision of any other tax statute and has not agreed to have Section
341 (f)(2) of the Code or any comparable provision of any other Tax statute
apply to any disposition of an asset. The Company has not made, is not obligated
to make and is not a party to any agreement that could require it to make any
payment that is not deductible under Section 280G of the Code. No asset of the
Company or of any Company Subsidiary is subject to any provision of applicable
law which eliminates or reduces the allowance for depreciation or amortization
with respect to that asset below the allowance generally available to an asset
of its type. No accounting method changes of the Company or of any Company
Subsidiary exist or are proposed or threatened which could give rise to an
adjustment under Section 481 of the Code. The Company uses the accrual method of
accounting for income tax purposes, and the Company's methods of accounting have
not changed in the past five years. The Company is not an investment company as
defined in Section 351(e)(1) of the Code.
The Stockholders made a valid election under the provisions of Subchapter
S of the Code, and the Company has not, since its formation, been subject to
taxation under the provisions of Subchapter C of the Code or under Section 11 or
Section 1374 of the Code. Neither the Stockholders nor the Company has taken any
action that terminated the Subchapter S election, which remains in effect on the
date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholders, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholders and the performance by the Company
and the Stockholders of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Company will be entitled to the rights and benefits under the Material Documents
to which the Company is entitled immediately prior to the Closing to the extent
such documents do not terminate by their terms or, subsequent to the Closing,
the Company does not breach or otherwise take any action to terminate such
agreements. Except as set forth on SCHEDULE 2.18 (and except for consents
already obtained), none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on SCHEDULE 2.18, none of the
Material Documents prohibits the use or
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publication of the name of any other party to such Material Document, and none
of the Material Documents prohibits or restricts the Company or will prevent or
restrict the Company or LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date, the Company
has conducted its operations in the ordinary course of business and, except as
set forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
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(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholders nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholders have provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholders contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. To the knowledge of the
Stockholders, there is no fact which has specific application to the Company or
its business or assets (other than general economic or industry conditions)
which would have a Material Adverse Effect or, so far as the Stockholders can
reasonably foresee, threatens to have a Material Adverse Effect, on the Company
or its business or assets, or the condition (financial or otherwise), results of
operations or prospects of the Company, which has not been described in the
Schedules hereto. Notwithstanding the foregoing, the Stockholders have made no
representations regarding the future operations of the Company.
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2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels are adequate to successfully operate the
business, and there has been no unusual build-up of cash needs at the date
hereof. The Company's total indebtedness as of the date hereof does not exceed
$975,000. The Company's pro forma net revenues for the 12-month period ended
July 31, 1998 were at least $6,900,000. The Company's pro forma EBITDA (earnings
before interest, taxes, depreciation and amortization) for the 12-month period
ended July 31, 1998 was at least $980,000. The Company's pro forma pre-tax
earnings for the 12-month period ended July 31, 1998 were at least $635,000. The
Company's tangible net worth as of the date hereof is at least $275,000.
2.27 YEAR 2000 COMPLIANCE. To the knowledge of the Stockholders, the
properties and assets of the Company, including, but not limited to, computer
hardware, microprocessor driven equipment, software and data, owned or used by
the Company will accurately process date and time data after December 31, 1999,
and the Company will suffer no loss of functional ability when processing dates
and related data outside the 1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholders
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
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3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3 CAPITAL STOCK OF LANDCARE. The shares of LandCARE Stock to be issued
pursuant to this Agreement will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights created by statute,
LandCARE's charter or bylaws or any agreement to which LandCARE is a party or is
bound. The Stockholders understand that the offer and sale of such shares will
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and will not be registered thereunder. Upon completion of the
transactions contemplated under this Agreement and provided that the
Stockholders comply with the obligations set forth herein, the Stockholders
shall be the beneficial owners on the date hereof of the LandCARe Stock.
3.4 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.5 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.6 REPORTS; FINANCIAL STATEMENTS. LandCARE has filed all forms, reports,
statements and other documents required to be filed with the New York Stock
Exchange and with the Securities and Exchange Commission ("SEC") pursuant to the
Securities Act, and the Securities Exchange Act of 1934, as amended, including,
without limitation, (i) all filings made in connection with its initial public
offering, the Registration Statement No. 333-58487 on Form S-1, or otherwise,
(ii) all Annual
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Reports on Form l0-K, (iii) all Quarterly Reports on Form 10-Q, (iv) all proxy
statements relating to meetings of stockholders (whether annual or special), and
(v) all Current Reports on Form 8-K (collectively, the "SEC Reports"). The SEC
Reports, (x) were prepared, as of the time they were filed, in all material
respects in accordance with the requirements of applicable laws and regulations
and (y) did not at the time they were filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholders are delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.2 are entering into Employment Agreements in the form of Annex I.
4.3 OPINION OF COUNSEL. Counsel to the Company and the Stockholders is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.4 GOOD STANDING CERTIFICATES. The Stockholders are delivering to
LandCARE certificates, dated as of a date no earlier than ten days prior to the
date hereof, duly issued by the appropriate governmental authority in the state
of Colorado and in each state in which the Company is authorized to do business,
showing the Company to be in good standing and authorized to do business
therein.
4.5 [INTENTIONALLY OMITTED.]
4.6 INDEBTEDNESS TO COMPANY. The Stockholders and their affiliates are
repaying that outstanding indebtedness listed on SCHEDULE 4.6 which they may
have to the Company and such indebtedness is the only indebtedness to the
Company owed by the Stockholders or their affiliates.
4.7 CONSENTS. The Stockholders are delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.8 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholders are
delivering to LandCARE the resignations of such directors and officers of the
Company as have been requested by LandCARE.
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5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholders, the Company
and LandCARE shall each deliver or cause to be delivered to the other following
the date hereof such additional instruments as the other may reasonably request
for the purpose of effecting the Merger and fully carrying out the intent of
this Agreement. LandCARE shall provide the Stockholders reasonable access to the
books and records of the Company after the Closing Date for purposes of tax
compliance and any other reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholders will pay the fees, expenses and disbursements
of the Stockholders and its agents, representatives, financial advisors,
accountants and counsel incurred in connection with the execution, delivery and
performance of this Agreement. The Stockholders shall pay any sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger.
The Stockholders shall file all necessary documentation and returns with respect
to such Transfer Taxes. In addition, the Stockholders acknowledge that the
Stockholders, and not the Company or LandCARE, will pay all taxes (income or
otherwise), if any, due upon receipt of the consideration payable pursuant to
this Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholders and the Company shall terminate any existing
agreements to which the Company and the Stockholders are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS. The Stockholders will join with
Purchaser in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law) (collectively a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares. As a result of the Section 338(h)(10) Election, the parties agree that
the Purchase Price and the liabilities of the Company (plus other relevant
items) will be allocated to the assets of the Company for all purposes
(including tax and financial accounting purposes), and, within 45 days after the
date hereof, the parties shall work in good faith to reasonably optimize the tax
allocation for the benefit of the Stockholders. Purchaser and the Company and
the Stockholders will file all tax returns (including amended returns and claims
for refund) and information reports in a manner consistent with such allocation.
5.5 OTHER FINANCIAL MATTERS. If the Company's total indebtedness exceeds
$975,000 at Closing, the cash portion of the Purchase Price shall be reduced on
a dollar-for-dollar basis, and,
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within 30 days of the date hereof, the Stockholders shall remit such amount to
LandCARE by wire transfer.
5.6 STOCKHOLDER GUARANTEES Notwithstanding anything else herein, LandCARE
agrees to hold harmless and to indemnify each of the Stockholders or their
affiliates from any loss, damage, claim, liability or obligation arising from
any guarantee (personal or otherwise) by the Stockholders of any liability or
obligation of the Company (contingent or otherwise), and agrees to cause the
unconditional release of the Stockholders and their affiliates from such
guarantees and all the obligations thereunder within ninety (90) days after the
Closing Date. LandCARE shall cooperate with the Stockholders to release the
Stockholders from guarantees of vendor accounts as specifically identified by
the Stockholders on a case-by-case basis. The guarantees and vendor accounts on
which LandCARE shall obtain releases is attached hereto as SCHEDULE 5.6.
5.7 BEST EFFORTS. With a view to making available the benefits of certain
rules and regulations of the Securities and Exchange Commission that may permit
the sale of LandCARE Stock to the public without registration, LandCARE agrees
that it will use its best efforts to (i) timely file all reports and other
documents required of LandCARE under the Securities Act and the Securities and
Exchange Act of 1934, as amended. LandCARE also agrees that it will use its best
efforts to maintain its listing with the New York Stock Exchange.
6. INDEMNIFICATION
The Stockholders and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2 (Authorization), 2.3 (Capital Stock of the
Company and Related Matters) and 2.17 (Taxes) of this Agreement shall survive
the Closing until the expiration of the periods prescribed by the applicable
statutes of limitations (including any extensions thereof) relating thereto; the
representations and warranties of the Stockholder made in Section 2.9
(Environmental Matters) shall survive the Closing for a period of five years
after the Closing Date; and the other representations and warranties of the
Stockholder made herein shall survive the Closing for a period of two years
after the Closing Date; provided, however, that representations and warranties
and indemnification provisions with respect to which a claim is made within the
survival period shall survive until such claim is finally determined and paid.
The limitation periods referred to in this subparagraph (a) are not intended to
limit any of the remedies available to LandCARE for causes of action arising out
of fraud by the Stockholder.
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(b) The representations and warranties of LandCARE made in Section 3
of this Agreement shall survive the Closing for a period of one year following
the Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders covenant
and agree that they will indemnify, defend, protect, and hold harmless the
Company, LandCARE and its subsidiaries and all of their officers, directors,
employees, stockholders, agents, representatives and affiliates at all times
from and after the date of this Agreement until the Expiration Date from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively
"Damages") incurred by such indemnified person as a result of or incident to (i)
any breach of any representation or warranty of the Stockholders set forth
herein, and (ii) any breach or nonfulfillment of any covenant or agreement by
the Company or the Stockholders under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholders covenant and agree
that they will indemnify, defend, protect and hold harmless the Company and
LandCARE and each of their respective subsidiaries, officers, directors,
employees, stockholders, agents, representatives and affiliates from and against
all Damages incurred by any of them in connection with: (a) violations or
alleged violations of any applicable federal, state, local, or other laws,
regulations, ordinances, or orders of any governmental entity which govern the
protection of the environment or human health and safety ("Environmental Laws")
relating in any way to any action or omission of the Company or any predecessor
of the Company to the extent the facts, events, or conditions giving rise to
such violation or alleged violation occurred or existed on or before the Closing
Date; (b) the actual or alleged presence, emanation, migration, disposal,
release, or threatened release (collectively, "Releases") of any oil, petroleum
product, hazardous material, or hazardous substance as such terms are defined by
Environmental Laws (collectively, "Hazardous Substances") at, under, to, or from
any property or facility which presently is or previously was owned, leased,
operated, or otherwise used by the Company or any predecessor of the Company to
the extent that said actual or alleged Release occurred or is alleged to have
occurred on or before the Closing Date; (c) the actual or alleged Release of any
Hazardous Substances at any location or facility whatsoever to the extent such
Hazardous Substances were generated by, or were arranged for disposal at such
location or facility by, the Company or any predecessor of the Company on or
before the Closing Date; and (d) any and all liability to third parties,
including but not limited to any governmental entities, arising from the
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release of petroleum products at a site known as 19 Inverness Way East,
Englewood, Colorado 80112 or Lot 4, Block 5, Replat of the First Amended Plat of
Inverness Subdivision, Filing No. Two, a portion of Section 35, Township 5
South, Range 67 West of the 6th Principal Meridian, County of Arapahoe, State of
Colorado.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholders at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholders as a result of (i) any breach
of any representation or warranty of LandCARE set forth herein; and (ii) any
breach or nonfulfillment of any covenant or agreement by LandCARE under this
Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.6 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholder until such time as the
aggregate of all claims which such persons may have against such the Stockholder
shall exceed $40,000 (the "Indemnification Threshold") and then only to the
extent that such claims exceed the Indemnification Threshold. The Stockholder
shall not assert any claim for indemnification hereunder against LandCARE until
such time as the aggregate of all claims which the Stockholder may have against
LandCARE shall exceed the Indemnification Threshold and
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then only to the extent that such claims exceed the Indemnification Threshold.
It is agreed that the exclusive remedy of the parties to this Agreement shall be
pursuant to Section 6 hereof.
6.7 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholders, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholders.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholders will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Company
within 100 miles of where the Company conducted business at any time
within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Company or LandCARE within the Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Company) for the
purpose or with the intent of enticing such employee away from or out of
the employ of LandCARE or any of its subsidiaries (including the Company);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Company) for the purpose of soliciting or selling products or services in
direct competition with LandCARE or any of its subsidiaries (including the
Company) within the Territory.
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Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholders from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than two
percent (2%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholders may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholders agree that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholders, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholders.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholders acknowledge that the covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholders against LandCARE
or any subsidiary thereof, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by LandCARE of such covenants.
It is specifically agreed that the period of five years stated at the beginning
of this Section, during which the agreements and covenants of the Stockholders
made in this Section shall be effective, shall be computed by excluding from
such computation any time during which the Stockholders are in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholders recognize and acknowledge that they have had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Company and LandCARE after
the Closing Date. The Stockholders agree that they will not disclose such
confidential information, or any confidential information of the Company or
LandCARE to which they may have access in the future, to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of LandCARE, (b) following the Closing,
such information may be disclosed by the Stockholders as may be required in the
course of performing their duties for the Company and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section, unless (i) such information becomes
known to the public generally through no fault of the Stockholders, or (ii)
disclosure is required by law or the order of any governmental authority,
provided, that prior to disclosing any information pursuant to this clause (ii),
the Stockholders shall give prior written notice thereof to LandCARE and provide
LandCARE with the opportunity to contest such disclosure. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
Section, LandCARE shall be entitled to injunctive or other equitable relief
restraining the Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
LandCARE from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholders agree that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. SECURITIES LAW MATTERS
9.1 ECONOMIC RISK; SOPHISTICATION. The Stockholders acknowledge and
confirm that they have received and reviewed a Prospectus from LandCARE relating
to their acquisition of shares of LandCARE Stock hereunder, but the Stockholders
understand that the shares of LandCARE Stock received by the Stockholders have
not been and will not be registered under the Securities Act. The Stockholders
(A) have such knowledge, sophistication and experience in business and financial
matters that they are capable of evaluating the merits and risks of an
investment in the shares of
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LandCARE Stock, (B) fully understand the nature, scope and duration of any
limitations on transfer of LandCARE Stock described in this Agreement and (C)
can bear the economic risk of an investment in the shares of LandCARE Stock.
9.2 COMPLIANCE WITH LAW. The Stockholders covenant that none of the
LandCARE Stock acquired by the Stockholders hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholders
except in full compliance with all applicable securities laws.
9.3 RESTRICTIONS ON RESALE. The Stockholders agree that they will not
sell, offer to sell, or otherwise transfer or dispose of, any shares of the
LandCARE Stock received by the Stockholders, engage in put, call, short-sale,
straddle or similar transactions, or in any other way reduce the Stockholders'
risk of owning shares of LandCARE Stock prior to the date two years after the
Closing Date, and agree that the certificates evidencing the LandCARE Stock to
be received by the Stockholders will bear the following legend evidencing this
restriction:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND
APPLICABLE SECURITIES LAW.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISTRIBUTION PRIOR TO [SECOND
ANNIVERSARY OF THE CLOSING DATE]. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
After the date one year after the Closing Date, the Stockholders may sell such
shares pursuant to the LandCARE Liquidity Plan, a copy of which is attached
hereto as SCHEDULE 9.3, and LandCARE shall remove the aforementioned legend to
the extent reasonably necessary to permit the Stockholders to participate in the
LandCARE Liquidity Plan. After the date two years after the Closing Date,
neither the restrictions set forth herein nor the provisions of the LandCARE
Liquidity Plan shall restrict the Stockholders from selling or otherwise
disposing of any of such shares of LandCARe Stock.
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10. GENERAL
10.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholders.
10.2 ENTIRE AGREEMENT. Except for the letter from LandCARe to the
Stockholders dated as of the date hereof, this Agreement (including the
schedules, exhibits and annexes attached hereto) and the documents delivered
pursuant hereto constitute the entire agreement and understanding among the
Stockholders, the Company and LandCARE, and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
10.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
10.4 BROKERS AND AGENTS. Except as set forth on SCHEDULE 10.4, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
10.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
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If to the Company, addressed to it at:
Real Property Maintenance, Inc.
9752 East Costilla Avenue
Englewood, Colorado 80112
If to the Stockholders, addressed to them at:
Stewart A. Miller
5090 E. Quincy
Englewood, Colorado 80110
John Bartley
7005 S. Gray Court
Littleton, Colorado 80123
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
10.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Colorado without regard to its principles governing
conflicts of laws.
10.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement and subject to Section 6 herein shall survive the consummation of the
transactions contemplated hereby and any examination on behalf of the parties.
10.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
10.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
10.10 TIME. Time is of the essence with respect to this Agreement.
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10.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
10.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
10.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
10.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
10.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
REAL PROPERTY MAINTENANCE, INC.
By: /s/ JOHN L. BARTLEY
Name: JOHN L. BARTLEY
Title: President
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STOCKHOLDERS:
/s/ STEWART A. MILLER
Stewart A. Miller
/s/ JOHN BARTLEY
John Bartley
EXHIBIT 10.19
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of November 9, 1998
by and among
LANDCARE USA, INC.,
AGM ACQUISITION CORP.,
ALBUQUERQUE GROUNDS MAINTENANCE, INC.
and
SANDRA LEE WEAVER
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TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation, By-laws, Directors and
Officers of Surviving Corporation...............................2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................2
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................3
2.1 Due Organization.................................................3
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................4
2.4 Subsidiaries.....................................................4
2.5 Financial Statements.............................................4
2.6 Liabilities and Obligations......................................5
2.7 Accounts and Notes Receivable....................................5
2.8 Permits and Intangibles..........................................6
2.9 Environmental Matters............................................6
2.10 Personal Property................................................7
2.11 Significant Customers; Material Contracts and Commitments........7
2.12 Real Property....................................................8
2.13 Insurance........................................................8
2.14 Compensation; Employment Agreements; Organized Labor Matters.....9
2.15 Employee Benefit Plans...........................................9
2.16 Conformity with Law; Litigation.................................11
2.17 Taxes...........................................................11
2.18 No Violations; All Required Consents Obtained...................12
2.19 Absence of Changes..............................................13
2.20 Powers of Attorney..............................................14
2.21 Inventory; Working Capital; Other Financial Matters.............14
2.22 Competing Lines of Business; Related-party Transactions.........15
2.23 Disclosure......................................................15
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2.24 Certain Business Practices......................................15
2.25 Notice to Bargaining Agents.....................................15
2.26 Notices and Consents............................................15
2.27 Year 2000 Compliance............................................15
2.28 Reliance Upon Oral Representations..............................16
3. REPRESENTATIONS OF LANDCARE AND NEWCO.................................16
3.1 Due Organization................................................16
3.2 Authorization...................................................16
3.3 No Violations...................................................16
3.4 Validity of Obligations.........................................17
3.5 Issuance of LandCARE Stock......................................17
4. DELIVERIES AT CLOSING.................................................17
4.1 Instruments of Transfer.........................................17
4.2 Certificate of Merger...........................................17
4.3 Employment Agreement............................................17
4.4 Opinion of Counsel..............................................17
4.5 Good Standing Certificates......................................17
4.6 Lease...........................................................17
4.7 Indebtedness to Company.........................................18
4.8 Tax Matters.....................................................18
4.9 Consents........................................................18
4.10 Resignations of Directors and Officers..........................18
5. POST-CLOSING COVENANTS................................................18
5.1 Future Cooperation; Further Assurances..........................18
5.2 Expenses........................................................18
5.3 Certain Agreements..............................................19
5.4 Preparation and Filing of Tax Returns...........................19
5.5 Stock Options...................................................19
5.6 Stockholder Guarantees..........................................19
5.7 Other Financial Matters.........................................20
5.8 ServiceMaster Agreement.........................................20
6. INDEMNIFICATION.......................................................20
6.1 Survival of Stockholder's Representations and Warranties. .....20
6.2 General Indemnification by the Stockholder......................21
6.3 Specific Indemnification by the Stockholders....................21
6.4 Indemnification by LandCARE.....................................22
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6.5 Third Person Claims.............................................22
6.6 Method of Payment...............................................22
6.7 Limitations on Indemnification..................................22
7. NONCOMPETITION........................................................23
7.1 Prohibited Activities...........................................23
7.2 Equitable Relief................................................24
7.3 Reasonable Restraint............................................24
7.4 Severability; Reformation.......................................24
7.5 Independent Covenant............................................24
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................25
8.1 General.........................................................25
8.2 Equitable Relief................................................25
8.3 Survival........................................................25
9. INTENDED TAX TREATMENT................................................25
9.1 Tax-Free Reorganization.........................................25
10. SECURITIES LAW MATTERS................................................26
10.1 Economic Risk; Sophistication...................................26
10.2 Compliance with Law.............................................26
10.3 Restrictions on Resale..........................................26
11. GENERAL...............................................................27
11.1 Successors and Assigns..........................................27
11.2 Entire Agreement................................................27
11.3 Counterparts....................................................28
11.4 Brokers and Agents..............................................28
11.5 Notices.........................................................28
11.6 Governing Law...................................................28
11.7 Survival of Representations and Warranties......................29
11.8 Effect of Investigation.........................................29
11.9 Exercise of Rights and Remedies.................................29
11.10 Time............................................................29
11.11 Reformation and Severability....................................29
11.12 Remedies Cumulative.............................................29
11.13 Captions........................................................29
11.14 Press Releases and Public Announcements.........................29
11.15 No Third-Party Beneficiaries....................................30
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SCHEDULES
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.22. Competing Lines of Business; Related Party Transactions
SCHEDULE 2.27. Year 2000 Compliance
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.6. Leases
SCHEDULE 5.9. ServiceMaster Agreement
SCHEDULE 10.3. Restrictions on Resale
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
Annex III - Form of Lease
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 9, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), AGM Acquisition Corp., a New Mexico corporation and
wholly owned subsidiary of LandCARE ("Newco"), Albuquerque Grounds Maintenance,
a New Mexico corporation (the "Company"), and Sandra Lee Weaver (the
"Stockholder"). The Stockholder is the only holder of capital stock of the
Company.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively called the "Constituent Corporations") deem it advisable and in
the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco pursuant to this
Agreement and the applicable provisions of the laws of the State of New Mexico
(the "State of Incorporation"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Newco (the "Merger") and the separate existence of the Company
shall cease, all in accordance with the provisions of the laws of the State of
Incorporation. Newco shall be the surviving corporation in the Merger and is
sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in form appropriate for filing, is
filed with the Secretary of State (or other appropriate authority) of the State
of Incorporation (the "Merger Filing"). The Merger
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Filing shall be made simultaneously with or as soon as practicable after the
execution and delivery of this Agreement.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Newco then in effect shall be the Articles of Incorporation of the Surviving
Corporation, and the By-laws of Newco then in effect shall be By-laws of the
Surviving Corporation. As part of the Merger Filing, or at any time thereafter,
the Surviving Corporation shall have the right to change its name to
"Albuquerque Grounds Maintenance, Inc." The directors and officers of Newco
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation. Except as herein
specifically set forth, the identity, existence, purposes, powers, objects,
franchises, privileges, rights and immunities of Newco shall continue unaffected
and unimpaired by the Merger and the corporate franchises, existence and rights
of the Company shall be merged with and into Newco, and Newco, as the Surviving
Corporation, shall be fully vested therewith. At the Effective Time, the
separate existence of the Company shall cease and, in accordance with the terms
of this Agreement, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, of a public, as well as of a private,
nature, and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares, and all taxes, including
those due and owing and those accrued, and all other choses in action, and all
and every other interest of or belonging to or due to the Company and Newco
shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Company and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation or
otherwise vested in the Company and Newco, shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the Company and Newco and any claim existing, or
action or proceeding pending, by or against the Company or Newco may be
prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in their place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger, and
all debts, liabilities and duties of the Company and Newco shall attach to the
Surviving Corporation, and may be enforced against the Surviving Corporation to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by such Surviving Corporation.
1.5 MANNER OF CONVERSION. The manner of converting the outstanding shares
of capital stock of the Company ("Company Stock") and the outstanding shares of
capital stock of Newco ("Newco Stock") shall be as follows:
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As of the Effective Time:
1. The Company Stock issued and outstanding immediately prior
to the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, automatically shall be converted into the right to
receive, in the aggregate, (i) 87,500 shares of common stock, par value $.01 per
share, of LandCARE ("LandCARE Stock") and (ii) an aggregate of $662,000 in cash
paid by wire transfer.
2. All shares of Company Stock, if any, that are held by the
Company as treasury stock shall be canceled and retired, and no shares of
LandCARE Stock or other consideration shall be delivered or paid in exchange
therefor; and
3. As of the Effective Time, each outstanding share of Newco
Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholders shall
deliver to LandCARE the certificates representing the Company Stock, duly
endorsed in blank by the Stockholders or accompanied by a stock transfer
endorsement separate from certificate together with an Affidavit of Lost
Certificate and Indemnification Agreement satisfactory to LandCare, and with all
necessary transfer tax and other revenue stamps, acquired at the Stockholder's
expense, affixed and canceled, and (ii) LandCARE shall cause its stock transfer
agent to deliver to the Stockholders certificates representing the LandCARE
Stock as described above (or shall deliver to the Stockholders a copy of an
irrevocable authorization to such transfer agent authorizing the issuance of
such certificates to the Stockholders). The Stockholders agree promptly to cure
any deficiencies with respect to the endorsement of the stock certificates or
other documents of conveyance with respect to such Company Stock or with respect
to the stock powers accompanying any Company Stock.
1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE as follows.
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation, and
has all requisite power and authority to carry on its business as it is now
being conducted. The Company is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth
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a list of all jurisdictions in which the Company is authorized or qualified to
do business. True, complete and correct copies of the Articles of Incorporation
and By-laws, each as amended, of the Company (the "Charter Documents") are all
attached to SCHEDULE 2.1. The stock records of the Company, a copy of which is
attached to SCHEDULE 2.1, are correct and complete in all material respects. All
records of all proceedings of the Board of Directors and stockholders of the
Company have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the transactions contemplated hereby,
all of which have been approved by the Stockholder and the Board of Directors of
the Company. This Agreement has been validly executed and delivered by the
Company and the Stockholder and constitutes the legal, valid and binding
obligation of each of them, enforceable in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 50,000 shares of common stock, par value $1.00 per
share, of which 1,000 shares are issued and outstanding and constitute all of
the issued and outstanding shares of Company Stock (the "Shares"). All of the
Shares are owned of record and beneficially by the Stockholder and are owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were offered, issued, sold and delivered by the Company in compliance with
all applicable state and federal laws governing the issuance of securities. None
of the Shares were issued in violation of any preemptive rights or similar
rights of any person. No option, warrant, call, conversion right or commitment
of any kind exists which obligates the Company to issue any additional shares of
its capital stock or obligates the Stockholder to transfer any of the Shares to
any person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
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(i) The balance sheets of the Company as of January 31, 1998 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of July 31, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets and liabilities of the
Company have been properly recorded therein in all material respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no liabilities or obligations of any kind, whether accrued,
absolute, secured or unsecured, contingent or otherwise. Except and to the
extent disclosed on SCHEDULE 2.6, there are no claims, liabilities or
obligations, nor any reasonable basis for assertion against the Company, of any
claim, liability or obligation, of any nature whatsoever. Except as expressly
set forth on SCHEDULE 2.6, all of the contingent liabilities of the Company
listed on SCHEDULE 2.6 are covered by the Company's insurance policies, and no
such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
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2.8 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits and other governmental authorizations required or necessary in
connection with the conduct of the Company's business. SCHEDULE 2.8 sets forth
an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property) (collectively, the "Intangible Assets") (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
compliance in all material respects with the requirements, standards, criteria
and conditions set forth in the Intangible Assets and other governmental
authorizations listed on SCHEDULES 2.8 and 2.9 and is not in violation of any of
the foregoing. Except as specifically set forth on SCHEDULE 2.8 or 2.9, the
transactions contemplated by this Agreement will not result in a default under
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any such Intangible Assets or other governmental
authorizations.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous
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Substances or arranged for the transportation of Hazardous Wastes, Hazardous
Materials or Hazardous Substances which is the subject of any federal, state,
local or foreign enforcement action or any other investigation which could lead
to any claim against the Company or LandCARE for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with any release of any Hazardous Waste, Hazardous Material or Hazardous
Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10, the Company has good and marketable title to the tangible and
intangible personal property it purports to own, subject to no security
interest, pledge, lien, claim, conditional sales agreement, encumbrance, charge
or restriction on transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as described on SCHEDULE
2.11, (i) none of the Significant Customers have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (ii) the Company has complied with all
commitments and obligations pertaining to it, and is not in default under any
contracts or agreements listed on SCHEDULE 2.11 and no notice of default under
any such contract or agreement has been received. The transactions contemplated
by this Agreement will not
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result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any such contracts or
agreements. SCHEDULE 2.11 also includes a summary description of all plans or
projects relating to the Company's business involving the opening of new
operations, expansion of existing operations, the acquisition of any property,
business or assets requiring, in any event, the payment of more than $50,000 in
the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
has been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholder has
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage
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against the risks involved in the Company's business. Except as set forth on
SCHEDULE 2.13, none of such policies is a "claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
SCHEDULE 2.14 sets forth an accurate schedule showing all bonus and other
incentive plans, agreements and arrangements of Company, written or unwritten
(the "Incentive Plans"), together with true, complete and correct copies of such
Incentive Plans (or in the event that the Incentive Plans are not in writing, a
true and complete summary of such Incentive Plans), and classifications of
employees covered thereby as of the Closing Date. SCHEDULE 2.14 shall also
include the maximum aggregate annual amount payable to covered employees under
the Incentive Plans for the current fiscal year, including, but not limited to,
discretionary amounts, if any.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company have any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or any non-qualified deferred compensation arrangement). For
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the purposes of this Agreement, the term "employee pension benefit plan" shall
have the same meaning as is given that term in Section 3(2) of ERISA. The
Company has not sponsored, maintained or contributed to any employee pension
benefit plan and is not required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions of employment of any of the Company's employees other than the
plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service for any excise tax or penalty, or being subject to any statutory
lien to secure payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the Company
that is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the Company.
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2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any claim, action, suit or proceeding, whether pending or threatened, has
been received by the Company during the last five years and, to the best
knowledge of the Stockholder, there is no basis therefor. Except as set forth on
SCHEDULE 2.16, there are no outstanding judgments, orders, writs, injunctions or
decrees against the Company. Except as set forth on SCHEDULE 2.16, the Company
has conducted and now conducts its business in material compliance with all
laws, regulations, writs, injunctions, decrees and orders applicable to the
Company or its assets. The Company is not in violation of any material law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the consolidated books
of the Company and the Company Subsidiaries for all Taxes for which any of the
Company and the Company subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has been,
liable for any Tax payable by reason of the income or property of a person or
entity other than the Company or a Company Subsidiary. Each of the
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Company and the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. No
accounting method changes of the Company or of any Company Subsidiary exist or
are proposed or threatened which could give rise to an adjustment under Section
481 of the Code. The Company uses the cash basis method of accounting for income
tax purposes, and the Company's methods of accounting have not changed in the
past five years. The Company is not an investment company as defined in Section
351(e)(1) of the Code.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result
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in any violation or breach or constitute a default under any of the terms or
provisions of the Material Documents or the Charter Documents, and (b) at and
after the Closing Date the Surviving Corporation will be entitled to the rights
and benefits under the Material Documents to which the Company is entitled
immediately prior to the Closing. Except as set forth on SCHEDULE 2.18 (and
except for consents already obtained), none of the Material Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party with respect to any of the transactions contemplated hereby in order to
remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit. Except as set forth on SCHEDULE
2.18, none of the Material Documents prohibits the use or publication of the
name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Surviving Corporation or will prevent or
restrict the Company or LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its operations in the ordinary course of business and, except as set
forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution with
respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, stockholders, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
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(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels (including financing in the ordinary course
of business) are adequate to successfully operate the business, and there has
been no unusual build-up of cash needs at the date hereof. The Company's total
debt at the date hereof does not exceed $138,000. The Company's pro forma net
revenues for the 12-month period ended July 31, 1998 were at least $1,900,000,
and its pro forma EBITDA (earnings before interest, taxes, depreciation and
amortization) for the 12-month period ended July 31, 1998 were at least
$285,000. The Company's pro forma net pre-tax earnings for the 12-month period
ended July 31, 1998 were at least $185,000. The Company's tangible net worth on
the date hereof is at least $300,000.
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2.22 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.22, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.22, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.23 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. None of the information so provided nor any
representation or warranty of the Stockholder contained in this Agreement
contains any untrue statement or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading. The Stockholder has no knowledge of
any fact which has specific application to the Company or its business or assets
(other than general economic or industry conditions) which would have a Material
Adverse Effect or, so far as the Stockholder can reasonably foresee, threatens
to have a Material Adverse Effect, on the Company or its business or assets, or
the condition (financial or otherwise), results of operations or prospects of
the Company, which has not been described in the Schedules hereto.
2.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.25 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.26 NOTICES AND CONSENTS. The Company has given any notices to third
parties and has obtained any third party consents that may be necessary to
consummate the transactions contemplated hereby.
2.27 YEAR 2000 COMPLIANCE. To the Stockholder's knowledge, except as set
forth on SCHEDULE 2.27, the properties and assets of the Company, including, but
not limited to, computer hardware, microprocessor driven equipment, software and
data, owned or used by the Company will accurately process date and time data
after December 31, 1999, and the Company will suffer no loss of functional
ability when processing dates and related data outside the 1900-1999 year range.
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2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by her or its
legal counsel and by her or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of her or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of her or
its attorney in entering into this Agreement; (c) that each, both personally and
through her or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to her or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE AND NEWCO
Each of LandCARE and Newco represents and warrants as follows:
3.1 DUE ORGANIZATION. Each of LandCARE and Newco is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
the State of Incorporation, respectively, and has all requisite corporate power
and authority to carry on its business as it is now being conducted. Each of
LandCARE and Newco is duly qualified and is in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect on LandCARE.
3.2 AUTHORIZATION. (i) The representatives of each of LandCARE and Newco
executing this Agreement have the authority to enter into and bind each of
LandCARE and Newco, respectively, to the terms of this Agreement and (ii) each
of LandCARE and Newco has the full legal right, power and authority to enter
into this Agreement and the transactions contemplated hereby, all of which have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of either of LandCARE or Newco is necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE. The execution of this Agreement and
the performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Certificate of
Incorporation or Bylaws of Newco.
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3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by each of LandCARE and Newco and the performance of the transactions
contemplated hereby have been duly and validly authorized by the respective
Board of Directors of each of LandCARE and Newco and this Agreement has been
duly and validly authorized by all necessary corporate action and is a legal,
valid and binding obligation of LandCARE and Newco.
3.5 ISSUANCE OF LANDCARE STOCK. The LandCARE Stock to be issued by
LandCARE to the Stockholders, in accordance with the terms and subject to the
conditions set forth in this Agreement, shall, upon issuance and delivery, be
duly authorized, validly issued, fully paid, nonassessable, and shall be free
and clear of all liens, encumbrances, charges, and restrictions imposed by
LandCARE except as described in Section 9.2 below. The offer and sale of such
shares will have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and will not be registered thereunder.
4. DELIVERIES AT CLOSING
At the Closing, all of the following actions are taking place, and all of them
shall be deemed to have taken place simultaneously.
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Shares, duly endorsed (or accompanied by
duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities a certificate of
merger or similar document for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. The Company and the persons identified in
SCHEDULE 4.3 are entering into Employment Agreements in the form of Annex I.
4.4 OPINION OF COUNSEL. Counsel to the Company and the Stockholder is
delivering an opinion to LandCARE dated the date hereof in the form attached
hereto as Annex II.
4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 LEASE. The Surviving Corporation is entering into leases of the
properties identified on SCHEDULE 4.6 in the form attached hereto as Annex III,
and the Stockholders are delivering to
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LandCARE evidence of the termination of all leases relating to such properties.
The Company is delivering to LandCARE consents to the Merger of the lessors of
the other properties leased by the Company.
4.7 INDEBTEDNESS TO COMPANY. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company.
4.8 TAX MATTERS. Tax advisors to the Stockholder are delivering an opinion
to the Stockholder satisfactory to the Stockholder regarding the tax
consequences of the transactions contemplated hereby.
4.9 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.10 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the Stockholder
reasonable access to the books and records of the Surviving Corporation after
the Closing Date for purposes of tax compliance and any other reasonable
purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholder
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise),
if any, due upon receipt of the consideration payable pursuant to this
Agreement.
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5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Surviving Corporation shall pay all Tax liabilities for all periods ending on or
prior to the Closing Date, but only to the extent of the accruals for such Tax
liabilities set forth in the Financial Statements. The Surviving Corporation
shall pay any Tax liability in excess of such accruals.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file tax returns pursuant to this Agreement shall bear all costs of filing
such tax returns.
5.5 STOCK OPTIONS. LandCARE hereby covenants and agrees to recommend to
the Compensation Committee of its Board of Directors the issuance of 8,750 stock
options to key management and supervisory employees of the Company identified by
the Stockholder. The options shall be issued pursuant to the LandCARE 1998
Long-Term Incentive Plan and shall have an exercise price of $11.00 per share.
5.6 STOCKHOLDER GUARANTEES. Notwithstanding anything else herein, LandCARE
agrees to hold harmless and to indemnify the Stockholder or her affiliates from
any loss, damage, claim, liability or obligation arising after the Effective
Time from any guarantee (personal or otherwise) by the Stockholder of any
liability or obligation of the Company (contingent or otherwise), and
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agrees to cause the unconditional release of the Stockholder and her affiliates
from such guarantees and all the obligations thereunder within ninety (90) days
after the Effective Time.
5.7 OTHER FINANCIAL MATTERS. If the Company's total indebtedness exceeds
$138,000 at Closing, the Purchase Price shall be reduced on a dollar-for-dollar
basis, and, within 30 days of the date hereof, the Stockholder shall remit such
amount to LandCARE by wire transfer.
5.8 SERVICEMASTER AGREEMENT. It is understood that LandCARE and The
ServiceMaster Company ("ServiceMaster") have entered into a definitive merger
agreement dated November 1, 1998 (the "ServiceMaster Agreement"), a summary of
which is attached hereto as SCHEDULE 5.9 and a copy of which has been provided
to the Stockholder, pursuant to which it is intended that LandCARE will become a
wholly-owned subsidiary of ServiceMaster (the "ServiceMaster Merger"). The
ServiceMaster Agreement is structured as a stock-for-stock exchange, whereby, on
consummation of the ServiceMaster Merger, each share of LandCARE Stock will be
exchanged for a fraction of a share of ServiceMaster common stock. It is hereby
understood and acknowledged that the consummation of the ServiceMaster Merger is
contingent on certain conditions (as set forth in the ServiceMaster Agreement)
which, if not met, may cause the ServiceMaster Merger to not occur. LandCARE,
therefore, makes no representation or guarantee as to the likelihood that the
ServiceMaster Merger will, in fact, take place.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
Sections 2.1 (Due Organization), 2.2. (Authorization), 2.3 (Capital Stock of the
Company), and 2.17 (Taxes) of this Agreement shall survive the Closing until the
expiration of the periods prescribed by the applicable statutes of limitations
(including any extensions thereof) relating thereto; the representations and
warranties of the Stockholder made in Section 2.9 (Environmental), shall survive
the Closing for a period of five years after the Closing Date; and the other
representations and warranties of the Stockholder made herein shall survive the
Closing for a period of two years after the Closing Date; provided, however,
that representations and warranties and indemnification provisions with respect
to which a claim is made within the survival period shall survive until such
claim is finally determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that
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representations and warranties with respect to which a claim is made within such
one-year period shall survive until such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that it will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, stockholders, agents, representatives and affiliates at
all times from and after the date of this Agreement until the Expiration Date
from and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDERS. In addition to the
indemnification provided for in Section 6.2, the Stockholder covenants and
agrees that she will indemnify, defend, protect and hold harmless the Company
and LandCARE and each of their respective subsidiaries, officers, directors,
employees, stockholders, agents, representatives and affiliates from and against
all Damages incurred by any of them in connection with: (a) violations or
alleged violations of any applicable federal, state, local, or other laws,
regulations, ordinances, or orders of any governmental entity which govern the
protection of the environment or human health and safety ("Environmental Laws")
relating in any way to any action or omission of the Company or any predecessor
of the Company to the extent the facts, events, or conditions giving rise to
such violation or alleged violation occurred or existed on or before the
Effective Date; (b) the actual or alleged presence, emanation, migration,
disposal, release, or threatened release (collectively, "Releases") of any oil,
petroleum product, hazardous material, or hazardous substance as such terms are
defined by Environmental Laws (collectively, "Hazardous Substances") at, under,
to, or from any property or facility which presently is or previously was owned,
leased, operated, or otherwise used by the Company or any predecessor of the
Company to the extent that said actual or alleged Release occurred or is alleged
to have occurred on or before the Effective Date; (c) the actual or alleged
Release of any Hazardous Substances at any location or facility whatsoever to
the extent such Hazardous Substances were generated by, or were arranged for
disposal at such location or facility by, the Company or any predecessor of the
Company on or before the Effective Date; and (d) any and all tort, civil,
criminal, or other complaints, actions, or proceedings pending or which
subsequently may be brought against the Company arising from or based on an
alleged incident in 1998, described as a citizen complaint to the New Mexico
Department of Agriculture ("NMDA"),
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as referenced in the Company's response to due diligence question LB-82 and in
NMDA Pesticide Inspection Report Number 001174, dated June 8, 1998.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the Indemnifying Party's receipt of notice thereof
from the Indemnified Party shall be deemed to constitute consent by the
Indemnifying Party of such settlement for purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash. If LandCARE reasonably believes that it or any other Indemnified Party has
suffered, or will suffer, Damages for which it or any other Indemnified Party
would be entitled to indemnification pursuant to this Agreement, LandCARE may,
at its sole option and by notice in writing to the Stockholder, elect to
withhold payment of an amount equal to the amount of such Damages from any
amounts owing by LandCARE to the Stockholder.
6.7 LIMITATIONS ON INDEMNIFICATION. LandCARE and the other persons or
entities indemnified pursuant to this Section shall not assert any claim for
indemnification hereunder against the Stockholder until such time as the
aggregate of all claims which such persons may have against such the Stockholder
shall exceed $25,000 (the "Indemnification Threshold") and then only to the
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extent that such claims exceed the Indemnification Threshold. The Stockholder
shall not assert any claim for indemnification hereunder against LandCARE until
such time as the aggregate of all claims which the Stockholder may have against
LandCARE shall exceed the Indemnification Threshold and then only to the extent
that such claims exceed the Indemnification Threshold. The aggregate liability
of the Stockholder under this Article 6 shall not exceed $750,000 (the
"Liability Limit"); the aggregate liability of LandCARE hereunder shall not
exceed the Liability Limit.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation within 100 miles of where the Company conducted business at
any time within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from (a) assisting her husband Walt Weaver with his
existing landscape architecture
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business, (b) entering the retail plant and tree nursery business after her
employment with the Surviving Corporation and any other LandCARE affiliates
ends, or (c) acquiring as a passive investor with no involvement in the
operations or management of the business, not more than one percent (1%) of the
capital stock of a competing business whose stock is publicly traded on a
national securities exchange or over-the-counter market.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that her covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that she has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that she will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing her duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against her by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes, except to the extent of any "boot" received, and
the Stockholder will not take any actions that disqualify the Merger for such
treatment. The Stockholder represents, warrants and covenants that:
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(i) the Company operates at least one historic business line, or
owns at least a significant portion of its historic business assets, in each
case within the meaning of Reg. 1.368-1(d) under the Code; and
(ii) the Company will hold "substantially all of its properties"
within the meaning of Section 368(a)(2)(D) of the Code (that is, after the
Closing, the Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the gross assets held by the Company immediately
prior to the Closing). For purposes of the preceding sentence, amounts paid by
the Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property and the Company assets used to pay its
reorganization expenses and all redemptions and distributions (except for normal
dividends) made by the Company immediately preceding the Closing, pursuant to
this Agreement or otherwise as part of the plan of Merger provided for herein,
will be included as assets of the Company held immediately prior to the Merger.
10. SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that she has received and reviewed a Prospectus from LandCARE relating
to her acquisition of shares of LandCARE Stock hereunder, but the Stockholder
understands that the shares of LandCARE Stock received by the her have not been
and will not be registered under the Securities Act. The Stockholder (A) has
such knowledge, sophistication and experience in business and financial matters
that she is capable of evaluating the merits and risks of an investment in the
shares of LandCARE Stock, (B) fully understands the nature, scope and duration
of any limitations on transfer of LandCARE Stock described in this Agreement and
(C) can bear the economic risk of an investment in the shares of LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
10.3 RESTRICTIONS ON RESALE. The Stockholder agrees that she will not
sell, offer to sell, or otherwise transfer or dispose of, any shares of the
LandCARE Stock received by the Stockholder, engage in put, call, short-sale,
straddle or similar transactions, or in any other way reduce the Stockholder's
risk of owning shares of LandCARE Stock prior to the date two years after the
Closing Date, and agrees that the certificates evidencing the LandCARE Stock to
be received by the Stockholder will bear the following legend evidencing this
restriction:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY ONLY BE SOLD OR
OTHERWISE
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TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAW.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISTRIBUTION PRIOR TO [SECOND
ANNIVERSARY OF THE CLOSING DATE]. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
After the date one year after the Closing Date, the Stockholder may sell such
shares pursuant to the LandCARE Liquidity Program, a summary of which is
attached hereto as SCHEDULE 10.3, or, in the event the ServiceMaster Merger
occurs, such comparable program in effect at ServiceMaster. If the ServiceMaster
Merger does not occur, LandCARE shall remove the aforementioned legend to the
extent reasonably necessary to permit the Stockholder to participate in the
LandCARE Liquidity Program. If the ServiceMaster Merger does occur, the shares
of ServiceMaster stock issued to the Stockholder will bear a legend
substantially similar to the second paragraph of the legend listed above, and
such legend shall be removed as may be reasonably necessary to permit the
Stockholder to participate in the ServiceMaster program described above;
provided, however that the ServiceMaster program shall be no more restrictive
than the LandCARE Liquidity Program. After the date two years after the Closing
Date, neither the restrictions set forth herein nor the provisions of the
LandCARE Liquidity Plan or ServiceMaster program shall restrict the Stockholder
from selling or otherwise disposing of any of such shares of LandCARe Stock or
ServiceMaster stock, as the case may be.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in
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accordance with its terms, and may be modified or amended only by a written
instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
Facsimile No. (713) 965-0343
If to the Company, addressed to it at:
Albuquerque Grounds Maintenance, Inc.
6406 Corona Avenue, N.E.
Albuquerque, New Mexico 87122
If to the Stockholder, addressed to her at the Company's address,
or to such other address as any party hereto shall specify pursuant to this
Section from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of New Mexico without regard to its principles governing
conflicts of laws.
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11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
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11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
AGM ACQUISITION CORP.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
President
ALBUQUERQUE GROUNDS MAINTENANCE,
INC.
By:/s/ SANDRA LEE WEAVER
Sandra Lee Weaver
President
By:/s/ SANDRA LEE WEAVER
Sandra Lee Weaver
By:/s/ WALTER LEE WEAVER
Walter Lee Weaver
EXHIBIT 10.20
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of November 9, 1998
by and among
LANDCARE USA, INC.,
GOLDBEAR ACQUISITION CORP.,
GOLDEN BEAR ARBORISTS, INC.,
REALGREEN GARDENING, INC.
and
the Stockholder named herein
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................1
1.1 The Merger.......................................................1
1.2 Effective Time...................................................1
1.3 Articles of Incorporation, By-laws, Directors and
Officers of Surviving Corporation...............................2
1.4 Effect of Merger.................................................2
1.5 Manner of Conversion.............................................3
1.6 Delivery of Certificates.........................................3
1.7 Closing..........................................................4
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......................4
2.1 Due Organization.................................................4
2.2 Authorization....................................................4
2.3 Capital Stock of the Company.....................................5
2.4 Subsidiaries.....................................................5
2.5 Financial Statements.............................................6
2.6 Liabilities and Obligations......................................6
2.7 Accounts and Notes Receivable....................................6
2.8 Permits and Intangibles..........................................7
2.9 Environmental Matters............................................7
2.10 Personal Property................................................8
2.11 Significant Customers; Material Contracts and Commitments........8
2.12 Real Property....................................................9
2.13 Insurance.......................................................10
2.14 Compensation; Employment Agreements; Organized Labor Matters....10
2.15 Employee Benefit Plans..........................................10
2.16 Conformity with Law; Litigation.................................12
2.17 Taxes...........................................................12
2.18 No Violations; All Required Consents Obtained...................14
2.19 Absence of Changes..............................................14
2.20 Powers of Attorney..............................................16
2.21 Competing Lines of Business; Related-party Transactions.........16
2.22 Disclosure......................................................16
2.23 Certain Business Practices......................................16
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2.24 Notice to Bargaining Agents.....................................16
2.25 Notices and Consents............................................16
2.26 Inventory; Working Capital; Other Financial Matters.............16
2.27 Year 2000 Compliance............................................17
2.28 Reliance Upon Oral Representations..............................17
3. REPRESENTATIONS OF LANDCARE...........................................17
3.1 Due Organization................................................17
3.2 Authorization...................................................17
3.3 No Violations...................................................18
3.4 Validity of Obligations.........................................18
3.5 Reports.........................................................18
3.6 Registration....................................................18
4. DELIVERIES............................................................18
4.1 Instruments of Transfer.........................................18
4.2 Certificate of Merger...........................................18
4.3 Employment Agreement............................................18
4.4 Opinion of Counsel to the Company and Realgreen.................18
4.5 Good Standing Certificates......................................19
4.6 Lease...........................................................19
4.7 Affiliate Indebtedness..........................................19
4.8 Consents........................................................19
4.9 Resignations of Directors and Officers..........................19
4.10 Distribution of Real Property...................................19
4.11 Distribution of Accounts Receivable.............................19
5. POST-CLOSING COVENANTS................................................19
5.1 Future Cooperation; Further Assurances..........................19
5.2 Expenses........................................................20
5.3 Certain Agreements..............................................20
5.4 Preparation and Filing of Tax Returns...........................20
5.5 Stock Options...................................................21
5.6 Other Financial Matters.........................................21
5.7 Stockholder Guarantees..........................................21
5.8 ServiceMaster Agreement.........................................21
5.9 Holdback........................................................22
6. INDEMNIFICATION.......................................................22
6.1 Survival of Stockholder's Representations and Warranties. .....22
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6.2 General Indemnification by the Stockholder......................22
6.3 Specific Indemnification by the Stockholder.....................22
6.4 Indemnification by LandCARE.....................................23
6.5 Third Person Claims.............................................23
6.6 Method of Payment...............................................24
7. NONCOMPETITION........................................................24
7.1 Prohibited Activities...........................................24
7.2 Equitable Relief................................................25
7.3 Reasonable Restraint............................................25
7.4 Severability; Reformation.......................................25
7.5 Independent Covenant............................................25
8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................26
8.1 General.........................................................26
8.2 Equitable Relief................................................26
8.3 Survival........................................................26
9. INTENDED TAX TREATMENT
.....................................................................26
9.1 Tax-Free Reorganization.........................................26
10. SECURITIES LAW MATTERS................................................27
10.1 Economic Risk; Sophistication...................................27
10.2 Compliance with Law.............................................27
10.3 Restrictions on Resale..........................................27
11. GENERAL...............................................................28
11.1 Successors and Assigns..........................................28
11.2 Entire Agreement................................................28
11.3 Counterparts....................................................28
11.4 Brokers and Agents..............................................28
11.5 Notices.........................................................29
11.6 Governing Law...................................................29
11.7 Survival of Representations and Warranties......................29
11.8 Effect of Investigation.........................................29
11.9 Exercise of Rights and Remedies.................................29
11.10 Time............................................................30
11.11 Reformation and Severability....................................30
11.12 Remedies Cumulative.............................................30
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11.13 Captions........................................................30
11.14 Press Releases and Public Announcements.........................30
11.15 No Third-Party Beneficiaries....................................30
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SCHEDULES
SCHEDULE 1.5. Manner of Conversion
SCHEDULE 2.1. Due Organization
SCHEDULE 2.4. Subsidiaries
SCHEDULE 2.5. Financial Statements
SCHEDULE 2.6. Liabilities and Obligations
SCHEDULE 2.7. Accounts and Notes Receivable
SCHEDULE 2.8. Permits and Intangibles
SCHEDULE 2.9. Environmental Matters
SCHEDULE 2.10. Personal Property
SCHEDULE 2.11. Significant Customers; Material Contracts and Commitments
SCHEDULE 2.12. Real Property
SCHEDULE 2.13. Insurance
SCHEDULE 2.14. Compensation; Employment Agreements; Organized Labor Matters
SCHEDULE 2.15. Employee Benefit Plans
SCHEDULE 2.16. Conformity with Law; Litigation
SCHEDULE 2.18. No Violations; No Consents Required
SCHEDULE 2.19. Absence of Changes
SCHEDULE 2.20. Powers of Attorney
SCHEDULE 2.21. Competing Lines of Business; Related Party Transactions
SCHEDULE 4.3. Persons Entering into Employment Agreements
SCHEDULE 4.6. Leases
SCHEDULE 4.10. Distribution of Real Property
SCHEDULE 5.7. Stockholder Guarantees
SCHEDULE 5.8. ServiceMaster Agreement
SCHEDULE 5.9. Holdback
SCHEDULE 10.3. Restrictions on Resale
ANNEXES
Annex I - Form of Employment Agreement
Annex II - Form of Opinion of Counsel to Company and
Stockholder
Annex III - Form of Lease
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of November 9, 1998 by and among LandCARE USA, Inc., a Delaware
corporation ("LandCARE"), GoldBear Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of LandCARE ("Newco"), Golden Bear Arborists, Inc., a
California corporation (the "Golden Bear"), Bradley J. Boyjian (the
"Stockholder"), and Realgreen Gardening, Inc., a California corporation
wholly-owned by the Stockholder ("Realgreen"). The Stockholder is the only
holder, directly or indirectly, of equity interests in Golden Bear and
Realgreen.
WHEREAS, the respective Boards of Directors of Newco, Golden Bear and
Realgreen (collectively called the "Constituent Corporations") deem it advisable
and in the best interests of the Constituent Corporations and their respective
stockholders that Golden Bear and Realgreen (hereinafter collectively referred
to as "the Company," except as the context otherwise requires) merge with and
into Newco pursuant to this Agreement and the applicable provisions of the laws
of the State of California (the "State of Incorporation") and of the State of
Delaware; and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, on the date hereof the parties are consummating the transactions
described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
agree as follows:
1. THE MERGER
1.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below), each of Golden Bear and
Realgreen shall be merged with and into Newco (the "Merger") and the separate
existence of each of Golden Bear and Realgreen shall cease, all in accordance
with the provisions of the laws of the State of Incorporation and of the State
of Delaware. Newco shall be the surviving corporation in the Merger and is
sometimes hereinafter called the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall become effective at such time (the
"Effective Time") as a certificate of merger, in form appropriate for filing, is
filed with the Secretary of State (or other appropriate authority) of the State
of Delaware (the "Merger Filing"). The Merger Filing
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shall be made simultaneously with or as soon as practicable after the execution
and delivery of this Agreement. A copy of the Merger Filing, together with such
other documents as may be necessary or appropriate, shall be filed with the
appropriate authorities of the State of California promptly, and in any case
within six months, after the Closing.
1.3 ARTICLES OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS OF
SURVIVING CORPORATION. At the Effective Time, the Articles of Incorporation of
Newco then in effect shall be the Articles of Incorporation of the Surviving
Corporation, and the By-laws of Newco then in effect shall be By-laws of the
Surviving Corporation. As part of the Merger Filing, or at any time thereafter,
the Surviving Corporation shall have the right to change its name to "Golden
Bear Arborists, Inc." The directors and officers of Newco immediately prior to
the Effective Time shall be the directors and officers of the Surviving
Corporation.
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the law of the State of Incorporation and the State of
California. Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities of
Newco shall continue unaffected and unimpaired by the Merger and the corporate
franchises, existence and rights of Golden Bear and Realgreen shall be merged
with and into Newco, and Newco, as the Surviving Corporation, shall be fully
vested therewith. At the Effective Time, the separate existence of Golden Bear
and Realgreen shall cease and, in accordance with the terms of this Agreement,
the Surviving Corporation shall possess all the rights, privileges, immunities
and franchises, of a public, as well as of a private, nature, and all property,
real, personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all taxes, including those due and owing and those
accrued, and all other choses in action, and all and every other interest of or
belonging to or due to Golden Bear and Realgreen and Newco shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of Golden Bear and
Realgreen and Newco; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the State of Incorporation or
otherwise vested in Golden Bear or Realgreen and Newco, shall not revert or be
in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of Golden Bear, Realgreen and Newco and
any claim existing, or action or proceeding pending, by or against Golden Bear,
Realgreen or Newco may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in their place. Neither the rights
of creditors nor any liens upon the property of Golden Bear, Realgreen or Newco
shall be impaired by the Merger, and all debts, liabilities and duties of Golden
Bear, Realgreen and Newco shall attach to the Surviving Corporation, and may be
enforced against the Surviving Corporation to the same extent as if said debts,
liabilities and duties had been incurred or contracted by such Surviving
Corporation.
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1.5 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of Golden Bear ("Golden Bear Stock"), (ii) outstanding
capital stock of Realgreen ("Realgreen Stock"), and (iii) stock of Newco issued
and outstanding immediately prior to the Effective Time ("Newco Stock"),
respectively, into shares of (x) common stock, $.01 par value per share, of
LandCare ("LandCARE Stock"), and (y) common stock of the Surviving Corporation
is set forth on SCHEDULE 2.1 and shall be as follows:
As of the Effective Time:
1. Each share of Golden Bear Stock issued and outstanding
immediately prior to the Effective Time, as well as each share of Realgreen
Stock, by virtue of the Merger and without any action on the part of the holder
thereof, automatically shall be converted into the right to receive, in the
aggregate, (i) 259,091 shares of common stock, par value $.01 per share, of
LandCARE Stock; (ii) $1,250,000 in cash at Closing (such number being equal to
$2,250,000 less $1,000,000 of Accumulated Adjustment Account ("AAA")
distributions made by the Company to the Stockholder as set forth in Section
4.11 hereof), which amount is being paid by wire transfer of immediately
available funds in accordance with wiring instructions provided by the
Stockholder; and (iii) $600,000 in cash or in immediately available funds (the
"Holdback"), which amount is being withheld by LandCARE and which shall be
distributed as set forth in Section 5.9 hereof.
2. All shares of Golden Bear Stock or Realgreen Stock, if any,
that are held by the Company or Realgreen, respectively, as treasury stock shall
be canceled and retired, and no shares of LandCARE Stock or other consideration
shall be delivered or paid in exchange therefor; and
3. As of the Effective Time, each outstanding share of Newco
Stock shall remain outstanding and unchanged.
1.6 DELIVERY OF CERTIFICATES. At the Closing, (i) the Stockholder shall
deliver to LandCARE the certificates representing the Golden Bear Stock and
Realgreen Stock, duly endorsed in blank by the Stockholder or accompanied by a
stock transfer endorsement separate from certificate, and with all necessary
transfer tax and other revenue stamps, acquired at the Stockholder's expense,
affixed and canceled, and (ii) LandCARE shall cause its stock transfer agent to
deliver to the Stockholder certificates representing the LandCARE Stock as
described above (or shall deliver to the Stockholder a copy of an irrevocable
authorization to such transfer agent authorizing the issuance of such
certificates to the Stockholder). The Stockholder agrees promptly to cure any
deficiencies with respect to the endorsement of the stock certificates or other
documents of conveyance with respect to such Golden Bear Stock and Realgreen
Stock or with respect to the stock powers accompanying any Golden Bear Stock and
Realgreen Stock.
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1.7 CLOSING. The transactions contemplated by this Agreement are being
consummated on the date hereof, and the date hereof is sometimes herein called
the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to LandCARE that all of the
following representations and warranties are true and correct in all material
respects at the date of this Agreement.
2.1 DUE ORGANIZATION. (a) Golden Bear is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation, and has all requisite power and authority to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company (as used herein with respect to the
Company, or with respect to any other person, a "Material Adverse Effect").
SCHEDULE 2.1 sets forth a list of all jurisdictions in which the Company is
authorized or qualified to do business. True, complete and correct copies of the
Articles of Incorporation and By-laws (the Charter Documents"), each as amended,
of the Company have been delivered to LandCARE. The stock records of the
Company, a copy of which is attached to SCHEDULE 2.1, are correct and complete
in all material respects. All records of all proceedings of the Board of
Directors and Stockholder of the Company have been made available to LandCARE.
(b) Realgreen is a corporation duly organized, validly existing and
in good standing under the laws of the State of Incorporation, and has all
requisite power and authority to carry on its business as it is now being
conducted. Realgreen is duly qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect on the business, assets, operations or condition (financial or otherwise)
of Realgreen. SCHEDULE 2.1 sets forth a list of all jurisdictions in which
Realgreen is authorized or qualified to do business. True, complete and correct
copies of the Charter Documents, each as amended, of Realgreen have been
delivered to LandCARE. The stock records of Realgreen, a copy of which is
attached to SCHEDULE 2.1, are correct and complete in all material respects. All
records of all proceedings of the Board of Directors and Stockholder of
Realgreen have been made available to LandCARE.
2.2 AUTHORIZATION. (i) The representative of the Company executing this
Agreement has the authority to enter into and bind the Company to the terms of
this Agreement and (ii) the Company has the full legal right, power and
authority to enter into this Agreement and the
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transactions contemplated hereby, all of which have been approved by the
Stockholder and the Board of Directors of the Company. This Agreement has been
validly executed and delivered by the Company and the Stockholder and
constitutes the legal, valid and binding obligation of each of them, enforceable
in accordance with its terms.
2.3 CAPITAL STOCK OF THE COMPANY. (a) The authorized capital stock of
Golden Bear consists solely of 10,000 shares of common stock of which 10,000
shares are issued and outstanding and constitute all of the issued and
outstanding shares of Golden Bear Stock (the "Company Shares"). All of the
Company Shares are owned of record and beneficially by the Stockholder and are
owned free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the Company
Shares have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable state and federal laws governing the issuance of
securities. None of the Company Shares were issued in violation of any
preemptive rights or similar rights of any person. No option, warrant, call,
conversion right or commitment of any kind exists which obligates the Company to
issue any additional shares of its capital stock or obligates the Stockholder to
transfer any of the Company Shares to any person except pursuant to this
Agreement.
(b) The authorized capital stock of Realgreen consists solely of
10,000 shares of common stock of which 500 shares are issued and outstanding and
constitute all of the issued and outstanding shares of Realgreen Stock (the
"Realgreen Shares"). All of the Realgreen Shares are owned of record and
beneficially by the Stockholder and are owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the Realgreen Shares have been duly authorized
and validly issued, are fully paid and nonassessable, and were offered, issued,
sold and delivered by Realgreen in compliance with all applicable state and
federal laws governing the issuance of securities. None of the Realgreen Shares
were issued in violation of any preemptive rights or similar rights of any
person. No option, warrant, call, conversion right or commitment of any kind
exists which obligates Realgreen to issue any additional shares of its capital
stock or obligates the Company to transfer any of the Realgreen Shares to any
person except pursuant to this Agreement.
2.4 SUBSIDIARIES. Except as set forth on SCHEDULE 2.4, the Company has no
subsidiaries or d/b/a names and has not conducted business under any other name
except its legal name as set forth in its Charter Documents. Except as set forth
in SCHEDULE 2.4, the Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
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2.5 FINANCIAL STATEMENTS. Complete and correct copies of the following
financial statements are attached as SCHEDULE 2.5:
(i) The balance sheets of the Company as of December 31, 1997 (the
"Balance Sheet Date") and any related statements of operations,
stockholder's equity and cash flows for the three-year period then ended,
together with any related notes and schedules (the "Year-end Financial
Statements"); and
(ii) The balance sheet (the "Interim Balance Sheet") of the Company
as of June 30, 1998 and the related statements of operations for the
six-month period then ended (the "Interim Financial Statements"). (The
Year-end Financial Statements and the Interim Financial Statements are
herein collectively called the "Financial Statements".)
The Financial Statements have been prepared from the books and records of
the Company in conformity with generally accepted accounting principles applied
on a basis consistent with preceding years and throughout the periods involved
("GAAP") and present fairly in all material respects the financial position and
results of operations of the Company as of the dates of such statements and for
the periods covered thereby. The books of account of the Company have been kept
accurately in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
2.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent disclosed and
adequately provided for in the Financial Statements or on SCHEDULE 2.6 hereto,
the Company has no material liabilities or obligations of any kind, whether
accrued, absolute, secured or unsecured, contingent or otherwise. Except and to
the extent disclosed on SCHEDULE 2.6, there are no material claims, liabilities
or obligations, nor any reasonable basis for assertion against the Company, of
any material claim, liability or obligation, of any nature whatsoever. Except as
expressly set forth on SCHEDULE 2.6, all of the contingent liabilities of the
Company listed on SCHEDULE 2.6 are covered by the Company's insurance policies,
and no such liability will exceed the policy limits of such insurance policies.
SCHEDULE 2.6 contains a reasonable estimate of the maximum amount which may be
payable with respect to known liabilities which are not fixed. For each such
known liability for which the amount is not fixed, SCHEDULE 2.6 includes a
summary description of each known liability, together with copies of all
relevant documentation relating thereto.
2.7 ACCOUNTS AND NOTES RECEIVABLE. SCHEDULE 2.7 sets forth an accurate
list of the accounts and notes receivable of the Company, as of the most recent
date practicable (which date is set forth thereon), showing amounts due in
30-day aging categories. Except to the extent reflected on SCHEDULE 2.7, all
such accounts, notes and other receivables were incurred in the ordinary course
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of business, are stated in accordance with GAAP and are collectible in the
amounts shown on SCHEDULE 2.7, net of reserves reflected in the balance sheet as
of the Balance Sheet Date.
2.8 PERMITS AND INTANGIBLES. The Company holds all material licenses,
franchises, permits and other governmental authorizations required or necessary
in connection with the conduct of the Company's business. SCHEDULE 2.8 sets
forth an accurate list and summary description of all such material licenses,
franchises, permits and other governmental authorizations, including permits,
titles (including licenses, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the Company or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) (collectively, the "Intangible Assets") (it
being understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on SCHEDULE 2.9). The Intangible Assets and
other governmental authorizations listed on SCHEDULES 2.8 and 2.9 are valid, and
the Company has not received any notice that any person intends to cancel,
terminate or not renew any such Intangible Assets or other governmental
authorization. The Company has conducted and is conducting its business in
material compliance with the requirements, standards, criteria and conditions
set forth in the Intangible Assets and other governmental authorizations listed
on SCHEDULES 2.8 and 2.9 and is not in violation of any of the foregoing. Except
as specifically set forth on SCHEDULE 2.8, 2.9 or 2.18, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
Company by, any such Intangible Assets or other governmental authorizations. Any
interest of the Company with respect to the trade name and mark "Golden Bear
Arborists, Inc." may be limited to the extent provided by California law.
2.9 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws"), including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances (including petroleum and petroleum
products) (as such terms are defined in any applicable Environmental Law) except
to the extent that noncompliance with any Environmental Laws, either singly or
in the aggregate, has not had and will not have a Material Adverse Effect on the
Company or any of its operations. The Company has obtained and adhered to all
necessary permits and other approvals required pursuant to any applicable
Environmental Laws including, without limitation, such permits or approvals as
are necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of all of
which permits and approvals is set forth on SCHEDULE 2.9. The Company has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
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where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in, under or
on any property owned or operated by the Company except as permitted by
Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances which is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company or LandCARE for any clean-up cost,
remedial work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, as amended, (iii) the Hazardous
Materials Transportation Act, as amended, or (iv) comparable state or local
statutes and regulations. The Company has no contingent liability in connection
with any release of any Hazardous Waste, Hazardous Material or Hazardous
Substance into the environment.
2.10 PERSONAL PROPERTY. SCHEDULE 2.10 sets forth an accurate list of (a)
all personal property included in "plant, property and equipment" or any similar
category on the balance sheet of the Company, (b) all other personal property
owned by the Company with a fair market value in excess of $5,000, and (c) all
leases and agreements with respect to personal property, copies of which have
been delivered to LandCARE. SCHEDULE 2.10 indicates which assets are currently
owned, or were formerly owned, by the Stockholder or any affiliate of the
Company or the Stockholder. Except as set forth on SCHEDULE 2.10, (i) all
material personal property used by the Company in its business is either owned
by the Company or leased by the Company pursuant to a lease included on SCHEDULE
2.10, (ii) all of the personal property listed on SCHEDULE 2.10 is in good
working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on SCHEDULE 2.10 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms. Except as set forth on
SCHEDULE 2.10 or as disclosed in the Financial Statements of the Company, the
Company has good and marketable title to the tangible and intangible personal
property it purports to own, subject to no security interest, pledge, lien,
claim, conditional sales agreement, encumbrance, charge or restriction on
transfer.
2.11 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. SCHEDULE
2.11 sets forth a list of (i) all customers representing 1% or more of the
Company's revenues in its last full fiscal year ("Significant Customers"), and
(ii) all material contracts, commitments and similar agreements to which the
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with Significant Customers, joint venture or
partnership agreements, contracts with any labor organizations, strategic
alliances and options to purchase land). True, complete and correct copies of
such agreements have been delivered to LandCARE. Except as
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described on SCHEDULE 2.11, (i) none of the Significant Customers have canceled
or substantially reduced or, to the knowledge of the Company, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company, and (ii) the Company has
complied with all commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on SCHEDULE 2.11 and no notice
of default under any such contract or agreement has been received. Except as
described on SCHEDULE 2.11, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to the Company by, any such contracts or
agreements. SCHEDULE 2.11 also includes a summary description of all plans or
projects relating to the Company's business involving the opening of new
operations, expansion of existing operations, the acquisition of any property,
business or assets requiring, in any event, the payment of more than $50,000 in
the aggregate.
2.12 REAL PROPERTY. SCHEDULE 2.12 includes a list of all real property
owned or leased by the Company at the date hereof (the "Real Property"), and all
other real property, if any, used by the Company in the conduct of its business.
True, complete and correct copies of all leases and agreements with respect to
Real Property leased by the Company have been delivered to LandCARE, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Stockholder or any affiliates of the Company or the
Stockholder is included in SCHEDULE 2.12. All leases relating to Real Property
leased by the Company from the Stockholder or any affiliate of the Stockholder
have been terminated. Except as set forth on SCHEDULE 2.12, all of such leases
included on SCHEDULE 2.12 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms. There are no leases, tenancy agreements, easements,
covenants, restrictions or any other instruments, agreements or arrangements
which create in or confer on any party, other than the Company, the right to
occupy or possess all or any portion of the Real Property or create in or confer
on any such party any right, title or interest in or to the Real Property or any
portion thereof or any interest therein; no party other than the Company
occupies or possesses the Real Property or any portion thereof; there is legal
and adequate ingress and egress between each tract of Real Property and an
adjacent (or, if none, the closest) public roadway; the Real Property is
properly zoned in order to allow its current use in the Company's businesses;
and there are no claims or demands pending or threatened by any party against
the Real Property which, if valid, would create in, or confer on, any party
other than the Company, any right, title or interest in or to the Real Property
or any portion thereof. None of the buildings, structures or improvements
described on SCHEDULE 2.12, or the operation or maintenance thereof as now
operated or maintained, contravenes any zoning ordinance or other administrative
regulation or violates any restrictive covenant or any provision of law, the
effect of which would materially interfere with or prevent their continued use
for the purposes for which they are now being used or would adversely affect the
value thereof or the interest of the Company therein. The Stockholder have
furnished to LandCARE a true and correct copy of all owner's policies of title
insurance and surveys pertaining to the real property owned by the Company.
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2.13 INSURANCE. SCHEDULE 2.13 sets forth an accurate list as of the date
hereof of all insurance policies now carried by the Company and an accurate list
of all insurance loss runs and workers compensation claims received for the past
three policy years. True, complete and correct copies of all insurance policies
currently in effect have been delivered to LandCARE. Such insurance policies
evidence all of the insurance that the Company is required to carry pursuant to
all of its contracts and other agreements and pursuant to all applicable laws,
and provide adequate coverage against the risks involved in the Company's
business. Except as set forth on SCHEDULE 2.13, none of such policies is a
"claims made" policy.
2.14 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
SCHEDULE 2.14 sets forth an accurate list showing all officers, directors and
key employees of the Company, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of the Balance Sheet Date. Except as
set forth on SCHEDULE 2.14, since the Balance Sheet Date, there have been no
increases in the base compensation payable or any special bonuses to any
officer, director, key employee or other employee.
Except as set forth on SCHEDULE 2.14, (i) the Company is not bound by or
subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened, labor dispute involving the
Company and any group of its employees. The Company has not experienced any
labor interruptions over the past five years.
SCHEDULE 2.14 sets forth an accurate schedule showing all bonus and other
incentive plans, agreements and arrangements of Company, written or unwritten
(the "Incentive Plans"), together with true, complete and correct copies of such
Incentive Plans (or in the event that the Incentive Plans are not in writing, a
true and complete summary of such Incentive Plans), and classifications of
employees covered thereby as of the Closing Date. SCHEDULE 2.14 shall also
include the maximum aggregate annual amount payable to covered employees under
the Incentive Plans for the current fiscal year, including, but not limited to,
discretionary amounts, if any.
2.15 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.15 sets forth an accurate schedule
showing all employee benefit plans of Company, including all agreements or
arrangements (other than agreements or arrangements set forth on SCHEDULE 2.14)
containing "golden parachute" or other similar provisions, and deferred
compensation agreements, together with true, complete and correct copies of such
plans, agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except for the employee
benefit plans, if any, described on SCHEDULE 2.15, the Company does not sponsor,
maintain or contribute to any plan,
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program, fund or arrangement that constitutes an "employee pension benefit
plan," nor does the Company have any obligation to contribute to or accrue or
pay any benefits under any deferred compensation or retirement funding
arrangement on behalf of any employee or employees (such as, for example, and
without limitation, any individual retirement account or annuity, any "excess
benefit plan" (within the meaning of Section 3(36) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), or any non-qualified
deferred compensation arrangement). For the purposes of this Agreement, the term
"employee pension benefit plan" shall have the same meaning as is given that
term in Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan and is not required to
contribute to any retirement plan pursuant to the provisions of any collective
bargaining agreement establishing the terms and conditions of employment of any
of the Company's employees other than the plans set forth on SCHEDULE 2.15.
The Company is not now, and will not as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation (the "PBGC") or to
any multi employer employee pension benefit plan under the provisions of Title
IV of ERISA. All employee benefit plans listed on SCHEDULE 2.15 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations. All accrued contribution obligations of the Company with respect to
any plan listed on SCHEDULE 2.15 have either been fulfilled in their entirety or
are fully reflected on the balance sheet of the Company as of the Balance Sheet
Date. All plans listed on SCHEDULE 2.15 that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), are, and have been, so qualified and have been determined
by the Internal Revenue Service to be so qualified. Except as disclosed on
SCHEDULE 2.15, all reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed, and the most recent copies thereof are
included as part of SCHEDULE 2.15. Neither the Stockholder, nor any plan listed
in SCHEDULE 2.15 nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed on SCHEDULE 2.15 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
Company has not incurred any liability for excise tax or penalty due to the
Internal Revenue Service or any liability to the PBGC. There have been no
terminations, partial terminations or discontinuance of contributions to any
such Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed on
SCHEDULE 2.15 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any such plan listed on SCHEDULE 2.15;
the Company has not incurred liability under Section 4062 of ERISA; and no
circumstances exist pursuant to which the Company could have any direct or
indirect liability whatsoever (including, but not limited to, any liability to
any multi employer plan or the PBGC under Title IV of ERISA or to the Internal
Revenue Service
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for any excise tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the Company that is, or at
any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
2.16 CONFORMITY WITH LAW; LITIGATION. Except as set forth on SCHEDULE
2.16, there are no claims, actions, suits or proceedings pending or, to the best
knowledge of the Stockholder, threatened, against or affecting the Company (as
any of its officers and directors in their capacities as such), at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over the Company. Except as set forth on SCHEDULE 2.16, no notice
of any material unresolved claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company during the last five years and, to
the best knowledge of the Stockholder, there is no basis therefor. Except as set
forth on SCHEDULE 2.16, there are no outstanding judgments, orders, writs,
injunctions or decrees against the Company. Except as set forth on SCHEDULE
2.16, the Company has conducted and now conducts its business in material
compliance with all laws, regulations, writs, injunctions, decrees and orders
applicable to the Company or its assets. The Company is not in violation of any
material law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over any of them. The Company has conducted
and is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on SCHEDULES 2.8 and 2.9.
2.17 TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof ("Taxing
Authority"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. As used herein, the term "Company
Subsidiaries" means the subsidiaries, if any, of the Company; it being
understood that there may be no such subsidiaries.
All Tax returns ("Returns") required to be filed with respect to any Tax
for which any of the Company and the Company Subsidiaries (if any) is liable
have been duly and timely filed with the appropriate Taxing Authority, each Tax
shown to be payable on each such Return has been paid, each Tax payable by the
Company or a Company Subsidiary by assessment has been timely paid in
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the amount assessed, and adequate reserves have been established on the
consolidated books of the Company and the Company Subsidiaries for all Taxes for
which any of the Company and the Company subsidiaries is liable, but the payment
of which is not yet due. Neither the Company nor any Company Subsidiary is, or
ever has been, liable for any Tax payable by reason of the income or property of
a person or entity other than the Company or a Company Subsidiary. Each of the
Company and the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such declaration
is required to be filed by it. No Liens for Taxes exist upon the assets of the
Company or any Company Subsidiary except Liens for Taxes which are not yet due.
Neither the Company nor any Company Subsidiary is, or ever has been, subject to
Tax in any jurisdiction outside the United States. No litigation with respect to
any Tax for which the Company or any Company Subsidiary is asserted to be liable
is pending or, to the knowledge of the Company or the Stockholder, threatened,
and no basis which the Company or any Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company or any
Company Subsidiary. There are no requests for rulings or determinations in
respect of any Taxes pending between the Company or any Company Subsidiary and
any Taxing Authority. No extension of any period during which any Tax may be
assessed or collected and for which the Company or any Company Subsidiary is or
may be liable has been granted to any Taxing Authority. Neither the Company nor
any Company Subsidiary is or has been party to any tax allocation or sharing
agreement. All amounts required to be withheld by any of the Company and the
Company Subsidiaries and paid to governmental agencies for income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the proper Taxing Authority. The Company and
each Company Subsidiary have made all deposits required by law to be made with
respect to employees' withholding and other employment Taxes. Neither the
Company nor the Stockholder is a "foreign person," as that term is referred to
in Section 1445(f)(3) of the Code. The Company has not filed a consent pursuant
to Section 341 (f) of the Code or any comparable provision of any other tax
statute and has not agreed to have Section 341 (f)(2) of the Code or any
comparable provision of any other Tax statute apply to any disposition of an
asset. The Company has not made, is not obligated to make and is not a party to
any agreement that could require it to make any payment that is not deductible
under Section 280G of the Code. No asset of the Company or of any Company
Subsidiary is subject to any provision of applicable law which eliminates or
reduces the allowance for depreciation or amortization with respect to that
asset below the allowance generally available to an asset of its type. Except as
disclosed to LandCARE, no accounting method changes of the Company or of any
Company Subsidiary exist or are proposed or threatened which could give rise to
an adjustment under Section 481 of the Code. The Company uses the accrual method
of accounting for income tax purposes, and the Company's methods of accounting
have not changed in the past five years. The Company is not an investment
company as defined in Section 351(e)(1) of the Code.
The Company has a taxable year ended December 31 and has not made an
election to retain a fiscal year other than December 31 under Code Section 444.
The Company is not a party to any
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joint venture, partnership, or other arrangement that is treated as a
partnership for federal income tax purposes. The Stockholder made a valid
election under the provisions of Subchapter S of the Code, and the Company has
not, since its formation, been subject to taxation under the provisions of
Subchapter C of the Code or under Section 11 or Section 1374 of the Code.
Neither the Stockholder nor the Company has taken any action that terminated the
Subchapter S election, which remains in effect on the date hereof.
2.18 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder, any other party thereto is in material default
under any lease, instrument, license, permit or material agreement to which the
Company is a party or by which its properties are bound (the "Material
Documents"). Except as set forth on SCHEDULE 2.18, (a) the execution of this
Agreement by the Company and the Stockholder and the performance by the Company
and the Stockholder of their obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of the Material
Documents or the Charter Documents, and (b) at and after the Closing Date the
Surviving Corporation will be entitled to the rights and benefits under the
Material Documents to which the Company is entitled immediately prior to the
Closing. Except as set forth on SCHEDULE 2.18 (and except for consents already
obtained), none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and
effect, and consummation of the transactions contemplated hereby will not give
rise to any right to termination, cancellation or acceleration or loss of any
right or benefit. Except as set forth on SCHEDULE 2.18, none of the Material
Documents prohibits the use or publication of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Surviving Corporation or will prevent or restrict the Company or
LandCARE from freely providing services to any person.
2.19 ABSENCE OF CHANGES. Since the Interim Balance Sheet Date, the Company
has conducted its operations in the ordinary course of business and, except as
set forth on SCHEDULE 2.19, there has not been:
(i) any change in the business, assets, liabilities or financial
condition of the Company which would have a Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) affecting any of the material assets of the Company or the
business of the Company which would have a Material Adverse Effect;
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(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) except for the distributions described in Sections 4.10 and
4.11 herein, any declaration or payment of any dividend or distribution
with respect to the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the Company;
(v) any increase or commitment to increase the compensation, bonus,
sales commissions or fee arrangement payable or to become payable by the
Company to any of its officers, directors, Stockholder, employees,
consultants or agents;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the Company;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person;
(viii)any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any amendment or termination of any contract, agreement,
license, permit or other right to which the Company is a party which would
have a Material Adverse Effect;
(xiii)any contract, commitment or liability entered into or incurred
or any capital expenditures made except in the normal course of business
consistent with past practice in an individual amount not in excess of
$10,000 and in an aggregate amount not in excess of $50,000; or
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(xiv) any transaction by the Company outside the ordinary course of
its business.
2.20 POWERS OF ATTORNEY. SCHEDULE 2.20 sets forth a schedule as of the
date of this Agreement of the name of each person, corporation, firm or other
entity holding any general or special power of attorney from the Company and a
description of the terms of each such power.
2.21 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth on SCHEDULE 2.21, neither the Stockholder nor any other affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company. Except as set forth on SCHEDULE 2.21, no officer, director or
stockholder of the Company has, nor during the period beginning January 1, 1995
through the date hereof had, any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the Company's business.
2.22 DISCLOSURE. The Stockholder has provided LandCARE with all the
information that LandCARE has requested in analyzing whether to consummate the
transactions contemplated hereby. To the actual knowledge of the Stockholder as
of the date hereof, there is no fact which has specific application to the
Company or its business or assets (other than general economic or industry
conditions) which would have a Material Adverse Effect on the Company or its
business or assets, or the condition (financial or otherwise), results of
operations or prospects of the Company, which has not been described in the
Schedules hereto.
2.23 CERTAIN BUSINESS PRACTICES. Neither the Company nor any person acting
on behalf of the Company has given or offered anything of value to any
governmental official, political party or candidate for government office nor
has it or any of them otherwise taken any action which would cause the Company
to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or
any law of similar effect.
2.24 NOTICE TO BARGAINING AGENTS. The Company has satisfied any
requirement for notice of the transactions contemplated by this Agreement under
applicable collective bargaining agreements.
2.25 NOTICES AND CONSENTS. Except as set forth on SCHEDULE 2.11 or
SCHEDULE 2.18, the Company has given any notices to third parties and has
obtained any third party consents that may be necessary to consummate the
transactions contemplated hereby.
2.26 INVENTORY; WORKING CAPITAL; OTHER FINANCIAL MATTERS. The Company's
inventory and working capital levels (including financing in the ordinary course
of business) are adequate to successfully operate the business, and there has
been no unusual build-up of cash needs at the date hereof. The Company's total
debt at the date hereof does not exceed $3,000,000 (exclusive of
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approximately $600,000 of indebtedness secured by certain real property being
distributed to the Stockholder as set forth in Section 4.10 hereof). The
Company's pro forma net revenues for the 12- month period ended June 30, 1998
were at least $11,000,000, and their combined pro forma EBITDA (earnings before
interest, taxes, depreciation and amortization) for the 12-month period ended
June 30, 1998 were at least $1,325,000. The Company's pro forma net pre-tax
earnings for the 12-month period ended June 30, 1998 were at least $411,000. The
Company's tangible net worth on the date hereof is at least $1,600,000.
2.27 YEAR 2000 COMPLIANCE. The properties and assets of the Company,
including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by the Company will accurately
process date and time data after December 31, 1999, and the Company will suffer
no loss of functional ability when processing dates and related data outside the
1900-1999 year range.
2.28 RELIANCE UPON ORAL REPRESENTATIONS. The Company and the Stockholder
each represent and warrant: (a) that each has been fully informed by his or its
legal counsel and by his or its own independent judgment of the terms,
conditions and effects of this Agreement; (b) that each has been represented by
independent legal counsel of his or its choice throughout all negotiations
preceding the execution of this Agreement and has received the advice of his or
its attorney in entering into this Agreement; (c) that each, both personally and
through his or its independently- retained attorneys, is fully satisfied with
the terms and effects of this Agreement; (d) that no promise or inducement has
been offered or made to him or it except as expressly stated in this Agreement;
and (e) that this Agreement is executed without reliance on any oral statement
or oral representation by any other party or any other party's agent or
attorney.
3. REPRESENTATIONS OF LANDCARE
LandCARE represents and warrants as follows:
3.1 DUE ORGANIZATION. LandCARE is duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and has the requisite
power and authority to carry on its business as it is now being conducted.
LandCARE is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
3.2 AUTHORIZATION. (i) The representative of LandCARE executing this
Agreement has the authority to enter into and bind LandCARE to the terms of this
Agreement and (ii) LandCARE has the full legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
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3.3 NO VIOLATIONS. The execution of this Agreement and the performance of
the obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Restated Certificate of Incorporation, as
amended, or Bylaws, as amended, of LandCARE.
3.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by LandCARE and the performance of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of LandCARE and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of LandCARE.
3.5 REPORTS. LandCARE has filed all forms, reports, statements and other
documents (the "SEC Reports") required to be filed with the Securities and
Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended
(the "Securities Act), and the Securities Exchange Act of 1934, as amended. The
SEC Reports were prepared, as of the time they were filed, in all material
respects in accordance with the requirements of applicable laws and regulations
and did not at the time they were filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.6 REGISTRATION. The Stockholder understands that the offer and sale of
such shares will have not been registered under the Securities Act and will not
be registered thereunder.
4. DELIVERIES
4.1 INSTRUMENTS OF TRANSFER. The Stockholder is delivering to LandCARE
certificates representing all of the Company Shares and Realgreen Shares, duly
endorsed (or accompanied by duly executed stock powers).
4.2 CERTIFICATE OF MERGER. The appropriate parties hereto are executing
and delivering for filing with the appropriate authorities certificates of
merger or similar documents for purposes of effecting the Merger.
4.3 EMPLOYMENT AGREEMENT. The Surviving Corporation and the persons
identified in SCHEDULE 4.3 are entering into Employment Agreements in the form
of Annex I.
4.4 OPINION OF COUNSEL TO THE COMPANY AND REALGREEN. Counsel to the
Company and the Stockholder is delivering an opinion to LandCARE dated the date
hereof in the form attached hereto as Annex II.
