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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 26, 1999
GREASE MONKEY HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 000-9812 87-0321320
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
633 17th Street, Suite 400, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 308-1660
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ITEM 5. OTHER EVENTS.
On March 26, 1999, Grease Monkey Holding Corporation entered into a
merger agreement with QL 3000, Inc., a privately held company based in
Jacksonville, Florida. The merger agreement provides that each shareholder
of Grease Monkey will receive $1.00 for each share of Grease Monkey common
stock. Holders of Grease Monkey preferred stock will receive the stated
value of their preferred stock plus all accrued and unpaid dividends. QL
3000 must complete debt and equity financing to fund the merger
consideration. Grease Monkey may terminate the Merger Agreement if QL 3000
has not received a commitment letter for the debt financing by May 25, 1999.
In addition, completion of the merger is subject to regulatory and
shareholder approvals.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits (numbered in accordance with Item 601 of regulation S-K).
2.1 Agreement and Plan of Merger
99.1 Press Release
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 31, 1999
GREASE MONKEY HOLDING CORPORATION
By: /s/ Rex L. Utsler
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Rex L. Utsler, President and Chief
Operating Officer
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AGREEMENT AND PLAN OF MERGER
AMONG
GREASE MONKEY HOLDING CORPORATION
AND
QL 3000, INC.
MARCH 26, 1999
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TABLE OF CONTENTS
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ARTICLE 1............................................................................................1
THE MERGER..................................................................................1
1.1 THE MERGER....................................................................1
1.2 ACTIONS BY GMHC; STOCKHOLDERS MEETING;
PROXY STATEMENT...............................................................1
1.3 EFFECTIVE TIME................................................................3
1.4 EFFECT OF MERGER..............................................................3
1.5 ARTICLES OF INCORPORATION AND BYLAWS..........................................3
1.6 DIRECTORS AND OFFICERS........................................................3
1.7 CLOSING.......................................................................3
ARTICLE 2............................................................................................4
MERGER CONSIDERATION........................................................................4
2.1 EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS.................4
2.1.1 Conversion and Redemption of GMHC Capital Stock.......................4
2.1.2 Cancellation of Stock.................................................4
2.1.3 Capital Stock of QL 3000..............................................4
2.1.4 Withholding Tax.......................................................5
2.1.5 Shares of Dissenting Stockholders.....................................5
2.2 EXCHANGE OF CERTIFICATES......................................................5
2.2.1 Paying Agen.t.........................................................5
2.2.2 Exchange Procedure....................................................5
2.2.3 No Further Ownership Rights in GMHC Common Stock......................6
2.2.4 No Liability..........................................................6
2.2.5 Lost, Stolen, or Destroyed Certificates...............................6
2.3 GMHC STOCK OPTIONS AND WARRANTS...............................................7
2.4 RELEASE OF GMHC STOCKHOLDER OBLIGATIONS.......................................7
2.5 PAYMENT OF FEES...............................................................7
ARTICLE 3............................................................................................8
REPRESENTATIONS AND WARRANTIES OF GMHC......................................................8
3.1 CORPORATE EXISTENCE AND AUTHORITY.............................................8
3.2 NO ADVERSE CONSEQUENCES.......................................................9
3.3 CAPITALIZATION................................................................9
3.4 SUBSIDIARIES AND JOINT VENTURES..............................................10
3.5 SEC REPORTS AND FINANCIAL STATEMENTS.........................................10
3.6 INFORMATION SUPPLIED.........................................................11
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3.7 LEGAL PROCEEDINGS............................................................11
3.8 CONTRACTS AND ARRANGEMENTS...................................................11
3.9 REAL PROPERTY; MATERIAL ASSETS...............................................12
3.10 LEASES.......................................................................13
3.11 STATUS OF CONTRACTS AND LEASES...............................................13
3.12 COMPLIANCE WITH LAWS.........................................................14
3.13 ENVIRONMENTAL MATTERS........................................................15
3.13.1 Definitions..........................................................15
3.13.2 Compliance...........................................................15
3.13.3 Hazardous Substances.................................................15
3.13.4 Storage Tanks........................................................16
3.13.5 Environmental Records................................................16
3.14 TAX MATTERS..................................................................16
3.14.1 Returns..............................................................16
3.14.2 Taxes Paid or Reserved...............................................17
3.14.3 Loss Carryforwards; Investment Tax Credit Carryforwards..............17
3.14.4 Definition...........................................................17
3.14.5 Miscellaneous........................................................17
3.14.6 Tax Sharing Agreements...............................................17
3.15 EMPLOYEES AND LABOR RELATIONS MATTERS........................................17
3.16 EMPLOYEE BENEFITS............................................................19
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................20
3.18 UNDISCLOSED LIABILITIES......................................................21
3.19 INSURANCE....................................................................21
3.20 INTELLECTUAL PROPERTY........................................................22
3.21 CAR COUNTS...................................................................23
3.22 FRANCHISES...................................................................23
3.23 YEAR 2000....................................................................23
3.24 GUARANTIES; POWERS OF ATTORNEY...............................................24
3.25 BROKERS......................................................................24
3.26 DISCLOSURE...................................................................24
3.27 TRUE AT CLOSING..............................................................24
ARTICLE 4...........................................................................................25
REPRESENTATIONS AND WARRANTIES OF QL 3000..................................................25
4.1 CORPORATE EXISTENCE AND AUTHORITY............................................25
4.2 NO ADVERSE CONSEQUENCES......................................................25
4.3 LEGAL PROCEEDINGS............................................................25
4.4 PROXY STATEMENT..............................................................25
ARTICLE 5...........................................................................................26
COVENANTS..................................................................................26
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5.1 CONTINUATION OF BUSINESS.....................................................26
5.2 NO SOLICITATION..............................................................28
5.3 ACCESS.......................................................................29
5.4 OTHER GOVERNMENT CONSENTS....................................................29
5.5 BEST EFFORTS; NO INCONSISTENT ACTION.........................................30
5.6 CHANGED CIRCUMSTANCES........................................................30
5.7 FEES AND EXPENSES............................................................30
5.8 PRESS RELEASES...............................................................30
5.9 INDEMNIFICATION..............................................................30
5.10 FINANCING....................................................................31
ARTICLE 6...........................................................................................31
CONDITIONS TO THE PARTIES' OBLIGATIONS.....................................................31
6.1 GOVERNMENTAL AUTHORIZATIONS..................................................31
6.2 GMHC STOCKHOLDER APPROVAL....................................................31
6.3 NO PROHIBITIONS..............................................................32
6.4 NO PROCEEDINGS...............................................................32
6.5 REPRESENTATIONS AND WARRANTIES...............................................32
6.6 FAIRNESS OPINIONS............................................................32
6.7 OTHER CONSENTS...............................................................32
6.8 DISSENTING STOCKHOLDERS......................................................32
6.9 COMPLETION OF FINANCINGS.....................................................32
ARTICLE 7...........................................................................................33
TERMINATION................................................................................33
7.1 TERMINATION BY QL 3000 AND/OR GMHC...........................................33
7.1.1 Mutual Consent.......................................................33
7.1.2 Injunction or Restraint..............................................33
7.2 TERMINATION BY QL 3000.......................................................33
7.3 TERMINATION BY GMHC..........................................................33
7.4 PROCEDURE; EFFECT OF TERMINATION.............................................34
ARTICLE 8...........................................................................................34
GENERAL PROVISIONS.........................................................................34
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................34
8.2 FURTHER ACTION...............................................................34
8.3 ENTIRE AGREEMENT.............................................................34
8.4 ASSIGNMENT...................................................................35
8.5 BINDING EFFECT; NO THIRD PARTY BENEFIT.......................................35
8.6 WAIVER.......................................................................35
8.7 GOVERNING LAW................................................................35
8.8 SEVERABILITY.................................................................35
8.9 TIME OF ESSENCE..............................................................35
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8.10 COUNTERPARTS.................................................................35
8.11 AMENDMENTS...................................................................36
8.12 AUTHORITY....................................................................36
8.13 NOTICES......................................................................36
ARTICLE 9...........................................................................................37
DEFINITIONS................................................................................37
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of March 26, 1999 (the
"Agreement") is among QL 3000, INC., a Florida corporation ("QL 3000"), and
GREASE MONKEY HOLDING CORPORATION, a Utah corporation ("GMHC").
RECITALS
A. The Boards of Directors of GMHC (the "GMHC Board") and QL 3000
have determined that it is advisable and in the best interests of their
respective corporations and stockholders that QL 3000 or a wholly owned
subsidiary or other affiliate of QL 3000 merge with and into GMHC pursuant to
the applicable provisions of the Utah Revised Business Corporation Act (the
"URBCA") and the terms and conditions of this Agreement (such merger, as
described in more detail in Article 2 below, the "Merger"), pursuant to which
GMHC would be the surviving corporation. The transactions described in this
Agreement are subject to the approvals of the shareholders of GMHC and the
satisfaction of certain other conditions described in this Agreement.
B. Jerry D. Armstrong, James B. Wallace, Ray O. Brownlie, J. H.
Bander, Charles H. Steinbrueck, Cortlandt S. Dietler, George F. Woods, Wayne
H. Patterson and Jim Baldwin, each a stockholder of GMHC, have agreed to vote
all of their respective shares of GMHC capital stock (common and preferred)
in favor of the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained in this Agreement,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and
conditions of this Agreement, at the Effective Time QL 3000 or a wholly owned
subsidiary of QL 3000 will be merged with and into GMHC in accordance with
the applicable provisions of the URBCA. GMHC shall be the Surviving
Corporation resulting from the merger and shall continue to be governed by
the laws of the State of Utah. Alternatively, at QL 3000's option, GMHC will
enter into the Agreement and Plan of Merger attached hereto as Exhibit A
providing for the merger of two of its subsidiaries with and into QL 3000 or
its designee and this Agreement will be terminated.
1.2 ACTIONS BY GMHC; STOCKHOLDERS MEETING; PROXY STATEMENT.
1.2.1 GMHC hereby approves of and consents to the Merger
and represents and warrants that the GMHC Board, at a meeting duly called and
held on March 5, 1999 has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to and in
the best interests of
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GMHC's stockholders, (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, and (iii) resolved to recommend
that the stockholders of GMHC, if required by applicable law, approve the
transactions contemplated hereby. GMHC has been advised by each of its
directors that each such person has agreed, subject to the terms and
conditions of this Agreement, to take all action necessary or advisable in
support of the Merger, to vote all Shares owned by such person in favor of
the Merger and to sell to QL 3000 all such Shares.
1.2.2 If required by applicable law in order to
consummate the Merger, GMHC will, in accordance with applicable law and
GMHC's Articles of Incorporation and Bylaws, call and hold a special meeting
of its stockholders (the "Stockholders' Meeting") as soon as practicable for
the purpose of approving the Merger. Subject to the terms and conditions of
this Agreement, the GMHC Board will recommend to its stockholders that the
Merger be approved, and, subject to the terms and conditions of this
Agreement, GMHC will use its best efforts to solicit from its stockholders
proxies in favor of the approval of the Merger, and will take all other
action necessary or advisable to secure the requisite vote or consent of
stockholders.
1.2.3 GMHC will prepare and file a preliminary proxy
statement to solicit Stockholder Approval (the "Proxy Statement") with the
SEC and will use its best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement, as finalized, to be mailed to
GMHC's stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the staff; PROVIDED, HOWEVER, that GMHC shall
not be required to prepare and file such proxy statement until (i) a bona
fide commitment letter from one or more lenders with respect to the Merger
Consideration has been issued to QL 3000 and delivered to GMHC and (ii) QL
3000 elects the form of Agreement and Plan of Merger in accordance with
Section 1.1 of this Agreement. QL 3000 will provide to GMHC in writing all
information regarding QL 3000 necessary for the preparation of the Proxy
Statement. GMHC will notify QL 3000 promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional
information and will supply QL 3000 with copies of all correspondence between
GMHC or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger.
If at any time before the Stockholders' Meeting there occurs any event that
should be set forth in an amendment or supplement to the Proxy Statement,
GMHC will promptly prepare and mail to its stockholders such an amendment or
supplement. GMHC will not mail any Proxy Statement, or any amendment or
supplement thereto, to which QL 3000 reasonably objects. The Proxy Statement
will include the GMHC Board's recommendation that GMHC's stockholders grant
proxies to approve the Merger; provided, however, that such recommendation
may be withdrawn, modified, or amended if and to the extent the GMHC Board
determines, in good faith after consultation with outside legal counsel, that
a failure to do so would be contrary to its fiduciary obligations.
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1.3 EFFECTIVE TIME. As soon as practicable after satisfaction or
waiver of all of the conditions to the Merger set forth in Article 6 of this
Agreement, a Certificate of Merger prepared in accordance with applicable law
(the "Certificate of Merger") will be executed and filed with the Secretaries
of State of the States of Florida and Utah. The Merger will be effective on
the later of the date and at the time (the "Effective Time") when the
Certificate of Merger has been accepted for filing by the Secretaries of
State of the States of Florida and Utah. The day during which the Effective
Time occurs is referred to herein as the "Effective Date."
1.4 EFFECT OF MERGER. At the Effective Time, QL 3000 or a wholly
owned subsidiary of QL 3000 will be merged with and into GMHC in the manner
and with the effect provided by the URBCA, the separate corporate existence
of QL 3000 or its subsidiary, as the case may be, will cease and thereupon
GMHC and QL 3000 or its subsidiary, as the case may be, will be a single
corporation (the "Surviving Corporation") and will continue to be governed by
the laws of the State of Utah.
1.5 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of GMHC as in effect at the Effective Time will be
the Articles of Incorporation and Bylaws of the Surviving Corporation, until
each has been duly amended in accordance with the terms thereof and of the
URBCA.
1.6 DIRECTORS AND OFFICERS. The directors of QL 3000 at the
Effective Time will be the directors of the Surviving Corporation, until
their respective successors have been duly elected or appointed and
qualified. The officers of QL 3000 at the Effective Time will be the officers
of the Surviving Corporation and will hold office from the Effective Time in
accordance with the Bylaws of the Surviving Corporation.