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4.5 GOOD STANDING CERTIFICATES. The Stockholder is delivering to LandCARE
certificates, dated as of a date no earlier than ten days prior to the date
hereof, duly issued by the appropriate governmental authority in the State of
Incorporation and in each state in which the Company is authorized to do
business, showing the Company to be in good standing and authorized to do
business therein.
4.6 LEASE. The Surviving Corporation is entering into leases of the
properties identified on SCHEDULE 4.6 in the form attached hereto as Annex III,
and the Stockholder is delivering to LandCARe evidence of the termination of all
leases relating to such properties. The Company is delivering to LandCARE
consents to the Merger of the lessors of the other properties leased by the
Company.
4.7 AFFILIATE INDEBTEDNESS. The Stockholder and its Affiliates are
repaying any outstanding indebtedness they may have to the Company. The Company
is repaying any outstanding indebtedness they may have to the Stockholder, in an
amount not to exceed $150,000.
4.8 CONSENTS. The Stockholder is delivering to LandCARE copies of any
third party consents required in connection with the consummation of the
transactions contemplated hereby.
4.9 RESIGNATIONS OF DIRECTORS AND OFFICERS. The Stockholder is delivering
to LandCARE the resignations of such directors and officers of the Company as
have been requested by LandCARE.
4.10 DISTRIBUTION OF REAL PROPERTY. Prior to or concurrently with the
Closing, the Company shall distribute to the Stockholder the real properties set
forth on SCHEDULE 4.10, and the Stockholder shall assume any and all debt
associated with such real properties.
4.11 DISTRIBUTION OF ACCOUNTS RECEIVABLE. Pursuant to the letter as of the
date hereof by and among the Company, LandCARE and the Stockholder, the Company
has distributed to the Stockholder prior to Closing $1,000,000 of the AAA in the
form of assignment of accounts receivable.
5. POST-CLOSING COVENANTS
The parties to this Agreement further covenant and agree as follows:
5.1 FUTURE COOPERATION; FURTHER ASSURANCES. The Stockholder, the Surviving
Corporation and LandCARE shall each deliver or cause to be delivered to the
other following the date hereof such additional instruments as the other may
reasonably request for the purpose of effecting the Merger and fully carrying
out the intent of this Agreement. LandCARE shall provide the
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Stockholder reasonable access to the books and records of the Surviving
Corporation after the Closing Date for purposes of tax compliance and any other
reasonable purpose.
5.2 EXPENSES. LandCARE will pay the fees, expenses and disbursements of
LandCARE and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement. The Stockholder will pay the fees, expenses and disbursements of
the Stockholder and its agents, representatives, financial advisors, accountants
and counsel incurred in connection with the execution, delivery and performance
of this Agreement. The Stockholder shall pay any sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the Merger. The Stockholder
shall file all necessary documentation and returns with respect to such Transfer
Taxes. In addition, the Stockholder acknowledges that the Stockholder, and not
the Surviving Corporation or LandCARE, will pay all taxes (income or otherwise),
if any, due upon receipt of the consideration payable pursuant to this
Agreement.
5.3 CERTAIN AGREEMENTS. Upon the request of LandCARE at any time after the
Closing, the Stockholder and the Surviving Corporation shall terminate any
existing agreements to which the Company and the Stockholder are parties.
5.4 PREPARATION AND FILING OF TAX RETURNS.
(a) The Stockholder shall file or cause to be filed all Tax Returns
for all taxable periods that end on or before the Closing Date, but in each case
only after LandCARE has reviewed such filings and consented thereto. The
Stockholder shall pay all Tax liabilities for all periods ending on or prior to
the Closing Date.
(b) LandCARE shall file or cause to be filed all Tax Returns for all
taxable periods ending after the Closing Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Tax Returns,
amended Tax Returns or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding with
respect to Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided.
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Subject to the preceding sentence, each party required to file tax returns
pursuant to this Agreement shall bear all costs of filing such tax returns.
5.5 STOCK OPTIONS. LandCARE hereby covenants and agrees to recommend to
the Compensation Committee of its Board of Directors the issuance of stock
options to purchase an aggregate of 25,910 shares of LandCARE Stock, which stock
options are to be granted to certain key management and supervisory employees of
the Company identified by the Stockholders. The options shall be issued pursuant
to the LandCARE 1998 Long-Term Incentive Plan and shall have an exercise price
of $11.00 per share.
5.6 OTHER FINANCIAL MATTERS. If the Company's total indebtedness exceeds
$3,000,000 at Closing, the cash portion of the Purchase Price shall be reduced
on a dollar-for-dollar basis, and, within thirty (30) days of the date hereof,
the Stockholder shall remit such amount to LandCARE by wire transfer.
5.7 STOCKHOLDER GUARANTEES. Notwithstanding anything else herein, LandCARE
agrees to hold harmless and to indemnify the Stockholder or his affiliates from
any loss, damage, claim, liability or obligation arising from any guarantee
(personal or otherwise) by the Stockholder of liabilities or obligations of the
Company (contingent or otherwise) directly relating to the operation of the
business of the Company as specifically identified on SCHEDULE 5.7, and agrees
to cause the unconditional release of the Stockholder and his affiliates from
such guarantees and all the obligations thereunder within thirty (30) days after
the Closing Date; provided, however, that LandCARE shall cause either (i) the
payment or (ii) the unconditional release of the Stockholder from any guarantees
of third-party debt listed on SCHEDULE 5.7 within ten (10) business days from
the Closing Date.
5.8 SERVICEMASTER AGREEMENT. It is understood that LandCARE and The
ServiceMaster Company ("ServiceMaster") have entered into a definitive merger
agreement dated November 1, 1998 (the "ServiceMaster Agreement"), a summary of
which is attached hereto as SCHEDULE 5.8 and a copy of which has been provided
to the Stockholder, pursuant to which it is intended that LandCARE will become a
wholly-owned subsidiary of ServiceMaster (the "ServiceMaster Merger"). The
ServiceMaster Agreement is structured as a stock-for-stock exchange, whereby, on
consummation of the ServiceMaster Merger, each share of LandCARE Stock will be
exchanged for a fraction of a share of ServiceMaster common stock. It is hereby
understood and acknowledged that the consummation of the ServiceMaster Merger is
contingent on certain conditions (as set forth in the ServiceMaster Agreement)
which, if not met, may cause the ServiceMaster Merger to not occur. LandCARE,
therefore, makes no representation or guarantee as to the likelihood that the
ServiceMaster Merger will, in fact, take place.
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5.9 HOLDBACK. Subject to the Stockholder's payment of the indebtedness
secured by the properties referenced on SCHEDULE 5.9, LandCARE shall release the
Holdback to the Stockholder within five business days of written confirmation to
LandCARE of payment of such indebtedness.
6. INDEMNIFICATION
The Stockholder and LandCARE each make the following covenants that are
applicable to them, respectively:
6.1 SURVIVAL OF STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES.
(a) The representations and warranties of the Stockholder made in
this Agreement herewith shall survive the Closing until the expiration of the
periods prescribed by the applicable statutes of limitations (including any
extensions thereof) relating thereto; provided, however, that representations
and warranties and indemnification provisions with respect to which a claim is
made within the survival period shall survive until such claim is finally
determined and paid.
(b) The representations and warranties of LandCARE made in this
Agreement shall survive the Closing for a period of one year following the
Closing Date; provided, however, that representations and warranties with
respect to which a claim is made within such one-year period shall survive until
such claim is finally determined and paid.
(c) The date on which a representation or warranty expires as
provided herein is herein called the "Expiration Date." No claim for
indemnification may be made with respect to a representation or warranty after
the Expiration Date, other than claims based on fraud.
6.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees that he will indemnify, defend, protect, and hold harmless the
Surviving Corporation, LandCARE and its subsidiaries and all of their officers,
directors, employees, Stockholder, agents, representatives and affiliates at all
times from and after the date of this Agreement until the Expiration Date from
and against all claims, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively "Damages") incurred by such indemnified person as a result of or
incident to (i) any breach of any representation or warranty of the Stockholder
set forth herein, and (ii) any breach or nonfulfillment of any covenant or
agreement by the Company or the Stockholder under this Agreement.
6.3 SPECIFIC INDEMNIFICATION BY THE STOCKHOLDER. In addition to the
indemnification provided for in Section 6.2, the Stockholder covenants and
agrees that he will indemnify, defend, protect and hold harmless the Company and
LandCARE and each of their respective subsidiaries,
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officers, directors, employees, Stockholder, agents, representatives and
affiliates from and against all Damages incurred by any of them in connection
with: (a) violations or alleged violations of any applicable federal, state,
local, or other laws, regulations, ordinances, or orders of any governmental
entity which govern the protection of the environment or human health and safety
("Environmental Laws") relating in any way to any action or omission of the
Company or any predecessor of the Company to the extent the facts, events, or
conditions giving rise to such violation or alleged violation occurred or
existed on or before the Effective Date; (b) the actual or alleged presence,
emanation, migration, disposal, release, or threatened release (collectively,
"Releases") of any oil, petroleum product, hazardous material, or hazardous
substance as such terms are defined by Environmental Laws (collectively,
"Hazardous Substances") at, under, to, or from any property or facility which
presently is or previously was owned, leased, operated, or otherwise used by the
Company or any predecessor of the Company to the extent that said actual or
alleged Release occurred or is alleged to have occurred on or before the
Effective Date; and (c) the actual or alleged Release of any Hazardous
Substances at any location or facility whatsoever to the extent such Hazardous
Substances were generated by, or were arranged for disposal at such location or
facility by, the Company or any predecessor of the Company on or before the
Effective Date.
6.4 INDEMNIFICATION BY LANDCARE. LandCARE covenants and agrees that it
will indemnify, defend, protect and hold harmless the Stockholder at all times
from and after the date of this Agreement until the Expiration Date from and
against all Damages incurred by the Stockholder as a result of (i) any breach of
any representation or warranty of LandCARE set forth herein; and (ii) any breach
or nonfulfillment of any covenant or agreement by LandCARE under this Agreement.
6.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the "Indemnified
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement ("Third Person") or the commencement of any action or
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall have
the right and shall be given the opportunity to associate with the Indemnified
Party in the defense of such claim, suit or proceedings, and may select counsel
for the Indemnified Party, such counsel to be reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall not, except at its own cost, make
any settlement with respect to any such claim, suit or proceeding without the
prior consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. It is understood and agreed that in situations where
failure of the Indemnifying Party to settle a claim expeditiously could have an
adverse effect on the Indemnified Party, the failure of the Indemnifying Party
to act upon the Indemnified Party's request for consent to such settlement
within five business days of the
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Indemnifying Party's receipt of notice thereof from the Indemnified Party shall
be deemed to constitute consent by the Indemnifying Party of such settlement for
purposes of this Section.
6.6 METHOD OF PAYMENT. All claims for indemnification shall be paid in
cash.
7. NONCOMPETITION
7.1 PROHIBITED ACTIVITIES. As partial consideration for the execution,
delivery and performance of this Agreement by LandCARE, the Stockholder will
not, for a period of five years following the Closing Date, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) own, manage, operate, join, control, consult or advise (whether
or not compensated for such consultation or advice), or participate in, or
render assistance to, or derive any benefit whatever from, any business
offering services or products in direct competition with the Surviving
Corporation within 200 miles of where the Company conducted business at
any time within one year prior to the Closing Date (the "Territory");
(ii) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a sales or managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business offering services or products in direct
competition with the Surviving Corporation or LandCARE within the
Territory;
(iii) call upon any person who is, at that time, an employee of
LandCARE or any of its subsidiaries (including the Surviving Corporation)
for the purpose or with the intent of enticing such employee away from or
out of the employ of LandCARE or any of its subsidiaries (including the
Surviving Corporation);
(iv) call upon any person or entity which is, at that time, or which
has been, within one year prior to the Closing Date, a customer of
LandCARE, the Company or any of LandCARE's subsidiaries (including the
Surviving Corporation) for the purpose of soliciting or selling products
or services in direct competition with LandCARE or any of its subsidiaries
(including the Company) within the Territory.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit the Stockholder from acquiring as a passive investor with no
involvement in the operations or management of the business, not more than one
percent (1%) of the capital stock of a competing business whose stock is
publicly traded on a national securities exchange or over-the-counter market.
The foregoing covenants shall further not be deemed to prohibit the Stockholder
from operating the
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Boylock Company, a California general partnership, in the business or businesses
in which the Boylock Company is engaged on the date hereof (it being understood
that such business or businesses are substantially comprised of nut harvesting
and the performance of field maintenance services for independent nut growers,
and it being agreed that such business or businesses do not compete with
LandCARE on the date hereof); provided, however, that the latter exception shall
not apply to any other competing businesses in which the Boylock Company may
engage in the future.
The provisions of this Section are independent of the noncompetition
provisions contained in any consulting or employment agreement to which the
Stockholder may be or may become a party in connection with the transactions
contemplated hereby. All such provisions are intended to be observed and
enforced in accordance with their terms.
7.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to LandCARE as a result of a breach of the foregoing covenant, and
because of the immediate and irreparable damage that could be caused to LandCARE
for which it would have no other adequate remedy, the Stockholder agrees that
the foregoing covenant may be enforced by LandCARE in the event of breach by the
Stockholder, by injunctions, restraining orders and other equitable actions.
7.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section impose a reasonable restraint on the
Stockholder.
7.4 SEVERABILITY; REFORMATION. The covenants in this Section are severable
and separate, and the unenforceability of any specific covenant shall not affect
the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
7.5 INDEPENDENT COVENANT. The Stockholder acknowledges that the covenants
set forth in this Section are material conditions to LandCARE's willingness to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All of the covenants in this Section shall be construed as
an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of the Stockholder against LandCARE or
any subsidiary thereof, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by LandCARE of such covenants. It is
specifically agreed that the period of five years stated at the beginning of
this Section, during which the agreements and covenants of the Stockholder made
in this Section shall be effective, shall be computed by excluding from such
computation any time during which the Stockholder is in violation of any
provision of this Section. The covenants contained in Section shall not be
affected by any breach of any other provision hereof by any party hereto.
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8. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
8.1 GENERAL. The Stockholder recognizes and acknowledges that he has had
access to certain customer lists, confidential information of the Company, such
as operational policies, pricing and cost policies, and other information, that
will be valuable, special and unique assets of the Surviving Corporation and
LandCARE after the Closing Date. The Stockholder agrees that he will not
disclose such confidential information, or any confidential information of the
Surviving Corporation or LandCARE to which they may have access in the future,
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of LandCARE, (b)
following the Closing, such information may be disclosed by the Stockholder as
may be required in the course of performing their duties for the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section,
unless (i) such information becomes known to the public generally through no
fault of the Stockholder, or (ii) disclosure is required by law or the order of
any governmental authority, provided, that prior to disclosing any information
pursuant to this clause (ii), the Stockholder shall give prior written notice
thereof to LandCARE and provide LandCARE with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by the Stockholder of
the provisions of this Section, LandCARE shall be entitled to injunctive or
other equitable relief restraining the Stockholder from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting LandCARE from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
8.2 EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which LandCARE would
have no other adequate remedy, the Stockholder agrees that the foregoing
covenants may be enforced against him by injunctions, restraining orders and
other appropriate equitable relief.
8.3 SURVIVAL. The obligations of the parties under this Section shall
survive the termination of this Agreement for an unlimited time with respect to
proprietary information and a period of five years with respect to
non-proprietary information.
9. INTENDED TAX TREATMENT
9.1 TAX-FREE REORGANIZATION. The parties are entering into this Agreement
with the intention that the Merger qualify as a tax-free reorganization for
federal income tax purposes pursuant to Section 368(a)(2)(D) of the Code, except
to the extent of any "boot" received, and the Stockholder will not take any
actions that disqualify the Merger for such treatment.
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10. SECURITIES LAW MATTERS
10.1 ECONOMIC RISK; SOPHISTICATION. The Stockholder acknowledges and
confirms that he has received and reviewed a Prospectus from LandCARE relating
to his acquisition of shares of LandCARE Stock hereunder, but the Stockholder
understands that the shares of LandCARE Stock received by the him have not been
and will not be registered under the Securities Act. The Stockholder (A) has
such knowledge, sophistication and experience in business and financial matters
that they are capable of evaluating the merits and risks of an investment in the
shares of LandCARE Stock, (B) fully understands the nature, scope and duration
of any limitations on transfer of LandCARE Stock described in this Agreement and
(C) can bear the economic risk of an investment in the shares of LandCARE Stock.
10.2 COMPLIANCE WITH LAW. The Stockholder covenants that none of the
LandCARE Stock acquired by the Stockholder hereunder will be offered, sold,
assigned, hypothecated, transferred or otherwise disposed of by the Stockholder
except in full compliance with all applicable securities laws.
10.3 RESTRICTIONS ON RESALE. The Stockholder agrees that he will not sell,
offer to sell, or otherwise transfer or dispose of, any shares of the LandCARE
Stock received by the Stockholder, engage in put, call, short-sale, straddle or
similar transactions, or in any other way reduce the Stockholder's risk of
owning shares of LandCARE Stock prior to the date two years after the Closing
Date, and agrees that the certificates evidencing the LandCARE Stock to be
received by the Stockholder will bear the following legend evidencing this
restriction:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND
APPLICABLE SECURITIES LAW.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISTRIBUTION PRIOR TO [SECOND
ANNIVERSARY OF THE CLOSING DATE]. UPON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
After the date one year after the Closing Date, the Stockholder may sell such
shares pursuant to the LandCARE Liquidity Program, a summary of which is
attached hereto as SCHEDULE 10.3, or, in the
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event the ServiceMaster Merger occurs, such comparable program in effect at
ServiceMaster. If the ServiceMaster Merger does not occur, LandCARE shall remove
the aforementioned legend to the extent reasonably necessary to permit the
Stockholder to participate in the LandCARE Liquidity Program. If the
ServiceMaster Merger does occur, the shares of ServiceMaster stock issued to the
Stockholder will bear a legend substantially similar to the second paragraph of
the legend listed above, and such legend shall be removed as may be reasonably
necessary to permit the Stockholder to participate in the ServiceMaster program
described above; provided, however that the ServiceMaster program shall be no
more restrictive than the LandCARE Liquidity Program. After the date two years
after the Closing Date, neither the restrictions set forth herein nor the
provisions of the LandCARE Liquidity Plan or ServiceMaster program shall
restrict the Stockholder from selling or otherwise disposing of any of such
shares of LandCARe Stock or ServiceMaster stock, as the case may be.
11. GENERAL
11.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
LandCARE, and the heirs and legal representatives of the Stockholder.
11.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and LandCARE, and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the parties hereto.
11.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. The signatures to
this Agreement need not all be on a single copy of this Agreement, and may be
facsimiles rather than originals, and shall be fully as effective as though all
signatures were originals on the same copy.
11.4 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
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11.5 NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, or by facsimile, as follows:
If to LandCARE, addressed to it at:
LandCARE USA, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attn: General Counsel
If to either Gold Bear or Realgreen, addressed to it at:
146 East Railroad Avenue
Monrovia, California 91016
If to the Stockholder, addressed to him at the Company's address, or to
such other address as any party hereto shall specify pursuant to this Section
from time to time.
11.6 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California without regard to its principles governing
conflicts of laws.
11.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties.
11.8 EFFECT OF INVESTIGATION. No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
11.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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11.10 TIME. Time is of the essence with respect to this Agreement.
11.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
11.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
11.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
11.14 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other party; provided,
however, that LandCARE may issue a press release in accordance with its
customary practices without such approval and any party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities.
11.15 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
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N WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LANDCARE USA, INC.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
Senior Vice President and General Counsel
GOLDBEAR ACQUISITION CORP.
By:/s/ WILLIAM L. FIEDLER
William L. Fiedler
President
GOLDEN BEAR ARBORISTS, INC.
By: BRADLEY J. BOYAJIAN
Bradley J. Boyajian
President
REALGREEN GARDENING, INC.
By: BRADLEY J. BOYAJIAN
Bradley J. Boyajian
President
By: BRADLEY J. BOYAJIAN
Bradley J. Boyajian
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 9, 1998
among
LANDCARE USA, INC.
THE INSTITUTIONS FROM TIME TO TIME
PARTIES HERETO AS LENDERS
BANKERS TRUST COMPANY,
as Documentation Agent
NATIONSBANK, N.A.,
as Administrative and Collateral Agent
and
THE BANK OF NOVA SCOTIA,
as Co-Agent
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I: DEFINITIONS.................................................1
1.1 Certain Defined Terms.......................................1
1.2 References.................................................19
ARTICLE II: THE LOAN FACILITIES........................................19
2.1 Loans......................................................19
2.2 Rate Options for all Advances..............................21
2.3 Optional Payments; Mandatory Prepayments...................21
(a) Optional Payments....................................21
(b) Mandatory Prepayments................................21
2.4 Changes in Commitments.....................................21
2.5 Method of Borrowing........................................23
2.6 Method of Selecting Types and Interest Periods for Advances24
2.7 Minimum Amount of Each Advance.............................24
2.8 Method of Selecting Types and Interest Periods for
Conversion and Continuation of Advances...................24
(a) Right to Convert.....................................24
(b) Automatic Conversion and Continuation................24
(c) No Conversion Post-Default or Post-Unmatured Default.24
(d) Conversion/Continuation Notice.......................24
2.9 Default Rate...............................................25
2.10 Method of Payment..........................................25
2.11 Revolving Notes, Telephonic Notices........................25
2.12 Promise to Pay; Interest and Commitment Fees; Interest
Payment Dates; Interest and Fee Basis; Taxes; Loan
and Control Accounts......................................25
(a) Promise to Pay.......................................25
(b) Interest Payment Dates...............................25
(c) Commitment Fee.......................................26
(d) Interest and Fee Basis; Applicable Eurodollar Margin,
Applicable Floating Rate Margin and Applicable
Commitment Fee Percentage...........................26
(f) Loan Account.........................................30
(g) Control Account......................................30
(h) Entries Binding......................................30
2.13 Notification of Advances, Interest Rates, Prepayments and
Aggregate Commitment Reductions...........................30
2.14 Lending Installations......................................30
2.15 Non-Receipt of Funds by the Agent..........................30
2.16 Termination Date...........................................31
2.17 Replacement of Certain Lenders.............................31
ARTICLE III: THE LETTER OF CREDIT FACILITY..............................32
3.1 Obligation to Issue........................................32
3.2 Types and Amounts..........................................32
3.3 Conditions.................................................32
3.4 Procedure for Issuance of Letters of Credit................32
3.5 Letter of Credit Participation.............................33
3.6 Reimbursement Obligation...................................33
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SECTION PAGE
3.7 Letter of Credit Fees......................................34
3.8 Issuing Bank Reporting Requirements........................34
3.9 Indemnification; Exoneration...............................34
3.10 Cash Collateral............................................35
ARTICLE IV: CHANGE IN CIRCUMSTANCES....................................35
4.1 Yield Protection...........................................35
4.2 Changes in Capital Adequacy Regulations....................36
4.3 Availability of Types of Advances..........................37
4.4 Funding Indemnification....................................37
4.5 Lender Statements; Survival of Indemnity...................37
ARTICLE V: CONDITIONS PRECEDENT.......................................38
5.1 Initial Advances and Letters of Credit.....................38
5.2 Each Advance and Letter of Credit..........................39
ARTICLE VI: REPRESENTATIONS AND WARRANTIES.............................39
6.1 Organization; Corporate Powers.............................39
6.2 Authority..................................................39
6.3 No Conflict; Governmental Consents.........................40
6.4 Financial Statements.......................................40
6.5 No Material Adverse Change.................................40
6.6 Taxes......................................................40
(a) Tax Examinations.....................................40
(b) Payment of Taxes.....................................40
6.7 Litigation; Loss Contingencies and Violations..............41
6.8 Subsidiaries...............................................41
6.9 ERISA......................................................41
6.10 Accuracy of Information....................................42
6.11 Securities Activities......................................42
6.12 Material Agreements........................................42
6.13 Compliance with Laws.......................................43
6.14 Assets and Properties......................................43
6.15 Statutory Indebtedness Restrictions........................43
6.16 Insurance..................................................43
6.17 Labor Matters..............................................43
6.18 Environmental Matters......................................43
6.19 Benefits...................................................44
6.20 Year 2000 Problem..........................................44
ARTICLE VII: COVENANTS..................................................44
7.1 Reporting..................................................44
(a) Financial Reporting..................................44
(b) Notice of Default....................................45
(c) Lawsuits.............................................46
(d) ERISA Notices........................................46
(e) Labor Matters........................................47
(f) Other Indebtedness...................................47
ii
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SECTION PAGE
(g) Other Reports........................................47
(h) Environmental Notices................................48
(i) Year 2000 Information................................48
(j) Other Information....................................48
7.2 Affirmative Covenants......................................48
(a) Corporate Existence, Etc.............................48
(b) Corporate Powers; Conduct of Business................48
(c) Compliance with Laws, Etc............................48
(d) Payment of Taxes and Claims; Tax Consolidation.......48
(e) Insurance............................................49
(f) Inspection of Property; Books and Records;
Discussions.........................................49
(g) ERISA Compliance.....................................49
(h) Maintenance of Property..............................49
(i) Environmental Compliance.............................50
(j) Use of Proceeds......................................50
(k) Addition of Guarantors; Addition of Pledged
Capital Stock.......................................50
(l) Year 2000 Problem....................................50
7.3 Negative Covenants.........................................50
(a) Indebtedness.........................................50
(b) Sales of Assets......................................52
(c) Liens................................................52
(d) Investments..........................................53
(e) Non-Guarantor Subsidiaries or Non-Pledged
Subsidiaries........................................54
(f) Restricted Payments..................................54
(g) Conduct of Business; Subsidiaries; Acquisitions......54
(h) Transactions with Shareholders and Affiliates........56
(i) Restriction on Fundamental Changes...................56
(j) Sales and Leasebacks.................................57
(k) Margin Regulations...................................57
(l) ERISA................................................57
(m) Issuance of Equity Interests.........................58
(n) Corporate Documents..................................58
(o) Fiscal Year..........................................58
(p) Subsidiary Covenants.................................58
(q) Hedging Obligations..................................58
7.4 Financial Covenants........................................58
(a) Fixed Charge Coverage Ratio..........................58
(b) Total Debt to EBITDA Ratio...........................58
(c) Senior Debt to EBITDA Ratio..........................59
(d) Minimum Consolidated Net Worth.......................59
(e) Capital Expenditures.................................59
ARTICLE VIII: DEFAULTS...................................................59
8.1 Defaults...................................................59
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES....................................62
9.1 Termination of Commitments; Acceleration...................62
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SECTION PAGE
9.2 Defaulting Lender..........................................62
9.3 Amendments.................................................63
9.4 Preservation of Rights.....................................64
ARTICLE X: GENERAL PROVISIONS.........................................64
10.1 Survival of Representations................................64
10.2 Governmental Regulation....................................64
10.3 Performance of Obligations.................................64
10.4 Headings...................................................65
10.5 Entire Agreement...........................................65
10.6 Several Obligations; Benefits of this Agreement............65
10.7 Expenses; Indemnification..................................65
(a) Expenses.............................................65
(b) Indemnity............................................65
(c) Waiver of Certain Claims; Settlement of Claims.......67
(d) Survival of Agreements...............................67
10.8 Numbers of Documents.......................................67
10.9 Accounting.................................................67
10.10 Severability of Provisions.................................67
10.11 Nonliability of Lenders....................................67
10.12 Governing Law..............................................67
10.13 Consent to Jurisdiction; Service of Process; Jury Trial....68
(a) Exclusive Jurisdiction...............................68
(b) Other Jurisdictions..................................68
(c) Service of Process...................................68
(d) Waiver of Jury Trial.................................68
(e) Waiver of Bond.......................................68
(f) Advice of Counsel....................................69
10.14 No Strict Construction.....................................69
10.15 Subordination of Intercompany Indebtedness.................69
10.16 Usury Not Intended.........................................70
10.17 Business Loans.............................................70
ARTICLE XI: THE AGENT..................................................70
11.1 Appointment of Agent; Nature of Relationship...............70
11.2 Powers.....................................................71
11.3 General Immunity...........................................71
11.4 No Responsibility for Loans, Creditworthiness,
Collateral, Recitals, Etc.................................71
11.5 Action on Instructions of Lenders..........................71
11.6 Employment of Agents and Counsel...........................72
11.7 Reliance on Documents; Counsel.............................72
11.8 The Agent's Reimbursement and Indemnification..............72
11.9 Rights as a Lender.........................................72
11.10 Lender Credit Decision.....................................72
11.11 Successor Agent............................................72
11.12 Collateral Documents.......................................73
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ARTICLE XII: SETOFF; RATABLE PAYMENTS...................................74
12.1 Setoff.....................................................74
12.2 Ratable Payments...........................................74
12.3 Application of Payments....................................74
12.4 Relations Among Lenders....................................75
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..........75
13.1 Successors and Assigns.....................................75
13.2 Participations.............................................76
(a) Permitted Participants; Effect.......................76
(b) Benefit of Setoff....................................76
13.3 Assignments................................................76
(a) Permitted Assignments................................76
(b) Effect; Closing Date.................................77
(c) The Register.........................................77
13.4 Confidentiality............................................77
13.5 Dissemination of Information...............................78
ARTICLE XIV: NOTICES....................................................78
14.1 Giving Notice..............................................78
14.2 Change of Address..........................................78
ARTICLE XV: COUNTERPARTS...............................................78
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EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A -- Form of Assignment Agreement
(Definitions, Sections 2.17 and 13.3)
EXHIBIT B -- Commitments
(Definitions)
EXHIBIT C -- Form of Revolving Note
(Definitions)
EXHIBIT D -- Form of Swing Line Note
(Definitions)
EXHIBIT E -- Form of Borrowing Notice (Section 2.6)
EXHIBIT F -- Form of Request for Letter of Credit (Section 3.3)
EXHIBIT G -- Form of Borrower's Counsel's Opinion
(Section 5.1)
EXHIBIT H -- Form of Officer's Certificate
(Sections 5.2 and 7.1(A)(iii))
EXHIBIT I -- Form of Compliance Certificate
(Sections 5.2 and 7.1(A)(iii))
EXHIBIT J -- Form of Guaranty Supplement
(Section 7.3(G)(ii))
EXHIBIT K -- Form of Opinion in respect of Increases in Aggregate
Commitment
(Section 2.4(b))
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SCHEDULES
Schedule 1.1.1 -- Founding Companies (Definitions)
Schedule 1.1.2 -- Initial Shareholders (Definitions)
Schedule 1.1.3 -- Permitted Existing Indebtedness (Definitions)
Schedule 1.1.4 -- Permitted Existing Investments (Definitions)
Schedule 1.1.5 -- Permitted Existing Liens (Definitions)
Schedule 6.8 -- Subsidiaries (Section 6.8)
Schedule 7.3 -- Subordination Terms (Section 7.3(A))
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CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of November 9, 1998 is
entered into among LandCARE USA, Inc., a Delaware corporation, the institutions
from time to time parties hereto as Lenders, whether by execution of this
Agreement or an Assignment Agreement pursuant to SECTION 13.3, NationsBank, N.A.
for itself and as Administrative and Collateral Agent for the other Lenders, and
Bankers Trust Company, as Documentation Agent.
RECITALS
WHEREAS, the Borrower, the Original Agent and the Original Lenders are
party to the Original Credit Agreement; and
WHEREAS, the Borrower has requested various modifications to the Original
Credit Agreement, including, without limitation, the replacement of the Original
Agent with the Agent and an increase in the amount of the available credit.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Borrower, the Lenders, the Agent,
and the Documentation Agent agree that the Original Credit Agreement is hereby
amended and restated in its entirety as follows:
ARTICLE I: DEFINITIONS
1.1 CERTAIN DEFINED TERMS. In addition to the terms defined above, the
following terms used in this Agreement shall have the following meanings,
applicable both to the singular and the plural forms of the terms defined.
As used in this Agreement:
"ACQUISITION" means any transaction, or any series of related
transactions, consummated on or after the Closing Date, by which the Borrower or
any of its Subsidiaries (i) acquires any going business or all or substantially
all of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage of voting power) of the outstanding
equity interests of another Person.
"ADVANCE" means a borrowing hereunder consisting of the aggregate amount
of the several Revolving Loans made by the Lenders to the Borrower of the same
Type and, in the case of Eurodollar Rate Advances, for the same Interest Period.
"AFFECTED LENDER" is defined in SECTION 2.17 hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of greater than ten percent (10%) or more of any class of voting
securities (or other voting interests)
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of the controlled Person or possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of Capital Stock, by contract or otherwise.
"AGENT" means NationsBank, N.A. as Administrative and Collateral Agent for
the Lenders pursuant to ARTICLE XI hereof and any successor Agent appointed
pursuant to ARTICLE XI hereof.
"AGGREGATE COMMITMENT" means the aggregate of the Commitments of all the
Lenders, as amended from time to time pursuant to the terms hereof. The initial
Aggregate Commitment is One Hundred Ten Million and 00/100 Dollars
($110,000,000.00).
"AGREEMENT" means this Amended and Restated Credit Agreement, as it may be
amended, restated or otherwise modified and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles in effect from time to time, applied in a manner consistent with that
used in preparing the financial statements referred to in SECTION 6.4(A) hereof,
PROVIDED, HOWEVER, that all PRO FORMA financial statements reflecting
Acquisitions shall be prepared in accordance with the requirements established
by the Commission for acquisition accounting for reporting acquisitions by
public companies (whether or not such Acquisitions are required to be publicly
reported).
"ALTERNATE BASE RATE" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Corporate Base Rate for such day and
(ii) the sum of (a) the Federal Funds Effective Rate for such day and (b)
one-half of one percent (0.5%) per annum.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means, as at any date of
determination, the rate per annum then applicable in the determination of the
amount payable under SECTION 2.12(C)(I) hereof, determined in accordance with
the provisions of SECTION 2.12(D)(II) hereof.
"APPLICABLE EURODOLLAR MARGIN" means, as at any date of determination, the
rate per annum then applicable to Eurodollar Rate Loans, determined in
accordance with the provisions of SECTION 2.12(D)(II) hereof.
"APPLICABLE FLOATING RATE MARGIN" means, as at any date of determination,
the rate per annum then applicable to Floating Rate Loans, determined in
accordance with the provisions of SECTION 2.12(D)(II) hereof.
"APPLICABLE L/C FEE PERCENTAGE" means, with respect to any Letter of
Credit and as at any date of determination, a rate per annum equal to the
Applicable Eurodollar Margin in effect on such date.
"ARRANGER" means NationsBanc Montgomery Securities LLC, in its capacity as
the Arranger and Syndication Agent for the loan transaction evidenced by this
Agreement.
"ASSET SALE" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Equity Interests of any Subsidiary of such Person).
"ASSIGNMENT AGREEMENT" means an assignment and acceptance agreement
entered into in connection with an assignment pursuant to SECTION 13.3 hereof in
substantially the form of EXHIBIT A.
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<PAGE>
"AUTHORIZED OFFICER" means any of the chief executive officer, president,
chief financial officer, treasurer, assistant treasurer or secretary of the
Borrower, acting singly.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which the Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" means LandCARE USA, Inc., a Delaware corporation, together with
its successors and assigns, including a debtor-in-possession on behalf of the
Borrower.
"BORROWING DATE" means a date on which an Advance or Swing Line Loan is
made hereunder.
"BORROWING NOTICE" is defined in SECTION 2.6 hereof.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurodollar Rate, a day (other than a
Saturday or Sunday) on which banks are open for business in Houston, Texas and
on which dealings in Dollars are carried on in the London interbank market and
(ii) for all other purposes a day (other than a Saturday or Sunday) on which
banks are open for business in Houston, Texas.
"BUYING LENDER(S)" is defined in SECTION 2.4(C) hereof.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities, including
Capitalized Leases and Permitted Purchase Money Indebtedness) (other than in
connection with Permitted Acquisitions) by the Borrower and its Subsidiaries
during that period that, in conformity with Agreement Accounting Principles, are
required to be included in or reflected by the property, plant, equipment or
similar fixed asset accounts reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations for any such deposits with a term of more than ten (10)
days); (iii) shares of money market, mutual or similar funds having assets in
excess of $100,000,000 and the investments of which are
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limited to investment grade securities (i.e., securities rated at least Baa by
Moody's Investors Service, Inc. or at least BBB by Standard & Poor's Ratings
Group); (iv) commercial paper of United States and foreign banks and bank
holding companies and their subsidiaries and United States and foreign finance,
commercial industrial or utility companies which, at the time of acquisition,
are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1 (or better)
by Moody's Investors Service, Inc.; (v) corporate bonds, mortgage-backed
securities and municipal bonds in each case of a domestic issuer rated at the
date of acquisition not less than Aaa by Moody's Investors Service, Inc. or AAA
by Standard & Poor's Ratings Group with maturities of no more than two (2) years
from the date of acquisition; (vi) repurchase agreements secured by debt
securities of the type described in part (i) above, the market value of which,
including accrued interest, is not less than 100% of the amount of the
repurchase agreement, with maturities of no more than two years from the date of
acquisition, issued by or acquired from or through any Lender or any bank or
trust company organized under the laws of the United States or any state thereof
and having capital and surplus aggregating at least $100,000,000.00; and (vii)
money market funds with respect to which not less than 90% of such funds are
invested in the type of investments specified in clauses (i) through (v) above;
PROVIDED, unless the context otherwise requires, that the maturities of such
Cash Equivalents shall not exceed 365 days.
"CHANGE" is defined in SECTION 4.2 hereof.
"CHANGE OF CONTROL" means an event or series of events by which:
(i) any "person" or "group" (as such terms are used in SECTIONS
13(D) and 14(D) of the Exchange Act), other than the Initial Shareholders,
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of 30% or more of the combined
voting power of the Borrower's Capital Stock ordinarily having the right
to vote at an election of directors;
(ii) during any period of 24 consecutive calendar months,
individuals:
(a) who were directors of the Borrower on the first day of
such period, or
(b) whose election or nomination for election to the board
of directors of the Borrower was recommended or approved
by at least a majority of the directors then still in
office who were directors of the Borrower on the first
day of such period, or whose election or nomination for
election was so approved,
shall cease to constitute a majority of the board of directors of the
Borrower;
(iii) the Borrower consolidates with or merges into another
corporation or conveys, transfers or leases all or substantially all of
its property to any Person, or any corporation consolidates with or merges
into the Borrower, in either event pursuant to a transaction in which the
outstanding Capital Stock of the Borrower is reclassified or changed into
or exchanged for cash, securities or other property; or
(iv) other than as a result of a transaction permitted under the
terms of this Agreement, the Borrower shall cease to own, of record and
beneficially, with sole voting and dispositive power, (a) 100% of the
outstanding shares of Capital Stock of each of the Founding Companies, (b)
80% of the outstanding shares of Capital Stock of each of the other
Guarantors or (c) shall cease to have
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<PAGE>
the power, directly or indirectly, to elect a majority of the members of
the board of directors of each of the Guarantors.
"CLOSING DATE" means November __, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, or any successor statute.
"COLLATERAL" means any property owned by the Borrower or any of its
Subsidiaries and pledged to the Agent pursuant to the Pledge Agreements to
secure the Secured Obligations.
"COMMISSION" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"COMMITMENT" means, for each Lender, the obligation of such Lender to make
Revolving Loans and to purchase participations in Letters of Credit not
exceeding the amount set forth on EXHIBIT B to this Agreement opposite its name
thereon under the heading "Commitment" or on Schedule 1 of the Assignment
Agreement by which it became a Lender or as set forth in the Commitment and
Acceptance pursuant to which it became a Lender, as such amount may be modified
from time to time pursuant to the terms of this Agreement or to give effect to
any applicable Assignment Agreement or Commitment and Acceptance.
"COMMITMENT INCREASE NOTICE" is defined in SECTION 2.4(B).
"CONSOLIDATED NET WORTH" means, at a particular date, all amounts which
would be included under shareholders' equity for the Borrower and its
consolidated Subsidiaries determined in accordance with Agreement Accounting
Principles.
"CONSOLIDATED REVENUES" means, as of any date of calculation, revenues of
the Borrower and its consolidated Subsidiaries for the twelve-month period ended
immediately prior to such calculation date; PROVIDED that the revenues for all
entities which are Subsidiaries as of such calculation date shall be included,
even though some of such revenues were earned prior to such entity becoming a
Subsidiary of the Borrower.
"CONSOLIDATED TANGIBLE ASSETS" means the total assets of the Borrower and
its Subsidiaries on a consolidated basis, but excluding therefrom all items that
are treated as intangibles under Agreement Accounting Principles.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBS"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"CONTINGENT OBLIGATION", as applied to any Person, means any Contractual
Obligation, contingent or otherwise, of that Person with respect to any
Indebtedness of another or other obligation or liability of another, including,
without limitation, any such Indebtedness, obligation or liability of another
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans,
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advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition, or to make
payment other than for value received.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision of
any equity or debt securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument, in each case in writing, to which that
Person is a party or by which it or any of its properties is bound, or to which
it or any of its properties is subject.
"CONTROLLED GROUP" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in CLAUSE (I) above or any
partnership or trade or business described in CLAUSE (II) above.
"CONTROLLED SUBSIDIARY" of any Person means a Subsidiary of such Person
(i) 90% or more of the total Equity Interests or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more wholly-owned Subsidiaries of such Person and (ii)
of which such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies, whether through the ownership
of voting securities, by agreement or otherwise.
"CONVERSION/CONTINUATION NOTICE" is defined in SECTION 2.8(D) hereof.
"CORPORATE BASE RATE" means the per annum rate of interest established
from time to time by NationsBank as its prime rate, which rate may not be the
lowest rate of interest charged by NationsBank to its customers.
"CURE LOAN" is defined in SECTION 9.2(III) hereof.
"CURRENT FINANCIALS" means, initially, the consolidated balance sheet and
related consolidated statements of income and cash flows of the Borrower and its
Subsidiaries dated as of June 30, 1998, and, subsequently, the most recent
consolidated financial statements of the Borrower and its Subsidiaries delivered
under SECTION 7.1.
"CUSTOMARY PERMITTED LIENS" means:
(i) Liens with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or (if
foreclosure, distraint, sale or other similar proceedings shall not have
been commenced) which are being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
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<PAGE>
(iii) Liens incurred or deposits made, in each case, in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety, appeal and performance bonds;
PROVIDED that (A) all such Liens do not in the aggregate materially
detract from the value of the Borrower's or such Subsidiary's assets or
property taken as a whole or materially impair the use thereof in the
operation of the businesses taken as a whole, and (B) with respect to
Liens securing bonds to stay judgments or in connection with appeals do
not secure at any time an aggregate amount which if paid at such time
would result in the occurrence or existence of a Default;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute a Default under SECTION 8.1(H)
hereof; and
(vi) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business.
"DEFAULT" means an event described in ARTICLE VIII hereof.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the Termination Date.
"DOCUMENTATION AGENT" means Bankers Trust Company in its capacity as
Documentation Agent for the loan transaction evidenced by this Agreement.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"DOLLAR" and "$" means dollars in the lawful currency of the United
States.
"EBITDA" means, for any period, on a consolidated basis for the Borrower
and its Subsidiaries, the sum of the amounts for such period, without
duplication, of:
(i) Net Income,
PLUS (ii) Interest Expense,
PLUS (iii) charges against income for foreign, federal, state and
local taxes, to the extent deducted in computing Net Income,
PLUS (iv) depreciation expense, to the extent deducted in computing Net
Income,
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PLUS (v) amortization expense, including, without limitation,
amortization of goodwill, other intangible assets and the
fees, costs and expenses payable by the Borrower in connection
with the Original Credit Agreement, this Agreement, the Public
Offering and the consummation of the Initial Acquisitions, to
the extent deducted in computing Net Income,
PLUS (vi) other non-cash charges classified as long-term deferrals
in accordance with Agreement Accounting Principles, to the
extent deducted in computing Net Income,
MINUS (vii) Net Extraordinary Gains,
PLUS (viii)non-cash extraordinary losses (and any non-cash
nonrecurring unusual losses arising in or outside of the
ordinary course of business not included in extraordinary
losses determined in accordance with Agreement Accounting
Principles) but only to the extent such amounts were not
utilized to offset gains in calculating Net Extraordinary
Gains,
PLUS (ix) for the four fiscal quarters commencing with the quarter
in which the applicable charge is taken, all non-cash
compensation expenses of the Borrower associated with the
issuance of the Borrower's common stock to management of the
Borrower or the Founding Companies and consultants to the
Borrower pursuant to the Public Offering,
PLUS (x) the PRO FORMA adjustments which are consistent with the
Commission's regulations and practices as of the Closing Date
(whether or not applicable) to account for adjustments to
historical EBITDA for an acquired entity,
PLUS (xi) any PRO FORMA adjustments which are approved by the Agent
to account for adjustments to historical EBITDA for an
acquired entity.