1.7 CLOSING. Unless this Agreement has been terminated and the
transactions contemplated by it have been abandoned pursuant to Article 7,
the closing of the Merger (the "Closing") will take place at the offices of
Otten, Johnson, Robinson, Neff & Ragonetti at 10:00 a.m. on the date five
business days after the date on which the last of the conditions set forth in
Article 6 hereof (other than conditions that by their terms are to occur at
"Closing") will have been fulfilled or waived or on such other date as QL
3000 and GMHC may agree (the "Closing Date").
ARTICLE 2
MERGER CONSIDERATION
2.1 EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS.
As of the Effective Time, by virtue of the Merger and without any action on
the part of QL 3000, GMHC or the holders of any Shares:
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2.1.1 CONVERSION AND REDEMPTION OF GMHC CAPITAL STOCK.
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be canceled in accordance with
Section 2.1.2 and Dissenting Shares (as defined below)) will be
converted into the right to receive from the Surviving Corporation a
cash payment in the amount of $1.00 (the "Merger Consideration"). As of
the Effective Time, all of the Shares will no longer be outstanding and
will automatically be canceled and retired and will cease to exist, and
each holder of a certificate representing any such Shares (other than
Shares referred to in Section 2.1.2 and Dissenting Shares (as defined
below)) will cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without interest.
(b) As of the Effective Date, all shares of GMHC Series C
Preferred Stock will no longer be outstanding and will automatically be
canceled and retired and will cease to exist and each holder of a
certificate representing any such preferred stock will cease to have
any rights with respect thereto, except the right to receive the
liquidation price of $100.00 per share plus an amount equal to any
unpaid cumulative dividends (whether or not declared), if any, without
interest, to the Effective Date.
2.1.2 CANCELLATION OF STOCK. Each issued and outstanding
Share that is held in the treasury of GMHC or held by any direct or indirect
subsidiary of GMHC and each issued and outstanding Share held by QL 3000 or
held by any direct or indirect subsidiary of QL 3000 immediately before the
conversion pursuant to Section 2.1.1 will automatically be canceled and
retired and will cease to exist, and no consideration will be delivered in
exchange therefor.
2.1.3 CAPITAL STOCK OF QL 3000. Immediately following the
Effective Time the issued and outstanding shares of capital stock of QL 3000,
$.01 par value per share, will be converted into a like number of shares of
GMHC Common Stock without any further action on the part of the holders
thereof, will be validly issued, fully paid and nonassessable shares of GMHC
Common Stock and will constitute all of the issued and outstanding shares of
the Surviving Corporation.
2.1.4 WITHHOLDING TAX. The right of any stockholder to
receive the Merger Consideration will be subject to and reduced by the amount
of any required tax withholding obligation.
2.1.5 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding
anything in this Agreement to the contrary, if any shareholder of GMHC who
has not voted such Shares in favor of or consented to the Merger and who is
entitled to dissent from the Merger and require appraisal for his or her
Shares under applicable law (a "Dissenting Stockholder") and complies with
all the provisions thereof concerning the right of holders
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of Shares to dissent from the Merger and require appraisal of their Shares
("Dissenting Shares") then such Dissenting Shares will not be converted as
described in Section 2.1.1 but will represent only the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to applicable law. If, after the Effective Time, such Dissenting
Stockholder (if any) withdraws his or her demand for appraisal or fails to
perfect or otherwise loses his or her right of appraisal, in any case
pursuant to applicable law, each of his or her Shares will be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration. GMHC will give QL 3000 (i) prompt notice of any demands for
appraisal of Shares received by GMHC and (ii) the opportunity to participate
in and direct all negotiations and proceedings with respect to any such
demands. GMHC will not, without the prior written consent of QL 3000, make
any payment with respect to, or settle, offer to settle, or otherwise
negotiate, any such demands except as required by applicable law.
2.2 EXCHANGE OF CERTIFICATES.
2.2.1 PAYING AGENT. Before the Effective Time, QL 3000
and GMHC will designate a mutually acceptable bank or trust company to act as
paying agent in the Merger (the "Paying Agent"). From time to time on, before
or after the Effective Time, QL 3000 will make available, or cause the
Surviving Corporation to make available, to the Paying Agent funds in amounts
and at the times necessary for the payment of the Merger Consideration for
each share entitled to payment under Section 2.2.1 upon surrender of
certificates representing such Shares, it being understood that any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement will be turned over to QL 3000.
2.2.2 EXCHANGE PROCEDURE. As soon as reasonably
practicable after the Effective Time, the Paying Agent will mail to each
holder of record of a certificate or certificates that immediately before the
Effective Time represented Shares (the "Certificates"), (i) a notice
(advising the holders that the Merger has become effective) and a letter of
transmittal in customary and appropriate form (which will specify that
delivery will be effected, and risk of loss and title to the Certificates
will pass, only upon proper delivery of the Certificates to the Paying Agent)
and (ii) instructions for use in effecting the surrender of the Certificates
in exchange for the Merger Consideration per share. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by QL 3000, together with such letter of
transmittal, properly completed and duly executed, and such other customary
documents as may reasonably be required by the Paying Agent, the holder of
such Certificate will be entitled to receive in exchange therefor the amount
of cash into which the Shares theretofore represented by such Certificate
have been converted pursuant to Section 2.1, and the Certificate so
surrendered will be canceled. In the event of a transfer of ownership of
Shares that is not registered in the transfer records of GMHC, payment may be
made to a Person (as defined in Section 2.2.4 below) other than the Person in
whose name the Certificate so surrendered is registered, if such Certificate
is properly endorsed
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or otherwise is in proper form for transfer and the Person requesting such
payment pays any transfer or other taxes required by reason of the payment to
a Person other than the registered holder of such Certificate or establishes
to the satisfaction of the Surviving Corporation that such tax has been paid
or is not applicable. Until surrendered as contemplated by this Section
2.2.2, each Certificate will be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration, without interest, into which the Shares theretofore
represented by such Certificate will have been converted pursuant to Section
2.1.1. No interest will be paid or will accrue on the cash payable upon the
surrender of any Certificate.
2.2.3 NO FURTHER OWNERSHIP RIGHTS IN GMHC COMMON STOCK.
All cash paid upon the surrender of Certificates in accordance with the terms
of Sections 2.1 will be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
At the Effective Time, the stock transfer books of GMHC will be closed, and
there will be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were outstanding
immediately before the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for any reason, they will be canceled and exchanged as provided in
Section 2.1.
2.2.4 NO LIABILITY. None of QL 3000, GMHC, the Surviving
Corporation or the Paying Agent will be liable to any Person in respect of
any cash or security delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law. As used in this
Agreement, the term "Person" means any individual, corporation, general
partnership, limited partnership, limited liability company, joint venture,
trust, cooperative or other association, Governmental Entity (as defined in
Section 3.2(b) below), or any other organization.