As used herein "NET EXTRAORDINARY GAINS" means the sum of, but only if positive,
extraordinary gains (and any nonrecurring unusual gains arising in or outside of
the ordinary course of business not included in extraordinary gains determined
in accordance with Agreement Accounting Principles which have been included in
the determination of Net Income) MINUS extraordinary losses (and any
nonrecurring unusual losses arising in or outside of the ordinary course of
business not included in extraordinary losses determined in accordance with
Agreement Accounting Principles). EBITDA shall be calculated for any period by
including the actual amount for the applicable period ending on such day,
including the EBITDA attributable to Permitted Acquisitions occurring during
such period on a PRO FORMA basis for the period from the first day of the
applicable period through the date of the closing of each Permitted Acquisition,
utilizing (a) where available or required pursuant to the terms of this
Agreement, historical audited and/or reviewed unaudited financial statements
obtained from the seller, broken down by fiscal quarter in the Borrower's
reasonable judgment or (b) unaudited financial statements (where no audited or
reviewed financial statements are required pursuant to the terms of this
Agreement) reviewed internally by the Borrower, broken down by fiscal quarter in
the Borrower's reasonable judgment.
"EFFECTIVE COMMITMENT AMOUNTS" is defined in SECTION 2.4(B) hereof.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive
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Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET
SEQ., the Occupational Safety and Health Act of 1970, 29 U.S.C. ss. 651 ET SEQ.,
and the Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 ET
SEQ., in each case including any amendments thereto, any successor statutes, and
any regulations or guidance promulgated thereunder, and any state or local
equivalent thereof.
"ENVIRONMENTAL LIEN" means a lien in favor of any Governmental Authority
for (a) any liability under Environmental, Health or Safety Requirements of Law,
or (b) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement of
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Rate Loan for
the relevant Interest Period, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "Eurodollar Base Rate" shall
mean, for any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in U.S. dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; PROVIDED,
HOWEVER, that if more than one rate is specified on Reuters Screen LIBO Page,
the applicable rate shall be the arithmetic mean of all such rates (rounded
upwards, if necessary, to the nearest 1/100 of 1%).
"EURODOLLAR RATE" means, with respect to a Eurodollar Rate Loan for the
relevant Interest Period, the Eurodollar Base Rate applicable to such Interest
Period PLUS the then Applicable Eurodollar Margin. The Eurodollar Rate shall be
rounded to the next higher multiple of 1/100 of 1% if the rate is not such a
multiple.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest at the
Eurodollar Rate.
"EURODOLLAR RATE LOAN" means a Loan, or portion thereof, which bears
interest at the Eurodollar Rate.
"FAIR VALUE" means (a) with respect to the Capital Stock of the Borrower,
the closing price for such Capital Stock on the trading date immediately
preceding the date of the applicable acquisition agreement; PROVIDED that such
amount may be discounted to the extent such discount is permitted by Agreement
Accounting Principles and (b) with respect to other assets, the value of the
relevant asset as of the date of acquisition or sale determined in an
arm's-length transaction conducted in good faith between an informed and willing
buyer and an informed and willing seller under no compulsion to buy.
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<PAGE>
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Houston
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FIXED CHARGE COVERAGE RATIO" is defined in SECTION 7.4(A) hereof.
"FLOATING RATE" means, for any day for any Loan, a rate per annum equal to
the Alternate Base Rate for such day PLUS the then Applicable Floating Rate
Margin, changing and as the Alternate Base Rate or Applicable Floating Rate
Margin changes.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
"FLOATING RATE LOAN" means a Loan, or portion thereof, which bears
interest at the Floating Rate.
"FOUNDING COMPANIES" means each of the Persons listed on SCHEDULE 1.1.1
hereto.
"GOVERNMENTAL ACTS" is defined in SECTION 3.9(A) hereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GROSS NEGLIGENCE" means recklessness, the absence of the slightest care
or the complete disregard of consequences. Gross Negligence does not mean the
absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. If the term "gross negligence" is used with respect to the Agent
or any Lender or any indemnitee in any of the other Loan Documents, it shall
have the meaning set forth herein.
"GUARANTORS" means all of the Borrower's Subsidiaries as of the Closing
Date and any other New Subsidiaries which have satisfied the provisions of
SECTION 7.3(G)(II) hereof, and their respective successors and assigns.
"GUARANTY" means that certain Subsidiary Guaranty dated as of the date of
this Agreement executed by the Guarantors in favor of the Agent, for the ratable
benefit of the Lenders, as it may be amended, modified, supplemented and/or
restated (including to add new Guarantors), and as in effect from time to time.
"HEDGING OBLIGATIONS" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
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"INDEBTEDNESS" of any Person means, without duplication, such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from property or assets now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances or other instruments, (e) Capitalized Lease Obligations, (f)
reimbursement obligations with respect to letters of credit (other than
commercial letters of credit) issued for the account of such Person, (g) Hedging
Obligations, (h) Off Balance Sheet Liabilities and (i) Contingent Obligations in
respect of obligations of another Person of the type described in the foregoing
clauses (a) through (h). The amount of Indebtedness of any Person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such Contingent Obligations at such date and (ii) in the case of Indebtedness of
others secured by a Lien to which the property or assets owned or held by such
Person is subject, the lesser of the fair market value at such date of any asset
subject to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured.
"INDEMNIFIED MATTERS" is defined in SECTION 10.7(B) hereof.
"INDEMNITEES" is defined in SECTION 10.7(B) hereof.
"INITIAL ACQUISITIONS" means the acquisition by the Borrower in separate
merger transactions, in exchange for cash and shares of its common stock, of the
Founding Companies.
"INITIAL SHAREHOLDERS" means the Persons set forth on SCHEDULE 1.1.2
hereto.
"INTEREST EXPENSE" means, for any period, the total interest expense of
the Borrower and its consolidated Subsidiaries, whether paid or accrued
(including the interest component of Capitalized Leases, facility and letter of
credit fees), but excluding interest expense not payable in cash (including
amortization of discount), all as determined in conformity with Agreement
Accounting Principles.
"INTEREST PERIOD" means, with respect to a Eurodollar Rate Loan, a period
of one (1), two (2), three (3), or six (6) months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period shall
end on (but exclude) the day which corresponds numerically to such date one,
two, three or six months thereafter; PROVIDED, HOWEVER, that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If an Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day, PROVIDED, HOWEVER, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"INVESTMENT" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of any Indebtedness, Equity Interests or other
securities, or of a beneficial interest in any Indebtedness, Equity Interests or
other securities, issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
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"ISSUING BANKS" means NationsBank and any other Lender which, at the
Borrower's request, agrees, in each such Lender's sole discretion, to become an
Issuing Bank for the purpose of issuing Letters of Credit, and their respective
successors and assigns, in each case in such Lender's separate capacity as an
issuer of Letters of Credit pursuant to SECTION 3.1. The designation of any
Lender as an Issuing Bank after the date hereof shall be subject to the prior
written consent of the Agent.
"L/C DRAFT" means a draft drawn on an Issuing Bank pursuant to a Letter of
Credit.
"LAWS" means all applicable statutes, laws, treaties, ordinances, rules,
regulations, permits, orders, writs, injunctions, decrees, judgments, opinions
and interpretations of any Governmental Authority.
"L/C INTEREST" is defined in SECTION 3.5 hereof.
"L/C OBLIGATIONS" means, without duplication, an amount equal to the sum
of (i) the aggregate of the amount then available for drawing under each of the
Letters of Credit, (ii) the face amount of all outstanding L/C Drafts
corresponding to the Letters of Credit, which L/C Drafts have been accepted by
the applicable Issuing Bank, (iii) the aggregate outstanding amount of all
Reimbursement Obligations at such time and (iv) the aggregate face amount of all
Letters of Credit requested by the Borrower but not yet issued (unless the
request for an unissued Letter of Credit has been denied).
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and each Proposed New Lender which becomes a Lender hereto
pursuant to the provisions of SECTION 2.4(B) and their respective successors and
assigns.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LENDING PARTY" is defined in SECTION 13.4 hereof.
"LETTER OF CREDIT" means the standby letters of credit issued by the
Issuing Banks pursuant to SECTION 3.1 hereof.
"LEVERAGE RATIO" is defined in SECTION 7.4(B) hereof.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, encumbrance or security agreement or preferential
arrangements of any kind or nature whatsoever (including, without limitation,
the interest of a vendor or lessor under any conditional sale, Capitalized Lease
or other title retention agreement).
"LOAN(S)" means, with respect to a Lender, such Lender's portion of any
Advance made pursuant to SECTION 2.1(A) hereof (individually a "REVOLVING LOAN"
and collectively, the "REVOLVING LOANS"), and in the case of the Swing Line
Bank, any Swing Line Loan made pursuant to SECTION 2.1(B) hereof, and
collectively all such Revolving Loans and Swing Line Loans, whether made or
continued as or converted to Floating Rate Loans or Eurodollar Rate Loans.
"LOAN ACCOUNT" is defined in SECTION 2.12(F) hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty, the Pledge
Agreements, and all other documents, instruments and agreements executed in
connection therewith or contemplated thereby, as the same may be amended,
restated or otherwise modified and in effect from time to time.
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"MARGIN STOCK" is defined in Regulation U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower, or the Borrower and its Subsidiaries, taken as a
whole, (b) the ability of the Borrower or any of its Subsidiaries to perform
their respective obligations under the Loan Documents in any material respect or
(c) the ability of the Lenders or the Agent to enforce in any material respect
their rights with respect to the Collateral.
"MATERIAL SUBSIDIARY" means on any date of its determination (a) any
"Significant Subsidiary" as defined in Regulation S-X issued pursuant to the
Securities Act and the Exchange Act as of such date and (b) any other Subsidiary
of the Borrower which accounts for ten percent (10%) or more of the Borrower's
Consolidated Revenues as of the last day of the month ending immediately
preceding such date.
"MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law. The maximum lawful rate under Texas law for this Agreement shall
be the weekly indicated rate ceiling under FINANCE CODE ss. 1.001 ET SEQ. (West
1998), unless any other lawful rate ceiling exceeds the rate ceiling so
determined, and then the higher rate ceiling shall apply.
"MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Borrower or any member of the Controlled
Group.
"NATIONSBANK" means NationsBank, N.A., in its individual capacity, and its
successors.
"NET INCOME" means, for any period, the net earnings (or loss) after taxes
of the Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with Agreement
Accounting Principles.
"NEW SUBSIDIARY" is defined in SECTION 7.3(G)(II).
"NON PRO RATA LOAN" is defined in SECTION 9.2 hereof.
"NOTICE OF ASSIGNMENT" is defined in SECTION 13.3(B) hereof.
"NOTES" means the Revolving Notes and the Swing Line Note.
"OBLIGATIONS" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower to the Agent, any Lender, the Swing
Line Bank, the Arranger, the Documentation Agent, any Affiliate of the Agent or
any Lender, or any Indemnitee, of any kind or nature, present or future, arising
under this Agreement, the Notes or any other Loan Document, whether or not
evidenced by any note, guaranty or other instrument, whether or not for the
payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements, paralegals' fees (in each case whether or not allowed),
and any other sum chargeable to the Borrower under this Agreement or any other
Loan Document.
"OFF BALANCE SHEET LIABILITIES" of a Person means (a) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback Transactions which do not create
a liability
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on the consolidated balance sheet of such Person, (c) any liability under any
financing lease or so-called "synthetic" lease transaction, or (d) any
obligations arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheets of such Person and its
Subsidiaries.
"ORIGINAL CREDIT AGREEMENT" means that Credit Agreement dated as of June
9, 1998 (as amended prior to the date hereof) among Borrower, the First National
Bank of Chicago, as Agent (the "ORIGINAL AGENT"), the First National Bank of
Chicago, Bankers Trust Company and NationsBank, as Lenders (the "ORIGINAL
LENDERS").
"OTHER TAXES" is defined in SECTION 2.12(E)(II) hereof.
"PARTICIPANTS" is defined in SECTION 13.2(A) hereof.
"PAYMENT DATE" means the last Business Day of each March, June, September
and December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERMITTED ACQUISITION" is defined in SECTION 7.3(G)(III) hereof.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the Borrower
and its Subsidiaries identified as such on SCHEDULE 1.1.3 to this Agreement.
"PERMITTED EXISTING INVESTMENTS" means the Investments of the Borrower and
its Subsidiaries identified as such on SCHEDULE 1.1.4 to this Agreement.
"PERMITTED EXISTING LIENS" means the Liens on assets of the Borrower and
its Subsidiaries identified as such on SCHEDULE 1.1.5 to this Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" is defined in SECTION 7.3(A)(IX)
hereof.
"PERMITTED REFINANCING INDEBTEDNESS" means any replacement, renewal,
refinancing or extension of any Indebtedness permitted by this Agreement that
(i) does not exceed the aggregate principal amount (plus associated fees and
expenses) of the Indebtedness being replaced, renewed, refinanced or extended,
(ii) does not rank at the time of such replacement, renewal, refinancing or
extension senior to the Indebtedness being replaced, renewed, refinanced or
extended, and (iii) does not contain terms (including, without limitation, terms
relating to security, amortization, maturity, interest rate, premiums, fees,
covenants, event of default and remedies) materially less favorable to the
Borrower or to the Lenders than those applicable to the Indebtedness being
replaced, renewed, refinanced or extended.
"PERMITTED SUBORDINATED INDEBTEDNESS" is defined in SECTION 7.3(A)(III)
hereof.
"PERSON" means any individual, corporation, firm, enterprise, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company or other entity of any kind, or any
government or political subdivision or any agency, department or instrumentality
thereof.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
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"PLEDGE AGREEMENTS" means (a) the Pledge Agreement dated as of the Closing
Date executed by the Borrower in favor of the Agent, and (b) any pledge
agreement executed by any Subsidiary with respect to the Capital Stock of any
other Subsidiary executed as of the Closing Date or pursuant to the terms of
SECTION 7.2(K), in each case, as amended, modified, supplemented and/or restated
(including to add additional pledged Capital Stock of additional Subsidiaries).
"PRO RATA SHARE" means, with respect to any Lender, the percentage
obtained by dividing (A) such Lender's Commitment at such time (as adjusted from
time to time in accordance with the provisions of this Agreement) by (B) the sum
of the Aggregate Commitments at such time; PROVIDED, HOWEVER, if the Commitments
are terminated pursuant to the terms of this Agreement, then "Pro Rata Share"
means the percentage obtained by dividing (x) the sum of such Lender's L/C
Obligations and Revolving Loans, and in the case of the Swing Line Bank, Swing
Line Loans by (y) the aggregate amount of all Revolving Loans, Swing Line Loans
and L/C Obligations.
"PROPOSED NEW LENDER" is defined in SECTION 2.4(B).
"PURCHASERS" is defined in SECTION 13.3(A) hereof.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
"REGISTER" is defined in SECTION 13.3(C) hereof.
"REGULATION T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying Margin
Stock applicable to member banks of the Federal Reserve System.
"REGULATION X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"REIMBURSEMENT OBLIGATION" is defined in SECTION 3.6 hereof.
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property but does not include any
amounts payable under Capitalized Leases of such Person.
"REPLACEMENT LENDER" is defined in SECTION 2.17 hereof.
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"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days after
such event occurs, PROVIDED, HOWEVER, that a failure to meet the minimum funding
standards of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
"REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the aggregate,
are equal to or greater than sixty-six and two-thirds percent (66-2/3%);
PROVIDED, HOWEVER, that, if any of the Lenders shall have failed to fund its Pro
Rata Share of any Revolving Loan requested by the Borrower, or any Swing Line
Loan as requested by the Agent, which such Lenders are obligated to fund under
the terms of this Agreement and any such failure has not been cured, then for so
long as such failure continues, "REQUIRED LENDERS" means Lenders (excluding all
Lenders whose failure to fund their respective Pro Rata Shares of such Revolving
Loans or Swing Line Loans has not been so cured) whose Pro Rata Shares represent
at least sixty-six and two-thirds percent (66-2/3%) of the aggregate Pro Rata
Shares of such Lenders; PROVIDED FURTHER, HOWEVER, that, if the Commitments have
been terminated pursuant to the terms of this Agreement, "REQUIRED LENDERS"
means Lenders (without regard to such Lenders' performance of their respective
obligations hereunder) whose aggregate ratable shares (stated as a percentage)
of the aggregate outstanding principal balance of all Loans and L/C Obligations
are equal to or greater than sixty-six and two-thirds percent (66- 2/3%).
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, Regulations T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or permit or environmental, labor,
employment, occupational safety or health law, rule or regulation, including
Environmental, Health or Safety Requirements of Law.
"RESERVES" means the maximum reserve requirement, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) with respect
to "Eurocurrency liabilities" or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Rate Loans is determined or category of extensions of credit or other assets
which includes loans by a non-United States office of any Lender to United
States residents.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct
or indirect, on account of any Equity Interests of the Borrower now or hereafter
outstanding, except a dividend payable solely in the Borrower's Capital Stock
(other than Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock, (ii) any redemption, retirement, purchase or other
acquisition for value, direct or indirect, of any Equity Interests of the
Borrower or any of its Subsidiaries now or hereafter outstanding, other than in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Borrower) of other Equity Interests of the
Borrower (other than Disqualified Stock), (iii) any redemption, purchase,
retirement, defeasance, prepayment or other acquisition for value, direct or
indirect, of any Permitted Subordinated Indebtedness, and (iv) any payment of a
claim for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of, any Permitted Subordinated Indebtedness or
any Equity Interests of the Borrower or any of the Borrower's Subsidiaries,
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or of a claim for reimbursement, indemnification or contribution arising out of
or related to any such claim for damages or rescission.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount
by which the Aggregate Commitment at such time exceeds the Revolving Credit
Obligations at such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum of
(i) the outstanding principal amount of the Loans (including the Swing Line
Loans) at such time, PLUS (ii) the L/C Obligations at such time.
"REVOLVING LOAN" is defined in the definition of "Loans" above.
"REVOLVING NOTE" means a promissory note, in substantially the form of
EXHIBIT C hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Commitment, including any amendment, restatement,
modification, renewal or replacement of such Revolving Note.
"RISK-BASED CAPITAL GUIDELINES" is defined in SECTION 4.2 hereof.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations and (ii)
all Hedging Obligations owing to any Lender or any affiliate of any Lender under
agreements with respect thereto entered into with any Lender or any affiliate of
any Lender.
"SELLING LENDER(S)" is defined in SECTION 2.4(C) hereof.
"SENIOR DEBT" means, when determined, Total Debt, except for Indebtedness
which is contractually subordinated or junior in right of payment to the
Obligations.
"SENIOR LEVERAGE RATIO" is defined in SECTION 7.4(C) hereof.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"SWING LINE BANK" means NationsBank or any other Lender as a successor
Swing Line Bank.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Bank to
make Swing Line Loans up to a maximum principal amount of $10,000,000 at any one
time outstanding.
"SWING LINE LOAN" means any Swing Line Loan made available to the Borrower
by the Swing Line Bank pursuant to SECTION 2.1(B) hereof.
"SWING LINE NOTE" means a promissory note, in substantially the form of
EXHIBIT D hereto, duly executed by the Borrower and payable to the order of the
Swing Line Bank in the amount of its Swing Line
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Commitment, including any amendment, restatement, modification, renewal or
replacement of such Swing Line Note.
"TAXES" is defined in SECTION 2.12(E)(I) hereof.
"TERMINATION DATE" means the earlier of (a) November 9, 2001 and (b) the
date of termination of the Aggregate Commitment pursuant to SECTION 2.4 hereof
or the Commitments pursuant to SECTION 9.1 hereof.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the Termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of the Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"TOTAL DEBT" means, for any period, on a consolidated basis for the
Borrower and its Subsidiaries, the sum of Indebtedness of the Borrower and its
Subsidiaries, other than Hedging Obligations.
"TRANSFEREE" is defined in SECTION 13.5 hereof.
"TYPE" means, with respect to any Loan, its nature as a Floating Rate Loan
or a Eurodollar Rate Loan.
"UNFUNDED LIABILITIES" means (i) in the case of Single Employer Plans, the
amount (if any) by which the present value of all vested nonforfeitable benefits
under all Single Employer Plans exceeds the fair market value of all such Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plans, and (ii) in the case of Multiemployer Plans, the
withdrawal liability that would be incurred by the Controlled Group if all
members of the Controlled Group completely withdrew from all Multiemployer
Plans.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"U.S." means United States of America.
"YEAR 2000 COMPLIANT" is defined in SECTION 6.20 hereof.
"YEAR 2000 PROBLEM" is defined in SECTION 6.20 hereof.
Any accounting terms used in this Agreement which are not specifically
defined herein shall have the meanings customarily given them in accordance with
generally accepted accounting principles in existence as of the Closing Date
hereof.
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1.2 REFERENCES. The existence throughout the Agreement of references to
the Borrower's Subsidiaries is for a matter of convenience only. Any references
to Subsidiaries of the Borrower set forth herein shall (i) with respect to
representations and warranties which deal with historical matters be deemed to
include each of the Founding Companies and their respective subsidiaries,
together with the businesses acquired pursuant to the Initial Acquisitions; and
(ii) shall not in any way be construed as consent by the Agent or any Lender to
the establishment, maintenance or acquisition of any Subsidiary, except as may
otherwise be permitted hereunder.
ARTICLE II: THE LOAN FACILITIES
2.1 LOANS.
(a) REVOLVING LOANS. Upon the satisfaction of the conditions
precedent set forth in SECTIONS 5.1 and 5.2, from and including the
Closing Date and prior to the Termination Date, each Lender severally and
not jointly agrees, on the terms and conditions set forth in this
Agreement, to make Revolving Loans to the Borrower from time to time, in
Dollars, in an amount not to exceed such Lender's Pro Rata Share of
Revolving Credit Availability at such time; PROVIDED, HOWEVER, that at no
time shall the Revolving Credit Obligations exceed the Aggregate
Commitment at such time. Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Loans at any time prior
to the Termination Date. The Revolving Loans made on the Closing Date
shall initially be Floating Rate Loans and thereafter may be continued as
Floating Rate Loans or converted into Eurodollar Rate Loans in the manner
provided in SECTION 2.8 and subject to the other conditions and
limitations therein set forth and set forth in this ARTICLE II. On the
Termination Date, the Borrower shall repay in full the outstanding
principal balance of the Loans. Each Advance under this SECTION 2.1(A)
shall consist of Revolving Loans made by each Lender ratably in proportion
to such Lender's respective Pro Rata Share.
(b) SWING LINE LOANS.
(i) AMOUNT OF SWING LINE LOANS. Upon the satisfaction of the
conditions precedent set forth in SECTION 5.1 and 5.2, from and
including the Closing Date and prior to the Termination Date, the
Swing Line Bank agrees, on the terms and conditions set forth in
this Agreement, to make swing line loans to the Borrower from time
to time, in Dollars, in an amount not to exceed the Swing Line
Commitment (each, individually, a "SWING LINE LOAN" and
collectively, the "SWING LINE LOANS"); PROVIDED, HOWEVER, that at no
time shall the Revolving Credit Obligations exceed the Aggregate
Commitment; and PROVIDED, FURTHER, that at no time shall the sum of
(a) the outstanding amount of the Swing Line Loans, PLUS (b) the
outstanding amount of Revolving Loans made by the Swing Line Bank
pursuant to SECTION 2.1(A) (after giving effect to any concurrent
repayment of Loans), exceed the Swing Line Bank's Commitment at such
time. Subject to the terms of this Agreement, the Borrower may
borrow, repay and reborrow Swing Line Loans at any time prior to the
Termination Date.
(ii) BORROWING NOTICE. The Borrower shall deliver to the Agent
and the Swing Line Bank a Borrowing Notice, signed by it, not later
than 11:00 a.m. (Houston time) on the Borrowing Date of each Swing
Line Loan, specifying (A) the applicable Borrowing Date (which shall
be a Business Day), and (B) the aggregate amount of the requested
Swing Line Loan. The Swing Line Loans shall at all times be
Eurodollar Rate Loans, which shall be an amount not less than
$250,000 and increments of $100,000 in excess thereof. The Agent
shall promptly notify each Lender of such request.
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(iii) MAKING OF SWING LINE LOANS. Promptly after receipt of
the Borrowing Notice under SECTION 2.1(B)(II) in respect of Swing
Line Loans, the Agent shall notify each Lender by telex or telecopy,
or other similar form of transmission, of the requested Swing Line
Loan. Not later than 2:00 p.m. (Houston time) on the applicable
Borrowing Date, the Swing Line Bank shall make available its Swing
Line Loan, in funds immediately available in Houston to the Agent at
its address specified pursuant to ARTICLE XIV. The Agent will
promptly make the funds so received from the Swing Line Bank
available to the Borrower at the Agent's aforesaid address.
(iv) REPAYMENT OF SWING LINE LOANS. The Swing Line Loans shall
be evidenced by the Swing Line Note, and each Swing Line Loan shall
be paid in full by the Borrower on or before the seventh Business
Day after the Borrowing Date for such Swing Line Loan. The Borrower
may at any time pay, without penalty or premium, all outstanding
Swing Line Loans or, in a minimum amount and increments of $100,000,
any portion of the outstanding Swing Line Loans, upon notice to the
Agent and the Swing Line Bank. In addition, the Agent (i) may at any
time in its sole discretion with respect to any outstanding Swing
Line Loan, or (ii) shall on the seventh Business Day after the
Borrowing Date of any Swing Line Loan, require each Lender
(including the Swing Line Bank) to make a Revolving Loan in the
amount of such Lender's Pro Rata Share of such Swing Line Loan, for
the purpose of repaying such Swing Line Loan. Not later than 2:00
p.m. (Houston time) on the date of any notice received pursuant to
this SECTION 2.1(B)(IV), each Lender shall make available its
required Revolving Loan or Revolving Loans, in funds immediately
available in Houston to the Agent at its address specified pursuant
to ARTICLE XIV. Revolving Loans made pursuant to this SECTION
2.1(B)(IV) shall initially be Floating Rate Loans and thereafter may
be continued as Floating Rate Loans or converted into Eurodollar
Rate Loans in the manner provided in SECTION 2.8 and subject to the
other conditions and limitations therein set forth and set forth in
this ARTICLE II. Unless a Lender shall have notified the Swing Line
Bank, prior to its making any Swing Line Loan, that any applicable
condition precedent set forth in SECTIONS 5.1 and 5.2 had not then
been satisfied, such Lender's obligation to make Revolving Loans
pursuant to this SECTION 2.1(B)(IV) to repay Swing Line Loans shall
be unconditional, continuing, irrevocable and absolute and shall not
be affected by any circumstances, including, without limitation, (A)
any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against the Agent, the Swing Line Bank or any
other Person, (B) the occurrence of continuance of a Default or
Unmatured Default, (C) any adverse change in the condition
(financial or otherwise) of the Borrower, or (D) any other
circumstances, happening or event whatsoever. In the event that any
Lender fails to make payment to the Agent of any amount due under
this SECTION 2.1(B)(IV), the Agent shall be entitled to receive,
retain and apply against such obligation the principal and interest
otherwise payable to such Lender hereunder until the Agent receives
such payment from such Lender or such obligation is otherwise fully
satisfied. In addition to the foregoing, if for any reason any
Lender fails to make payment to the Agent of any amount due under
this SECTION 2.1(B)(IV), such Lender shall be deemed, at the option
of the Agent, to have unconditionally and irrevocably purchased from
the Swing Line Bank, without recourse or warranty, an undivided
interest and participation in the applicable Swing Line Loan in the
amount of such Revolving Loan, and such interest and participation
may be recovered from such Lender together with interest thereon at
the Federal Funds Effective Rate for each day during the period
commencing on the date of demand and ending on the date such amount
is received. On the Termination Date, the Borrower shall repay in
full the outstanding principal balance of the Swing Line Loans.
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2.2 RATE OPTIONS FOR ALL ADVANCES. The Revolving Loans may be Floating
Rate Advances or Eurodollar Rate Advances, or a combination thereof, selected by
the Borrower in accordance with SECTION 2.8. The Borrower may select, in
accordance with SECTION 2.8, Rate Options and Interest Periods applicable to
portions of the Revolving Loans; PROVIDED that there shall be no more than seven
(7) Interest Periods in effect with respect to all of the Revolving Loans at any
time. The Swing Line Loans shall bear interest at the lesser of (i) the Maximum
Rate, and (ii) the Swing Line Bank's cost of funds for such Swing Line Loan (as
determined by the Swing Line Bank from day-to-day in its sole discretion) PLUS
the Applicable Eurodollar Margin.
2.3 OPTIONAL PAYMENTS; MANDATORY PREPAYMENTS.
(a) OPTIONAL PAYMENTS. The Borrower may from time to time repay or
prepay, without penalty or premium all or any part of outstanding Floating
Rate Advances in a minimum amount of $1,000,000 and in increments of
$1,000,000 in excess thereof; PROVIDED, that the Borrower may not so
prepay Floating Rate Advances unless it shall have provided at least one
Business Day's written notice to the Agent of such prepayment. Eurodollar
Rate Advances may be voluntarily repaid or prepaid prior to the last day
of the applicable Interest Period in a minimum amount of $1,000,000 and in
increments of $1,000,000 in excess thereof, subject to the indemnification
provisions contained in SECTION 4.4, PROVIDED that the Borrower may not so
prepay Eurodollar Rate Advances unless it shall have provided at least two
(2) Business Days' written notice to the Agent of such prepayment.
(b) MANDATORY PREPAYMENTS. If at any time and for any reason the
Revolving Credit Obligations are greater than the Aggregate Commitment,
the Borrower shall immediately make a mandatory prepayment of the
Obligations in an amount equal to such excess. In addition, if Revolving
Credit Availability is at any time less than the amount of contingent L/C
Obligations outstanding at any time, the Borrower shall deposit cash
collateral with the Agent in an amount equal to the amount by which such
L/C Obligations exceed such Revolving Credit Availability. All of the
mandatory prepayments made under this SECTION 2.3(B) shall be applied
first to Floating Rate Loans and to any Eurodollar Rate Loans maturing on
such date and then to subsequently maturing Eurodollar Rate Loans in order
of maturity.
2.4 CHANGES IN COMMITMENTS.
(a) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders, in an aggregate minimum
amount of $5,000,000 and integral multiples of $5,000,000 in excess of
that amount (unless the Aggregate Commitment is reduced in whole), upon at
least three (3) Business Days' written notice to the Agent, which notice
shall specify the amount of any such reduction; PROVIDED, HOWEVER, that
the amount of the Aggregate Commitment may not be reduced below the
aggregate principal amount of the outstanding Revolving Credit
Obligations. All accrued facility fees shall be payable on the effective
date of any partial or complete termination of the obligations of the
Lenders to make Revolving Loans hereunder.
(b) INCREASES OF COMMITMENTS. At any time, the Borrower may request
that the Aggregate Commitment be increased; PROVIDED that, without the
prior written consent of all of the Lenders, (i) the Aggregate Commitment
shall at no time exceed $125,000,000 MINUS the aggregate amount of all
reductions in the Aggregate Commitment previously made pursuant to SECTION
2.4(A) and (ii) the Borrower shall not make any such request during the
six month period following any reduction in the Aggregate Commitment
occurring under SECTION 2.4(A). Such request shall be made
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in a written notice given to the Agent and the Lenders by the Borrower not
less than twenty (20) Business Days prior to the proposed effective date
of such increase, which notice (a "COMMITMENT INCREASE NOTICE") shall
specify the amount of the proposed increase in the Aggregate Commitment
and the proposed effective date of such increase. On or prior to the date
that is fifteen (15) Business Days after receipt of the Commitment
Increase Notice, each Lender shall submit to the Agent a notice indicating
the maximum amount by which it is willing to increase its Commitment in
connection with such Commitment Increase Notice (any such notice to the
Agent being herein a "LENDER INCREASE NOTICE"). Any Lender which does not
submit a Lender Increase Notice to the Agent prior to the expiration of
such fifteen (15) Business Day period shall be deemed to have denied any
increase in its Commitment. In the event that the increases of Commitments
set forth in the Lender Increase Notices exceed the amount requested by
the Borrower in the Commitment Increase Notice, the Agent and the Arranger
shall have the right, in consultation with the Borrower, to allocate the
amount of increases necessary to meet the Borrower's Commitment Increase
Notice. In the event that the Lender Increase Notices are less than the
amount requested by the Borrower, the Agent and the Arranger shall assist
the Borrower in attempting to identify financial institutions which may
have an interest in becoming Lenders under this Agreement. Not later than
3 Business Days prior to the proposed effective date the Borrower may
notify the Agent of any financial institution that shall have agreed to
become a "Lender" party hereto (a "PROPOSED NEW LENDER") in connection
with the Commitment Increase Notice. Any Proposed New Lender shall be
consented to by the Agent (which consent shall not be unreasonably
withheld). If the Borrower, the Agent and the Arranger shall not have
arranged any Proposed New Lender(s) to commit to the shortfall from the
Lender Increase Notices, then the Borrower shall be deemed to have reduced
the amount of its Commitment Increase Notice to the aggregate amount set
forth in the Lender Increase Notices. Based upon the Lender Increase
Notices, any allocations made in connection therewith and any notice
regarding any Proposed New Lender, if applicable, the Agent shall notify
the Borrower and the Lenders on or before the Business Day immediately
prior to the proposed effective date of the amount of each Lender's and
Proposed New Lenders' Commitment (such new amounts being the "EFFECTIVE
COMMITMENT AMOUNTS") and the amount of the Aggregate Commitment, which
amounts shall be effective on the following Business Day. Any increase in
the Aggregate Commitment shall be subject to the following conditions
precedent: (A) the Borrower shall have obtained the consent thereto of
each Guarantor and its reaffirmation of the Loan Document(s) executed by
it, which consent and reaffirmation shall be in writing and in form and
substance reasonably satisfactory to the Agent, (B) as of the date of the
Commitment Increase Notice and as of the proposed effective date of the
increase in the Aggregate Commitment, no event shall have occurred and
then be continuing which constitutes a Default or Unmatured Default, (C)
the Borrower, the Agent and each Proposed New Lender or Lender that shall
have agreed to provide a "Commitment" in support of such increase in the
Aggregate Commitment shall have executed and delivered a "COMMITMENT AND
ACCEPTANCE" substantially in form and substance satisfactory to the Agent
and the Borrower, (D) counsel for the Borrower and for the Guarantors
shall have provided to the Agent supplemental opinions substantially in
the form (and limited to the matters) set forth in EXHIBIT K hereto and
(E) the Borrower and the Proposed New Lender shall otherwise have executed
and delivered such other instruments and documents as may be required
under SECTION 2.12(E)(VI) or that the Agent shall have reasonably
requested in connection with such increase. If any fee shall be charged by
the Lenders in connection with any such increase, such fee shall be in
accordance with then prevailing market conditions, which market conditions
shall have been reasonably documented by the Agent to the Borrower. Upon
satisfaction of the conditions precedent to any increase in the Aggregate
Commitment, the Agent shall promptly advise the Borrower and each Lender
of the effective date of such increase. Upon the effective date of any
increase in the Aggregate Commitment that is supported by a Proposed New
Lender, such Proposed New Lender shall be a party hereto as a Lender and
shall have the rights and obligations of a Lender hereunder.
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Nothing contained herein shall constitute, or otherwise be deemed to be, a
commitment on the part of any Lender to increase its Commitment hereunder
at any time. Upon the effective date of any increase in the Aggregate
Commitment, the Lenders (including Proposed New Lenders allocated a
Commitment) shall be bound by the terms of the following CLAUSE (C).
(c) MASTER ASSIGNMENT IN CONNECTION WITH COMMITMENT INCREASES. For
purposes of this SECTION 2.4(C), the term "BUYING LENDER(S)" shall mean
(1) each Lender the Effective Commitment Amount of which is greater than
its Commitment prior to the effective date of any increase in the
Aggregate Commitment and (2) each Proposed New Lender that is allocated an
Effective Commitment Amount in connection with any Commitment Increase
Notice and the term "SELLING LENDER(S)" shall mean each Lender whose
Commitment under this Agreement is not being increased from that in effect
prior to such increase in the Aggregate Commitment. Effective on the
effective date of any increase in the Aggregate Commitment pursuant to
CLAUSE (B) above, each Selling Lender hereby sells, grants, assigns and
conveys to each Buying Lender, without recourse, warranty, or
representation of any kind, except as specifically provided herein, an
undivided percentage in such Selling Lender's right, title and interest in
and to its outstanding Loans and L/C Obligations in the respective dollar
amounts and percentages necessary so that, from and after such sale, each
such Selling Lender's outstanding Loans and L/C Obligations shall equal
such Selling Lender's Pro Rata Share (calculated based upon the Effective
Commitment Amounts) of the outstanding Loans and L/C Obligations under
this Agreement. Effective on the effective date of the increase in the
Aggregate Commitment pursuant to CLAUSE (B) above, each Buying Lender
hereby purchases and accepts such grant, assignment and conveyance from
the Selling Lenders. Each Buying Lender hereby agrees that its respective
purchase price for the portion of the outstanding Loans and L/C
Obligations purchased hereby shall equal the respective dollar amount
necessary so that, from and after such payments, each Buying Lender's
outstanding Loans and L/C Obligations shall equal such Buying Lender's Pro
Rata Share (calculated based upon the Effective Commitment Amounts) of the
outstanding Loans and L/C Obligations under this Agreement. Such amount
shall be payable on the effective date of the increase in the Aggregate
Commitment by wire transfer of immediately available funds to the Agent.
The Agent, in turn, shall wire transfer any such funds received to the
Selling Lenders, in same day funds, for the sole account of the Selling
Lenders. Each Selling Lender hereby represents and warrants to each Buying
Lender that such Selling Lender owns the Loans and L/C Obligations being
sold and assigned hereby for its own account and has not sold, transferred
or encumbered any or all of its interest in such Loans or L/C Obligations,
except for participations which will be extinguished upon payment to
Selling Lender of an amount equal to the portion of the outstanding Loans
and L/C Obligations being sold by such Selling Lender. Each Buying Lender
hereby acknowledges and agrees that, except for each Selling Lender's
representations and warranties contained in the foregoing sentence, each
such Buying Lender has entered into its Commitment and Acceptance with
respect to such increase on the basis of its own independent investigation
and has not relied upon, and will not rely upon, any explicit or implicit
written or oral representation, warranty or other statement of the Lenders
or the Agent concerning the authorization, execution, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the other Loan Documents. The Borrower hereby agrees to
compensate each Selling Lender for all losses, expenses and liabilities
incurred by each Lender in connection with the sale and assignment of any
Eurodollar Rate Loans hereunder on the terms and in the manner as set
forth in SECTION 4.4.
2.5 METHOD OF BORROWING. Not later than 2:00 p.m. (Houston time) on each
Borrowing Date, each Lender shall make available its Revolving Loan, in funds
immediately available in Houston to the Agent at its address specified pursuant
to ARTICLE XIV. The Agent will promptly make the funds so received from the
Lenders available to the Borrower at the Agent's aforesaid address.
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2.6 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Rate Advance, the Interest Period applicable to each Advance from time to time.
The Borrower shall give the Agent irrevocable notice in substantially the form
of EXHIBIT E hereto (a "BORROWING NOTICE") not later than 10:00 a.m. (Houston
time) (a) on the Borrowing Date of each Floating Rate Advance and (b) three
Business Days before the Borrowing Date for each Eurodollar Rate Advance,
specifying: (i) the Borrowing Date (which shall be a Business Day) of such
Advance; (ii) the aggregate amount of such Advance; (iii) the Type of Advance
selected; and (iv) in the case of each Eurodollar Rate Advance, the Interest
Period applicable thereto. Each Floating Rate Advance and all Obligations other
than Loans shall bear interest from and including the date of the making of such
Advance to (but not including) the date of repayment thereof at the Floating
Rate, changing when and as such Floating Rate changes. Changes in the rate of
interest on that portion of any Advance maintained as a Floating Rate Loan will
take effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Rate Advance shall bear interest from and including the first day of
the Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such
Eurodollar Rate Advance.
2.7 MINIMUM AMOUNT OF EACH ADVANCE. Each Advance (other than an Advance to
repay Swing Line Loans pursuant to SECTION 2.1(B)(IV) or a Reimbursement
Obligation pursuant to SECTION 3.6) shall be in the minimum amount of $1,000,000
(and in multiples of $1,000,000 if in excess thereof), PROVIDED, HOWEVER, that
any Floating Rate Advance may be in the amount of the unused Aggregate
Commitment.
2.8 METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR CONVERSION AND
CONTINUATION OF ADVANCES.
(a) RIGHT TO CONVERT. The Borrower may elect from time to time,
subject to the provisions of SECTION 2.2 and this SECTION 2.8, and, for
any conversion of a Eurodollar Rate Advance other than at the end of an
Interest Period, subject to payment of amounts payable under SECTION 4.4,
to convert all or any part of a Revolving Loan of any Type into any other
Type or Types of Loans.
(b) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans
are converted into Eurodollar Rate Loans. Eurodollar Rate Loans shall
continue as Eurodollar Rate Loans until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Rate Loans shall
be automatically converted into Floating Rate Loans unless the Borrower
shall have given the Agent notice in accordance with SECTION 2.8(D)
requesting that, at the end of such Interest Period, such Eurodollar Rate
Loans continue as a Eurodollar Rate Loan.
(c) NO CONVERSION POST-DEFAULT OR POST-UNMATURED DEFAULT.
Notwithstanding anything to the contrary contained in SECTION 2.8(A) or
SECTION 2.8(B), no Revolving Loan may be converted into or continued as a
Eurodollar Rate Loan (except with the consent of the Required Lenders)
when any Default or Unmatured Default has occurred and is continuing.
(d) CONVERSION/CONTINUATION NOTICE. The Borrower shall give the
Agent irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of each
conversion of a Floating Rate Loan into a Eurodollar Rate Loan or
continuation of a Eurodollar Rate Loan not later than 11:00 a.m. (Houston
time) three (3) Business Days prior to the date of the requested
conversion or continuation, specifying: (1) the requested date (which
shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the
amount of Eurodollar Rate Loan(s) into which such Loan is to be converted
or continued and the duration of the Interest Period applicable thereto.
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2.9 DEFAULT RATE. After the occurrence and during the continuance of a
Default, at the option of the Agent or at the direction of the Required Lenders,
the interest rate(s) applicable to the Obligations shall be equal to the
Floating Rate PLUS two percent (2.0%) per annum and fees payable under SECTION
3.7 with respect to standby Letters of Credit shall be increased by two percent
(2.0%) per annum.
2.10 METHOD OF PAYMENT. All principal, interest and other amounts to be
paid by Borrower under the Loan Documents shall be made to the office of Agent
located at 901 Main Street, Dallas, Texas 75202 in U.S. Dollars and in
immediately available funds, without setoff, deduction or counterclaim, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by 2:00 p.m. (Houston time) on the date when due and shall be made
ratably among the Lenders (unless such amount is not to be shared ratably in
accordance with the terms hereof). Each payment delivered to the Agent for the
account of any Lender shall be delivered promptly by the Agent to such Lender in
the same type of funds which the Agent received at the foregoing address or at
any Lending Installation specified in a notice received by the Agent from such
Lender. The Borrower authorizes the Agent to charge the account of the Borrower
maintained with NationsBank for each payment of principal, interest, fees and
other amounts as it becomes due hereunder.
2.11 REVOLVING NOTES, TELEPHONIC NOTICES. Each Lender is authorized to
record the principal amount of each of its Revolving Loans and each repayment
with respect to its Revolving Loans on the schedule attached to its respective
Revolving Note; PROVIDED, HOWEVER, that the failure to so record shall not
affect the Borrower's obligations under any such Revolving Note. The Borrower
authorizes the Lenders and the Agent to extend Advances and Swing Line Loans,
effect selections of Types of Advances and to transfer funds based on telephonic
notices made by any person or persons the Agent or any Lender in good faith
believes to be acting on behalf of the Borrower. The Borrower agrees to deliver
promptly to the Agent a written confirmation, signed by an Authorized Officer,
if such confirmation is requested by the Agent or any Lender, of each telephonic
notice. If the written confirmation differs in any material respect from the
action taken by the Agent and the Lenders, (i) the telephonic notice shall
govern absent manifest error and (ii) the Agent or the Lender, as applicable,
shall promptly notify the Authorized Officer who provided such confirmation of
such difference.
2.12 PROMISE TO PAY; INTEREST AND COMMITMENT FEES; INTEREST PAYMENT DATES;
INTEREST AND FEE BASIS; TAXES; LOAN AND CONTROL ACCOUNTS.
(a) PROMISE TO PAY. The Borrower unconditionally promises to pay
when due the principal amount of each Loan and all other Obligations
incurred by it, and to pay all unpaid interest accrued thereon and fees,
in accordance with the terms of this Agreement and the Notes.
(b) INTEREST PAYMENT DATES. Interest accrued on each Floating Rate
Loan shall be payable on each Payment Date, commencing with the first such
date to occur after the date hereof and at maturity (whether by
acceleration or otherwise). Interest accrued on each Eurodollar Rate Loan
shall be payable on the last day of its applicable Interest Period, on any
date on which the Eurodollar Rate Loan is prepaid, whether by acceleration
or otherwise, and at maturity; PROVIDED, HOWEVER, that interest accrued on
each Eurodollar Rate Loan having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest accrued on the principal balance of
all other Obligations shall be payable in arrears (i) on the last day of
each calendar month, commencing on the first such day following the
incurrence of such Obligation, (ii) upon repayment thereof in full or in
part, and (iii) if not theretofore paid in full, at the time such other
Obligation becomes due and payable (whether by acceleration or otherwise).
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(c) COMMITMENT FEEs.
(i) The Borrower shall pay to the Agent, for the account of
the Lenders in accordance with their Pro Rata Shares, from and after
the Closing Date until the date on which the Aggregate Commitment
shall be terminated in whole, a commitment fee accruing at the rate
of the then Applicable Commitment Fee Percentage, on the aggregate
amount of the average daily unused portion of the Aggregate
Commitment in effect from time to time (without reducing such amount
for amounts borrowed under the Swing Line Commitment). All such
commitment fees payable under this SECTION 2.12(C) shall be payable
quarterly in arrears on each Payment Date occurring after the
Closing Date (with the first such payment being calculated for the
period from the Closing Date and ending on such Payment Date), and,
in addition, on the date on which the Aggregate Commitment shall be
terminated in whole.
(ii) The Borrower agrees to pay to (A) the Agent for the sole
account of the Agent (unless otherwise agreed between the Agent and
any Lender) the fees set forth in the letter agreement between the
Agent and the Borrower dated August 28, 1998, payable at the times
and in the amounts set forth therein, and (B) the Agent, for the
account of the Lenders, the facility fees set forth in the letter
agreement between the Agent and the Borrower dated September 30,
1998, payable at the times and in the amounts set forth therein.
(d) INTEREST AND FEE BASIS; APPLICABLE EURODOLLAR MARGIN, APPLICABLE
FLOATING RATE MARGIN AND APPLICABLE COMMITMENT FEE PERCENTAGE.
(i) Interest on Floating Rate Loans and fees (other than
Letter of Credit fees) shall be calculated for actual days elapsed
on the basis of a 365/366-day year. Interest on all other
Obligations and Letter of Credit fees shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest shall be
payable for the day an Obligation is incurred but not for the day of
any payment on the amount paid if payment is received prior to 2:00
p.m. (Houston time) at the place of payment. If any payment of
principal of or interest on a Loan or any payment of any other
Obligations shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and,
in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
(ii) The Applicable Eurodollar Margin, Applicable Floating
Rate Margin and Applicable Commitment Fee Percentage shall be
determined from time to time by reference to the table set forth
below, on the basis of the then applicable Leverage Ratio as
described in this SECTION 2.12(D)(II); PROVIDED, HOWEVER, that for
the period from the Closing Date until receipt of Borrower's audited
financial statements for the period ended December 31, 1998, Level
II shall apply to the Applicable Eurodollar Margin, Applicable
Floating Rate Margin and Applicable Commitment Fee Percentage.
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<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Leverage Ratio ........................... >=2.50 to >=2.00 to >=1.5 >=1.00 to <1.00 to
1.00 1.00 . 1.00 1.00 1.00
and and and
< 2.50 to <2.00 to <1.50 to
1.00 1.00 1.00
Applicable Commitment
Fee Percentage ........................... 0.50% 0.40% 0.375% 0.30% 0.30%
Applicable Eurodollar
Rate Margin and .......................... 2.25% 1.75% 1.50% 1.375% 1.25%
Applicable L/C Fee
Percentage
Applicable Floating Rat
Margin ................................... .75% .50% .25% 0% 0%
</TABLE>
For purposes of this SECTION 2.12(D)(II), the Leverage Ratio shall be
determined as of the last day of each fiscal quarter based upon (a) for
Total Debt, Total Debt as of the last day of each such fiscal quarter; and
(b) for EBITDA, EBITDA for the twelve-month period ending on such day
calculated as set forth in the definition thereof. Upon receipt of the
financial statements delivered pursuant to SECTIONS 7.1(A)(I) (subject to
adjustment upon receipt of the financial statements delivered pursuant to
SECTION 7.1(A)(II)), the Applicable Eurodollar Margin, Applicable Floating
Rate Margin and Applicable Facility Fee Percentage shall be adjusted, such
adjustment being effective five (5) Business Days following the Agent's
receipt of such financial statements and the compliance certificate
required to be delivered in connection therewith pursuant to SECTION
7.1(A)(III); PROVIDED that if the Borrower shall not have timely delivered
its financial statements in accordance with SECTION 7.1(A)(I) or (II), as
applicable, then commencing on the date upon which such financial
statements should have been delivered and continuing until such financial
statements are actually delivered, it shall be assumed for purposes of
determining the Applicable Eurodollar Margin, Applicable Floating Rate
Margin and Applicable Facility Fee Percentage that the Leverage Ratio was
greater than 2.50 to 1.0.
(e) TAXES.
(i) Any and all payments by the Borrower hereunder shall be
made free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or
withholdings or any liabilities with respect thereto including those
arising after the Closing Date hereof as a result of the adoption of
or any change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in the
interpretation or application thereof by a Governmental Authority
but excluding, in the case of each Lender and the Agent, such taxes
(including income taxes, franchise taxes and branch profit taxes) as
are imposed on or measured by such Lender's or Agent's, as the case
may be, income by the United States of America or any Governmental
Authority of the jurisdiction under the laws of which such Lender or
Agent, as the case may be, is organized (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings, and
liabilities which the Agent or a Lender determines to be applicable
to this Agreement, the other Loan Documents, the Commitments, the
Loans or the Letters of Credit being hereinafter referred to as
"TAXES"). If the Borrower shall be required by law to deduct
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any Taxes from or in respect of any sum payable hereunder or under
the other Loan Documents to any Lender or the Agent (other than due
to a Lender's failure to comply with SECTION 2.12(E)(VII)), (i) the
sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this SECTION 2.12(E)) such Lender or
the Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions, and (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law. If a withholding
tax of the United States of America or any other Governmental
Authority shall be or become applicable (y) after the Closing Date,
to such payments by the Borrower made to the Lending Installation or
any other office that a Lender may claim as its Lending
Installation, or (z) after such Lender's selection and designation
of any other Lending Installation, to such payments made to such
other Lending Installation, such Lender shall use reasonable efforts
to make, fund and maintain its Loans through another Lending
Installation of such Lender in another jurisdiction so as to reduce
the Borrower's liability hereunder, if the making, funding or
maintenance of such Loans through such other Lending Installation of
such Lender does not, in the judgment of such Lender, otherwise
adversely affect such Loans, or obligations under the Commitments or
such Lender.
(ii) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges, or similar levies which arise from any payment made
hereunder, from the issuance of Letters of Credit hereunder, or from
the execution, delivery or registration of, or otherwise with
respect to, this Agreement, the other Loan Documents, the
Commitments, the Loans or the Letters of Credit (hereinafter
referred to as "OTHER TAXES").
(iii) The Borrower indemnifies each Lender and the Agent for
the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any Governmental
Authority on amounts payable under this SECTION 2.12(E)) paid by
such Lender or the Agent (as the case may be) and any liability
(including penalties, interest, and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made
within thirty (30) days after the date such Lender or the Agent (as
the case may be) makes written demand therefor. A certificate as to
any additional amount payable to any Lender or the Agent under this
SECTION 2.12(E) submitted to the Borrower and the Agent (if a Lender
is so submitting) by such Lender or the Agent shall show in
reasonable detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be final,
conclusive and binding upon all parties hereto. With respect to such
deduction or withholding for or on account of any Taxes and to
confirm that all such Taxes have been paid to the appropriate
Governmental Authorities, the Borrower shall promptly (and in any
event not later than thirty (30) days after receipt) furnish to each
Lender and the Agent such certificates, receipts and other documents
as may be required (in the judgment of such Lender or the Agent) to
establish any tax credit to which such Lender or the Agent may be
entitled.
(iv) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by the Borrower, the Borrower shall furnish to
the Agent the original or a certified copy of a receipt evidencing
payment thereof.
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(v) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this SECTION 2.12(E) shall survive the payment
in full of principal and interest hereunder, the termination of the
Letters of Credit and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrower under
this SECTION 2.12(E), each Lender that is not created or organized
under the laws of the United States of America or a political
subdivision thereof shall deliver to the Borrower and the Agent on
or before the Closing Date, or, if later, the date on which such
Lender becomes a Lender pursuant to SECTION 13.3, a true and
accurate certificate executed in duplicate by a duly authorized
officer of such Lender, in a form satisfactory to the Borrower and
the Agent, to the effect that such Lender is capable under the
provisions of an applicable tax treaty concluded by the United
States of America (in which case the certificate shall be
accompanied by two executed copies of Form 1001 of the IRS) or under
Section 1442 of the Code (in which case the certificate shall be
accompanied by two copies of Form 4224 of the IRS) of receiving
payments of interest hereunder without deduction or withholding of
United States federal income tax. Each such Lender further agrees to
deliver to the Borrower and the Agent from time to time a true and
accurate certificate executed in duplicate by a duly authorized
officer of such Lender substantially in a form satisfactory to the
Borrower and the Agent, before or promptly upon the occurrence of
any event requiring a change in the most recent certificate
previously delivered by it to the Borrower and the Agent pursuant to
this SECTION 2.12(E)(VI). Further, each Lender which delivers a
certificate accompanied by Form 1001 of the IRS covenants and agrees
to deliver to the Borrower and the Agent within fifteen (15) days
prior to January 1, 1999, and every third (3rd) anniversary of such
date thereafter on which this Agreement is still in effect, another
such certificate and two accurate and complete original signed
copies of Form 1001 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder), and
each Lender that delivers a certificate accompanied by Form 4224 of
the IRS covenants and agrees to deliver to the Borrower and the
Agent within fifteen (15) days prior to the beginning of each
subsequent taxable year of such Lender during which this Agreement
is still in effect, another such certificate and two accurate and
complete original signed copies of IRS Form 4224 (or any successor
form or forms required under the Code or the applicable regulations
promulgated thereunder). Each such certificate shall certify as to
one of the following:
(A) that such Lender is capable of receiving payments of
interest hereunder without deduction or withholding of United
States of America federal income tax;
(B) that such Lender is not capable of receiving
payments of interest hereunder without deduction or
withholding of United States of America federal income tax as
specified therein but is capable of recovering the full amount
of any such deduction or withholding from a source other than
the Borrower and will not seek any such recovery from the
Borrower; or
(C) that, as a result of the adoption of or any change
in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in the
interpretation or application thereof by a Governmental
Authority after the date such Lender became a party hereto,
such Lender is not capable of receiving payments of interest
hereunder without deduction or withholding of United States of
America federal income tax as specified therein and that it is
not
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<PAGE>
capable of recovering the full amount of the same from a
source other than the Borrower.
Each Lender shall promptly furnish to the Borrower and the Agent such
additional documents as may be reasonably required by the Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained
without undue expense to such Lender.
(f) LOAN ACCOUNT. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the
Obligations of the Borrower to such Lender owing to such Lender from time
to time, including the amount of principal and interest payable and paid
to such Lender from time to time hereunder and under the Notes.
(g) CONTROL ACCOUNT. The Register maintained by the Agent pursuant
to SECTION 13.3(C) shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be
recorded (i) the date and amount of each Advance made hereunder, the type
of Loan comprising such Advance and any Interest Period applicable
thereto, (ii) the effective date and amount of each Assignment Agreement
delivered to and accepted by it and the parties thereto pursuant to
SECTION 13.3, (iii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender
hereunder or under the Notes, (iv) the amount of any sum received by the
Agent from the Borrower hereunder and each Lender's share thereof (v) the
amount of any increase of the Aggregate Commitment pursuant to SECTION
2.4(B) and the applicable Lenders with respect thereto and (vi) all other
appropriate debits and credits as provided in this Agreement, including,
without limitation, all fees, charges, expenses and interest.
(h) ENTRIES BINDING. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest
error, unless the Borrower objects to information contained in the
Register and each Loan Account within thirty (30) days of the Borrower's
receipt of such information.
2.13 NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND AGGREGATE
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Commitment Increase Notice, Borrowing Notice, Continuation/Conversion Notice,
and repayment notice received by it hereunder. The Agent will notify each Lender
of the interest rate applicable to each Eurodollar Rate Loan promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.
2.14 LENDING INSTALLATIONS. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Revolving Notes shall be deemed held by each Lender for the
benefit of such Lending Installation. Each Lender may, by written or facsimile
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.15 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the
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Borrower, as the case may be, has not in fact made such payment to the Agent,
the recipient of such payment shall, on demand by the Agent, repay to the Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to (i) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day or (ii) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan.
2.16 TERMINATION DATE. This Agreement shall be effective until the
Termination Date. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations (other than contingent indemnity
obligations) shall have been fully and indefeasibly paid and satisfied, all
financing arrangements among the Borrower and the Lenders in connection with
this Agreement shall have been terminated (other than under agreements with
respect to Hedging Obligations) and all of the Letters of Credit shall have
expired, been canceled or terminated, all of the rights and remedies under this
Agreement and the other Loan Documents shall survive and the Agent shall be
entitled to retain its security interest in and to all existing and future
Collateral.
2.17 REPLACEMENT OF CERTAIN LENDERS. In the event a Lender ("AFFECTED
LENDER") shall have: (i) failed to fund its Pro Rata Share of any Advance
requested by the Borrower, or to fund a Revolving Loan in order to repay Swing
Line Loans pursuant to SECTION 2.1(B)(IV), which such Lender is obligated to
fund under the terms of this Agreement and which failure has not been cured,
(ii) requested compensation from the Borrower under SECTIONS 2.12(E), 4.1 or 4.2
to recover Taxes, Other Taxes or other additional costs incurred by such Lender
which are not being incurred generally by the other Lenders, (iii) delivered a
notice pursuant to SECTION 4.3 claiming that such Lender is unable to extend
Eurodollar Rate Loans to the Borrower for reasons not generally applicable to
the other Lenders or (iv) has invoked SECTION 10.2, then, in any such case, the
Borrower or the Agent may make written demand on such Affected Lender (with a
copy to the Agent in the case of a demand by the Borrower and a copy to the
Borrower in the case of a demand by the Agent) for the Affected Lender to
assign, and such Affected Lender shall use its best efforts to assign pursuant
to one or more duly Assignment Agreements five (5) Business Days after the date
of such demand, to one or more financial institutions that comply with the
provisions of SECTION 13.3(A) which the Borrower or the Agent, as the case may
be, shall have engaged for such purpose ("REPLACEMENT LENDER"), all of such
Affected Lender's rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, its Commitment, all Loans owing to it,
all of its participation interests in existing Letters of Credit, and its
obligation to participate in additional Letters of Credit hereunder) in
accordance with SECTION 13.3. The Agent agrees, upon the occurrence of such
events with respect to an Affected Lender and upon the written request of the
Borrower, to use its reasonable efforts to obtain the Commitments from one or
more financial institutions to act as a Replacement Lender. The Agent is
authorized to execute one or more of such assignment agreements as
attorney-in-fact for any Affected Lender failing to execute and deliver the same
within ten (10) Business Days after the date of such demand. Further, with
respect to such assignment the Affected Lender shall have concurrently received,
in cash, all amounts due and owing to the Affected Lender hereunder or under any
other Loan Document, including, without limitation, the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment, amounts payable under
SECTIONS 2.12(E), 4.1, and 4.2 with respect to such Affected Lender and
compensation payable under SECTION 2.12(C) in the event of any replacement of
any Affected Lender under CLAUSE (II) or CLAUSE (III) of this SECTION 2.17;
PROVIDED that upon such Affected Lender's replacement, such Affected Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of SECTIONS 2.12(E), 4.1, 4.2, 4.4, and 10.7, as well as to any fees
accrued for its account hereunder and not yet paid, and shall continue to be
obligated under SECTION 11.8. Upon the replacement of any Affected Lender
pursuant to this SECTION 2.17, the provisions of SECTION 9.2 shall continue to
apply with respect to Advances which are then outstanding with respect to which
the Affected Lender failed to fund its Pro Rata Share and which failure has not
been cured.
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ARTICLE III: THE LETTER OF CREDIT FACILITY
3.1 OBLIGATION TO ISSUE. Subject to the terms and conditions of this
Agreement and in reliance upon the representations, warranties and covenants of
the Borrower herein set forth, each Issuing Bank hereby agrees to issue for the
account of the Borrower through such Issuing Bank's branches as it and the
Borrower may jointly agree, one or more Letters of Credit in accordance with
this ARTICLE III, from time to time during the period, commencing on the Closing
Date and ending five (5) Business Days prior to the Termination Date.
3.2 TYPES AND AMOUNTS. No Issuing Bank shall have any obligation to and no
Issuing Bank shall:
(i) issue any Letter of Credit if on the date of issuance, before or
after giving effect to the Letter of Credit requested hereunder, (a) the
Revolving Credit Obligations at such time would exceed the Aggregate
Commitment at such time, or (b) the aggregate outstanding amount of the
L/C Obligations would exceed $10,000,000;
(ii) issue any Letter of Credit which has an expiration date later
than the date which is the earlier of one (1) year after the date of
issuance thereof or five (5) Business Days immediately preceding the
Termination Date; or
(iii) issue any Letter of Credit in any currency other than Dollars,
and provides for drafts payable other than at sight.
3.3 CONDITIONS. In addition to being subject to the satisfaction of the
conditions contained in SECTIONS 5.1 and 5.2, the obligation of an Issuing Bank
to issue any Letter of Credit is subject to the satisfaction in full of the
following conditions:
(i) the Borrower shall have delivered to the applicable Issuing Bank
at such times and in such manner as such Issuing Bank may reasonably
prescribe, a request for issuance of such Letter of Credit in
substantially the form of EXHIBIT F hereto, duly executed applications for
such Letter of Credit, and such other documents, instructions and
agreements as may be reasonably required pursuant to the terms thereof,
and the proposed Letter of Credit shall be reasonably satisfactory to such
Issuing Bank as to form and content; and
(ii) as of the date of issuance no order, judgment or decree of any
court, arbitrator or Governmental Authority shall purport by its terms to
enjoin or restrain the applicable Issuing Bank from issuing such Letter of
Credit and no law, rule or regulation applicable to such Issuing Bank and
no request or directive (whether or not having the force of law) from a
Governmental Authority with jurisdiction over such Issuing Bank shall
prohibit or request that such Issuing Bank refrain from the issuance of
Letters of Credit generally or the issuance of that Letter of Credit.
If any provision in a letter of credit application delivered in connection with
the foregoing is inconsistent with or more restrictive than a provision
contained in this Agreement, the provisions contained in this Agreement shall
control.
3.4 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this ARTICLE III and
provided that the applicable conditions set forth in SECTIONS 5.1 and 5.2
hereof have been satisfied, the applicable
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Issuing Bank shall, on the requested date, issue a Letter of Credit on
behalf of the Borrower in accordance with such Issuing Bank's usual and
customary business practices and, in this connection, such Issuing Bank
may assume that the applicable conditions set forth in SECTION 5.2 hereof
have been satisfied unless it shall have received notice to the contrary
from the Agent or a Lender or has knowledge that the applicable conditions
have not been met.
(b) The applicable Issuing Bank shall give the Agent written or
telex notice, or telephonic notice confirmed promptly thereafter in
writing, of the issuance of a Letter of Credit, PROVIDED, HOWEVER, that
the failure to provide such notice shall not result in any liability on
the part of such Issuing Bank.
(c) No Issuing Bank shall extend or amend any Letter of Credit
unless the requirements of this SECTION 3.4 are met as though a new Letter
of Credit was being requested and issued.
3.5 LETTER OF CREDIT PARTICIPATION. Unless a Lender shall have notified
the Issuing Bank, prior to its issuance of a Letter of Credit, that any
applicable condition precedent set forth in SECTIONS 5.1 and 5.2 had not then
been satisfied, immediately upon the issuance of each other Letter of Credit
hereunder, each Lender shall be deemed to have automatically, irrevocably and
unconditionally purchased and received from the applicable Issuing Bank an
undivided interest and participation in and to such Letter of Credit, the
obligations of the Borrower in respect thereof, and the liability of such
Issuing Bank thereunder (collectively, an "L/C INTEREST") in an amount equal to
the amount available for drawing under such Letter of Credit multiplied by such
Lender's Pro Rata Share. Each Issuing Bank will notify each Lender promptly upon
presentation to it of an L/C Draft or upon any other draw under a Letter of
Credit. On or before the Business Day on which an Issuing Bank makes payment of
each such L/C Draft or, in the case of any other draw on a Letter of Credit, on
demand by the Agent, each Lender shall make payment to the Agent, for the
account of the applicable Issuing Bank, in immediately available funds in an
amount equal to such Lender's Pro Rata Share of the amount of such payment or
draw. The obligation of each Lender to reimburse the Issuing Banks under this
SECTION 3.5 shall be unconditional, continuing, irrevocable and absolute;
PROVIDED, HOWEVER, that the obligation of each Lender shall not extend to
payments made under a Letter of Credit resulting from the Issuing Bank's Gross
Negligence or willful misconduct in honoring any L/C Draft. In the event that
any Lender fails to make payment to the Agent of any amount due under this
SECTION 3.5, the Agent shall be entitled to receive, retain and apply against
such obligation the principal and interest otherwise payable to such Lender
hereunder until the Agent receives such payment from such Lender or such
obligation is otherwise fully satisfied; PROVIDED, HOWEVER, that nothing
contained in this sentence shall relieve such Lender of its obligation to
reimburse the applicable Issuing Bank for such amount in accordance with this
SECTION 3.5.
3.6 REIMBURSEMENT OBLIGATION. The Borrower agrees unconditionally,
irrevocably and absolutely to pay immediately to the Agent, for the account of
the Lenders, the amount of each advance which may be drawn under or pursuant to
a Letter of Credit or an L/C Draft related thereto (such obligation of the
Borrower to reimburse the Agent for an advance made under a Letter of Credit or
L/C Draft being hereinafter referred to as a "REIMBURSEMENT OBLIGATION" with
respect to such Letter of Credit or L/C Draft). If the Borrower at any time
fails to repay a Reimbursement Obligation pursuant to this SECTION 3.6, the
Borrower shall be deemed to have elected to borrow Revolving Loans from the
Lenders, as of the date of the advance giving rise to the Reimbursement
Obligation, equal in amount to the amount of the unpaid Reimbursement
Obligation. Such Revolving Loans shall be made as of the date of the payment
giving rise to such Reimbursement Obligation, automatically, without notice and
without any requirement to satisfy the conditions precedent otherwise applicable
to an Advance of Revolving Loans. Such Revolving Loans shall constitute a
Floating Rate Advance, the proceeds of which Advance shall be used to repay such
Reimbursement Obligation. If, for any reason, the Borrower fails to repay a
Reimbursement Obligation on
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the day such Reimbursement Obligation arises and, for any reason, the Lenders
are unable to make or have no obligation to make Revolving Loans, then such
Reimbursement Obligation shall bear interest from and after such day, until paid
in full, at the interest rate applicable to a Floating Rate Advance.
3.7 LETTER OF CREDIT FEES. The Borrower agrees to pay (i) quarterly, in
arrears, on each Payment Date to the Agent a letter of credit fee at a rate per
annum equal to the Applicable L/C Fee Percentage on the average daily
outstanding face amount available for drawing under all Letters of Credit , in
addition to 0.125% which shall be payable to the applicable Issuing Bank for
their sole account as a fronting fee and the balance of which shall be payable
to the Agent for the ratable benefit of the Lenders, except as set forth in
SECTION 9.2, and (ii) to the Agent for the benefit of each Issuing Bank, all
customary fees and other issuance, amendment, document examination, negotiation
and presentment expenses and related charges in connection with the issuance,
amendment, presentation of L/C Drafts, and the like customarily charged by the
Issuing Banks with respect to standby and commercial Letters of Credit,
including, without limitation, standard commissions with respect to commercial
Letters of Credit, payable at the time of invoice of such amounts.
3.8 ISSUING BANK REPORTING REQUIREMENTS. In addition to the notices
required by SECTION 3.4(C), each Issuing Bank shall, no later than the tenth
Business Day following the last day of each month, provide to the Agent, upon
the Agent's request, schedules, in form and substance reasonably satisfactory to
the Agent, showing the date of issue, account party, amount, expiration date and
the reference number of each Letter of Credit issued by it outstanding at any
time during such month and the aggregate amount payable by the Borrower during
such month. In addition, upon the request of the Agent, each Issuing Bank shall
furnish to the Agent copies of any Letter of Credit and any application for or
reimbursement agreement with respect to a Letter of Credit to which the Issuing
Bank is party and such other documentation as may reasonably be requested by the
Agent. Upon the request of any Lender, the Agent will provide to such Lender
information concerning such Letters of Credit.
3.9 INDEMNIFICATION; EXONERATION.
(a) In addition to amounts payable as elsewhere provided in this
ARTICLE III, the Borrower hereby agrees to protect, indemnify, pay and
save harmless the Agent, each Issuing Bank and each Lender from and
against any and all liabilities and costs which the Agent, such Issuing
Bank or such Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit other than, in the
case of the applicable Issuing Bank, as a result of its Gross Negligence
or willful misconduct, as determined by the final judgment of a court of
competent jurisdiction, or (ii) the failure of the applicable Issuing Bank
to honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future DE JURE
or DE FACTO Governmental Authority (all such acts or omissions herein
called "GOVERNMENTAL ACTS").
(b) As among the Borrower, the Lenders, the Agent and the Issuing
Banks, the Borrower assumes all risks of the acts and omissions of, or
misuse of such Letter of Credit by, the beneficiary of any Letters of
Credit. In furtherance and not in limitation of the foregoing, subject to
the provisions of the Letter of Credit applications and Letter of Credit
reimbursement agreements executed by the Borrower at the time of request
for any Letter of Credit, neither the Agent, any Issuing Bank nor any
Lender shall be responsible (in the absence of Gross Negligence or willful
misconduct in connection therewith, as determined by the final judgment of
a court of competent jurisdiction): (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance
of the Letters of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
for the validity or sufficiency of any instrument transferring or
assigning
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or purporting to transfer or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii) for failure of
the beneficiary of a Letter of Credit to comply duly with conditions
required in order to draw upon such Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (v) for errors in interpretation of
technical trade terms; (vi) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any
Letter of Credit or of the proceeds thereof; (vii) for the misapplication
by the beneficiary of a Letter of Credit of the proceeds of any drawing
under such Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Agent, the Issuing Banks and the Lenders,
including, without limitation, any Governmental Acts. None of the above
shall affect, impair, or prevent the vesting of any Issuing Bank's rights
or powers under this SECTION 3.9.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
any Issuing Bank under or in connection with the Letters of Credit or any
related certificates shall not, in the absence of Gross Negligence or
willful misconduct, as determined by the final judgment of a court of
competent jurisdiction, put the applicable Issuing Bank, the Agent or any
Lender under any resulting liability to the Borrower or relieve the
Borrower of any of its obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this SECTION 3.9 shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit
and the termination of this Agreement.
3.10 CASH COLLATERAL. Notwithstanding anything to the contrary herein or
in any application for a Letter of Credit, after the occurrence and during the
continuance of Default, the Borrower shall, upon the Agent's demand, deliver to
the Agent for the benefit of the Lenders and the Issuing Banks, cash, or other
collateral of a type satisfactory to the Required Lenders, having a value, as
determined by such Lenders, equal to the aggregate outstanding L/C Obligations.
In addition, if the Revolving Credit Availability is at any time less than the
amount of contingent L/C Obligations outstanding at any time, the Borrower shall
deposit cash collateral with the Agent in an amount equal to the amount by which
such L/C Obligations exceed such Revolving Credit Availability. Any such
collateral shall be held by the Agent in a separate account appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by the Agent for the benefit of the Lenders and
the Issuing Banks as collateral security for the Borrower's obligations in
respect of this Agreement and each of the Letters of Credit and L/C Drafts. Such
amounts shall be applied to reimburse the Issuing Banks for drawings or payments
under or pursuant to Letters of Credit or L/C Drafts, or if no such
reimbursement is required, to payment of such of the other Obligations as the
Agent shall determine. If no Default shall be continuing, amounts remaining in
any cash collateral account established pursuant to this SECTION 3.10 which are
not to be applied to reimburse an Issuing Bank for amounts actually paid or to
be paid by such Issuing Bank in respect of a Letter of Credit or L/C Draft,
shall be returned to the Borrower (after deduction of the Agent's expenses
incurred in connection with such cash collateral account).
ARTICLE IV: CHANGE IN CIRCUMSTANCES
4.1 YIELD PROTECTION. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) adopted after the Closing Date and having general applicability to
all banks within the jurisdiction in which such Lender operates (excluding, for
the avoidance of doubt, the effect of and phasing in of capital requirements or
other regulations or
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guidelines passed prior to the Closing Date), or any interpretation or
application thereof by any Governmental Authority charged with the
interpretation or application thereof, or the compliance of any Lender
therewith,
(i) to the extent not otherwise covered pursuant to the provisions
of SECTION 2.12(E), subjects any Lender or any applicable Lending
Installation to any tax, duty, charge or withholding on or from payments
due from the Borrower (excluding, in the case of each Lender and the
Agent, such taxes (including income taxes, franchise taxes and branch
profit taxes) as are imposed on or measured by such Lender's or Agent's,
as the case may be, income by the United States of America or any
Governmental Authority of the jurisdiction under the laws of which such
Lender or Agent, as the case may be, is organized ), or changes the basis
of taxation of payments to any Lender in respect of its Loans, its L/C
Interests, the Letters of Credit or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended
by, any Lender or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Rate Loans) with respect to its Loans, L/C
Interests or the Letters of Credit, or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining the Loans, the L/C Interests or the Letters of
Credit or reduces any amount received by any Lender or any applicable
Lending Installation in connection with Loans or Letters of Credit, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Loans or L/C Interests
held or interest received by it or by reference to the Letters of Credit,
by an amount deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or
to reduce any amount received under this Agreement, then, within 15 days after
receipt by the Borrower of written demand by such Lender pursuant to SECTION
4.5, the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received which such Lender determines is
attributable to making, funding and maintaining its Loans, L/C Interests,
Letters of Credit and its Commitment.
4.2 CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender determines (i)
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a "Change" (as defined below), and (ii) such
increase in capital will result in an increase in the cost to such Lender of
maintaining its Loans, L/C Interests, the Letters of Credit or its obligation to
make Loans hereunder, then, within 15 days after receipt by the Borrower of
written demand by such Lender pursuant to SECTION 4.5, the Borrower shall pay
such Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans, its L/C Interests, the Letters of
Credit or its obligation to make Loans hereunder (after taking into account such
Lender's policies as to capital adequacy). "CHANGE" means (i) any change after
the Closing Date of this Agreement in the "Risk-Based Capital Guidelines" (as
defined below) excluding, for the avoidance of doubt, the effect of any phasing
in of such Risk-Based Capital Guidelines or any other capital requirements
passed prior to the Closing Date hereof, or (ii) any adoption of or change in
any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of law)
after the Closing Date and having general applicability to all banks and
financial institutions within the jurisdiction in which such Lender operates
which affects the amount of capital required or expected to be
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maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "RISK- BASED CAPITAL GUIDELINES" means (i) the
risk-based capital guidelines in effect in the United States on the Closing
Date, including transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States implementing the
July 1988 report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the Closing Date.
4.3 AVAILABILITY OF TYPES OF ADVANCES. If (i) any Lender determines that
maintenance of its Eurodollar Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation or directive, whether or not
having the force of law, or (ii) the Required Lenders determine that (x)
deposits of a type and maturity appropriate to match fund Eurodollar Rate
Advances are not available or (y) the interest rate applicable to a Type of
Advance does not accurately reflect the cost of making or maintaining such an
Advance, then the Agent shall suspend the availability of the affected Type of
Advance and, in the case of any occurrence set forth in clause (i) require any
Advances of the affected Type to be converted to Floating Rate Loans until the
circumstances giving rise to such suspension no longer exist.
4.4 FUNDING INDEMNIFICATION. If any payment of a Eurodollar Rate Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment, or otherwise, or a Eurodollar Rate
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, or a Eurodollar Rate Advance is converted on a day
other than the last day of the applicable Interest Period, the Borrower
indemnifies each Lender for any loss or cost incurred by it resulting therefrom
(including loss of profit other than loss of profit represented by the
Applicable Eurodollar Margin which would have been payable for such Interest
Period), including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Eurodollar Rate Advance. In
connection with any assignment by any Lender of any portion of the loans made
pursuant to SECTION 2.4(C), the Borrower shall be deemed to have repaid all
outstanding Eurodollar Rate Advances as of the effective date of such assignment
and reborrowed such amount as a Floating Rate Advance and/or Eurodollar Rate
Advance (chosen in accordance with the provisions of SECTION 2.2) and the
indemnification provisions under this SECTION 4.4 shall apply.
4.5 LENDER STATEMENTS; SURVIVAL OF INDEMNITY. If reasonably possible, each
Lender shall designate an alternate Lending Installation with respect to its
Eurodollar Rate Loans to reduce any liability of the Borrower to such Lender
under SECTIONS 4.1 and 4.2 or to avoid the unavailability of a Type of Advance
under SECTION 4.3, so long as such designation is not disadvantageous to such
Lender. Each Lender requiring compensation pursuant to SECTION 2.12(E) or to
this ARTICLE IV shall use its reasonable efforts to notify the Borrower and the
Agent in writing of any Change, law, policy, rule, guideline or directive giving
rise to such demand for compensation not later than ninety (90) days following
the date upon which the responsible account officer of such Lender knows or
should have known of such Change, law, policy, rule, guideline or directive;
PROVIDED, HOWEVER, that the failure to so notify the Borrower shall not affect
the Borrower's obligations under this SECTION 4.5. Any demand for compensation
pursuant to this ARTICLE IV shall be in writing and shall state the amount due,
if any, under SECTION 4.1, 4.2 or 4.4 and shall set forth in reasonable detail
the calculations upon which such Lender determined such amount. Such written
demand shall be rebuttably presumed correct for all purposes. Determination of
amounts payable under such Sections in connection with a Eurodollar Rate Loan
shall be calculated as though each Lender funded its Eurodollar Rate Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. The obligations of the
Borrower under SECTIONS 4.1, 4.2 and 4.4 shall survive payment of the
Obligations and termination of this Agreement.
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ARTICLE V: CONDITIONS PRECEDENT
5.1 INITIAL ADVANCES AND LETTERS OF CREDIT. The Lenders shall not be
required to make the initial Loans or issue any Letters of Credit or purchase
any participations therein unless (i) no law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which is likely to,
(A) enjoin, prohibit or restrain the making of the initial Loans on the Closing
Date or (B) impose or result in the imposition of a Material Adverse Effect;
(ii) there shall have occurred no material adverse change (A) in the primary and
secondary loan syndication markets or capital markets generally and (B) since
March 31, 1998, in the business, assets, operations, or financial condition of
the Borrower and its Subsidiaries or in the facts and information regarding such
entities as represented to date in this Agreement; (iii) there exists no Default
or Unmatured Default under the Original Credit Agreement; (iv) execution and
delivery of that certain Assignment Agreement whereby (A) the Original Agent
sells and assigns, and the Agent purchases and assumes the "Assumed Obligations"
(as defined therein), and (B) the Original Agent resigns as agent under the
Original Credit Agreement, (v) termination of all liens and security interests
in favor of the Original Agent pursuant to the Original Credit Agreement and the
related security documents thereto; and (vi) the Borrower has furnished to the
Agent each of the following, with sufficient copies for the Lenders, all in form
and substance satisfactory to the Agent and the Lenders:
(a) Copies, certified by the Secretary or Assistant Secretary of the
Borrower and each Guarantor, of its articles or certificate of
incorporation (which copies for the Borrower shall be certified as of a
recent date by the appropriate governmental officer in its respective
jurisdiction of incorporation), its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed necessary
by counsel for any Lender) authorizing the execution of the Loan
Documents;
(b) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower and each Guarantor, which shall
identify by name and title and bear the signature of the officers of the
Borrower and Guarantors authorized to sign the Loan Documents and, in the
case of the Borrower, to request Loans and Letters of Credit hereunder,
upon which certificate the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower;
(c) A certificate, in form and substance satisfactory to the Agent,
signed by the chief financial officer or treasurer of the Borrower, (i)
stating that on the Closing Date no Default or Unmatured Default has
occurred and is continuing, and (ii) setting forth the PRO FORMA
calculation of the Leverage Ratio as of Closing Date;
(d) A written opinion of the Borrower's and Guarantors' counsel,
addressed to the Agent and the Lenders, in substantially the form attached
as EXHIBIT G hereto;
(e) Revolving Notes payable to the order of each of the applicable
Lenders;
(f) A Swing Line Note payable to the order of NationsBank;
(g) The Guaranty executed by each of the Guarantors;
(h) A Pledge Agreement executed by each of the Borrower and its
Subsidiaries, as applicable, in connection with which each of the Borrower
and such Subsidiaries, as applicable, shall have delivered stock
certificates, stock powers and UCC-1 financing statements;
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(i) Copies of each environmental assessment report conducted by the
Borrower or any of its Subsidiaries with respect to their operations or
properties; and
(j) Such other documents as the Agent or any Lender or its counsel
may have reasonably requested.
5.2 EACH ADVANCE AND LETTER OF CREDIT. The Lenders shall not be required
to make any Advance, issue any Letter of Credit or purchase any participation
therein, unless on the applicable Borrowing Date, or in the case of a Letter of
Credit, the date on which the Letter of Credit is to be issued:
(i) There exists no Default or Unmatured Default; and
(ii) The representations and warranties contained in ARTICLE VI are
true and correct as of such Borrowing Date (unless such representation and
warranty expressly relates to an earlier date or is no longer true solely
as a result of transactions permitted by this Agreement).
Each Borrowing Notice with respect to each such Advance and the letter of
credit application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
SECTIONS 5.2(I) and (II) have been satisfied. If any Lender has a reasonable
basis for believing a Default or Unmatured Default may have occurred and is
continuing or that the Borrower is not able to make one or more of the
representations and warranties set forth in ARTICLE VI, such Lender may require
a duly completed officer's certificate in substantially the form of EXHIBIT H
hereto and/or a duly completed compliance certificate in substantially the form
of EXHIBIT I hereto as a condition to making an Advance or the issuance of any
Letter of Credit.
ARTICLE VI: REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows to each Lender and the
Agent as of the Closing Date, and thereafter on each date as required by SECTION
5.2:
6.1 ORGANIZATION; CORPORATE POWERS. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is duly
qualified to do business and is in good standing under the laws of each
jurisdiction in which failure to be so qualified and in good standing could not
reasonably be expected to have a Material Adverse Effect and (iii) has all
requisite corporate power and authority to own, operate and encumber its
property and to conduct its business as presently conducted and as proposed to
be conducted.
6.2 AUTHORITY.
(a) The Borrower and each of its Subsidiaries has the requisite
power and authority to execute, deliver and perform each of the Loan
Documents which are to be executed by it or which have been executed by it
as required by this Agreement on or prior to the Closing Date.
(b) The execution, delivery, performance and filing, as the case may
be, of each of the Loan Documents which must be executed or filed by the
Borrower or any of its Subsidiaries or which have been executed or filed
as required by this Agreement on or prior to the Closing Date and to which
the Borrower or any of its Subsidiaries is party, and the consummation of
the transactions contemplated thereby, have been duly approved by the
respective boards of directors and, if
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necessary, the shareholders of the Borrower and its Subsidiaries, and such
approvals have not been rescinded. No other corporate action or
proceedings on the part of the Borrower or its Subsidiaries are necessary
to consummate such transactions.
(c) Each of the Loan Documents to which the Borrower or any of its
Subsidiaries is a party has been duly executed, delivered or filed, as the
case may be, by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
6.3 NO CONFLICT; GOVERNMENTAL CONSENTS. The execution, delivery and
performance of each of the Loan Documents to which the Borrower or any of its
Subsidiaries is a party do not and will not (i) conflict with the certificate or
articles of incorporation or by-laws of the Borrower or any such Subsidiary,
(ii) constitute a tortious interference with any Contractual Obligation of any
Person or conflict with, result in a breach of or constitute (with or without
notice or lapse of time or both) a default under any Requirement of Law
(including, without limitation, any Environmental Property Transfer Act) or
Contractual Obligation of the Borrower or any such Subsidiary, or require
termination of any Contractual Obligation, except such interference, breach,
default or termination which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, (iii) result in or
require the creation or imposition of any Lien whatsoever upon any of the
property or assets of the Borrower or any such Subsidiary, other than Liens
permitted by the Loan Documents, or (iv) require any approval of the Borrower's
or any such Subsidiary's shareholders except such as have been obtained. The
execution, delivery and performance of each of the Loan Documents to which the
Borrower or any of its Subsidiaries is a party do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by any Governmental Authority, including under any Environmental
Property Transfer Act, except filings, consents or notices which have been made,
obtained or given, or which, if not made, obtained or given, individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
6.4 FINANCIAL STATEMENTS. The Current Financials were prepared in
accordance with Agreement Accounting Principles and fairly present, in all
material respects, the consolidated financial condition, results of operations,
and cash flows of the Borrower and such Subsidiaries as of the dates contained
therein, and for the portion of the fiscal year ending on the date or dates
thereof (subject only to normal year-end adjustments).
6.5 NO MATERIAL ADVERSE CHANGE. Since March 31, 1998, there has occurred
no event or circumstance which has had or could reasonably be expected to have a
Material Adverse Effect.
6.6 TAXES.
(a) TAX EXAMINATIONS. All material deficiencies which have been
asserted against the Borrower or any of the Borrower's Subsidiaries as a
result of any federal, state, local or foreign tax examination for each
taxable year in respect of which an examination has been conducted have
been fully paid or finally settled or are being contested in good faith,
and as of the Closing Date no issue has been raised by any taxing
authority in any such examination which, by application of similar
principles, reasonably can be expected to result in assertion by such
taxing authority of a material deficiency for any other year not so
examined which has not been reserved for in the Borrower's consolidated
financial statements to the extent, if any, required by Agreement
Accounting Principles.