2.2.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. In the
event that any Certificate has 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, GMHC will issue in exchange for such lost,
stolen, or destroyed Certificate, the Merger Consideration deliverable in
respect thereof as determined in accordance with this Agreement; PROVIDED,
HOWEVER, that GMHC may, in its sole discretion and as a condition precedent
to the issuance thereof, require the owner of such lost, stolen, or destroyed
Certificate to indemnify GMHC or to give GMHC a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
GMHC with respect to the certificate alleged to have been lost, stolen, or
destroyed.
2.3 GMHC STOCK OPTIONS AND WARRANTS. GMHC shall use its best
efforts to enter into an agreement with each holder of stock options, vested
and unvested, outstanding under GMHC's 1986 Incentive Stock Option Plan, 1993
Incentive Stock Option Plan, 1993 Amendment to 1993 Incentive Stock Option
Plan, 1994 Stock Incentive Plan and Amendment to 1994 Stock Incentive Plan
(the "Stock Option Plans")
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and all outstanding warrants to purchase GMHC common stock, which agreement
provides that, immediately after the Effective Date, each option or warrant
that is then outstanding, whether or not then exercisable or vested, shall be
canceled by GMHC, and each holder of a canceled option or warrant shall be
entitled to receive from GMHC as of the Effective Time, in consideration for
the cancellation of such option or warrant, an amount in cash equal to the
product of (i) the number of Shares previously subject to such option or
warrant, and (ii) the excess, if any, of the Merger Consideration over the
exercise price per Share previously subject to such option or warrant,
reduced by any applicable withholding. In any event as of the Effective Time
all such Stock Option Plans, options issued pursuant thereto and outstanding
warrants shall be cancelled and of no further effect.
2.4 RELEASE OF GMHC STOCKHOLDER OBLIGATIONS. On or before the
Effective Date, QL 3000 shall cause to be released or cancelled the GMHC
stockholder guarantees and letters of credit described in Schedule 2.4
attached hereto.
2.5 PAYMENT OF FEES. On the Effective Date, QL 3000 shall cause
all outstanding and unpaid legal, accounting and investment banking fees
incurred by GMHC in connection with the Merger to be paid in full by QL 3000
or the Surviving Corporation. The total legal, accounting and investment
banking fees incurred by GMHC in connection with the merger subsequent to
September 30, 1998 shall not exceed $435,000.
2.6 REPAYMENT OF ADVANCES. On the Effective Date, QL 3000 shall
cause the Surviving Corporation to repay all amounts advanced to GMHC by
Brownlie Wallace Armstrong & Bander Exploration and its affiliates described
in Schedule 2.6 attached hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GMHC
In this Agreement, the term "Material Adverse Effect" used in
connection with a party means any event, change or effect that is materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations or results of operations of such party in
excess of $100,000. "Combined Material Adverse Effect" means any individual
or combination of events, changes or effects that are materially adverse to
the condition (financial or otherwise), properties, assets, liabilities,
businesses, operations or results of operations of such party in excess of
$250,000. "Material Adverse Change" means any change that has resulted, will
result or is likely to result in a Material Adverse Effect. The term
"Disclosure Schedule" means the document delivered by GMHC to QL 3000 on the
date hereof that sets forth certain exceptions to the representations and
warranties contained in this Agreement under captions referencing each and
every Section to which such exceptions apply (whether or not referred to in a
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particular representation or warranty), provided that information
appropriately and expressly disclosed or qualified with respect to one
representation or warranty in the Disclosure Schedule shall be deemed to have
been disclosed or qualified with respect to any other applicable
representation or warranty to the extent that the disclosure contains a clear
statement of the relevant fact or facts so as to provide reasonable notice of
the applicability of the disclosure to the unreferenced representation or
warranty.
GMHC hereby represents and warrants to QL 3000 as follows:
3.1 CORPORATE EXISTENCE AND AUTHORITY. GMHC is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Utah and has the requisite corporate power and authority to own, operate
and lease its properties and assets and to carry on its business as it is now
being conducted. GMHC is duly qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of business or the
ownership or lease of property requires or makes it desirable for GMHC to be
so qualified except where the failure to be so qualified would not have a
Material Adverse Effect. GMHC has the full corporate power and authority to
enter into this Agreement and carry out its terms, subject to the conditions
set forth in the Agreement. The Board of Directors of GMHC has, by
resolutions duly adopted, authorized and approved the Merger, which
resolutions have not been rescinded or otherwise modified and remain in full
force and effect. Except for the approval of its stockholders, GMHC has taken
all corporate action necessary to authorize the execution, delivery, and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by GMHC and is binding upon and enforceable against
GMHC in accordance with its terms, and the Articles of Merger, when executed
and delivered by GMHC, will constitute the valid and binding obligation of
GMHC. GMHC has heretofore delivered to QL 3000 correct and complete copies of
its Articles of Incorporation and Bylaws as in effect on the date of this
Agreement.
3.2 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of
this Agreement by GMHC nor the consummation of the transactions contemplated
by this Agreement will:
(a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of GMHC or any of its subsidiaries;
(b) violate any law, judgment, order, injunction, decree,
rule, regulation, or ruling of any court, legislature, administrative
agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity") applicable to GMHC or any
of its subsidiaries, except as such would not have a Material Adverse
Effect, individually or in the aggregate;
(c) either alone, or with the giving of notice or the passage
of time or both, conflict with, constitute grounds for termination or
acceleration of, result
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in the breach of the terms, conditions, or provisions of, result in the
loss of any benefit to GMHC or any of its subsidiaries, or constitute
a default under any agreement, instrument, license, or permit to which
GMHC or any of its subsidiaries is a party or by which GMHC or any of
its subsidiaries is bound, or result in the creation or imposition of
any lien, charge or encumbrance on any of the assets of GMHC or any of
its subsidiaries except as such would not have a Material Adverse
Effect, individually or in the aggregate; or
(d) require any notices to or consent of any third party,
including without limitation any Governmental Entity.
3.3 CAPITALIZATION. GMHC has authorized capital stock consisting
of (i) 20,000,000 shares of GMHC Common Stock, par value $.03 per Share (each
a "Share," collectively the "Shares"), of which 4,647,880 Shares were
outstanding on March 1, 1999 and no Shares are in treasury and (ii) 200,000
shares of GMHC Preferred Stock, no par value per share, of which 20,896
shares of Series C Convertible Preferred Stock, no par value per share and
liquidation value $100.00 plus accrued unpaid dividends per share, were
outstanding on March 1, 1999 (the "Preferred Shares") and no shares are in
treasury. Options to purchase 854,266 Shares were outstanding on March 1,
1999 under grants made pursuant to the Stock Option Plans. Warrants to
purchase 400,000 Shares were outstanding on March 1, 1999. All of the
outstanding shares of capital stock of GMHC have been duly authorized and are
validly issued, fully paid, and nonassessable, and no shares were issued in
violation of preemptive or similar rights of any stockholder or in violation
of any applicable securities laws. Except as set forth above, there are no
shares of capital stock of GMHC authorized, issued, or outstanding, and,
except as set forth above, there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities, or other
agreements or commitments of GMHC of any character relating to the issued or
unissued capital stock or other securities of GMHC. There are no outstanding
obligations of GMHC to repurchase, redeem, or otherwise acquire any of the
Shares.