(b) PAYMENT OF TAXES. All tax returns and reports of the Borrower
and its Subsidiaries required to be filed have been timely filed, and all
taxes, assessments, fees and other governmental charges thereupon and upon
their respective property, assets, income and franchises which are shown
in such returns or reports to be due and payable have been paid except
those items which are
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being contested in good faith and have been reserved for in accordance
with Agreement Accounting
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Principles or for which the failure to file could not reasonably be
expected to have a Material Adverse Effect. The Borrower has no knowledge
of any proposed tax assessment against the Borrower or any of its
Subsidiaries that will have or could reasonably be expected to have a
Material Adverse Effect.
6.7 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. There is no action,
suit, proceeding, arbitration or (to the Borrower's knowledge after diligent
inquiry) investigation before or by any Governmental Authority or private
arbitrator pending or, to the Borrower's knowledge after diligent inquiry,
threatened against the Borrower or any of its Subsidiaries or any property of
any of them (i) challenging the validity or the enforceability of any material
provision of the Loan Documents or (ii) which will have or could reasonably be
expected to have a Material Adverse Effect. There is no material loss
contingency within the meaning of Agreement Accounting Principles which has not
been reflected in the consolidated financial statements of the Borrower and its
Subsidiaries prepared and delivered pursuant to SECTION 7.1(A) for the fiscal
period during which such material loss contingency was incurred. Neither the
Borrower nor any of its Subsidiaries is (a) in violation of any applicable
Requirements of Law which violation will have or could reasonably be expected to
have a Material Adverse Effect, or (b) subject to or in default with respect to
any final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or Governmental Authority which will
have or could reasonably be expected to have a Material Adverse Effect.
6.8 SUBSIDIARIES. SCHEDULE 6.8 to this Agreement (i) contains a
description as of the Closing Date (or as of the date of any supplement thereto)
of the corporate structure of, the Borrower and its Subsidiaries and any other
Person in which the Borrower or any of its Subsidiaries holds an Equity
Interest; and (ii) accurately sets forth as of the Closing Date (or as of the
date of any supplement thereto) (A) the correct legal name, the jurisdiction of
incorporation and the jurisdictions in which each of the Borrower and the
Subsidiaries of the Borrower is qualified to transact business as a foreign
corporation, (B) for each Subsidiary of the Borrower which is not a wholly-owned
Subsidiary, the authorized, issued and outstanding shares of each class of
Capital Stock of such Subsidiaries and the owners of such shares (both as of the
Closing Date and on a fully-diluted basis), and (C) a summary of the direct and
indirect partnership, joint venture, or other Equity Interests, if any, of the
Borrower and each Subsidiary of the Borrower in any Person that is not a
corporation. After the formation or acquisition of any New Subsidiary permitted
under SECTION 7.3(G)(II), if requested by the Agent, the Borrower shall provide
a supplement to SCHEDULE 6.8 to this Agreement. None of the issued and
outstanding Capital Stock of the Borrower or any of its Subsidiaries is subject
to any redemption or repurchase agreement. The outstanding Capital Stock of the
Borrower and each of the Borrower's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable. The Borrower has no Subsidiaries other (i)
the Subsidiaries set forth on SCHEDULE 6.8 and (ii) any Subsidiaries acquired in
connection with a Permitted Acquisition, in connection with which the Borrower
shall have provided all of the documents, instruments and agreements as required
by this Agreement.
6.9 ERISA. No Benefit Plan has incurred any material accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code)
whether or not waived. Neither the Borrower nor any member of the Controlled
Group has incurred any material liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium payments which have
become due which are unpaid. Schedule B to the most recent annual report filed
with the IRS with respect to each Benefit Plan and, if so requested, furnished
to the Lenders, is complete and accurate. Since the date of each such Schedule
B, there has been no material adverse change in the funding status or financial
condition of the Benefit Plan relating to such Schedule B. Neither the Borrower
nor any member of the Controlled Group has (i) failed to make a required
contribution or payment to a Multiemployer Plan or (ii) made a complete or
partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan,
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in either event which could result in any material liability. Neither the
Borrower nor any member of the Controlled Group has failed to make a required
installment or any other required payment under Section 412 of the Code, in
either case involving any material amount, on or before the due date for such
installment or other payment. Neither the Borrower nor any member of the
Controlled Group is required to provide security to a Benefit Plan under Section
401(a)(29) of the Code due to a Plan amendment that results in an increase in
current liability for the plan year. Neither the Borrower nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
Each Plan which is intended to be qualified under Section 401(a) of the Code as
currently in effect is so qualified, and each trust related to any such Plan is
exempt from federal income tax under Section 501(a) of the Code as currently in
effect. The Borrower and all Subsidiaries are in compliance in all material
respects with the responsibilities, obligations and duties imposed on them by
ERISA and the Code with respect to all Plans. Neither the Borrower nor any of
its Subsidiaries nor any fiduciary of any Plan has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
which could reasonably be expected to subject the Borrower or any Guarantor to
material liability. Neither the Borrower nor any member of the Controlled Group
has taken or failed to take any action which would constitute or result in a
Termination Event, which action or inaction could reasonably be expected to
subject the Borrower to material liability. Neither the Borrower nor any
Subsidiary is subject to any liability under Sections 4063, 4064, 4069, 4204 or
4212(c) of ERISA and no other member of the Controlled Group is subject to any
liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA which could
reasonably be expected to subject the Borrower or any Guarantor to material
liability. Neither the Borrower nor any of its Subsidiaries has, by reason of
the transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement. For purposes
of this SECTION 6.9 "material" means any noncompliance or basis for liability
which could reasonably be likely to subject the Borrower or any of its
Subsidiaries to liability individually or in the aggregate for all such matters
in excess of $5,000,000.
6.10 ACCURACY OF INFORMATION. The information, exhibits and reports
furnished by or on behalf of the Borrower and any of its Subsidiaries to the
Agent or to any Lender in connection with the negotiation of, or compliance
with, the Loan Documents, the representations and warranties of the Borrower and
its Subsidiaries contained in the Loan Documents, and all certificates and
documents delivered to the Agent and the Lenders pursuant to the terms thereof,
taken as a whole, do not contain as of the date furnished any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein or therein, taken as a whole, in light of the
circumstances under which they were made, not misleading.
6.11 SECURITIES ACTIVITIES. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
6.12 MATERIAL AGREEMENTS. Neither the Borrower nor any of its Subsidiaries
is a party to any Contractual Obligation or subject to any charter or other
corporate restriction which individually or in the aggregate will have or could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries has received notice or has knowledge that (i) it is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, or (ii) any condition exists which, with the giving of notice
or the lapse of time or both, would constitute a default with respect to any
such Contractual Obligation, in each case, except where such default or
defaults, if any, individually or in the aggregate will not have or could not
reasonably be expected to have a Material Adverse Effect.
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6.13 COMPLIANCE WITH LAWS. The Borrower and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their respective
businesses, in each case where the failure to so comply individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
6.14 ASSETS AND PROPERTIES. The Borrower and each of its Subsidiaries has
good and marketable title to all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets (except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such assets), except
where the failure to have any such title will not have or could not reasonably
be expected to have a Material Adverse Effect, and all such assets and property
are free and clear of all Liens, except Liens permitted under SECTION 7.3(C).
Substantially all of the assets and properties owned by, leased to or used by
the Borrower and/or each such Subsidiary of the Borrower are in adequate
operating condition and repair, ordinary wear and tear excepted. Neither this
Agreement nor any transaction contemplated under this Agreement, will affect any
right, title or interest of the Borrower or such Subsidiary in and to any of its
assets in a manner that will have or could reasonably be expected to have a
Material Adverse Effect.
6.15 STATUTORY INDEBTEDNESS RESTRICTIONS. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal, state or local statute,
ordinance or regulation which limits its ability to incur indebtedness or its
ability to consummate the transactions contemplated hereby.
6.16 INSURANCE. The Borrower's and its Subsidiaries' insurance policies
and programs reflect coverage that is reasonably consistent with prudent
industry practice.
6.17 LABOR MATTERS. As of the Closing Date, to the Borrower's and its
Subsidiaries' knowledge, there are no material labor disputes to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities.
6.18 ENVIRONMENTAL MATTERS.
(a) (i) The operations of the Borrower and its Subsidiaries comply
in all material respects with Environmental, Health or Safety
Requirements of Law;
(ii) the Borrower and its Subsidiaries have all material
permits, licenses or other authorizations required under
Environmental, Health or Safety Requirements of Law and are in
material compliance with such permits;
(iii) neither the Borrower, any of its Subsidiaries nor any of
their respective present property or operations, or, to the best of,
the Borrower's or any of its Subsidiaries' knowledge, any of their
respective past property or operations, are subject to or the
subject of, any investigation known to the Borrower or any of its
Subsidiaries, any judicial or administrative proceeding, order,
judgment, decree, settlement or other agreement respecting: (A) any
material violation of Environmental, Health or Safety Requirements
of Law; (B) any material remedial action; or (C) any material claims
or liabilities arising from the Release or threatened Release of a
Contaminant into the environment;
(iv) there is not now, nor to the best of the Borrower's or
any of its Subsidiaries' knowledge has there ever been on or in the
property of the Borrower or any of its
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Subsidiaries any landfill, waste pile, underground storage tanks,
aboveground storage tanks, surface impoundment or hazardous waste
storage facility of any kind, any polychlorinated biphenyls (PCBs)
used in hydraulic oils, electric transformers or other equipment, or
any asbestos containing material that in the case of any of the
foregoing could be reasonably expected to result in any material
claims or liabilities; and
(v) neither the Borrower nor any of its Subsidiaries has any
material Contingent Obligation in connection with any Release or
threatened Release of a Contaminant into the environment.
(b) For purposes of this SECTION 6.18, "material" means any
noncompliance or basis for liability which could reasonably be expected
individually or in the aggregate to have a Material Adverse Effect.
6.19 BENEFITS. Each of the Borrower and its Subsidiaries will benefit from
the financing arrangement established by this Agreement. The Agent and the
Lenders have stated and the Borrower acknowledges that, but for the agreement by
each of the Guarantors to execute and deliver the Guaranty, the Agent and the
Lenders would not have made available the credit facilities established hereby
on the terms set forth herein.
6.20 YEAR 2000 PROBLEM. The Borrower has: (a) initiated a review and
assessment of all areas within the Borrower's and each Subsidiary's business and
operations (including those affected by suppliers, vendors and customers) that
could be adversely affected by the "YEAR 2000 PROBLEM" (that is, the risk that
computer applications used by the Borrower or any Subsidiary (or suppliers,
vendors or customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to, and any date after,
December 31, 1999); (b) developed a plan and timeline for addressing the Year
2000 Problem on a timely basis; and (c) to date, implemented that plan
materially in accordance with that timetable. Based on the foregoing, the
Borrower believes that all computer applications (including those of its
suppliers, vendors and customers) that are material to the Borrower or any
Subsidiary's business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, "YEAR 2000 COMPLIANT"), except to the extent
that a failure to do so could not reasonably be expected to constitute a
Material Adverse Effect.
ARTICLE VII: COVENANTS
The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders shall
otherwise give prior written consent:
7.1 REPORTING. The Borrower shall:
(a) FINANCIAL REPORTING. Furnish to the Lenders:
(i) QUARTERLY REPORTS. As soon as practicable, and in any
event within fifty (50) days after the end of each of the first
three quarters in each fiscal year, the consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such period
and the related consolidated statements of income and cash flows of
the Borrower and its Subsidiaries for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, certified by the chief financial officer
of the Borrower on behalf of the Borrower as fairly presenting the
consolidated financial position
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of the Borrower and its Subsidiaries as at the dates indicated and
the results of their operations and cash flows for the periods
indicated in accordance with Agreement Accounting Principles,
subject to normal year end adjustments. In addition, as soon as
practicable, and in any event within fifty (50) days after the end
of the fourth fiscal quarter in each fiscal year, such financial
statements and information as shall be reasonably acceptable to the
Agent as sufficient for the calculation of the Leverage Ratio as of
the end of such fiscal quarter, certified by the chief financial
officer of the Borrower.
(ii) ANNUAL REPORTS. As soon as practicable, and in any event
within ninety-five (95) days after the end of each fiscal year, (A)
the consolidated balance sheet of the Borrower and its Subsidiaries
as at the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for such fiscal year, and in
comparative form the corresponding figures for the previous fiscal
year and (B) an audit report on the items listed in CLAUSE (A)
hereof of independent certified public accountants of recognized
national standing, which audit report shall be unqualified and shall
state that such financial statements fairly present the consolidated
financial position of the Borrower and its Subsidiaries as at the
dates indicated and the results of their operations and cash flows
for the periods indicated in conformity with Agreement Accounting
Principles and that the examination by such accountants in
connection with such consolidated financial statements has been made
in accordance with generally accepted auditing standards. The
deliveries made pursuant to this CLAUSE (II) shall be accompanied by
any management letter prepared by the above-referenced accountants.
(iii) OFFICER'S CERTIFICATE. Together with each delivery of
any financial statement (A) pursuant to CLAUSES (I) and (II) of this
SECTION 7.1(A), an Officer's Certificate of the Borrower,
substantially in the form of EXHIBIT H attached hereto and made a
part hereof, stating that no Default or Unmatured Default exists, or
if any Default or Unmatured Default exists, stating the nature and
status thereof and (B) pursuant to CLAUSES (I) and (II) of this
SECTION 7.1(A), a compliance certificate, substantially in the form
of EXHIBIT I attached hereto and made a part hereof, signed by the
Borrower's chief financial officer or treasurer, setting forth
calculations for the period then ended, which demonstrate
compliance, when applicable, with the provisions of SECTION 7.4, and
which calculate the Leverage Ratio for purposes of determining the
then Applicable Eurodollar Margin, Applicable Floating Rate Margin
and Applicable Facility Fee Percentage.
(iv) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. Not less
frequently than once during each 12-month period following the
Closing Date, a copy of the plan and forecast (including a projected
balance sheet, income statement and statement of cash flow) of the
Borrower and its Subsidiaries for the upcoming 12-month period
prepared in such detail as shall be reasonably satisfactory to the
Agent.
(b) NOTICE OF DEFAULT. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Borrower obtaining knowledge (i) of any condition or
event which constitutes a Default or Unmatured Default, or becoming aware
that any Lender or Agent has given any written notice with respect to a
claimed Default or Unmatured Default under this Agreement, or (ii) that
any Person has given any written notice to the Borrower or any Subsidiary
of the Borrower or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION 8.1(E),
deliver to the Agent and the Lenders a notice specifying (A) the nature
and period of existence of any such claimed default, Default, Unmatured
Default, condition or event, (B) the notice given or action taken by such
Person in
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connection therewith, and (C) what action the Borrower has taken, is
taking and proposes to take with respect thereto.
(c) LAWSUITS. (i) Promptly upon the Borrower obtaining knowledge of
the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the
Borrower or any of its Subsidiaries or any property of the Borrower or any
of its Subsidiaries, which action, suit, proceeding, governmental
investigation or arbitration exposes, or in the case of multiple actions,
suits, proceedings, governmental investigations or arbitrations arising
out of the same general allegations or circumstances which could
reasonably be expected to have a Material Adverse Effect, give written
notice thereof to the Agent and provide such other information as may be
reasonably available to enable each Lender and the Agent and its counsel
to evaluate such matters; and (ii) in addition to the requirements set
forth in CLAUSE (I) of this SECTION 7.1(C), upon request of the Agent or
the Required Lenders, promptly give written notice of the status of any
action, suit, proceeding, governmental investigation or arbitration
covered by a report delivered pursuant to CLAUSE (I) above or disclosed in
any filing with the Commission and provide such other information as may
be reasonably available to it that would not violate any attorney-client
privilege by disclosure to the Lenders to enable each Lender and the Agent
and its counsel to evaluate such matters.
(d) ERISA NOTICES. Deliver or cause to be delivered to the Agent and
the Lenders, at the Borrower's expense, the following information and
notices as soon as reasonably possible, and in any event:
(i) (A) within ten (10) Business Days after the Borrower
obtains knowledge that a Termination Event has occurred, a written
statement of the chief financial officer of the Borrower describing
such Termination Event and the action, if any, which the Borrower
has taken, is taking or proposes to take with respect thereto, and
when known, any action taken or threatened by the IRS, DOL or PBGC
with respect thereto and (B) within ten (10) Business Days after any
member of the Controlled Group obtains knowledge that a Termination
Event has occurred which could reasonably be expected to subject the
Borrower or any member of the Controlled Group to liability
individually or in the aggregate in excess of $1,000,000, a written
statement of the chief financial officer of the Borrower describing
such Termination Event and the action, if any, which the member of
the Controlled Group has taken, is taking or proposes to take with
respect thereto, and when known, any action taken or threatened by
the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower or any
of its Subsidiaries obtains knowledge that a prohibited transaction
(defined in Sections 406 of ERISA and Section 4975 of the Code) has
occurred which could result in material liability , a statement of
the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or such Subsidiary has
taken, is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the Borrower or any
of its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Code, copies of each such letter;
(iv) within ten (10) Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with
respect to any Benefit Plan and all
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communications received by the Borrower or a member of the
Controlled Group with respect to such request;
(v) within ten (10) Business Days after receipt by the
Borrower or any member of the Controlled Group of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed
to administer a Benefit Plan, copies of each such notice;
(vi) within ten (10) Business Days after receipt by the
Borrower or any member of the Controlled Group of a notice from a
Multiemployer Plan regarding the imposition of withdrawal liability,
copies of each such notice;
(vii) within ten (10) Business Days after the Borrower or any
member of the Controlled Group fails to make a required installment
or any other required payment under Section 412 of the Code on or
before the due date for such installment or payment, a notification
of such failure; and
(viii) within ten (10) Business Days after the Borrower or any
member of the Controlled Group knows or has reason to know that (A)
a Multiemployer Plan has been terminated, (B) the administrator or
plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (C) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer
Plan.
For purposes of this SECTION 7.1(D), the Borrower, any of its Subsidiaries
and any member of the Controlled Group shall be deemed to know all facts
known by the Administrator of any Plan of which the Borrower or any member
of the Controlled Group or such Subsidiary is the plan sponsor.
(e) LABOR MATTERS. Notify the Agent and the Lenders in writing,
promptly upon the Borrower's learning thereof, of (i) any material labor
dispute to which the Borrower or any of its Subsidiaries may become a
party, including, without limitation, any strikes, lockouts or other
disputes relating to such Persons' plants and other facilities and (ii)
any material liability incurred under the Worker Adjustment and Retraining
Notification Act with respect to the closing of any plant or other
facility of the Borrower or any of its Subsidiaries.
(f) OTHER INDEBTEDNESS. Deliver to the Agent (i) a copy of each
notice or communication regarding potential or actual defaults (including
any accompanying officer's certificate) delivered by or on behalf of the
Borrower or any of its Subsidiaries to the holders of funded Indebtedness
pursuant to the terms of the agreements governing such Indebtedness, such
delivery to be made at the same time and by the same means as such notice
or other communication is delivered to such holders, and (ii) a copy of
each notice or other communication regarding potential or actual defaults
received by the Borrower or any of its Subsidiaries from the from the
holders of funded Indebtedness pursuant to the terms of such Indebtedness,
such delivery to be made promptly after such notice or other communication
is received by the Borrower or any such Subsidiary.
(g) OTHER REPORTS. Deliver or cause to be delivered to the Agent and
the Lenders copies of all financial statements, reports and notices, if
any, sent or made available generally by the Borrower to its securities
holders or filed with the Commission by the Borrower, all press releases
made available generally by the Borrower or any of the Borrower's
Subsidiaries to the public concerning material developments in the
business of the Borrower or any such Subsidiary and all notifications
received from the Commission by the Borrower or its Subsidiaries pursuant
to the
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Securities Exchange Act of 1934 and the rules promulgated thereunder
(other than customary comment letters received in connection with
registration statements or other routine communications between the
Commission and the Borrower).
(h) ENVIRONMENTAL NOTICES. As soon as possible and in any event
within ten (10) days after receipt by the Borrower or any of its
Subsidiaries, a copy of (i) any notice or claim to the effect that the
Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the Release by the Borrower, any of its Subsidiaries, or any
other Person of any Contaminant into the environment, and (ii) any notice
alleging any violation of any Environmental, Health or Safety Requirements
of Law by the Borrower or any of its Subsidiaries if, in either case, such
notice or claim relates to an event which could reasonably be expected to
have a Material Adverse Effect.
(i) YEAR 2000 INFORMATION. The Borrower will provide to the Agent a
copy of the Year 2000 review and assessment when completed and, if
warranted as a result of such review and assessment, its program in
respect thereof for the Borrower and its Subsidiaries, including updates
and progress reports upon request of the Agent or any of the Lenders. The
Borrower will provide Agent notice, promptly after the Borrower or any
Subsidiary discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material
to the Borrower's or such Subsidiary's business and operations will not be
Year 2000 Compliant, except to the extent such failure could not
reasonably be expected to constitute a Material Adverse Effect.
(j) OTHER INFORMATION. Promptly upon receiving a request therefor
from the Agent or any Lender, prepare and deliver to the Agent and the
Lenders such other information with respect to the Borrower, any of its
Subsidiaries or the Collateral as from time to time may be reasonably
requested by the Agent or any Lender.
7.2 AFFIRMATIVE COVENANTS.
(a) CORPORATE EXISTENCE, ETC. Except for mergers permitted pursuant
to SECTION 7.3(I), the Borrower shall, and shall cause each of the
Guarantors to, at all times maintain its corporate existence and preserve
and keep, or cause to be preserved and kept, in full force and effect its
rights and franchises material to its businesses.
(b) CORPORATE POWERS; CONDUCT OF BUSINESS. The Borrower shall, and
shall cause each of its Subsidiaries to, qualify and remain qualified to
do business in each jurisdiction in which the nature of its business
requires it to be so qualified and where the failure to be so qualified
will have or could reasonably be expected to have a Material Adverse
Effect. The Borrower will, and will cause each Subsidiary to, carry on and
conduct its business in substantially the same manner and in substantially
the same fields of enterprise as it is presently conducted.
(c) COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause
its Subsidiaries to, (i) comply with all Requirements of Law and all
restrictive covenants affecting such Person or the business, properties,
assets or operations of such Person, and (ii) obtain as needed all Permits
necessary for its operations and maintain such Permits in good standing
unless failure to comply or obtain could not reasonably be expected to
have a Material Adverse Effect.
(d) PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower
shall pay, and cause each of its Subsidiaries to pay, (i) all taxes,
assessments and other governmental charges imposed upon it or on any of
its properties or assets or in respect of any of its franchises, business,
income or property before any penalty or interest accrues thereon, and
(ii) all claims (including,
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without limitation, claims for labor, services, materials and supplies)
for sums which have become due and payable and which by law have or may
become a Lien (other than a Lien permitted by SECTION 7.3(C)) upon any of
the Borrower's or such Subsidiary's property or assets, prior to the time
when any penalty or fine shall be incurred with respect thereto; PROVIDED,
HOWEVER, that no such taxes, assessments and governmental charges referred
to in CLAUSE (I) above or claims referred to in CLAUSE (II) above (and
interest, penalties or fines relating thereto) need be paid if being
contested in good faith by appropriate proceedings diligently instituted
and conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with Agreement Accounting Principles
shall have been made therefor. The Borrower will not, nor will it permit
any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any other Person other than the
consolidated return of the Borrower.
(e) INSURANCE. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full
force and effect, insurance policies and programs reflecting coverage that
is reasonably consistent with prudent industry practice.
(f) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The
Borrower shall permit and cause each of the Borrower's Subsidiaries to
permit, any authorized representative(s) designated by either the Agent or
any Lender to visit and inspect any of the properties of the Borrower or
any of its Subsidiaries, to examine, audit, check and make copies of their
respective financial and accounting records, books, journals, orders,
receipts and any correspondence and other data relating to their
respective businesses or the transactions contemplated hereby (including,
without limitation, in connection with environmental compliance, hazard or
liability), and to discuss their affairs, finances and accounts with their
officers and independent certified public accountants, all upon reasonable
notice and at such reasonable times during normal business hours, as often
as may be reasonably requested; PROVIDED that while no Default or
Unmatured Default exists, all of the foregoing shall be at the expense of
the Agent or Lenders, as applicable; PROVIDED, FURTHER, that any of the
foregoing conducted while an Unmatured Default exists which Unmatured
Default is cured prior to its maturing into a Default shall be at the
expense of the Agent or Lenders, as applicable. The Borrower shall keep
and maintain, and cause each of the Borrower's Subsidiaries to keep and
maintain, in all material respects, proper books of record and account in
which entries in conformity with Agreement Accounting Principles shall be
made of all dealings and transactions in relation to their respective
businesses and activities. If a Default has occurred and is continuing,
the Borrower, upon the Agent's request, shall turn over any such records
to the Agent or its representatives.
(g) ERISA COMPLIANCE. The Borrower shall, and shall cause each of
the Borrower's Subsidiaries to, establish, maintain and operate all Plans
to comply in all material respects with the provisions of ERISA, the Code,
all other applicable laws, and the regulations and interpretations
thereunder and the respective requirements of the governing documents for
such Plans, except where the failure to comply will not or could not
reasonably be expected to subject the Borrower and its Subsidiaries to
liability individually or in the aggregate in excess of $5,000,000.
(h) MAINTENANCE OF PROPERTY. The Borrower shall cause all property
used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Borrower may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER,
that nothing in this SECTION 7.2(H) shall prevent the Borrower from
discontinuing the operation or maintenance of any of such property if such
discontinuance is, in the judgment of the Borrower,
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desirable in the conduct of its business or the business of any Subsidiary
and not disadvantageous in any material respect to the Agent or the
Lenders.
(i) ENVIRONMENTAL COMPLIANCE. The Borrower and its Subsidiaries
shall comply with all Environmental, Health or Safety Requirements of Law,
except where noncompliance could not reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
shall be the subject of any proceeding or investigation pertaining to (i)
the Release by the Borrower or any of its Subsidiaries of any Contaminant
into the environment or (ii) the liability of the Borrower or any of its
Subsidiaries arising from the Release by any other Person of any
Contaminant into the environment, which, in either case, has or is
reasonably likely to have a Material Adverse Effect.
(j) USE OF PROCEEDS. The Borrower shall use the proceeds of the
Loans (i) to provide funds for working capital needs, capital expenditures
and other general corporate purposes of the Borrower and its Subsidiaries,
and (ii) to fund Permitted Acquisitions. The Borrower will not, nor will
it permit any Subsidiary to, use any of the proceeds of the Loans to
purchase or carry any "Margin Stock" or to make any Acquisition, other
than any Permitted Acquisition pursuant to SECTION 7.3(G).
(k) ADDITION OF GUARANTORS; ADDITION OF PLEDGED CAPITAL STOCK. The
Borrower shall cause (i) each Subsidiary that is, at any time, a Material
Subsidiary, and (ii) each other Subsidiary necessary for the Borrower to
comply with the requirements set forth in SECTION 7.3(E), to deliver to
the Agent an executed Guaranty Supplement to become a Guarantor under the
Guaranty in the form of EXHIBIT J attached hereto and appropriate
corporate resolutions, opinions and other documentation in form and
substance reasonably satisfactory to the Agent, such Guaranty Supplement
and other documentation to be delivered to the Agent as promptly as
possible but in any event within thirty (30) days of determination that a
Subsidiary is a Material Subsidiary or otherwise needs to be added as a
Guarantor. Simultaneously with any Subsidiary becoming a Guarantor, the
Borrower shall (or, if the Capital Stock of such Subsidiary is owned by
another Subsidiary, shall cause such other Subsidiary to) deliver to the
Agent an executed supplement to the Pledge Agreement or a Pledge
Agreement, together with appropriate corporate resolutions, opinions,
stock certificates, UCC filings or amendments and other documentation, in
each case in form and substance reasonably satisfactory to the Agent and
the Agent shall be reasonably satisfied that it has a first priority
perfected pledge of all of the Capital Stock of such Guarantor owned by
the Borrower and its Subsidiaries.
(l) YEAR 2000 PROBLEM. The Borrower shall and shall cause each of
its Subsidiaries to take all actions reasonably necessary to assure that
the Year 2000 Problem will not have a Material Adverse Effect.
7.3 NEGATIVE COVENANTS.
(a) INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to any Indebtedness,
except:
(i) the Obligations;
(ii) Permitted Existing Indebtedness and Permitted
Refinancing Indebtedness;
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(iii) unsecured subordinated indebtedness (including in
connection with any Permitted Acquisition) that (x) does not have a
stated maturity before the Termination Date in effect as of the date
such indebtedness is incurred, (y) has terms that are no more
restrictive than the terms of this Agreement and the other Loan
Documents, and (z) is subordinated to the Obligations on terms at
least as favorable to the Lenders as the terms set forth on SCHEDULE
7.3 attached hereto (such Indebtedness being referred to herein as
"PERMITTED SUBORDINATED INDEBTEDNESS");
(iv) Indebtedness in respect of obligations secured by
Customary Permitted Liens;
(v) Indebtedness constituting Contingent Obligations in
respect of Indebtedness otherwise permitted hereunder;
(vi) Indebtedness arising from intercompany loans from the
Borrower to any Controlled Subsidiary or from any Subsidiary to the
Borrower or any Controlled Subsidiary; PROVIDED that in each case
such Indebtedness is subordinated upon terms satisfactory to the
Agent to the obligations of the Borrower and its Subsidiaries with
respect to the Obligations;
(vii) guaranties by the Borrower of Indebtedness permitted to
be incurred by any Subsidiary;
(viii) Indebtedness in respect of Hedging Obligations
permitted under SECTION 7.3(Q);
(ix) secured or unsecured purchase money Indebtedness
(including Capitalized Leases) incurred by the Borrower or any of
its Subsidiaries after the Closing Date (including, as a result of
the assumption of any such Indebtedness in connection with a
Permitted Acquisition) to finance the acquisition of fixed assets,
if (1) at the time of such incurrence, no Default or Unmatured
Default has occurred and is continuing or would result from such
incurrence, (2) such Indebtedness has a scheduled maturity and is
not due on demand, (3) such Indebtedness does not exceed the lower
of the fair market value or the cost of the applicable fixed assets
on the date acquired, (4) such Indebtedness does not exceed in the
aggregate at any time an amount equal to the sum of (a) $6,000,000
PLUS (b) an amount equal to 1.5% of Consolidated Revenues of the
Borrower and its Subsidiaries for each fiscal year, commencing with
the fiscal year ending December 31, 1998, and (5) any Lien securing
such Indebtedness is permitted under SECTION 7.3(C) (such
Indebtedness being referred to herein as "PERMITTED PURCHASE MONEY
INDEBTEDNESS");
(x) Indebtedness with respect to surety, appeal and
performance bonds obtained by the Borrower or any of its
Subsidiaries in the ordinary course of business;
(xi) Indebtedness arising under the Guaranty;
(xii) Indebtedness of a Subsidiary consisting of
tax-advantaged industrial revenue bond, industrial development bond
or other similar financings assumed in connection with (but not
incurred in connection with or in anticipation of) a Permitted
Acquisition;
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(xiii) other Indebtedness (other than working capital
financing) existing at a New Subsidiary at the time of the Permitted
Acquisition thereof (but not incurred in connection or in
anticipation of such Permitted Acquisition) the outstanding
principal balance of which does not exceed twenty-five percent (25%)
of the book value of the assets acquired as a result of such
Permitted Acquisition; and
(xiv) other Indebtedness in addition to that referred to
elsewhere in this SECTION 7.3(A) incurred by the Borrower or any of
its Subsidiaries; PROVIDED that (A) the aggregate amount of such
other Indebtedness shall not at any time exceed $25,000,000; and (B)
no Default or Unmatured Default shall have occurred and be
continuing at the date of such incurrence or would result therefrom.
(b) SALES OF ASSETS. Neither the Borrower nor any of its
Subsidiaries shall sell, assign, transfer, lease, convey or otherwise
dispose of any property (including the stock of any Subsidiary), whether
now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so, except:
(i) sales of inventory in the ordinary course of business;
(ii) the disposition in the ordinary course of business of
equipment that is obsolete, excess or no longer useful in the
Borrower's or its Subsidiaries' business; and
(iii) sales, assignments, transfers, leases, conveyances or
other dispositions of other assets (including sales of stock of a
Subsidiary) if such transaction:
(A) in the case of sales of a Material Subsidiary or
other assets representing 10% of Consolidated Tangible Assets,
is for consideration consisting of at least 70% of cash; and
(B) for all such transactions (1) is for not less than
Fair Value, and (2) when combined with all such other
transactions (each such transaction being valued at book
value) (a) during the immediately preceding twelve-month
period, represents the disposition of not greater than ten
percent (10%) of the Borrower's Consolidated Tangible Assets
at the end of the fiscal year immediately preceding that in
which such transaction is proposed to be entered into, and (b)
during the period from the Closing Date to the date of such
proposed transaction, represents the disposition of not
greater than twenty percent (20%) of the Borrower's
Consolidated Tangible Assets at the end of the fiscal year
immediately preceding that in which such transaction is
proposed to be entered into.
(c) LIENS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien
on or with respect to any of their respective property or assets except:
(i) Permitted Existing Liens;
(ii) Customary Permitted Liens;
(iii) purchase money Liens (including the interest of a lessor
under a Capitalized Lease and Liens to which any property is subject
at the time of the Borrower's or a
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Subsidiary's acquisition thereof) securing Permitted Purchase Money
Indebtedness; PROVIDED that such Liens shall not apply to any
property of the Borrower or its Subsidiaries other than that
purchased or subject to such Capitalized Lease;
(iv) Liens securing Indebtedness assumed in connection with a
Permitted Acquisition and permitted pursuant to CLAUSE (XII) or
CLAUSE (XIII) of SECTION 7.3(A); PROVIDED that such Liens shall not
apply to any property of the Borrower or its Subsidiaries other than
that purchased or directly financed in connection with such
Indebtedness;
(v) Liens securing the Obligations or Secured Obligations;
and
(vi) Liens (other than on the stock of any Subsidiaries)
securing other obligations not exceeding $5,000,000 in the aggregate
at any time outstanding.
In addition, neither the Borrower nor any of its Subsidiaries shall become
a party to any agreement, note, indenture or other instrument, or take any
other action, which would prohibit the creation of a Lien on any of its
properties or other assets in favor of the Agent for the benefit of itself
and Lenders, as collateral for the Obligations; PROVIDED that any
agreement, note, indenture or other instrument in connection with Liens
permitted pursuant to CLAUSES (I), (III) and (IV) above may prohibit the
creation of a Lien in favor of the Agent for the benefit of itself and the
Lenders on the items of property subject to such Lien.
(d) INVESTMENTS. Except to the extent permitted pursuant to SECTION
7.3(G) below, neither the Borrower nor any of its Subsidiaries shall
directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater
than the amount thereof on the Closing Date;
(iii) Investments in trade receivables or received in
connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary
course of business;
(iv) Investments consisting of deposit accounts maintained by
the Borrower or its Subsidiaries in the ordinary course of business
in connection with its cash management system;
(v) Investments consisting of non-cash consideration from a
sale, assignment, transfer, lease, conveyance or other disposition
of property permitted by SECTION 7.3(B);
(vi) Investments consisting of intercompany loans from any
Subsidiary to the Borrower or any other Subsidiary permitted by
SECTION 7.3(A)(VI);
(vii) Investments in any Controlled Subsidiary of the
Borrower;
(viii) Investments constituting Permitted Acquisitions; and
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(ix) Investments in addition to those referred to elsewhere in
this SECTION 7.3(D) in an amount not to exceed $1,000,000 in the
aggregate at any time outstanding;
PROVIDED, HOWEVER, that the Investments described in CLAUSES (V), (VIII)
and (IX) above shall not be permitted if either a Default or Unmatured
Default shall have occurred and be continuing on the date thereof or would
result therefrom.
(e) NON-GUARANTOR SUBSIDIARIES OR NON-PLEDGED SUBSIDIARIES. The
Borrower shall not permit the total revenues of the Subsidiaries which are
not Guarantors or the Capital Stock of which is not pledged (such revenues
to be calculated on a basis consistent with the calculation of
Consolidated Revenues) to be equal to or greater than ten percent (10%) of
Consolidated Revenues.
(f) RESTRICTED PAYMENTS. Neither the Borrower nor any of its
Subsidiaries shall declare or make any Restricted Payment, except:
(i) the defeasance, redemption, repurchase or prepayment of
any Permitted Subordinated Indebtedness with the net cash proceeds
of Permitted Refinancing Indebtedness;
(ii) the defeasance, redemption, repurchase or prepayment of
any Permitted Subordinated Indebtedness; PROVIDED that the aggregate
amount so defeased, redeemed, repurchased or prepaid after the
Closing Date shall not exceed an amount equal to ten percent (10%)
of the Aggregate Commitment;
(iii) in connection with the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests;
PROVIDED that the aggregate purchase price of all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 in the aggregate since the Closing Date or such larger
amount as may be agreed to by the Required Lenders; and
(iv) where the consideration therefor consists solely of
Equity Interests (but excluding Disqualified Stock) of the Borrower
or its Subsidiaries provided no Change of Control would occur as a
result thereof;
PROVIDED, HOWEVER, that the Restricted Payments described in CLAUSES(I),
(II) and (III) above shall not be permitted if either a Default shall have
occurred and be continuing at the date of declaration or payment thereof
or would result therefrom.
(g) CONDUCT OF BUSINESS; SUBSIDIARIES; ACQUISITIONS.
(i) Neither the Borrower nor any of its Subsidiaries shall
engage in any business other than the businesses engaged in by the
Borrower on the Closing Date and any business or activities which
are substantially similar, related or incidental thereto.
(ii) The Borrower may create, acquire and/or capitalize any
Subsidiary (a "NEW SUBSIDIARY") after the date hereof pursuant to
any transaction that is permitted by or not otherwise prohibited by
this Agreement; PROVIDED that upon the creation or acquisition of
each New Subsidiary, the Borrower shall cause each New Subsidiary
that is a Material Subsidiary to promptly deliver to the Agent an
executed counterpart of a Guaranty Supplemental to become a
Guarantor under the Guaranty in the form of EXHIBIT J attached
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hereto and appropriate corporate resolutions, opinions and other
documentation in form and substance satisfactory to the Agent, and
all New Subsidiaries that are Material Subsidiaries shall be
Controlled Subsidiaries.
(iii) The Borrower shall not make any Acquisitions, other than
Acquisitions meeting the following requirements (each such
Acquisition constituting a "PERMITTED ACQUISITION"):
(A) no Default or Unmatured Default shall have occurred
and be continuing or would result from such Acquisition or the
incurrence of any Indebtedness in connection therewith;
(B) in the case of an Acquisition of Equity Interests of
an entity, such Acquisition shall be of at least ninety
percent (90%) of the Equity Interests of such entity;
(C) the businesses being acquired shall be substantially
similar, related or incidental to the businesses or activities
engaged in by the Borrower and its Subsidiaries on the Closing
Date;
(D) the Indebtedness incurred by the Borrower to the
Seller as part of the consideration therefor (other than
Indebtedness assumed in connection therewith and permitted
pursuant to CLAUSES (IX), (XII) or (XIII) of SECTION 7.3(A))
shall be Permitted Subordinated Indebtedness under SECTION
7.3(A);
(E) prior to each such Acquisition, the Borrower shall
deliver to the Agent and the Lenders a certificate from one of
the Authorized Officers, (1) calculating the purchase price
and EBITDA for purposes of CLAUSE (H) below; and (2)
certifying that after giving effect to such Acquisition and
the incurrence of any Indebtedness hereunder and permitted by
SECTION 7.3(A) in connection therewith, on a PRO FORMA basis,
as if the Acquisition and such incurrence of Indebtedness had
occurred on the first day of the twelve-month period ending on
the last day of the Borrower's most recently completed fiscal
quarter, the Borrower would have been in compliance with all
of the covenants contained in this Agreement, including,
without limitation, the financial covenants set forth in
SECTION 7.4;
(F) the purchase is consummated pursuant to a negotiated
acquisition agreement on a non-hostile basis;
(G) after giving effect to such Acquisition, the
representations and warranties set forth in ARTICLE VI hereof
shall be true and correct in all material re spects on and as
of the date of such Acquisition with the same effect as though
made on and as of such date; and
(H) the written consent of the Required Lenders shall
have been obtained in connection with any Acquisition if:
(1) the aggregate, without duplication, of (a) the
cash portion of the purchase price, PLUS (b) the
difference (if positive) of (i) Indebtedness incurred or
assumed in connection with such Acquisition
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MINUS (ii) cash acquired in such Acquisition is greater
than $15,000,000; or
(2) the cash portion of the purchase price for
such Acquisition, together with the aggregate cash
portions of the purchase price for all other Permitted
Acquisitions for the then fiscal year exceeds
$40,000,000; or
(3) (a) the aggregate purchase price (including,
without limitation or duplication, cash, stock,
Indebtedness assumed (net of any cash acquired), and
transaction related contractual payments, including
amounts payable under non-compete, consulting or similar
agreements)(valuing all non-cash consideration at Fair
Value) (the "PURCHASE PRICE") is equal to or greater
than $5,000,000; and (b) the Purchase Price is equal to
or greater than seven (7) times the EBITDA of the target
entity for the last 12-month period preceding such
Acquisition for which financial statements are
available.
With respect to any Acquisition where the target entity's revenues
for the 12-month period ended immediately preceding such Acquisition
are equal to or greater than ten percent (10%) of the Borrower's and
its Subsidiaries' Consolidated Revenues, the Borrower shall (a) have
obtained (and shall have based the calculations set forth above on)
historical audited financial statements for the target and/or
reviewed unaudited financial statements for the target for a period
of not less than two years, obtained from the seller or provided by
independent certified public accountants retained for the purposes
of such Acquisition, broken down by fiscal quarter in the Borrower's
reasonable judgment, copies of which shall be provided to the Agent
and the Lenders and (b) at the request of the Required Lenders (such
request not to be made more frequently than once in any fiscal
quarter) provide such financial information as shall be reasonably
acceptable to the Agent and the Required Lenders demonstrating the
Borrower's PRO FORMA compliance with the covenants after taking into
account such Acquisition and the incurrence of any Indebtedness in
connection therewith.
(h) TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the
Borrower nor any of its Subsidiaries shall directly or indirectly enter
into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of
any service) with any holder or holders of any of the Equity Interests of
the Borrower, or with any Affiliate of the Borrower which is not its
Subsidiary, on terms that are less favorable to the Borrower or any of its
Subsidiaries, as applicable, than those that might be obtained in an arm's
length transaction at the time from Persons who are not such a holder or
Affiliate, except for Restricted Payments permitted by SECTION 7.3(F).
(i) RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor any
of its Subsidiaries shall enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
or convey, lease, sell, transfer or otherwise dispose of, in one
transaction or series of transactions, all or substantially all of the
Borrower's or any such Subsidiary's business or property, whether now or
hereafter acquired, except (i) transactions permitted under SECTIONS
7.3(B) or 7.3(G) (ii) the merger of a Subsidiary of the Borrower into a
Person acquired in connection with a Permitted Acquisition; (iii) the
merger of a wholly-owned Subsidiary of the Borrower with and into the
Borrower; and (iv) the merger of a Subsidiary of the Borrower with another
Subsidiary of the Borrower; PROVIDED, HOWEVER, that (i) with respect to
any
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such permitted mergers involving any Guarantor, the surviving corporation
in the merger shall also be or become a Guarantor; and (ii) after the
consummation of any such transaction, the Borrower shall be in compliance
with the provisions of SECTIONS 7.2(K) and 7.3(E).
(j) SALES AND LEASEBACKS. Neither the Borrower nor any of its
Subsidiaries shall become liable, directly, by assumption or by Contingent
Obligation, with respect to any lease, whether an operating lease or a
Capitalized Lease, of any property (whether real or personal or mixed) (i)
which it or one of its Subsidiaries sold or transferred or is to sell or
transfer to any other Person, or (ii) which it or one of its Subsidiaries
intends to use for substantially the same purposes as any other property
which has been or is to be sold or transferred by it or one of its
Subsidiaries to any other Person in connection with such lease, unless (i)
the sale involved is not prohibited under SECTION 7.3(B), (ii) the lease
does not involve Indebtedness prohibited under SECTION 7.3(A) and (iii)
the aggregate amount of all obligations incurred by the Borrower and its
Subsidiaries in connection therewith does not exceed $5,000,000
outstanding at any time.