3.4 SUBSIDIARIES AND JOINT VENTURES. Except as disclosed on the
Disclosure Schedule, GMHC has no subsidiaries and owns no stock or other
interest in any other corporation or in any partnership or limited liability
company, or other venture or entity. Each subsidiary of GMHC is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or formation and is duly qualified to do
business as a foreign corporation in each jurisdiction in which the conduct
of business or the ownership or lease of property requires or makes it
desirable for such subsidiary to be so qualified except where the failure to
be so qualified would not have a Material Adverse Effect. All of the
outstanding shares of capital stock of each subsidiary are validly issued,
fully paid and nonassessable and owned by GMHC free and clear of all liens,
claims or encumbrances. There are no options, calls or commitments of any
character relating to the issued or unissued capital stock of any subsidiary.
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3.5 SEC REPORTS AND FINANCIAL STATEMENTS. GMHC has filed with the
SEC, and has made available to QL 3000 true and complete copies of, all
forms, reports, schedules, statements, and other documents required to be
filed by it since December 31, 1997 under the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act") (each of such forms, reports,
schedules, statements, and other documents, to the extent filed and publicly
available before the date of this Agreement, other than preliminary filings,
is referred to as a "GMHC SEC Document"). Each GMHC SEC Document, at the time
filed, (a) 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 (b) 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.
The financial statements of GMHC and its subsidiaries included in the GMHC
SEC Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of GMHC and
its subsidiaries as of and at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
3.6 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by GMHC specifically for inclusion or incorporation by reference
in the Proxy Statement will at the time the Proxy Statement is first mailed
to GMHC's stockholders or at the time of the 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 are made, not
misleading, except that no representation or warranty is made by GMHC with
respect to statements made or incorporated by reference therein based on
information supplied by QL 3000 in writing specifically for inclusion or
incorporation by reference therein.
3.7 LEGAL PROCEEDINGS. Except as disclosed in a GMHC SEC Document
or in the Disclosure Schedule, there is neither pending nor to GMHC's
knowledge threatened by or against GMHC or any of its subsidiaries any legal
action, claim, arbitration, investigation, or administrative proceeding
before any Governmental Entity that could (i) have a Material Adverse Effect
on the parties or the financial condition, assets, liabilities, business or
results of operations of GMHC following the Closing; or (ii) enjoin or
restrict the right or ability of GMHC to perform its obligations under this
Agreement; and (iii) to the best knowledge of GMHC, there is no basis for any
such claim, litigation, proceeding, or investigation; and (iv) there is not
in existence any
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judgment, injunction, order or decree requiring GMHC to take any action of
any kind, or to which GMHC is subject or by which it or its assets are bound
or affected.
3.8 CONTRACTS AND ARRANGEMENTS. The Disclosure Schedule contains a
complete and accurate list of all agreements of the following types,
organized by type of agreement, to which GMHC or any of its subsidiaries is a
party or by which GMHC or any of its subsidiaries is bound or otherwise
affected and which are material to GMHC or any of its subsidiaries (the
"Contracts"):
(a) any mortgage, note, or other instrument or agreement
relating to the borrowing of money or the incurrence of indebtedness by
GMHC or any of its subsidiaries or any guaranty of any obligation for
the borrowing of money;
(b) contracts, agreements, purchase orders, or acknowledgment
forms for the purchase, sale, lease or other disposition of GMHC's or
any of its subsidiaries' equipment, products, materials, or capital
assets, or for the performance of services which exceed $5,000.00
individually or on an annual commitment basis;
(c) contracts or agreements for the joint performance of work
or services and all other joint venture agreements;
(d) contracts or agreements with agents, brokers, consignees,
sales representatives, or distributors relating to the sale of GMHC's
products or services;
(e) contracts or agreements relating to the employment or
compensation of GMHC's or any of its subsidiaries' officers, directors,
or employees, including without limitation any collective bargaining
agreements, and agreements with former officers, directors or employees
which remain in effect, other than disclosed in the Disclosure Schedule
in response to Section 3.16;
(f) franchise agreements; and
(g) any other contract, instrument, agreement, or obligation
not described in any other section of this Agreement to which GMHC or
any of its subsidiaries is a party or by which it or any such
subsidiary is bound and which contains unfulfilled obligations of GMHC
or any of its subsidiaries in excess of $5,000.
3.9 REAL PROPERTY; MATERIAL ASSETS. The Disclosure Schedule
contains a list of (i) all real property owned by GMHC or any of its
subsidiaries (the "Material Properties") and (ii) all other assets owned by
GMHC or any of its subsidiaries having an original cost of more than $2,500
(together, the "Material Properties and Assets"). Except as set forth in the
Disclosure Schedule, GMHC or a subsidiary of
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GMHC has good and marketable title to all of its respective Material
Properties and Assets subject to no encumbrance, lien, charge, or other
restriction (including, without limitation, any restriction on transfer) of
any kind or character and there is no condition, restriction, or reservation
affecting the title to or utility of any of the Material Properties and
Assets, other than (i) such imperfections or irregularities of title,
encumbrances, claims, liens, charges or other conditions, restrictions or
reservations set forth on the Disclosure Schedule, (ii) statutory liens
securing payments (including taxes) not yet due and (iii) such other minor
imperfections or irregularities of title, encumbrances, claims, liens,
charges or other conditions, restrictions or reservations as do not
materially affect the use and value of the properties or assets subject
thereto or affected thereby or otherwise materially impair business
operations at such properties. All facilities located on the Material
Properties set forth on the Disclosure Schedule are in satisfactory condition
and are suitable for the purpose for which they are being used, subject in
each case to ordinary wear and tear and to ordinary repair, maintenance and
periodic replacement.
All of the buildings and improvements upon such Material
Properties comply with all applicable size, height, setback and other zoning
restrictions and regulations. Neither GMHC nor any subsidiary has been denied
any special exception, variance or other zoning permit or approval required
for the construction, operation and maintenance thereof by GMHC or a
subsidiary. There presently is located within such Material Properties an
adequate number of automobile parking spaces to satisfy the requirements of
all applicable zoning ordinances and regulations as modified by duly issued
zoning variances. To the best knowledge of GMHC, there is not existing, or
presently contemplated or proposed, (i) any condemnation or similar action,
or rezoning action or proceeding, with respect to any portion of such
Material Properties or (ii) any moratorium upon or similar impediment to land
development or building construction or hook-up to or usage of water or sewer
or other utility services that could affect the use or development thereof.
Such Material Properties are zoned commercial/industrial in a manner
sufficient to enable QL 3000 to continue to conduct the businesses as
presently conducted by GMHC and its subsidiaries. Sewer or septic services
and water services are available now and, to GMHC's knowledge, will be
available after Closing to enable QL 3000 to conduct the businesses presently
conducted by GMHC and its subsidiaries. Adequate access, ingress and egress
are available now and, to GMHC's knowledge, will be provided to such Material
Properties.
3.10 LEASES. The Disclosure Schedule contains a list of all
material leases for the lease of any real or personal property with terms in
excess of one year to which GMHC or any of its subsidiaries is a party (the
"Leases" and the real property covered by a Lease the "Leased Properties").
Except as described in the Disclosure Schedule, GMHC or any subsidiary enjoys
undisturbed possession to each leasehold interest it holds under the Leases.
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All of the buildings and improvements upon the Leased
Properties comply with all applicable size, height, setback and other zoning
restrictions and regulations. Neither GMHC nor any subsidiary has been denied
any special exception, variance or other zoning permit or approval required
for the construction, operation and maintenance thereof by GMHC or a
subsidiary. There presently is located upon the Leased Properties an adequate
number of automobile parking spaces to satisfy the requirements of all
applicable zoning ordinances and regulations as modified by duly issued
zoning variances. To the best knowledge of GMHC, there is not existing, or
presently contemplated or proposed, (i) any condemnation or similar action,
or rezoning action or proceeding, with respect to any portion of the Leased
Properties or (ii) any moratorium upon or similar impediment to land
development or building construction or hook-up to or usage of water or sewer
or other utility services that could affect the use or development thereof.
The Leased Properties are zoned commercial/industrial in a manner sufficient
to enable QL 3000 to continue to conduct the businesses as presently
conducted by GMHC and its subsidiaries. Sewer or septic services and water
services are available now and, to GMHC's knowledge, will be available after
Closing to enable QL 3000 to conduct the businesses presently conducted by
GMHC and its subsidiaries. Adequate access, ingress and egress are available
now and, to GMHC's knowledge, will be provided to the Leased Properties.
3.11 STATUS OF CONTRACTS AND LEASES.
(a) Each of the Contracts and Leases is valid, binding, and
enforceable by GMHC or its subsidiaries in accordance with its terms
and is in full force and effect, except as enforceability may be
limited or affected by applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or
affecting the rights of creditors and except as enforceability may be
limited by principles of equity governing specific performance,
injunctive relief or other equitable remedies. There is no existing
default or violation by GMHC or its subsidiaries under any Contract or
Lease and no event has occurred which (whether with or without notice,
lapse of time, or both) would constitute a default of GMHC or its
subsidiaries under any Contract or Lease, except for such defaults as
would not have a Material Adverse Effect.
(b) To the best knowledge of GMHC, neither GMHC nor any of its
subsidiaries is aware of any default by any other party to any Contract
or Lease or of any event which (whether with or without notice, lapse
of time, or both) would constitute a default by any other party with
respect to obligations of that party under any Contract or Lease,
except for such defaults set forth on the Disclosure Schedule.
(c) Except as set forth on the Disclosure Schedule, neither
GMHC nor its subsidiaries is a party to, or is bound by, any Contract
that:
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(i) will result in any material loss to it upon the
performance thereof, including any material liability for
penalties or damages, whether liquidated, direct, indirect,
incidental or consequential, or
(ii) is not terminable by GMHC with 90 days or fewer
notice and which termination will not cause a Material Adverse
Effect.
3.12 COMPLIANCE WITH LAWS. Except for those whose absence, either
individually or in the aggregate, would not have a Material Adverse Effect,
and, with the passage of time will not have a Material Adverse Effect, GMHC
and its subsidiaries possess all governmental and other licenses,
certificates, consents, permits, and other authorizations of Governmental
Entities (collectively, the "Licenses") legally required to carry on its
business as now conducted. No material violation exists in respect of, and no
proceeding is pending or threatened to revoke or limit, any such License.
Except as disclosed in the GMHC SEC Documents or the Disclosure Schedule, the
businesses of GMHC and its subsidiaries are not being conducted in violation
of any laws, rules, regulations, ordinances, codes, judgments, orders, writs,
or decrees applicable to its business where such violation would have a
Material Adverse Effect. Except as set forth on the Disclosure Schedule or
disclosed in the GMHC SEC Documents, there have been no violations of such
laws, rules, regulations, ordinances, codes, judgments, orders, writs, and
decrees since December 31, 1993 where such violation, either individually or
in the aggregate, would have a Material Adverse Effect.
3.13 ENVIRONMENTAL MATTERS.
3.13.1 DEFINITIONS. As used in this Agreement,
"Environmental Law" means any federal, state, or local statute, regulation,
or ordinance pertaining to the protection of human health or the environment
and any applicable orders, judgments, decrees, permits, licenses, or other
authorizations or mandates under such laws. "Hazardous Substance" means any
hazardous, toxic, radioactive, or infectious substance, material, or waste as
defined, listed, or regulated under any Environmental Law, and includes
without limitation petroleum oil and its fractions. "Contamination" means the
existence (actual or reasonably suspected) in the environment of a Hazardous
Substance, if the existence or suspected existence of such Hazardous
Substance requires any investigatory, remedial, removal, or other response
action under any Environmental Law, if such response action legally could be
required by any Governmental Entity under prevailing Environmental Laws.
3.13.2 COMPLIANCE. Except as disclosed on the Disclosure
Schedule, the businesses and the assets of GMHC and it subsidiaries are in
material compliance with all Environmental Laws and those entities have all
permits required under Environmental Laws in connection with the
construction, ownership or operation of those assets and the businesses. GMHC
is not aware of and has not received notice of any past, present or
anticipated future events, conditions, activities, investigation, studies,
plans or proposals
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that (a) would interfere with or prevent compliance by GMHC with any
Environmental Law, or (b) may give rise to any common law or other liability,
or otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving GMHC and related in any way to Hazardous Substances
or Environmental Laws.
3.13.3 HAZARDOUS SUBSTANCES. Except as disclosed on the
Disclosure Schedule, no Hazardous Substance has been disposed of, spilled,
leaked or otherwise released on, in, under or from, or otherwise come to be
located in the soil or water (including surface and ground water) on or
under, any real property owned, leased or occupied by GMHC or its
subsidiaries now or in the past. Except as disclosed on the Disclosure
Schedule, none of the assets of GMHC or its subsidiaries have incorporated
into them any asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls (in electrical equipment or otherwise), lead-based paint or any
other Hazardous Substance which is prohibited, restricted or regulated when
present in buildings, structures, fixtures or equipment. Except as disclosed
on the Disclosure Schedule, all wastes generated in connection with the
businesses of GMHC or its subsidiaries are and have been transported to and
disposed of at an authorized waste disposal facility in compliance with all
Environmental Laws. Except as disclosed on the Disclosure Schedule, GMHC is
not liable under any Environmental Law for investigation, remedial, removal
or other response costs, natural resources damages or other damages or for
any other claims (including administrative orders) arising out of the release
or threatened release of, or exposure to, any Hazardous Substance and no
basis exists for any such liability. GMHC has not entered any contract
pursuant to which it has assumed the liability of any other person or entity,
or agreed to indemnify any other person or entity for any liability, under
any Environmental Law or arising out of the release or threatened release of,
or exposure to, any Hazardous Substance.