(k) MARGIN REGULATIONS. Neither the Borrower nor any of its
Subsidiaries, shall use all or any portion of the proceeds of any credit
extended under this Agreement to purchase or carry Margin Stock.
(l) ERISA. The Borrower shall not
(i) engage, or permit any of its Subsidiaries to engage, in
any prohibited transaction described in Sections 406 of ERISA or
4975 of the Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained
from the DOL;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Code), with respect
to any Benefit Plan, whether or not waived;
(iii) fail, or permit any Controlled Group member to fail, to
pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;
(iv) terminate, or permit any Controlled Group member to
terminate, any Benefit Plan which would result in any liability of
the Borrower or any Controlled Group member under Title IV of ERISA;
(v) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any Controlled Group member
may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto;
(vi) fail, or permit any Controlled Group member to fail, to
pay any required installment or any other payment required under
Section 412 of the Code on or before the due date for such
installment or other payment; or
(vii) amend, or permit any Controlled Group member to amend, a
Plan resulting in an increase in current liability for the plan year
such that the Borrower or any Controlled Group member is required to
provide security to such Plan under Section 401(a)(29) of the Code,
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except where such transactions, events, circumstances, or failures will
not have or is not reasonably likely to subject the Borrower and its
Subsidiaries to liability individually or in the aggregate in excess of
$5,000,000.
(m) ISSUANCE OF EQUITY INTERESTS. The Borrower shall not issue any
Equity Interests if as a result of such issuance a Change of Control shall
occur. None of the Borrower's Subsidiaries shall issue any Equity
Interests other than to the Borrower.
(n) CORPORATE DOCUMENTS. Neither the Borrower nor any of its
Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective constituent documents as in effect
on the Closing Date hereof in any manner adverse in any material respect
to the interests of the Lenders, without the prior written consent of the
Required Lenders.
(o) FISCAL YEAR. Neither the Borrower nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax purposes
from a period consisting of the 12-month period ending on December 31 of
each calendar year.
(p) SUBSIDIARY COVENANTS. The Borrower will not, and will not permit
any Subsidiary to, create or otherwise cause to become effective any
consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to pay dividends or make any other distribution on its stock,
or make any other Restricted Payment, pay any Indebtedness or other
Obligation owed to the Borrower or any other Subsidiary, make loans or
advances or other Investments in the Borrower or any other Subsidiary, or
sell, transfer or otherwise convey any of its property to the Borrower or
any other Subsidiary.
(q) HEDGING OBLIGATIONS. The Borrower shall not and shall not permit
any of its Subsidiaries to enter into any interest rate, commodity or
foreign currency exchange, swap, collar, cap or similar agreements
evidencing Hedging Obligations, other than interest rate, foreign currency
or commodity exchange, swap, collar, cap or similar agreements entered
into by the Borrower or a Subsidiary pursuant to which the Borrower or
such Subsidiary has hedged its actual interest rate, foreign currency or
commodity exposure.
7.4 FINANCIAL COVENANTS. The Borrower shall comply with the following:
(a) FIXED CHARGE COVERAGE RATIO. The Borrower shall maintain a ratio
("FIXED CHARGE COVERAGE RATIO") of (i) the sum of EBITDA MINUS cash Taxes
paid to (ii) the sum of Interest Expense PLUS twenty percent (20%) of
Indebtedness for borrowed money, of 1.40 to 1.00 for each fiscal quarter
commencing with the fiscal quarter ending December 31, 1998 and each
fiscal quarter thereafter. In each case, the Fixed Charge Coverage Ratio
shall be determined as of the last day of each fiscal quarter based upon
(A) for Indebtedness for borrowed money, the outstanding principal amount
of such Indebtedness on such day, and (B) for EBITDA, Interest Expense
PLUS Taxes for the four-quarter period ending on such day.
(b) TOTAL DEBT TO EBITDA RATIO. The Borrower shall not at any time
permit the ratio (the "LEVERAGE RATIO") of (i) Total Debt of the Borrower
and its consolidated Subsidiaries to (ii) EBITDA of the Borrower and its
consolidated Subsidiaries, to be greater than 3.00 to 1.00. The Leverage
Ratio shall be calculated, in each case, determined as of the last day of
each fiscal quarter (commencing with the fiscal quarter ending December
31, 1998 and each fiscal quarter thereafter) based upon (A) for Total
Debt, outstanding principal amount of Total Debt as of the last day of
each
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such fiscal quarter; and (B) for EBITDA, EBITDA for the four-quarter
period ending on such day, calculated as set forth in the definition
thereof.
(c) SENIOR DEBT TO EBITDA RATIO. The Borrower shall not at any time
permit the ratio (the "SENIOR LEVERAGE RATIO") of (i) Senior Debt of the
Borrower and its consolidated Subsidiaries to (ii) EBITDA of the Borrower
and its consolidated Subsidiaries to be greater than 2.50 to 1.00. The
Senior Leverage Ratio shall be calculated, in each case, as of the last
day of each fiscal quarter (commencing with the fiscal quarter ending
December 31, 1998 and each fiscal quarter thereafter) based upon (A) for
Senior Debt, the Senior Debt as of the last day of each such fiscal
quarter; and (B) for EBITDA, EBITDA for the four-quarter period ending on
such day; calculated as set forth in the definition thereof.
(d) MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not permit
its Consolidated Net Worth at any time to be less than the sum of (i)
$75,000,000 PLUS (ii) seventy-five percent (75%) of Net Income (if
positive) calculated separately for each fiscal quarter ending after June
30, 1998, PLUS (iii) seventy-five percent (75%) of the adjustment to
stockholders' equity made in connection with the issuance of any Capital
Stock.
(e) CAPITAL EXPENDITURES. The Borrower will not, nor will it permit
any Subsidiary to, expend, or be committed to expend, for Capital
Expenditures in the acquisition of fixed assets, for each of the following
periods, individually or in the aggregate, in excess of the following
amounts: (i) $10,000,000 from October 1, 1998 through December 31, 1998,
(ii) $30,000,000 from January 1, 1999 through December 31, 1999, (iii)
$40,000,000 from January 1, 2000 through December 31, 2000, and (iv)
$45,000,000 from January 1, 2001 through December 31, 2001 or the
Termination Date, whichever date occurs earlier.
ARTICLE VIII: DEFAULTS
8.1 DEFAULTS. Each of the following occurrences shall constitute a Default
under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall (i) fail
to pay when due any of the Obligations consisting of principal with
respect to the Loans or (ii) shall fail to pay within three (3) Business
Days of the date when due any of the other Obligations under this
Agreement or the other Loan Documents.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation
binding on the Borrower under:
(i) SECTION 7.1(J) or 7.2(B) and such failure shall continue
unremedied for ten (10) Business Days;
(ii) SECTIONS 7.1(A), 7.2(C), 7.2(D), 7.2(E), 7.2(G) and
including 7.2(I) and such failure shall continue unremedied for five
(5) Business Days; or
(iii) SECTIONS 7.1(B),7.2(A), 7.2(F), 7.2(J), 7.3 or 7.4.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Borrower to the Agent or any Lender
herein or by the Borrower or any of its Subsidiaries in any of the other
Loan Documents or in any written statement or certificate at any
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time given by any such Person pursuant to any of the Loan Documents shall
be false or misleading in any material respect on the date as of which
made (or deemed made).
(d) OTHER DEFAULTS. The Borrower shall default in the performance of
or compliance with any term contained in this Agreement (other than as
covered by PARAGRAPHS (A), (B) or (C) of this SECTION 8.1), or the
Borrower or any of its Subsidiaries shall default in the performance of or
compliance with any term contained in any of the other Loan Documents, and
such default shall continue for thirty (30) days after the occurrence
thereof.
(e) DEFAULT AS TO OTHER INDEBTEDNESS. The Borrower or any of its
Subsidiaries shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) with
respect to any Indebtedness the outstanding principal amount of which
Indebtedness is in excess of $5,000,000; or any breach, default or event
of default shall occur, or any other condition shall exist under any
instrument, agreement, or any other indenture pertaining to any such
Indebtedness, if the effect thereof is to cause an acceleration, mandatory
redemption, a requirement that the Borrower offer to purchase such
Indebtedness or other required repurchase of such Indebtedness, or permit
the holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such
Indebtedness; or any such Indebtedness shall be otherwise declared to be
due and payable (by acceleration or otherwise) or required to be prepaid,
redeemed or otherwise repurchased by the Borrower or any of its
Subsidiaries (other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the
Borrower or any of the Borrower's Subsidiaries and the petition
shall not be dismissed, stayed, bonded or discharged within sixty
(60) days after commencement of the case; or a court having
jurisdiction in the premises shall enter a decree or order for
relief in respect of the Borrower or any of the Borrower's
Subsidiaries in an involuntary case, under any applicable
bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any
applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over the Borrower or any of the Borrower's Subsidiaries or
over all or a substantial part of the property of the Borrower or
any of the Borrower's Subsidiaries shall be entered; or an interim
receiver, trustee or other custodian of the Borrower or any of the
Borrower's Subsidiaries or of all or a substantial part of the
property of the Borrower or any of the Borrower's Subsidiaries shall
be appointed or a warrant of attachment, execution or similar
process against any substantial part of the property of the Borrower
or any of the Borrower's Subsidiaries shall be issued and any such
event shall not be stayed, dismissed, bonded or discharged within
sixty (60) days after entry, appointment or issuance.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower
or any of the Borrower's Subsidiaries shall (i) commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, (iii) consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property, (iv) make any assignment for the benefit
of creditors or (v) take any corporate action to authorize any of the
foregoing.
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(h) JUDGMENTS AND ATTACHMENTS. Any money judgment(s), writ or
warrant of attachment, or similar process against the Borrower or any of
its Subsidiaries or any of their respective assets involving in any single
case or in the aggregate an amount in excess of $2,500,000 is or are
entered and shall remain undischarged, unvacated, unbonded or unstayed for
a period of sixty (60) days or in any event later than fifteen (15) days
prior to the date of any proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered
against the Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of sixty (60) days; or the Borrower or any
of its Subsidiaries shall otherwise dissolve or cease to exist except as
specifically permitted by this Agreement.
(j) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any
reason, (i) any Loan Document as a whole that materially affects the
ability of the Agent, or any of the Lenders to enforce the Obligations or
enforce their rights against the Collateral ceases to be in full force and
effect or the Borrower or any of the Borrower's Subsidiaries party thereto
seeks to repudiate its obligations thereunder or the Liens intended to be
created thereby are, or the Borrower or any such Subsidiary seeks to
render such Liens, invalid or unperfected, or (ii) any Lien on the Capital
Stock of any Material Subsidiary shall, at any time, for any reason, be
invalidated or otherwise cease to be in full force and effect, or such
Lien shall not have the priority contemplated by this Agreement or the
Loan Documents.
(k) TERMINATION EVENT. Any Termination Event occurs which is
reasonably likely to subject the Borrower or any of its Subsidiaries to
liability individually or in the aggregate in excess of $5,000,000.
(l) WAIVER OF MINIMUM FUNDING STANDARD. If the plan administrator of
any Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(a) of the Code and any Lender
believes the substantial business hardship upon which the application for
the waiver is based could reasonably be expected to subject either the
Borrower or any Controlled Group member to liability individually or in
the aggregate in excess of $1,000,000.
(m) CHANGE OF CONTROL. A Change of Control shall occur.
(n) HEDGING AGREEMENTS. Nonpayment by the Borrower or any Subsidiary
of any obligation under any contract with respect to Hedging Obligations
entered into by the Borrower or such Subsidiary with any Lender (or
Affiliate thereof) or the breach by the Borrower or Subsidiary of any
other term, provision or condition contained in any agreement and such
nonpayment or breach shall continue for ten (10) days after the occurrence
thereof.
(o) GUARANTOR DEFAULT OR REVOCATION. Any Guaranty shall fail to
remain in full force or effect or any action shall be taken by the
Borrower or any Subsidiary to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply
with any of the terms or provisions of any Guaranty to which it is a
party, or any Guarantor denies that it has any further liability under any
Guaranty to which it is a party, or gives notice to such effect.
(p) FAILURE OF SUBORDINATION. The subordination provisions of the
documents and instruments evidencing any Permitted Subordinated
Indebtedness in an individual or aggregate
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principal amount outstanding in excess of $5,000,000 shall, at any time,
be invalidated or otherwise cease to be in full force and effect.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with SECTION 9.3.
ARTICLE IX: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS
AND REMEDIES
9.1 TERMINATION OF COMMITMENTS; ACCELERATION. If any Default described in
SECTION 8.1(F) or 8.1(G) occurs with respect to the Borrower, the obligations of
the Lenders to make Loans hereunder and the obligation of the Agent to issue
Letters of Credit hereunder shall automatically terminate and the Obligations
shall immediately become due and payable without any election or action on the
part of the Agent or any Lender. If any other Default occurs, the Required
Lenders may terminate or suspend the obligations of the Lenders to make Loans
hereunder and the obligation of the Issuing Banks to issue Letters of Credit
hereunder, or declare the Obligations to be due and payable, or both, whereupon,
after written notice to the Borrower, the Obligations shall become immediately
due and payable, without presentment, demand, protest or other notice of any
kind, all of which the Borrower expressly waives.
9.2 DEFAULTING LENDER. In the event that any Lender fails to fund its Pro
Rata Share of any Advance requested or deemed requested by the Borrower, which
such Lender is obligated to fund under the terms of this Agreement (the funded
portion of such Advance being hereinafter referred to as a "NON PRO RATA LOAN"),
until the earlier of such Lender's cure of such failure and the termination of
the Commitments, the proceeds of all amounts thereafter repaid to the Agent by
the Borrower and otherwise required to be applied to such Lender's share of all
other Obligations pursuant to the terms of this Agreement shall be advanced to
the Borrower by the Agent on behalf of such Lender to cure, in full or in part,
such failure by such Lender, but shall nevertheless be deemed to have been paid
to such Lender in satisfaction of such other Obligations. Notwithstanding
anything in this Agreement to the contrary:
(i) the foregoing provisions of this SECTION 9.2 shall apply only
with respect to the proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans pursuant to SECTION 2.8;
(ii) any such Lender shall be deemed to have cured its failure to
fund its Pro Rata Share of any Advance at such time as an amount equal to
such Lender's original Pro Rata Share of the requested principal portion
of such Advance is fully funded to the Borrower, whether made by such
Lender itself or by operation of the terms of this SECTION 9.2, and
whether or not the Non Pro Rata Loan with respect thereto has been repaid,
converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in part,
any such Lender's failure to fund its Pro Rata Share of any Advance ("CURE
LOANS") shall bear interest at the rate applicable to Floating Rate Loans
in effect from time to time, and for all other purposes of this Agreement
shall be treated as if they were Floating Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to its
desired application, all repayments of principal which, in accordance with
the other terms of this Agreement, would be applied to the outstanding
Floating Rate Loans shall be applied FIRST, ratably to all Floating Rate
Loans constituting Non Pro Rata Loans, SECOND, ratably to Floating Rate
Loans other than those constituting Non Pro Rata Loans or Cure Loans and,
THIRD, ratably to Floating Rate Loans constituting Cure Loans;
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(v) for so long as and until the earlier of any such Lender's cure
of the failure to fund its Pro Rata Share of any Advance and the
termination of the Commitments, the term "Required Lenders" for purposes
of this Agreement shall mean Lenders (excluding all Lenders whose failure
to fund their respective Pro Rata Shares of such Advance have not been so
cured) whose Pro Rata Shares represent at least sixty-six and two-thirds
percent (66-2/3%) of the aggregate Pro Rata Shares of such Lenders; and
(vi) for so long as and until any such Lender's failure to fund its
Pro Rata Share of any Advance is cured in accordance with SECTION 9.2(II),
(A) such Lender shall not be entitled to any facility fees with respect to
its Commitment and (B) such Lender shall not be entitled to any letter of
credit fees, which facility fees and letter of credit fees shall accrue in
favor of the Lenders which have funded their respective Pro Rata Share of
such requested Advance, shall be allocated among such performing Lenders
ratably based upon their relative Commitments, and shall be calculated
based upon the average amount by which the aggregate Commitments of such
performing Lenders exceeds the sum of (I) the outstanding principal amount
of the Loans owing to such performing Lenders, PLUS (II) the outstanding
Reimbursement Obligations owing to such performing Lenders, PLUS (III) the
aggregate participation interests of such performing Lenders arising
pursuant to SECTION 3.5 with respect to undrawn and outstanding Letters of
Credit.
9.3 AMENDMENTS. Subject to the provisions of this ARTICLE IX, the Required
Lenders (or the Agent with the consent in writing of the Required Lenders) and
the Borrower may enter into agreements supplemental hereto for the purpose of
adding or modifying any provisions to the Loan Documents or changing in any
manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder or any provision in any Loan Document; PROVIDED, HOWEVER, that
no such supplemental agreement shall, without the consent of each Lender
affected thereby:
(i) Postpone or extend the Termination Date or any other date fixed
for any payment of principal of, or interest on, the Loans, the
Reimbursement Obligations or any fees or other amounts payable to such
Lender (except with respect to (a) any modifications of the provisions
relating to prepayments of Loans and other Obligations and (b) a waiver of
the application of the default rate of interest pursuant to SECTION 2.9
hereof);
(ii) Reduce the principal amount of any Loans or L/C Obligations, or
reduce the rate or extend the time of payment of interest or fees thereon;
(iii) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters;
(iv) Other than pursuant to the provisions of SECTION 2.4(B),
increase the amount of the Commitment of any Lender hereunder;
(v) Permit the Borrower to assign its rights under this Agreement;
(vi) Amend this SECTION 9.3;
(vii) Other than in connection with a transaction permitted under
the terms of the Agreement release any guarantor of the Obligations;
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(viii) Other than in connection with a transaction permitted under
the terms of the Agreement, release all or substantially all of the
Collateral; or
(ix) Amend the terms of SECTION 12.2.
No amendment of any provision of this Agreement relating to (a) the Agent shall
be effective without the written consent of the Agent, (b) Swing Line Loans
shall be effective without the written consent of the Swing Line Bank and (c)
Letters of Credit shall be effective without the written consent of the Issuing
Banks. The Agent may waive payment of the fee required under SECTION 13.3(B)
without obtaining the consent of any of the Lenders.
9.4 PRESERVATION OF RIGHTS. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan or the issuance of a Letter of Credit notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Loan or issuance of such Letter of Credit shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to SECTION 9.3, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
ARTICLE X: GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
10.2 GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
10.3 PERFORMANCE OF OBLIGATIONS. The Borrower agrees that the Agent may,
but shall have no obligation to (i) at any time, pay or discharge taxes, liens,
security interests or other encumbrances levied or placed on or threatened
against any Collateral and (ii) after the occurrence and during the continuance
of a Default, make any other payment or perform any act required of the Borrower
under any Loan Document or take any other action which the Agent in its
discretion deems necessary or desirable to protect or preserve the Collateral or
enhance the likelihood of repayment of the Obligations. The Agent shall use its
reasonable efforts to give the Borrower and the Lenders notice of any action
taken under this SECTION 10.3 prior to the taking of such action or promptly
thereafter provided the failure to give such notice shall not affect the
Borrower's or Lenders' obligations in respect thereof. The Borrower agrees to
pay the Agent, upon demand, the principal amount of all funds advanced by the
Agent under this SECTION 10.3, together with interest thereon at the rate from
time to time applicable to Floating Rate Loans from the date of such advance
until the outstanding principal balance thereof is paid in full. If the Borrower
fails to make payment in respect of any such advance under this SECTION 10.3
within one (1) Business Day after the date the Borrower receives written demand
therefor from the Agent, the Agent shall promptly notify each Lender and each
Lender agrees that it shall thereupon make available to the Agent, in Dollars in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
such advance. If such funds are not made available to the Agent by such Lender
within one (1) Business Day after the Agent's demand therefor, the Agent will be
entitled to recover any such amount from such Lender together with interest
thereon at the Federal Funds
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Effective Rate for each day during the period commencing on the date of such
demand and ending on the date such amount is received. The failure of any Lender
to make available to the Agent its Pro Rata Share of any such unreimbursed
advance under this SECTION 10.3 shall neither relieve any other Lender of its
obligation hereunder to make available to the Agent such other Lender's Pro Rata
Share of such advance on the date such payment is to be made nor increase the
obligation of any other Lender to make such payment to the Agent. All
outstanding principal of, and interest on, advances made under this SECTION 10.3
shall constitute Obligations for purposes hereof.
10.4 HEADINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
10.5 ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
10.6 SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other Lender (except to the extent to which
the Agent is authorized to act as such). The failure of any Lender to perform
any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
10.7 EXPENSES; INDEMNIFICATION.
(a) EXPENSES. The Borrower shall reimburse the Agent for any
reasonable costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' and paralegals' fees and time charges of attorneys
and paralegals for the Agent, which attorneys and paralegals may be
employees of the Agent) paid or incurred by the Agent in connection with
the preparation, negotiation, execution, delivery, syndication, review,
amendment, modification, and administration of the Loan Documents. The
Borrower also agrees to reimburse the Agent and the Lenders for any costs,
internal charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the
Agent and the Lenders, which attorneys and paralegals may be employees of
the Agent or the Lenders) paid or incurred by the Agent or any Lender in
connection with the collection of the Obligations and enforcement of the
Loan Documents. In addition to expenses set forth above, the Borrower
agrees to reimburse the Agent, promptly after the Agent's request
therefor, for each audit or other business analysis performed by or for
the benefit of the Lenders in connection with this Agreement or the other
Loan Documents at a time when a Default exists in an amount equal to the
Agent's then reasonable and customary charges for each person employed to
perform such audit or analysis, plus all costs and expenses (including
without limitation, travel expenses) incurred by the Agent in the
performance of such audit or analysis. Agent shall provide the Borrower
with a detailed statement of all reimbursements requested under this
SECTION 10.7(A).
(b) INDEMNITY. THE BORROWER FURTHER AGREES TO DEFEND, PROTECT,
INDEMNIFY, AND HOLD HARMLESS THE AGENT AND EACH AND ALL OF THE LENDERS AND
EACH OF THEIR RESPECTIVE AFFILIATES, AND EACH OF SUCH AGENT'S, LENDER'S,
OR AFFILIATE'S RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND
AGENTS (INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH
THE SATISFACTION OR ATTEMPTED SATISFACTION OF ANY OF THE CONDITIONS SET
FORTH IN ARTICLE V)
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(COLLECTIVELY, THE "INDEMNITEES") FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, COSTS, EXPENSES OF ANY KIND OR NATURE WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, THE FEES AND DISBURSEMENTS OF COUNSEL FOR
SUCH INDEMNITEES IN CONNECTION WITH ANY INVESTIGATIVE, ADMINISTRATIVE OR
JUDICIAL PROCEEDING, WHETHER OR NOT SUCH INDEMNITEES SHALL BE DESIGNATED A
PARTY THERETO), IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST SUCH
INDEMNITEES IN ANY MANNER RELATING TO OR ARISING OUT OF:
(I) ANY LOAN DOCUMENT, OR ANY ACT, EVENT OR TRANSACTION
RELATED OR ATTENDANT THERETO OR TO ANY PERMITTED ACQUISITION, THE
MAKING OF THE LOANS, AND THE ISSUANCE OF AND PARTICIPATION IN
LETTERS OF CREDIT HEREUNDER, THE MANAGEMENT OF SUCH LOANS OR LETTERS
OF CREDIT, THE USE OR INTENDED USE OF THE PROCEEDS OF THE LOANS OR
LETTERS OF CREDIT HEREUNDER, OR ANY OF THE OTHER TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS; OR
(II) ANY LIABILITIES, OBLIGATIONS, RESPONSIBILITIES, LOSSES,
DAMAGES, PERSONAL INJURY, DEATH, PUNITIVE DAMAGES, ECONOMIC DAMAGES,
CONSEQUENTIAL DAMAGES, TREBLE DAMAGES, INTENTIONAL, WILLFUL OR
WANTON INJURY, DAMAGE OR THREAT TO THE ENVIRONMENT, NATURAL
RESOURCES OR PUBLIC HEALTH OR WELFARE, COSTS AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEY, EXPERT AND CONSULTING FEES
AND COSTS OF INVESTIGATION, FEASIBILITY OR REMEDIAL ACTION STUDIES),
FINES, PENALTIES AND MONETARY SANCTIONS, INTEREST, DIRECT OR
INDIRECT, KNOWN OR UNKNOWN, ABSOLUTE OR CONTINGENT, PAST, PRESENT OR
FUTURE RELATING TO VIOLATION OF ANY ENVIRONMENTAL, HEALTH OR SAFETY
REQUIREMENTS OF LAW ARISING FROM OR IN CONNECTION WITH THE PAST,
PRESENT OR FUTURE OPERATIONS OF THE BORROWER, ITS SUBSIDIARIES OR
ANY OF THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR, THE PAST,
PRESENT OR FUTURE ENVIRONMENTAL, HEALTH OR SAFETY CONDITION OF ANY
RESPECTIVE PROPERTY OF THE BORROWER OR ITS SUBSIDIARIES, THE
PRESENCE OF ASBESTOS-CONTAINING MATERIALS AT ANY RESPECTIVE PROPERTY
OF THE BORROWER OR ITS SUBSIDIARIES OR THE RELEASE OR THREATENED
RELEASE OF ANY CONTAMINANT INTO THE ENVIRONMENT (COLLECTIVELY, THE
"INDEMNIFIED MATTERS");
(INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF ANY
INDEMNITEE), PROVIDED, HOWEVER, THAT THE BORROWER SHALL HAVE NO
OBLIGATION TO AN INDEMNITEE HEREUNDER WITH RESPECT TO INDEMNIFIED
MATTERS CAUSED BY OR RESULTING FROM (Y) A DISPUTE AMONG THE
LENDERS OR A DISPUTE BETWEEN ANY LENDER AND THE AGENT, OR (Z) THE
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH INDEMNITEE OR
BREACH OF CONTRACT BY SUCH INDEMNITEE WITH RESPECT TO THE LOAN
DOCUMENTS, IN EACH CASE, AS DETERMINED BY THE FINAL NON-APPEALED
JUDGMENT OF A COURT OF COMPETENT JURISDICTION. IF THE UNDERTAKING
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TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THE PRECEDING SENTENCE
MAY BE UNENFORCEABLE BECAUSE IT IS VIOLATIVE OF ANY LAW OR PUBLIC POLICY,
THE BORROWER SHALL CONTRIBUTE THE MAXIMUM PORTION WHICH IT IS PERMITTED TO
PAY AND SATISFY UNDER APPLICABLE LAW, TO THE PAYMENT AND SATISFACTION OF
ALL INDEMNIFIED MATTERS INCURRED BY THE INDEMNITEES.
(c) WAIVER OF CERTAIN CLAIMS; SETTLEMENT OF CLAIMS. THE BORROWER
FURTHER AGREES TO ASSERT NO CLAIM AGAINST ANY OF THE INDEMNITEES ON ANY
THEORY OF LIABILITY FOR CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY OR
PUNITIVE DAMAGES. NO SETTLEMENT SHALL BE ENTERED INTO BY THE BORROWER OR
ANY IF ITS SUBSIDIARIES WITH RESPECT TO ANY CLAIM, LITIGATION, ARBITRATION
OR OTHER PROCEEDING RELATING TO OR ARISING OUT OF THE TRANSACTIONS
EVIDENCED BY THE LOAN DOCUMENTS OR IN CONNECTION WITH ANY PERMITTED
ACQUISITION OR RELATED TRANSACTIONS (WHETHER OR NOT THE AGENT OR ANY
LENDER OR ANY INDEMNITEE IS A PARTY THERETO) UNLESS SUCH SETTLEMENT
RELEASES ALL INDEMNITEES FROM ANY AND ALL LIABILITY WITH RESPECT THERETO.
(d) SURVIVAL OF AGREEMENTS. The obligations and agreements of the
Borrower under this SECTION 10.7 shall survive the termination of this
Agreement.
10.8 NUMBERS OF DOCUMENTS. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
10.9 ACCOUNTING. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
10.10 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
10.11 NONLIABILITY OF LENDERS. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent nor any Lender undertakes any responsibility to the
Borrower to review or inform the Borrower of any matter in connection with any
phase of the Borrower's business or operations.
10.12 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT, ANY
LENDER, OR ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL
LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF TEXAS.
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10.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(a) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS
LOCATED IN HOUSTON, TEXAS, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE
OF HOUSTON, TEXAS. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES
BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(b) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, ANY
LENDER OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON
TO (1) OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE
BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
SUBSECTION (B).
(c) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE
MAILING THEREOF BY THE AGENT OR THE LENDERS BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER ADDRESSED AS PROVIDED HEREIN.
NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF A PARTY
TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH
ABOVE.
(d) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH
OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
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ORDER, PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT.
(f) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 10.13, WITH ITS COUNSEL.
10.14 NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
10.15 SUBORDINATION OF INTERCOMPANY INDEBTEDNESS. The Borrower agrees that
any and all claims of the Borrower against any Guarantor, any endorser or any
other guarantor of all or any part of the Obligations, or against any of its
properties, including, without limitation, pursuant to the any intercompany
Indebtedness permitted under SECTION 7.3(A)(VI), shall be subordinate and
subject in right of payment to the prior payment, in full and in cash, of all
Obligations. Notwithstanding any right of the Borrower to ask, demand, sue for,
take or receive any payment from any Guarantor, all rights, liens and security
interests of the Borrower, whether now or hereafter arising and howsoever
existing, in any assets of any Guarantor shall be and are subordinated to the
rights, if any, of the Lenders and the Agent in those assets. The Borrower shall
have no right to possession of any such asset or to foreclose upon any such
asset, whether by judicial action or otherwise, unless and until all of the
Obligations shall have been paid in full in cash and satisfied and all financing
arrangements under this Agreement and the other Loan Documents between the
Borrower and the Agent and the Lenders have been terminated. If, during the
continuance of a Default, all or any part of the assets of any Guarantor, or the
proceeds thereof, are subject to any distribution, division or application to
the creditors of any Guarantor, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, then, and in any such event, any payment or distribution of any kind
or character, either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any indebtedness of any Guarantor
to the Borrower, including, without limitation, pursuant to the any intercompany
Indebtedness permitted under SECTION 7.3(A)(VI) ("INTERCOMPANY INDEBTEDNESS")
shall be paid or delivered directly to the Agent for application on any of the
Obligations, due or to become due, until such Obligations shall have first been
paid in full in cash and satisfied; PROVIDED, HOWEVER, that ordinary course
payments or distributions made by any Guarantor to the Borrower shall be
required to be paid or delivered to the Agent only upon the Agent's request. The
Borrower irrevocably authorizes and empowers the Agent to demand, sue for,
collect and receive every such payment or distribution and give acquittance
therefor and to make and present for and on behalf of the Borrower such proofs
of claim and take such other action, in the Agent's own name or in the name of
the Borrower or otherwise, as the Agent may deem necessary or advisable for the
enforcement of this SECTION 10.15. The Agent may vote such proofs of claim in
any such proceeding, receive and collect any and all dividends or other payments
or disbursements made thereon in whatever form the same may be paid or issued
and apply the same on account of any of the Obligations. Should any payment,
distribution, security or instrument or proceeds thereof be received by the
Borrower upon or with respect to the Intercompany Indebtedness during the
continuance of a Default and prior to the satisfaction of all of the Obligations
and the termination of all financing arrangements under this Agreement and the
other Loan Documents between the Borrower and the Agent and the Lenders, the
Borrower shall receive and hold the same in trust, as trustee, for the benefit
of the Agent and the Lenders and shall forthwith deliver the same to the Agent,
for the benefit of the Agent and the Lenders, in precisely the form received
(except for the endorsement or assignment of the Borrower where necessary), for
application to any of the Obligations, due or not due, and, until so delivered,
the same shall be held in trust by the
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Borrower as the property of the Agent and the Lenders; PROVIDED, HOWEVER, that
ordinary course payments or distributions made by any Guarantor to the Borrower
shall be required to be paid or delivered to the Agent only upon the Agent's
request. If the Borrower fails to make any such endorsement or assignment to the
Agent, the Agent or any of its officers or employees are irrevocably authorized
to make the same. The Borrower agrees that until the Obligations have been paid
in full in cash and satisfied and all financing arrangements under this
Agreement and the other Loan Documents between the Borrower and the Agent and
the Lenders have been terminated, the Borrower will not assign or transfer to
any Person (other than the Agent) any claim the Borrower has or may have against
any Guarantor.
10.16 USURY NOT INTENDED. It is the intent of the Borrower and each Lender
in the execution and performance of this Agreement and the other Loan Documents
to contract in strict compliance with applicable usury laws, including conflicts
of law concepts, governing the Advances of each Lender including such applicable
laws of the State of Texas and the United States of America from time-to-time in
effect. In furtherance thereof, the Lenders and the Borrower stipulate and agree
that none of the terms and provisions contained in this Agreement or the other
Loan Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a rate
in excess of the Maximum Rate and that for purposes hereof "interest" shall
include the aggregate of all charges which constitute interest under such laws
that are contracted for, charged or received under this Agreement; and in the
event that, notwithstanding the foregoing, under any circumstances the aggregate
amounts taken, reserved, charged, received or paid on the Advances, include
amounts which by applicable law are deemed interest which would exceed the
Maximum Rate, then such excess shall be deemed to be a mistake and each Lender
receiving same shall credit the same on the principal of its Notes (or if such
Notes shall have been paid in full, refund said excess to the Borrower). In the
event that the maturity of the Notes are accelerated by reason of any election
of the holder thereof resulting from any Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the Maximum
Rate and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the applicable Notes
(or, if the applicable Notes shall have been paid in full, refunded to the
Borrower of such interest). In determining whether or not the interest paid or
payable under any specific contingencies exceeds the Maximum Rate, the Borrower
and the Lenders shall to the maximum extent permitted under applicable law
amortize, prorate, allocate and spread in equal parts during the period of the
full stated term of the Notes all amounts considered to be interest under
applicable law at any time contracted for, charged, received or reserved in
connection with the Obligations. The provisions of this Section shall control
over all other provisions of this Agreement or the other Loan Documents which
may be in apparent conflict herewith. Borrower agrees that V.T.C.A., FINANCE
CODE CHAPTER 346 (which regulates certain revolving credit loan accounts and
revolving tri-party accounts), does not apply to the Obligations, other than ss.
346.004.
10.17 BUSINESS LOANS. The Borrower warrants and represents that the Loans
evidenced by the Notes are and shall be for business, commercial, investment or
other similar purposes and not primarily for personal, family, household or
agricultural use, as such terms are used in Chapter One ("Chapter One") of the
Texas Credit Code. At all such times, if any, as Chapter One shall establish a
Maximum Rate, the Maximum Rate shall be the "indicated rate ceiling" (as such
term is defined in Chapter One) from time to time in effect.
ARTICLE XI: THE AGENT
11.1 APPOINTMENT OF AGENT; NATURE OF RELATIONSHIP. NationsBank, N.A. is
appointed by the Lenders as the Agent hereunder and under each other Loan
Document, and each of the Lenders irrevocably
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authorizes the Agent (for so long as the Agent remains in such capacity under
this Agreement) to act as the contractual representative of such Lender with
only the rights and duties expressly set forth herein and in the other Loan
Documents. The Agent agrees to act as such contractual representative upon the
express conditions contained in this ARTICLE XI. Notwithstanding the use of the
defined term "Agent," it is expressly understood and agreed that the Agent shall
not have any fiduciary responsibilities to any Lender by reason of this
Agreement and that the Agent is merely acting as the representative of the
Lenders with only those duties as are expressly set forth in this Agreement and
the other Loan Documents. In its capacity as the Lenders' contractual
representative, the Agent (i) does not assume any fiduciary duties to any of the
Lenders, (ii) is a "representative" of the Lenders within the meaning of Section
9-105 of the Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those expressly set
forth in this Agreement and the other Loan Documents. Each of the Lenders agrees
to assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender waives.
11.2 POWERS. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties or fiduciary duties to the Lenders, or any
obligation to the Lenders to take any action hereunder or under any of the other
Loan Documents except any action specifically provided by the Loan Documents
required to be taken by the Agent.
11.3 GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is found in a final judgment by a court of
competent jurisdiction to have arisen solely from (i) the Gross Negligence or
willful misconduct of such Person or (ii) breach of contract by such Person with
respect to the Loan Documents.
11.4 NO RESPONSIBILITY FOR LOANS, CREDITWORTHINESS, COLLATERAL, RECITALS,
ETC. Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(i) any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in ARTICLE V, except receipt of items
required to be delivered solely to the Agent; (iv) the existence or possible
existence of any Default or (v) the validity, effectiveness or genuineness of
any Loan Document or any other instrument or writing furnished in connection
therewith. The Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or in any of the other Loan
Documents, for the perfection or priority of any of the Liens on any of the
Collateral, or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectibility, or sufficiency of this Agreement or
any of the other Loan Documents or the transactions contemplated thereby, or for
the financial condition of any guarantor of any or all of the Obligations, the
Borrower or any of its Subsidiaries.
11.5 ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders (or any other percentage of Lenders specified to be the
applicable percentage in this Agreement or any other Loan Document to act on
specified matters), and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
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11.6 EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its
duties as the Agent hereunder and under any other Loan Document by or through
employees, agents, and attorney-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
11.7 RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
11.8 THE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Borrower for which the
Agent is entitled to reimbursement by the Borrower under the Loan Documents,
(ii) for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents and (iii) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith or
the transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
solely from the Gross Negligence or willful misconduct of the Agent.
11.9 RIGHTS AS A LENDER. With respect to its Commitment, Loans made by it
and the Notes issued to it, the Agent shall have the same rights and powers
hereunder and under any other Loan Document as any Lender and may exercise the
same as through it were not the Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which such Person is not prohibited
hereby from engaging with any other Person.
11.10 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
11.11 SUCCESSOR AGENT. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, and the Agent may be removed at
any time with or without cause by written notice received by the Agent from the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the retiring Agent's giving notice of resignation, then the retiring Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding
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anything herein to the contrary, so long as no Default has occurred and is
continuing, each such successor Agent shall be subject to approval by the
Borrower, which approval shall not be unreasonably withheld. Such successor
Agent shall be a commercial bank having capital and retained earnings of at
least $100,000,000. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents. After any retiring
Agent's resignation hereunder as Agent, the provisions of this ARTICLE XI shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Agent hereunder and under the other
Loan Documents.
11.12 COLLATERAL DOCUMENTS.
(a) Each Lender authorizes the Agent to enter into the Pledge
Agreements and each of the other Collateral documents contemplated thereby
(collectively, the "Collateral Documents") to which it is a party and to
take all action contemplated by such documents. Each Lender agrees that no
Holder of Secured Obligations (other than the Agent) shall have the right
individually to seek to realize upon the security granted by any
Collateral Document, it being understood and agreed that such rights and
remedies may be exercised solely by the Agent for the benefit of the
Holders of Secured Obligations upon the terms of the Collateral Documents.
(b) In the event that any Collateral is hereafter pledged by any
Person as collateral security for the Obligations, the Agent is hereby
authorized to execute and deliver on behalf of the Holders of Secured
Obligations any Loan Documents necessary or appropriate to grant and
perfect a Lien on such Collateral in favor of the Agent on behalf of the
Holders of Secured Obligations.
(c) The Lenders hereby authorize the Agent, at its option and in its
discretion, to (y) release any Lien granted to or held by the Agent upon
any Collateral and/or (z) release any Guarantor from its obligations under
the Guaranty (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations at any time arising under or in
respect of this Agreement or the Loan Documents or the transactions
contemplated hereby or thereby; (ii) in connection with any transaction
permitted by, but only in accordance with, the terms of the applicable
Loan Document; or (iii) in connection with any transaction approved,
authorized or ratified in writing by the Required Lenders, unless such
release is required to be approved by all of the Lenders hereunder. Upon
request by the Agent at any time, the Lenders will confirm in writing the
Agent's authority to release particular types or items of Collateral
pursuant to this SECTION 11.12(C).
(d) Upon any sale or transfer of assets constituting Collateral
which is permitted pursuant to the terms of any Loan Document, or
consented to in writing by the Required Lenders or all of the Lenders, as
applicable, or consummation of any transaction involving the sale of all
or substantially all of the assets of a Guarantor and upon at least five
Business Days' prior written request by the Borrower, the Agent shall (and
is hereby irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens granted to the
Agent for the benefit of the Holders of Secured Obligations herein or
pursuant hereto upon the Collateral that was sold or transferred or
evidence the release of the applicable Guarantor from its obligations
under the Guaranty; PROVIDED, HOWEVER, that (i) the Agent shall not be
required to execute any such document on terms which, in the Agent's
opinion, would expose the Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without
recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Secured Obligations any other Guarantor's
obligations under the Guaranty or any Liens
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upon (or obligations of the Borrower or any Subsidiary in respect of) all
interests retained by the Borrower or any Subsidiary, including (without
limitation) the proceeds of the sale, all of which shall continue to
constitute part of the Collateral.
ARTICLE XII: SETOFF; RATABLE PAYMENTS
12.1 SETOFF. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Default occurs and is continuing, any
indebtedness from any Lender to the Borrower (including all account balances,
whether provisional or final and whether or not collected or available) may be
offset and applied toward the payment of the Obligations owing to such Lender,
whether or not the Obligations, or any part hereof, shall then be due and
regardless of the adequacy of any collateral thereof.
12.2 RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
SECTIONS 4.1, 4.2 or 4.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in proportion to the obligations owing to them. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
12.3 APPLICATION OF PAYMENTS. Subject to the provisions of SECTION 9.2,
(i) prior to the occurrence of a Default, the Agent shall apply all payments and
prepayments in respect of the Obligations in such order as shall be specified by
the Borrower and (ii) after the occurrence of a Default, the Agent shall, unless
otherwise specified at the direction of the Required Lenders which direction
shall be consistent with the last sentence of this SECTION 12.3, apply all
payments and prepayments in respect of any Obligations and all proceeds of
Collateral in the following order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay interest on and then principal of any advance
made under SECTION 10.3 for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders and the Issuing
Banks;
(E) fifth, to pay interest due in respect of Swing Line Loans;
(F) sixth, to pay interest due in respect of Loans (other than Swing
Line Loans) and L/C Obligations;
(G) seventh, to the ratable payment or prepayment of principal
outstanding on Swing Line Loans;
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(H) eighth, to the ratable payment or prepayment of principal
outstanding on Loans (other than Swing Line Loans) and Reimbursement
Obligations in such order as the Agent may determine in its sole
discretion;
(I) ninth, to provide required cash collateral, if required pursuant
to SECTION 3.10 and
(J) tenth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable prior to
the occurrence of a Default) by the Borrower, all principal payments in respect
of Loans (other than Swing Line Loans) shall be applied FIRST, to repay
outstanding Floating Rate Loans, and THEN to repay outstanding Eurodollar Rate
Loans with those Eurodollar Rate Loans which have earlier expiring Interest
Periods being repaid prior to those which have later expiring Interest Periods.
The order of priority set forth in CLAUSE (II) of this SECTION 12.3 and the
related provisions of this Agreement are set forth solely to determine the
rights and priorities of the Agent, the Swing Line Bank, and the Issuing Banks
as among themselves. The order of priority set forth in SUBCLAUSES (D) through
(J) of CLAUSE (II) of this SECTION 12.3 may at any time and from time to time be
changed by the Required Lenders without necessity of notice to or consent of or
approval by the Borrower, or any other Person; PROVIDED, that the order of
priority of payments in respect of Swing Line Loans may be changed only with the
prior written consent of the Swing Line Bank. The order of priority set forth in
SUBCLAUSES (A) through (C) of CLAUSE (II) of this SECTION 12.3 may be changed
only with the prior written consent of the Agent.