3.13.4 STORAGE TANKS. Except as disclosed on the
Disclosure Schedule, there are no underground or other storage tanks on any
real property owned, leased or occupied by GMHC or its subsidiaries now or in
the past (whether or not regulated and whether or not out of service, closed
or decommissioned). To the extent GMHC has or has had underground or other
storage tanks, it has complied with all federal, state and local laws, and
rules applicable thereto (including financial responsibility and required
upgrades).
3.13.5 ENVIRONMENTAL RECORDS. Except as disclosed on the
Disclosure Schedule, GMHC has disclosed and made available to QL 3000 true,
complete and correct copies of any reports, studies, analysis, tests,
monitoring, correspondence with any Governmental Entity or other documents in
the possession of or initiated by GMHC or otherwise known to GMHC, pertaining
to Hazardous Substances, the existence of Contamination, compliance with
Environmental Laws, or any other environmental concern relating to the assets
or the businesses of GMHC or its subsidiaries.
3.14 TAX MATTERS.
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3.14.1 RETURNS. GMHC has filed on a timely basis all
federal, state, foreign, and other returns, reports, forms, declarations, and
information returns required to be filed by it with respect to Taxes (as
defined below) that relate to the business, results of operations, financial
condition, properties, or assets of GMHC and its subsidiaries (collectively,
the "GMHC Returns"), all GMHC Returns filed are complete and accurate, and
GMHC has paid on a timely basis all Taxes. Except as disclosed on the
Disclosure Schedule, GMHC is not part of, nor has it been part of, an
affiliated group of corporations that files or has the privilege of filing
consolidated tax returns pursuant to Section 1501 of the Internal Revenue
Code of 1986, as amended (the "Code") or any similar provisions of state,
local, or foreign law, and GMHC is not a party to, nor has been a party to,
any tax-sharing or tax-allocation agreement. Except as set forth on the
Disclosure Schedule, GMHC has not received any notice of audit and neither
GMHC nor any director, officer or employee responsible for tax matters of
GMHC has knowledge of any intention of any authority to assess additional
Taxes against GMHC or of any dispute with any authority with respect to such
Taxes. There are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for such Taxes for any period.
GMHC has provided QL 3000 with complete and accurate copies of GMHC Returns
for each of GMHC's fiscal years 1993 through 1997 and the Forms 1139 related
to any loss or credit carryback claim for those years.
3.14.2 TAXES PAID OR RESERVED. The reserves for taxes
reflected in the current balance sheet most recently filed as part of a GMHC
SEC Document are adequate for payment of Taxes in respect of periods ending
on the date thereof. All reserves for Taxes have been determined in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved and with prior periods. All Taxes that GMHC
has been required to collect or withhold have been collected or withheld and,
to the extent required, have been paid to the proper taxing authority.
3.14.3 LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT
CARRYFORWARDS. The Disclosure Schedule contains a complete and accurate list
of net operating loss ("NOL") carryforwards and investment tax credit
carryforwards available to GMHC or one or more of its subsidiaries for
federal income tax purposes that originated in taxable years 1988 through
1997.
3.14.4 DEFINITION. As used in this Agreement, the term
"Taxes" means all federal, state, local, or foreign taxes, charges, fees,
levies, or other assessments, including without limitation all net income,
gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated severance, stamp, occupation, property, or other taxes, fees,
assessments, or charges of any kind whatsoever, together with any interest
and any penalties (including penalties for failure to file in accordance with
applicable information reporting requirements), and additions to tax.
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3.14.5 MISCELLANEOUS. GMHC has not filed a consent under
IRC Section 341(f) concerning collapsible corporations. GMHC has not made any
payments, is not obligated to make any payments, nor is a party to any
agreement that in certain circumstances could obligate it to make any
payments that will not be deductible under IRC Section 280G. GMHC has not
been a United States real property holding corporation within the meaning of
IRC Section 897(c)(2) during the applicable period specified in IRC Section
897(c)(1)(A)(ii). GMHC has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
of federal income tax within the meaning of IRC Section 6662. GMHC shall
deliver to QL 3000 all necessary certificates and documents confirming that
no withholding under IRC Section 1445 is required in connection with payment
of the purchase price.
3.14.6 TAX SHARING AGREEMENTS. GMHC is not a party to any
Tax allocation or sharing agreement.
3.15 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on
the Disclosure Schedule or as provided in this Agreement:
(a) No GMHC key employee or executive has communicated to GMHC
any plans to terminate employment with GMHC.
(b) GMHC and its subsidiaries have complied in all material
respects with all labor and employment laws, including provisions
thereof relating to wages, hours, equal opportunity, discrimination,
collective bargaining, and the payment of social security and other
taxes, except where the failure to comply would not have a Material
Adverse Effect;
(c) There is no unfair labor practice charge, complaint,
representation, petition, or other action against GMHC or any of its
subsidiaries pending or to GMHC's best knowledge threatened before the
National Labor Relations Board or any other Governmental Entity and
neither GMHC nor any of its subsidiaries is subject to any order to
bargain by the National Labor Relations Board;
(d) There is no labor strike, request for representation,
slowdown, or work stoppage actually occurring, pending, or to GMHC's
best knowledge threatened against GMHC or any of its subsidiaries;
(e) To GMHC's knowledge, no questions concerning
representation have been raised or are threatened with respect to
employees of GMHC or any of its subsidiaries;
(f) No grievance that might have a Material Adverse Effect on
GMHC or any of its subsidiaries and no arbitration proceeding arising
out of or under any
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collective bargaining agreement is pending and to GMHC's best knowledge
no basis exists for any such grievance or arbitration proceeding; and
(g) To GMHC's knowledge, no employee of GMHC or any of its
subsidiaries is subject to any noncompetition, nondisclosure,
confidentiality, employment, consulting, or similar agreements with
Persons other than GMHC or its subsidiaries relating to the present
business activities of GMHC.
(h) All employees of GMHC and its subsidiaries are at-will
employees, and GMHC is not a party or otherwise subject to any
collective bargaining or other agreement governing the wages, hours or
terms of employment of its employees. GMHC has no written severance pay
plan, policy, practice or agreement with any of its employees, except
as described in the Disclosure Schedule.
(i) GMHC has not experienced any primary work stoppage or
other organized work stoppage involving its employees in the past five
years.
(j) There are no pending claims, and to GMHC's best knowledge,
no threatened claims by or on behalf of any of the employees of GMHC or
any of its subsidiaries under any federal, state or local labor or
employment laws or regulations.