12.4 RELATIONS AMONG LENDERS.
(a) Except with respect to the exercise of set-off rights of any
Lender in accordance with SECTION 12.1, the proceeds of which are applied
in accordance with this Agreement, and except as set forth in the second
sentence of CLAUSE (B) below, each Lender agrees that it will not take any
action, nor institute any actions or proceedings, against the Borrower or
any other obligor hereunder or with respect to any Collateral or any Loan
Document, without the prior written consent of the Required Lenders or, as
may be provided in this Agreement or the other Loan Documents, at the
direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender
shall be liable for the acts or omissions of, or (except as otherwise set
forth herein in case of the Agent) authorized to act for, any other
Lender. Notwithstanding the foregoing, and subject to SECTION 12.2, any
Lender shall have the right to enforce on an unsecured basis the payment
of the principal of and interest on any Loan made by it after the date
such principal or interest has become due and payable pursuant to the
terms of this Agreement.
ARTICLE XIII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
13.1 SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with SECTION 13.3 hereof. Notwithstanding clause (ii) of this SECTION 13.1, any
Lender may at any time, without the consent of the Borrower or the Agent, assign
all or any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; PROVIDED, HOWEVER, that no such assignment shall release the
transferor Lender from its obligations hereunder. The Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with SECTION 13.3 hereof in the case of an assignment thereof
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or, in the case of any other transfer, a written notice of the transfer is filed
with the Agent. Any assignee or transferee of a Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
13.2 PARTICIPATIONS.
(a) PERMITTED PARTICIPANTS; EFFECT. Subject to the terms set forth
in this SECTION 13.2, any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time sell to one or
more banks or other entities ("PARTICIPANTS") participations in all or a
portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Commitments or its Loans);
PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (iii)
the Participant shall be entitled to the benefit of the provisions
contained in SECTIONS 4.1 through 4.5, and (iv) the Borrower and the Agent
shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement, and such
Lender shall retain the sole right to enforce the obligations of the
Borrower relating to its Loans and its Notes and to approve any amendment,
modification, or waiver of any provision of this Agreement (other than
amendments, modifications, or waivers decreasing the amount of principal
of or the rate at which interest is payable on such Loans or Notes,
extending any scheduled principal payment date or date fixed for the
payment of interest on such Loans or Notes, or extending its Commitment).
(b) BENEFIT OF SETOFF. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in SECTION 12.1
hereof in respect to its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
PROVIDED that each Lender shall retain the right of setoff provided in
SECTION 12.1 hereof with respect to the amount of participating interests
sold to each Participant except to the extent such Participant exercises
its right of setoff. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in SECTION
12.1 hereof, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared
in accordance with SECTION 12.2 as if each Participant were a Lender.
13.3 ASSIGNMENTS.
(a) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to
one or more banks or other entities ("PURCHASERS") all or a portion of its
rights and obligations under this Agreement (including, without
limitation, its Commitment, all Loans owing to it, all of its
participation interests in existing Letters of Credit, and its obligation
to participate in additional Letters of Credit hereunder) in accordance
with the provisions of this SECTION 13.3. Each assignment shall be of a
constant, and not a varying, ratable percentage of all of the assigning
Lender's rights and obligations under this Agreement. Such assignment
shall be effected through an Assignment Agreement substantially in the
form of EXHIBIT A hereto and shall not be permitted hereunder unless such
assignment is either for all of such Lender's rights and obligations under
the Loan Documents or, without the prior written consent of the Agent,
involves Loans and Commitments in an aggregate amount of at least
$5,000,000. The consent of the Agent and, prior to the occurrence of a
Default or Unmatured Default, the Borrower (which consent, in each such
case, shall not be unreasonably withheld), shall
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be required prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof. Notwithstanding
the foregoing, any Lender may at any time, without the consent of the
Borrower or the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that
no such assignment shall release the transferor Lender from its
obligations hereunder.
(b) EFFECT; CLOSING DATE. Upon (i) delivery to the Agent of a notice
of assignment, substantially in the form attached as APPENDIX I to EXHIBIT
A hereto (a "NOTICE OF ASSIGNMENT"), together with any consent required by
SECTION 13.3(A) hereof, and (ii) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of
Assignment shall contain a representation by the Purchaser to the effect
that none of the consideration used to make the purchase of the
Commitment, Loans and L/C Obligations under the applicable Assignment
Agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be
"plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser, if not already a Lender, shall for all
purposes be a Lender party to this Agreement and any other Loan Documents
executed by the Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required to release the transferor
Lender with respect to the percentage of the Aggregate Commitment, Loans
and Letter of Credit participations assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this SECTION
13.3(B), the transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting
their Commitments, as adjusted pursuant to such assignment.
(c) THE REGISTER. The Agent shall maintain at its address referred
to in SECTION 14.1 a copy of each Commitment and Acceptance delivered
pursuant to SECTION 2.4(B) and each Assignment Agreement delivered to and
accepted by it pursuant to this SECTION 13.3 and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders
and the Commitment of and principal amount of the Loans owing to, each
Lender from time to time and whether such Lender is an original Lender,
became a Lender pursuant to SECTION 2.4(B) or the assignee of another
Lender pursuant to an assignment under this SECTION 13.3. The entries in
the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower and each of its Subsidiaries, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender
at any reasonable time and from time to time upon reasonable prior notice.
13.4 CONFIDENTIALITY. Subject to SECTION 13.5, the Agent and the Lenders
(each, a "LENDING PARTY") agree to keep confidential any information furnished
or made available to it by the Borrower pursuant to this Agreement that is
marked confidential; PROVIDED, that nothing herein shall prevent any Lending
Party from disclosing such information (a) to any other Lending Party or any
Affiliate of any Lending Party, or any officer, director, employee, agent, or
advisor of any Lending Party or Affiliate of any Lending Party, (b) to any other
Person if reasonably incidental to the administration of the credit facility
provided herein, (c) as required by any Law, (d) upon the order, request or
demand of any Governmental Authority, (e) that is or becomes available to the
public or that is or becomes available to any Lending Party other than as a
result of a disclosure by any Lending Party prohibited by this Agreement, (f) in
connection
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with any litigation to which such Lending Party or any of its Affiliates may be
a party, and (g) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Loan Document.
13.5 DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in such Lender's possession
concerning the Borrower and its Subsidiaries and the Collateral; PROVIDED that
prior to any such disclosure, such prospective Transferee shall agree to
preserve in accordance with SECTION 13.4 the confidentiality of any confidential
information described therein.
ARTICLE XIV: NOTICES
14.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.11 with
respect to Borrowing Notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
14.2 CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party has notified the Agent by telex or telephone, that it has taken
such action.
[SIGNATURES APPEAR ON THE FOLLOWING PAGES.]
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IN WITNESS WHEREOF, the Borrower, the Lenders, the Agent, and the
Documentation Agent have executed this Agreement as of the Closing Date.
LANDCARE USA, INC., as the Borrower
By:/s/ PETER C. FORBES
Peter C. Forbes
Senior Vice President and Chief
Financial Officer
Address:
2603 Augusta, Suite 1300
Houston, Texas 77057
Attention: Chief Financial Officer
Telephone No.: (713) 965-0336
Facsimile No.: (713) 965-0343
NATIONSBANK, N.A., as Agent and as a Lender
By:/s/ RICHARD L. NICHOLS, JR.
Richard L. Nichols, Jr.
Vice President
Address:
NationsBank, N.A.
Corporate Finance Group
700 Louisiana, 8th Floor
Houston, Texas 77002
Attention: Richard L. Nichols, Jr.
Telephone No.: (713) 247-6258
Facsimile No.: (713) 247-6360
BANKERS TRUST COMPANY,
as Documentation Agent and as a Lender
By:/s/ MARY JO JOLLY
Name: MARY JO JOLLY
Title: Assistant Vice President
<PAGE>
THE BANK OF NOVA SCOTIA,
as Co Agent and as a Lender
By: /s/ A.S. NORSWORTHY
Name: A.S. NORSWORTHY
Title: Sr. Team Leader-Loan Operations
CITIZENS BANK OF MASSACHUSETTS,
as a Lender
By:/s/ LUKE TSOKANIS
Luke Tsokanis
Vice President
COMERICA BANK,
as a Lender
By:/s/ MARK B. GROVE
Name:MARK B. GROVE
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
as a Lender
By:/s/ J. SCOTT JESSUP
J. Scott Jessup
Vice President
CENTURA BANKS, INC.,
as a Lender
By:/s/ GREGORY GREEN
Name: GREGORY GREEN
Title:Corporate Banking Officer
EXHIBIT 10.22
REVOLVING CREDIT PROMISSORY NOTE
$20,000,000 HOUSTON, TEXAS SEPTEMBER 30, 1998
FOR VALUE RECEIVED, LANDCARE USA, INC. ("BORROWER"), promises to pay to
the order of NATIONSBANK, N.A. (together with any subsequent holder of this
note, "LENDER"), at its offices at 901 Main Street, Dallas, Texas 75202, on or
before November 5, 1998, the sum of TWENTY MILLION DOLLARS (or such lesser sum
as shall then be outstanding hereunder), together with interest on the unpaid
principal balance from time to time outstanding at a rate per annum which shall
from day to day be equal to the lesser of (a) as selected by Borrower, either
the Variable Rate, calculated on the basis of actual days elapsed and a 365-day
year, or the LIBOR Rate, calculated on the basis of actual days elapsed and a
360-day year, or (b) the Highest Lawful Rate, calculated on the basis of actual
days elapsed and a 365-day year. Each change in the rate charged hereunder will
become effective without notice to Borrower on the effective date of each change
in the Variable Rate, the LIBOR Rate or the Highest Lawful Rate, as applicable.
If at any time the Variable Rate or LIBOR Rate exceeds the Highest Lawful Rate,
thereby causing the interest hereto to be limited to the Highest Lawful Rate,
then any subsequent reduction in the Variable Rate or LIBOR Rate shall not
reduce the interest hereon below the Highest Lawful Rate until the total amount
of interest accrued equals the amount of interest which would have accrued if
the Variable Rate or LIBOR Rate had at all times been in effect. All past-due
principal and accrued interest thereon shall, at the option of Lender, bear
interest from maturity (stated or by acceleration) until paid at the Variable
Rate plus 2%.
"VARIABLE RATE" means the sum of 0.25% plus the rate of interest
established from time to time by NationsBank, N.A. as its general reference rate
of interest, after taking into account such factors as it may from time to time,
in its sole discretion, deem appropriate (it being understood that NationsBank,
N.A. may from time to time make various loans at rates of interest having no
relationship to such general rate). "LIBOR RATE" means for any Interest Period
(as defined below) the sum of 1.50% plus the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S.
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period.
If for any reason such rate is not available, the term "LIBOR Rate" shall mean,
for any LIBOR Borrowing for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to Interest
Period; PROVIDED, HOWEVER, THAT if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates. "HIGHEST LAWFUL RATE" means the maximum rate of interest which Lender is
allowed to contract for, charge, take, reserve, or receive under applicable law
after taking into account, to the extent required by applicable law, any and all
relevant payments or charges hereunder.
1. PAYMENTS. The principal of this note is payable in full on November 5,
1998 (the "MATURITY DATE"). Accrued interest is payable upon the earlier of the
maturity (stated or by acceleration) or cancellation of this note. If any
payment is due on a day which is not a Business Day, Borrower shall be entitled
to delay such payment until the next Business Day, but interest shall continue
to accrue until the payment is in fact made. Each payment or prepayment hereon
must be paid at the office of NationsBank, N.A., set forth above in lawful and
freely transferable money of the United
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States of America and in funds which are or will be available for immediate use
by Lender at such office by noon (Dallas, Texas time) on the day due, without
setoff or counterclaim and in such amounts as may be necessary in order that all
such payments, after deduction or withholding for or on account of any present
or future taxes, levies, imposts, duties or other charges, of whatever nature,
shall not be less than the amounts otherwise specified to be paid hereunder.
"BUSINESS DAY" means (a) for all purposes, any day OTHER THAN Saturday, Sunday,
and any other day that commercial banks are authorized by law to be closed in
Texas and (b) for purposes of any LIBOR Rate advance, a day that satisfies the
requirements of CLAUSE (A) and is a day that commercial banks are open for
domestic or international business in London.
2. REVOLVING CREDIT. Lender shall disburse the principal of this note to
Borrower in one or more advances (each in an amount of not less than $1,000,000
and in an integral multiple thereof) from time to time upon not less than one
(in the case of a Variable Rate advance) and three (in the case of a LIBOR Rate
advance) Business Days prior written request (which shall be irrevocable), and
Borrower may prepay the principal of, and accrued interest on, this note from
time to time, and at any time, in whole or in part, without premium or penalty,
and, thereafter, prior to the Maturity Date, request Lender to make additional
advances of principal hereunder. This note shall not be deemed to be terminated
or cancelled prior to the Maturity Date simply because the entire principal
balance hereof may from time to time be paid in full.
3. COVENANTS. Until this note is paid in full, Borrower shall: (a) keep
proper and complete books, records and accounts and permit Lender to inspect and
copy them and to inspect Borrower's properties and discuss Borrower's affairs,
conditions and finances with any director or employee of Borrower; (b) pay when
due all taxes (except those being contested in good faith by appropriate
proceedings and for which adequate reserves therefore have been made in
accordance with generally accepted accounting principles) and not use any
portion of any advance to pay wages unless a timely payment of all amounts of
tax required to be deducted or withheld therefrom is also made; and (c) maintain
its corporate existence and good standing in Delaware and its qualification to
do business and good standing as a foreign corporation in Texas.
4. INTEREST AND YIELD PROTECTION.
(a) INTEREST CALCULATIONS. The provisions of this note relating to
calculation of the Variable Rate and LIBOR Rate are included herein only
for the purpose of determining the rate of interest or other amounts to be
paid under this note that are based upon those rates. Lender may fund and
maintain its funding of all or any part of each advance as it selects.
(b) INTEREST PERIODS. When Borrower requests any LIBOR Rate advance,
Borrower may elect the applicable interest period (each an "INTEREST
PERIOD"), which may be, at Borrower's option, any period of days ending on
or before the Maturity Date.
(c) CONVERSIONS. Borrower may (a) on the last day of the applicable
Interest Period convert all or part of a LIBOR Rate advance to a Variable
Rate advance, (b) at any time convert all or part of a Variable Rate
advance to a LIBOR Rate advance, and (c) elect a new Interest Period for a
LIBOR Rate advance. Any such conversion is subject to the dollar limits
and denominations of PARAGRAPH 2 above and may be accomplished by
delivering a written request to Lender no later than (i) three Business
Days before the conversion date for conversion to a LIBOR Rate advance and
the last day of the Interest Period, for the election of a new Interest
Period, and (ii) one Business Day before the last day of the Interest
Period for conversion to a Variable Rate advance. Absent Borrower's notice
of conversion or election of a new Interest Period, a LIBOR Rate advance
shall be converted to a Base Rate advance when the applicable Interest
Period expires.
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(d) BASIS UNAVAILABLE OR INADEQUATE FOR LIBOR. If, on or before any
date when a LIBOR Rate is to be determined, Lender determines that the
basis for determining the applicable rate is not available or that the
resulting rate does not accurately reflect the cost to Lender of making or
converting advances at that rate for the applicable Interest Period, then
Lender shall promptly notify Borrower of that determination (which is
conclusive and binding on Borrower absent manifest error) and the
applicable advance shall bear interest at the Variable Rate. Until Lender
notifies Borrower that those circumstances no longer exist, Lender's
commitment under this note to make, or to convert to, LIBOR Rate advances
will be suspended.
(e) ADDITIONAL COSTS. With respect to any law, requirement, request,
directive or change affecting banking institutions generally:
(i) With respect to any LIBOR Rate advance, if (A) any change
in present law or any future law imposes, modifies, or deems
applicable (or if compliance by any Lender with any such requirement
of any tribunal results in) any such requirement that any reserves
(including, without limitation, any marginal, emergency,
supplemental or special reserves) be maintained, and (B) those
reserves reduce any sums receivable by Lender under this note or
increase the costs incurred by Lender in advancing or maintaining
any portion of any LIBOR Rate advance, then Lender shall deliver to
Borrower a certificate setting forth in reasonable detail the
calculation of the amount necessary to compensate it for its
reduction or increase (which certificate is conclusive and binding
absent manifest error), and Borrower shall promptly pay that amount
to Lender upon demand. The provisions of and undertakings and
indemnification set forth in this PARAGRAPH 4(E)(I) shall survive
the satisfaction and payment of this note.
(ii) With respect to any advance, if any change in present law
or any future law regarding capital adequacy or compliance by Lender
with any request, directive or requirement now existing or hereafter
imposed by any tribunal regarding capital adequacy, or any change in
its written policies or in the risk category of this transaction,
reduces the rate of return on its capital as a consequence of its
obligations under this note to a level below that which it otherwise
could have achieved (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the amount, use reasonable
assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect
is already reflected in the rate of interest then applicable under
this note) Lender shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of
the amount necessary to compensate it (which certificate is
conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to Lender upon demand. The provisions of
and undertakings and indemnification set forth in this PARAGRAPH
4(E)(II) shall survive the satisfaction and payment of this note.
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(iii) Any taxes payable by Lender or ruled payable by Lender
in respect of this note shall, if permitted by law, be paid by
Borrower, together with interest and penalties, if any (except for
taxes imposed on or measured by the overall net income of Lender and
franchise or similar taxes of Lender and except for interest and
penalties incurred as a result of the gross negligence or willful
misconduct of Lender). Lender shall notify Borrower and deliver to
Borrower a certificate setting forth in reasonable detail the
calculation of the amount of payable taxes, which certificate is
conclusive and binding (absent manifest error), and Borrower shall
promptly pay that amount to Lender. If Lender subsequently receives
a refund of the taxes paid to it by Borrower, then it shall promptly
pay the refund to Borrower.
(f) CHANGE IN LAWS. If any law makes it unlawful for Lender to make
or maintain LIBOR Rate advances, then Lender shall promptly notify
Borrower, and (a) as to undisbursed funds, advances shall be made as a
Base Rate advance, and (b), as to any outstanding advance, (i) if
maintaining the advance until the last day of the applicable Interest
Period is unlawful, the advance shall be converted to a Variable Rate
advance as of the date of notice and Borrower shall pay any related
Funding Loss, or (ii) if not prohibited by Law, the advance shall be
converted to a Variable Rate advance as of the last day of the applicable
Interest Period, or (iii) if any conversion will not resolve the
unlawfulness, Borrower shall promptly prepay the advance, without penalty,
together with any related Funding Loss. "FUNDING LOSS" means, without
duplication, (a) the administrative or reemployment costs customarily
charged by Lender when (i) Borrower fails or refuses (for any reason OTHER
THAN Lender's failure to comply with this note) to take any advance that
it has requested under this note, or (ii) Borrower prepays or pays any
advance or converts any advance to an advance of another type, in each
case, before the last day of the applicable Interest Period, PLUS (b) an
amount equal to the excess of the amount of interest that would have
accrued on the advance at the elected interest rate during the remainder
of the applicable Interest Period (but for such failure, refusal, payment,
prepayment or conversion) over the amount of interest that would accrue on
the same type of Borrowing for an interest period of the same duration as
the remainder of the applicable Interest Period.
(g) FUNDING LOSS. BORROWER AGREES TO INDEMNIFY LENDER AGAINST, AND
PAY TO IT UPON DEMAND, ANY FUNDING LOSS. When Lender demands that Borrower
pay any Funding Loss, Lender shall deliver to Borrower a certificate
setting forth in reasonable detail the basis for imposing Funding Loss and
the calculation of the amount, which calculation is conclusive and binding
absent manifest error. The provisions of and undertakings and
indemnification set forth in this PARAGRAPH 4(G) shall survive the
satisfaction and payment of this note.
5. CONDITIONS. Notwithstanding the commitment of Lender set forth in
PARAGRAPH 2 above and in the Commitment Letter between NationsBank, N.A., and
Borrower dated September 30, 1998 (the "COMMITMENT LETTER"), Lender shall not be
obligated to make any advance hereunder until it receives, in form and substance
satisfactory to it, an opinion of Borrower's counsel as to (a) Borrower's
existence and good standing in Delaware and its qualification to do business and
good standing as a foreign corporation in Texas, and (b) the authorization,
execution and delivery of the note, its legal, valid and enforceable nature, and
the absence of any conflict with Borrower's certificate of incorporation or
bylaws or any laws binding upon Borrower.
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6. ORDER OF APPLICATION. All payments and prepayments on this note shall
be applied by Lender FIRST, to accrued interest; SECOND, to expenses for which
Lender is due to be reimbursed; and THIRD, to principal.
7. DEFAULT. The term "DEFAULT" means: (a) The failure or refusal of
Borrower to make any payment hereunder when due or to comply with any provision
herein; (b) a "Default" as defined in the Credit Agreement dated as of June 9,
1998, among Borrower, The First National Bank of Chicago, as Agent, and the
Lenders named therein, as in effect on the date hereof (the "CREDIT AGREEMENT");
(c) any increase above $55,000,000 in the credit available to Borrower under the
Credit Agreement; (d) the discovery by Lender that any statement by Borrower
herein or in connection herewith is false or misleading; or (e) Borrower becomes
insolvent, fails to pay its debts generally as they become due or becomes the
subject of any proceeding under any debtor relief law. In the event of a
Default, Lender may (i) declare the entire unpaid balance of this note, or any
part hereof, immediately due and payable, whereupon it shall be due and payable
(PROVIDED THAT, upon the occurrence of a Default under CLAUSE (D) above, this
note shall automatically become due and payable without notice or other action
of any kind); (ii) terminate its commitment to lend under this note and the
Commitment Letter; (iii) offset against this note any sum or sums owed by Lender
to Borrower; and/or (iv) proceed to protect and enforce any other legal or
equitable right or remedy of Lender. No delay on the part of Lender in the
exercise of any power or right or single or partial exercise of any such power
or right, under this note or any other instrument executed in connection
herewith, shall operate as a waiver thereof. Enforcement of any security for
this note shall not constitute an election of remedies so as to preclude the
exercise of any other remedy.
8. WAIVER. Borrower and each other party ever liable for the payment of
any sum hereunder jointly and severally waive demand, presentment, protest,
notice of nonpayment, notice of intention to accelerate, notice of acceleration,
notice of protest and any and all lack of diligence or delay in collection or
the filing of suit hereon which may occur, and agree that their liability
regarding this note shall not be affected by any renewal, extension, indulgence
or any release or change in security, and hereby consent to any and all
renewals, extensions, indulgences, releases or changes, regardless of the number
thereof.
9. ATTORNEYS' FEES AND COSTS. Borrower agrees to reimburse Lender for its
expenses (including, but not limited to, attorneys' fees) incurred in the
preparation, negotiation and execution of this note and any documents related
hereto. If this note is placed in the hands of an attorney for collection, or if
this note is collected in whole or in part through legal proceedings of any
nature, Borrower promises to pay all costs of collection, including but not
limited to reasonable attorneys' fees incurred by Lender, whether or not suit is
filed.
10. NOTICES. Any notice or demand given hereunder shall be deemed to have
been given and received (a) when actually received, if delivered in person, or
(b) if mailed to the address opposite the recipient's signature below (whether
ever received or not), two Business Days after deposit in the U.S. Mail, postage
prepaid.
11. GOVERNING LAW. This note is intended to be performed in Texas and the
laws of Texas shall govern its validity, enforcement and interpretation.
Borrower hereby irrevocably submits to the nonexclusive jurisdiction of the
state and federal courts of the State of Texas and irrevocably waives any
objection to venue or claim of an inconvenient forum with respect to the
district courts of Harris County, Texas, or the U.S. District Court for the
Southern District of Texas (Houston Division) in any dispute related to this
note, and irrevocably consents to the service of process out of any of such
courts by postage prepaid certified mail to its address below.
-5-
<PAGE>
12. HEADINGS. The headings herein are for convenience only and shall not
be deemed a part hereof.
13. SUCCESSORS AND ASSIGNS. All of Borrower's agreements in this note
shall bind its successors and assigns (PROVIDED, HOWEVER, THAT Borrower may not,
without the prior consent of Lender, assign any rights, powers or obligations
under this note).
14. MAXIMUM INTEREST RATE. Regardless of any provision contained herein or
in any document related hereto, Lender shall never be entitled to receive,
collect or apply as interest any amount in excess of the Highest Lawful Rate. In
the event Lender ever receives, collects or applies as interest any such excess,
it shall be deemed a partial prepayment of principal and treated hereunder as
such and, if the principal hereof is paid in full, any remaining excess shall be
refunded to Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful Rate,
Borrower and Lender shall (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) spread the total amount of interest
throughout the entire contemplated term hereof (PROVIDED THAT if the
indebtedness evidenced hereby is paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence exceeds the Highest Lawful Rate, Lender shall apply or
refund such excess as provided above, and shall not be subject to any penalties
provided by any laws for contracting for, charging or receiving interest in
excess of the Highest Lawful Rate).
15. ENTIRETY AND AMENDMENTS. THIS NOTE AND THE COMMITMENT LETTER
(COLLECTIVELY, THE "COMMITMENT DOCUMENTS") REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. The Commitment Documents embody the entire
written agreement between the parties, supersedes all prior written agreements
and understandings, if any, relating to the subject matter hereof, and may be
amended only by an instrument in writing executed jointly by Borrower and
Lender.
ADDRESS: LANDCARE USA, INC.
5850 San Felipe, Suite 500
Houston, Texas 77057 By: ____________________________
Attention: William J. Fiedler Name: ______________________
General Counsel Title: _____________________
ADDRESS: NATIONSBANK, N.A.
700 Louisiana Street, 8th Floor
Houston, Texas 77002 By: ____________________________
Attention: Richard L. Nichols, Jr. Name: ______________________
Title: _____________________
-6-
EXHIBIT 10.23
REPLACEMENT REVOLVING CREDIT PROMISSORY NOTE
$25,000,000 HOUSTON, TEXAS OCTOBER 30, 1998
FOR VALUE RECEIVED, LANDCARE USA, INC. ("BORROWER"), promises to pay to
the order of NATIONSBANK, N.A. (together with any subsequent holder of this
note, "LENDER"), at its offices at 901 Main Street, Dallas, Texas 75202, on or
before November 16, 1998, the sum of TWENTY FIVE MILLION DOLLARS (or such lesser
sum as shall then be outstanding hereunder), together with interest on the
unpaid principal balance from time to time outstanding at a rate per annum which
shall from day to day be equal to the lesser of (a) as selected by Borrower,
either the Variable Rate, calculated on the basis of actual days elapsed and a
365-day year, or the LIBOR Rate, calculated on the basis of actual days elapsed
and a 360-day year, or (b) the Highest Lawful Rate, calculated on the basis of
actual days elapsed and a 365-day year. Each change in the rate charged
hereunder will become effective without notice to Borrower on the effective date
of each change in the Variable Rate, the LIBOR Rate or the Highest Lawful Rate,
as applicable. If at any time the Variable Rate or LIBOR Rate exceeds the
Highest Lawful Rate, thereby causing the interest hereto to be limited to the
Highest Lawful Rate, then any subsequent reduction in the Variable Rate or LIBOR
Rate shall not reduce the interest hereon below the Highest Lawful Rate until
the total amount of interest accrued equals the amount of interest which would
have accrued if the Variable Rate or LIBOR Rate had at all times been in effect.
All past-due principal and accrued interest thereon shall, at the option of
Lender, bear interest from maturity (stated or by acceleration) until paid at
the Variable Rate plus 2%.
"VARIABLE RATE" means the sum of 0.25% plus the rate of interest
established from time to time by NationsBank, N.A. as its general reference rate
of interest, after taking into account such factors as it may from time to time,
in its sole discretion, deem appropriate (it being understood that NationsBank,
N.A. may from time to time make various loans at rates of interest having no
relationship to such general rate). "LIBOR RATE" means for any Interest Period
(as defined below) the sum of 1.50% plus the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S.
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period.
If for any reason such rate is not available, the term "LIBOR Rate" shall mean,
for any LIBOR Borrowing for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to Interest
Period; PROVIDED, HOWEVER, THAT if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates. "HIGHEST LAWFUL RATE" means the maximum rate of interest which Lender is
allowed to contract for, charge, take, reserve, or receive under applicable law
after taking into account, to the extent required by applicable law, any and all
relevant payments or charges hereunder.
1. PAYMENTS. The principal of this note is payable in full on November 16,
1998 (the "MATURITY DATE"). Accrued interest is payable upon the earlier of the
maturity (stated or by acceleration) or cancellation of this note. If any
payment is due on a day which is not a Business Day, Borrower shall be entitled
to delay such payment until the next Business Day, but interest shall continue
to accrue until the payment is in fact made. Each payment or prepayment hereon
must be paid at the
-1-
<PAGE>
office of NationsBank, N.A., set forth above in lawful and freely transferable
money of the United States of America and in funds which are or will be
available for immediate use by Lender at such office by noon (Dallas, Texas
time) on the day due, without setoff or counterclaim and in such amounts as may
be necessary in order that all such payments, after deduction or withholding for
or on account of any present or future taxes, levies, imposts, duties or other
charges, of whatever nature, shall not be less than the amounts otherwise
specified to be paid hereunder. "BUSINESS DAY" means (a) for all purposes, any
day OTHER THAN Saturday, Sunday, and any other day that commercial banks are
authorized by law to be closed in Texas and (b) for purposes of any LIBOR Rate
advance, a day that satisfies the requirements of CLAUSE (A) and is a day that
commercial banks are open for domestic or international business in London.
2. REVOLVING CREDIT. Lender shall disburse the principal of this note to
Borrower in one or more advances (each in an amount of not less than $1,000,000
and in an integral multiple thereof) from time to time upon not less than one
(in the case of a Variable Rate advance) and three (in the case of a LIBOR Rate
advance) Business Days prior written request (which shall be irrevocable), and
Borrower may prepay the principal of, and accrued interest on, this note from
time to time, and at any time, in whole or in part, without premium or penalty,
and, thereafter, prior to the Maturity Date, request Lender to make additional
advances of principal hereunder. This note shall not be deemed to be terminated
or cancelled prior to the Maturity Date simply because the entire principal
balance hereof may from time to time be paid in full.
3. COVENANTS. Until this note is paid in full, Borrower shall: (a) keep
proper and complete books, records and accounts and permit Lender to inspect and
copy them and to inspect Borrower's properties and discuss Borrower's affairs,
conditions and finances with any director or employee of Borrower; (b) pay when
due all taxes (except those being contested in good faith by appropriate
proceedings and for which adequate reserves therefore have been made in
accordance with generally accepted accounting principles) and not use any
portion of any advance to pay wages unless a timely payment of all amounts of
tax required to be deducted or withheld therefrom is also made; and (c) maintain
its corporate existence and good standing in Delaware and its qualification to
do business and good standing as a foreign corporation in Texas.
4. INTEREST AND YIELD PROTECTION.
(a) INTEREST CALCULATIONS. The provisions of this note relating to
calculation of the Variable Rate and LIBOR Rate are included herein only
for the purpose of determining the rate of interest or other amounts to be
paid under this note that are based upon those rates. Lender may fund and
maintain its funding of all or any part of each advance as it selects.
(b) INTEREST PERIODS. When Borrower requests any LIBOR Rate advance,
Borrower may elect the applicable interest period (each an "INTEREST
PERIOD"), which may be, at Borrower's option, any period of days ending on
or before the Maturity Date.
(c) CONVERSIONS. Borrower may (a) on the last day of the applicable
Interest Period convert all or part of a LIBOR Rate advance to a Variable
Rate advance, (b) at any time convert all or part of a Variable Rate
advance to a LIBOR Rate advance, and (c) elect a new Interest Period for a
LIBOR Rate advance. Any such conversion is subject to the dollar limits
and denominations of PARAGRAPH 2 above and may be accomplished by
delivering a written request to Lender no later than (i) three Business
Days before the conversion date for conversion to a LIBOR Rate advance and
the last day of the Interest Period, for the election of a new Interest
Period, and (ii) one Business Day before the last day of the Interest
Period for conversion to a Variable Rate advance. Absent Borrower's notice
of conversion or election of a new Interest Period, a LIBOR Rate advance
shall be converted to a Base Rate advance when the applicable Interest
Period expires.
-2-
<PAGE>
(d) BASIS UNAVAILABLE OR INADEQUATE FOR LIBOR. If, on or before any
date when a LIBOR Rate is to be determined, Lender determines that the
basis for determining the applicable rate is not available or that the
resulting rate does not accurately reflect the cost to Lender of making or
converting advances at that rate for the applicable Interest Period, then
Lender shall promptly notify Borrower of that determination (which is
conclusive and binding on Borrower absent manifest error) and the
applicable advance shall bear interest at the Variable Rate. Until Lender
notifies Borrower that those circumstances no longer exist, Lender's
commitment under this note to make, or to convert to, LIBOR Rate advances
will be suspended.
(e) ADDITIONAL COSTS. With respect to any law, requirement, request,
directive or change affecting banking institutions generally:
(i) With respect to any LIBOR Rate advance, if (A) any change
in present law or any future law imposes, modifies, or deems
applicable (or if compliance by any Lender with any such requirement
of any tribunal results in) any such requirement that any reserves
(including, without limitation, any marginal, emergency,
supplemental or special reserves) be maintained, and (B) those
reserves reduce any sums receivable by Lender under this note or
increase the costs incurred by Lender in advancing or maintaining
any portion of any LIBOR Rate advance, then Lender shall deliver to
Borrower a certificate setting forth in reasonable detail the
calculation of the amount necessary to compensate it for its
reduction or increase (which certificate is conclusive and binding
absent manifest error), and Borrower shall promptly pay that amount
to Lender upon demand. The provisions of and undertakings and
indemnification set forth in this PARAGRAPH 4(E)(I) shall survive
the satisfaction and payment of this note.
(ii) With respect to any advance, if any change in present law
or any future law regarding capital adequacy or compliance by Lender
with any request, directive or requirement now existing or hereafter
imposed by any tribunal regarding capital adequacy, or any change in
its written policies or in the risk category of this transaction,
reduces the rate of return on its capital as a consequence of its
obligations under this note to a level below that which it otherwise
could have achieved (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the amount, use reasonable
assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect
is already reflected in the rate of interest then applicable under
this note) Lender shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of
the amount necessary to compensate it (which certificate is
conclusive and binding absent manifest error), and Borrower shall
promptly pay that amount to Lender upon demand. The provisions of
and undertakings and indemnification set forth in this PARAGRAPH
4(E)(II) shall survive the satisfaction and payment of this note.
-3-
<PAGE>
(iii) Any taxes payable by Lender or ruled payable by Lender
in respect of this note shall, if permitted by law, be paid by
Borrower, together with interest and penalties, if any (except for
taxes imposed on or measured by the overall net income of Lender and
franchise or similar taxes of Lender and except for interest and
penalties incurred as a result of the gross negligence or willful
misconduct of Lender). Lender shall notify Borrower and deliver to
Borrower a certificate setting forth in reasonable detail the
calculation of the amount of payable taxes, which certificate is
conclusive and binding (absent manifest error), and Borrower shall
promptly pay that amount to Lender. If Lender subsequently receives
a refund of the taxes paid to it by Borrower, then it shall promptly
pay the refund to Borrower.
(f) CHANGE IN LAWS. If any law makes it unlawful for Lender to make
or maintain LIBOR Rate advances, then Lender shall promptly notify
Borrower, and (a) as to undisbursed funds, advances shall be made as a
Base Rate advance, and (b), as to any outstanding advance, (i) if
maintaining the advance until the last day of the applicable Interest
Period is unlawful, the advance shall be converted to a Variable Rate
advance as of the date of notice and Borrower shall pay any related
Funding Loss, or (ii) if not prohibited by Law, the advance shall be
converted to a Variable Rate advance as of the last day of the applicable
Interest Period, or (iii) if any conversion will not resolve the
unlawfulness, Borrower shall promptly prepay the advance, without penalty,
together with any related Funding Loss. "FUNDING LOSS" means, without
duplication, (a) the administrative or reemployment costs customarily
charged by Lender when (i) Borrower fails or refuses (for any reason OTHER
THAN Lender's failure to comply with this note) to take any advance that
it has requested under this note, or (ii) Borrower prepays or pays any
advance or converts any advance to an advance of another type, in each
case, before the last day of the applicable Interest Period, PLUS (b) an
amount equal to the excess of the amount of interest that would have
accrued on the advance at the elected interest rate during the remainder
of the applicable Interest Period (but for such failure, refusal, payment,
prepayment or conversion) over the amount of interest that would accrue on
the same type of Borrowing for an interest period of the same duration as
the remainder of the applicable Interest Period.
(g) FUNDING LOSS. BORROWER AGREES TO INDEMNIFY LENDER AGAINST, AND
PAY TO IT UPON DEMAND, ANY FUNDING LOSS. When Lender demands that Borrower
pay any Funding Loss, Lender shall deliver to Borrower a certificate
setting forth in reasonable detail the basis for imposing Funding Loss and
the calculation of the amount, which calculation is conclusive and binding
absent manifest error. The provisions of and undertakings and
indemnification set forth in this PARAGRAPH 4(G) shall survive the
satisfaction and payment of this note.
5. CONDITIONS. Notwithstanding the commitment of Lender set forth in
PARAGRAPH 2 above and in the Commitment Letter between NationsBank, N.A., and
Borrower dated September 30, 1998 (the "COMMITMENT LETTER"), Lender shall not be
obligated to make any advance hereunder until it receives, in form and substance
satisfactory to it, an opinion of Borrower's counsel as to (a) Borrower's
existence and good standing in Delaware and its qualification to do business and
good standing as a foreign corporation in Texas, and (b) the authorization,
execution and delivery of the note, its legal, valid and enforceable nature, and
the absence of any conflict with Borrower's certificate of incorporation or
bylaws or any laws binding upon Borrower.
-4-
<PAGE>
6. ORDER OF APPLICATION. All payments and prepayments on this note shall
be applied by Lender FIRST, to accrued interest; SECOND, to expenses for which
Lender is due to be reimbursed; and THIRD, to principal.
7. DEFAULT. The term "DEFAULT" means: (a) The failure or refusal of
Borrower to make any payment hereunder when due or to comply with any provision
herein; (b) a "Default" as defined in the Credit Agreement dated as of June 9,
1998, among Borrower, The First National Bank of Chicago, as Agent, and the
Lenders named therein, as in effect on the date hereof (the "CREDIT AGREEMENT");
(c) any increase above $55,000,000 in the credit available to Borrower under the
Credit Agreement; (d) the discovery by Lender that any statement by Borrower
herein or in connection herewith is false or misleading; or (e) Borrower becomes
insolvent, fails to pay its debts generally as they become due or becomes the
subject of any proceeding under any debtor relief law. In the event of a
Default, Lender may (i) declare the entire unpaid balance of this note, or any
part hereof, immediately due and payable, whereupon it shall be due and payable
(PROVIDED THAT, upon the occurrence of a Default under CLAUSE (D) above, this
note shall automatically become due and payable without notice or other action
of any kind); (ii) terminate its commitment to lend under this note and the
Commitment Letter; (iii) offset against this note any sum or sums owed by Lender
to Borrower; and/or (iv) proceed to protect and enforce any other legal or
equitable right or remedy of Lender. No delay on the part of Lender in the
exercise of any power or right or single or partial exercise of any such power
or right, under this note or any other instrument executed in connection
herewith, shall operate as a waiver thereof. Enforcement of any security for
this note shall not constitute an election of remedies so as to preclude the
exercise of any other remedy.
8. WAIVER. Borrower and each other party ever liable for the payment of
any sum hereunder jointly and severally waive demand, presentment, protest,
notice of nonpayment, notice of intention to accelerate, notice of acceleration,
notice of protest and any and all lack of diligence or delay in collection or
the filing of suit hereon which may occur, and agree that their liability
regarding this note shall not be affected by any renewal, extension, indulgence
or any release or change in security, and hereby consent to any and all
renewals, extensions, indulgences, releases or changes, regardless of the number
thereof.
9. ATTORNEYS' FEES AND COSTS. Borrower agrees to reimburse Lender for its
expenses (including, but not limited to, attorneys' fees) incurred in the
preparation, negotiation and execution of this note and any documents related
hereto. If this note is placed in the hands of an attorney for collection, or if
this note is collected in whole or in part through legal proceedings of any
nature, Borrower promises to pay all costs of collection, including but not
limited to reasonable attorneys' fees incurred by Lender, whether or not suit is
filed.
10. NOTICES. Any notice or demand given hereunder shall be deemed to have
been given and received (a) when actually received, if delivered in person, or
(b) if mailed to the address opposite the recipient's signature below (whether
ever received or not), two Business Days after deposit in the U.S. Mail, postage
prepaid.
11. GOVERNING LAW. This note is intended to be performed in Texas and the
laws of Texas shall govern its validity, enforcement and interpretation.
Borrower hereby irrevocably submits to the nonexclusive jurisdiction of the
state and federal courts of the State of Texas and irrevocably waives any
objection to venue or claim of an inconvenient forum with respect to the
district courts of Harris County, Texas, or the U.S. District Court for the
Southern District of Texas (Houston Division) in any dispute related to this
note, and irrevocably consents to the service of process out of any of such
courts by postage prepaid certified mail to its address below.
-5-
<PAGE>
12. HEADINGS. The headings herein are for convenience only and shall not
be deemed a part hereof.
13. SUCCESSORS AND ASSIGNS. All of Borrower's agreements in this note
shall bind its successors and assigns (PROVIDED, HOWEVER, THAT Borrower may not,
without the prior consent of Lender, assign any rights, powers or obligations
under this note).
14. MAXIMUM INTEREST RATE. Regardless of any provision contained herein or
in any document related hereto, Lender shall never be entitled to receive,
collect or apply as interest any amount in excess of the Highest Lawful Rate. In
the event Lender ever receives, collects or applies as interest any such excess,
it shall be deemed a partial prepayment of principal and treated hereunder as
such and, if the principal hereof is paid in full, any remaining excess shall be
refunded to Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful Rate,
Borrower and Lender shall (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) spread the total amount of interest
throughout the entire contemplated term hereof (PROVIDED THAT if the
indebtedness evidenced hereby is paid and performed in full prior to the end of
the full contemplated term thereof, and if the interest received for the actual
period of existence exceeds the Highest Lawful Rate, Lender shall apply or
refund such excess as provided above, and shall not be subject to any penalties
provided by any laws for contracting for, charging or receiving interest in
excess of the Highest Lawful Rate).
15. REPLACEMENT NOTE. This note is issued as a replacement for, and as an
extension and increase of (but not a novation of) that certain Revolving Credit
Promissory Note dated September 30, 1998 by Borrower to Lender in the original
principal amount of $20,000,000.
16. ENTIRETY AND AMENDMENTS. THIS NOTE AND THE COMMITMENT LETTER
(COLLECTIVELY, THE "COMMITMENT DOCUMENTS") REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES. The Commitment Documents embody the entire
written agreement between the parties, supersedes all prior written agreements
and
-6-
<PAGE>
understandings, if any, relating to the subject matter hereof, and may be
amended only by an instrument in writing executed jointly by Borrower and
Lender.
ADDRESS: LANDCARE USA, INC.
5850 San Felipe, Suite 500
Houston, Texas 77057 By: __________________________
Attention: William J. Fiedler Name: ____________________
General Counsel Title: ___________________
ADDRESS: NATIONSBANK, N.A.
700 Louisiana Street, 8th Floor
Houston, Texas 77002 By: __________________________
Attention: Richard L. Nichols, Jr. Richard L. Nichols, Jr.
Vice President
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS OF LANDCARE, USA, INC. AS OF SEPTEMBER
30, 1998 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,161
<SECURITIES> 0
<RECEIVABLES> 48,594
<ALLOWANCES> (2,848)
<INVENTORY> 4,271
<CURRENT-ASSETS> 3,888
<PP&E> 76,198
<DEPRECIATION> (41,661)
<TOTAL-ASSETS> 186,793
<CURRENT-LIABILITIES> 31,336
<BONDS> 0
0
0
<COMMON> 166
<OTHER-SE> 92,377
<TOTAL-LIABILITY-AND-EQUITY> 186,793
<SALES> 101,908
<TOTAL-REVENUES> 102,114
<CGS> 80,496
<TOTAL-COSTS> 80,496
<OTHER-EXPENSES> 13,093
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 847
<INCOME-PRETAX> 7,678
<INCOME-TAX> 3,413
<INCOME-CONTINUING> 4,265
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,265
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