3.16 EMPLOYEE BENEFITS. The Disclosure Schedule lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission,
incentive, life insurance, health and disability insurance, hospitalization,
and all other employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees, insurance companies or
others relating to any such employee benefit plans or arrangements)
established, maintained, or contributed to by GMHC that are currently in
effect or that have been terminated within the past twelve months, and
complete and accurate copies of all those plans or arrangements have been
provided to QL 3000. The employee pension and employee welfare benefit plans
(within the meaning of Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) established and maintained
by GMHC that are subject to ERISA are listed separately as ERISA Plans on the
Disclosure Schedule (the "ERISA Plans"). The ERISA Plans comply in all
material respects with the applicable requirements of ERISA and any other
applicable laws and regulations. With respect to ERISA Plans intended to
qualify under Section 401(a) of the Code, GMHC has received from the Internal
Revenue Service ("IRS") a favorable determination for each of the ERISA Plans
that each of the ERISA Plans is qualified. There has been no event subsequent
to that determination of which GMHC has received notice from IRS or has
otherwise become aware that has adversely affected the tax qualified status
of any of the ERISA Plans or the exemption of the related trusts. As to any
such ERISA Plan that has been terminated, any legally-required notices to
employees and to the Pension Benefit Guaranty Corporation (if applicable)
have been
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provided as required, all other legally-required actions have been taken to
accomplish the termination, and a favorable IRS determination letter has been
requested with respect to such termination. In response to any such request
for a determination letter on plan termination, a favorable letter has been
received from the IRS or, if the requested favorable letter has not yet been
received, there has been no event or absence of a necessary action that would
prevent the issuance of a favorable determination letter on the termination
in due course. No accumulated funding deficiency as defined in Section
302(a)(2) of ERISA or Section 412(a) of the Code exists, with respect to any
of the ERISA Plans. Neither GMHC nor a controlled group of corporations of
which GMHC is a member have any actual or potential withdrawal liability, as
defined in Section 4201 and related provisions of ERISA. To the knowledge of
GMHC, none of the ERISA Plans, their related trusts or any trustee,
investment manager or administrator thereof has engaged in a nonexempt
prohibited transaction, as such term is defined in Section 406 of ERISA and
Section 4975 of the Code. There are not and have not been any excess
deferrals or excess contributions as defined in Code Sections 401(k)(8)(B)
and 402(g)(2)(a) under any ERISA Plan that have not been corrected. Each
ERISA Plan is, and to the knowledge of GMHC has been, operated and
administered in all material respects in conformance with the requirements of
all applicable laws and regulations, whether or not the ERISA Plan documents
have been amended to reflect such requirements. Except as set forth in the
Disclosure Schedule, GMHC has no obligation of any kind (whether under the
terms of the ERISA Plans or under any understanding with employees) to make
payments under, or to pay contributions to, any plan, agreement, or other
arrangement for deferred compensation of employees, whether or not tax
qualified, including, without limitation, a single employer tax qualified
plan, a tax qualified plan of a controlled group of corporations, a
multi-employer pension plan, a nonqualified deferred compensation plan or an
individual employment or compensation agreement, or any commitment to provide
medical benefits to retirees.
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Disclosure Schedule, since September 30, 1998, there has not been:
(a) Any event, occurrence, development, or state of
circumstances or facts which could reasonably be expected to result in
(i) a Material Adverse Effect on the business, results of operations,
financial position, assets, or properties of GMHC or its subsidiaries
or (ii) any transaction, contract or commitment except in the ordinary
and usual course of business and not requiring the payment in any case
of an amount in excess of $10,000.00 annually;
(b) Any damage, destruction, or casualty loss, whether insured
against or not, to the assets or properties of GMHC or its subsidiaries
that would result in a Material Adverse Effect;
(c) Except as permitted by Section 5.1(k), any increase in the
rate or terms of compensation payable or to become payable by GMHC to
its directors,
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officers, or key employees; any increase in the rate or terms of any
bonus, insurance, pension, or other employee benefit plan, payment,
or arrangement made to, for or with any such directors, officers, or
key employees; any special bonus or remuneration paid; or any written
employment, severance or change of control contract executed
or amended;
(d) Any amendment to GMHC's Articles of Incorporation or
Bylaws or any entry into any material agreement, commitment, or
transaction (including, without limitation, any borrowing, capital
expenditure or capital financing or any amendment, modification, or
termination of any existing agreement, commitment, or transaction) by
GMHC, except agreements, commitments, or transactions in the ordinary
course of business and consistent with past practices or as expressly
contemplated in this Agreement;
(e) Any direct or indirect declaration, setting aside, or
payment of any dividend or other distribution (whether in cash, stock,
property, or any combination thereof) in respect of the common stock of
GMHC, or any direct or indirect repurchase, redemption, or other
acquisition by GMHC of any shares of its stock or any option, warrant
or other agreement relating thereto;
(f) Any issuance or sale of any stock of GMHC (other than
issuances pursuant to the exercise of options or warrants outstanding
on September 30, 1998) or any issuance or granting of any option,
warrant, or right to purchase any stock of GMHC or any commitment to do
any of the foregoing;
(g) Any conduct of business that is outside the ordinary
course of business or not substantially in the manner that GMHC or its
subsidiaries have previously conducted their business (including any
change in their accounting method, principles or practices);
(h) Any material purchase or other acquisition of property by
GMHC or its subsidiaries; any sale, lease, or other disposition of
property by GMHC or its subsidiaries; or any expenditure by GMHC or its
subsidiaries, except in the ordinary course of business;
(i) Any incurrence of any noncontract liability which, either
singularly or in the aggregate is material to the business, results of
operations, financial condition, or prospects of GMHC or its
subsidiaries; or
(j) Any encumbrance or consent to encumbrance of any material
property or assets of GMHC or its subsidiaries except in the ordinary
course of business and except for the types of encumbrances listed in
Section 3.9.
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3.18 UNDISCLOSED LIABILITIES. Except for liabilities or
obligations described in the GMHC SEC Documents or the Disclosure Schedule,
or liabilities or obligations that would not in the aggregate have a Combined
Material Adverse Effect, neither GMHC or any of its subsidiaries nor any of
the property of GMHC or any of its subsidiaries is subject to any material
liability or obligation of any kind, whether accrued, absolute, contingent,
known, unknown or otherwise, whether or not such liabilities or obligations
would have been required to be contained or disclosed in a GMHC SEC Document
or any financial statement of GMHC and its subsidiaries. Without limiting the
generality of the foregoing, GMHC and its subsidiaries have no liability (and
to GMHC's knowledge there is no basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand
against GMHC or any of its subsidiaries giving rise to any liability) arising
out of any injury to persons or property as a result of the ownership,
possession or use of any product manufactured, sold, leased or delivered or
service provided by GMHC or any of its subsidiaries.
3.19 INSURANCE. GMHC and its subsidiaries are now maintaining with
financially responsible insurance companies, the policies of insurance (the
"Policies") on their products, tangible assets and business as are listed in
the Disclosure Schedule, and all such Policies are currently in full force
and effect. There are no disputes with insurers under the Policies, and all
premiums due and payable thereto have been paid. To GMHC's knowledge, (i)
there are no pending or threatened cancellations or nonrenewals with respect
to any of the Policies, and GMHC or its subsidiaries, as the case may be, is
in compliance with all material conditions contained in the Policies, and
(ii) there are no pending or threatened claims against GMHC or any of its
subsidiaries related to product liability.
3.20 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" means collectively:
(i) all registered and unregistered trademarks,
service marks, and applications (collectively, "Marks");
(ii) all patents and patent applications
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works that are material to GMHC's businesses
(collectively, "Copyrights");
(iv) all trade secrets; and
(v) all trade names, technology, know-how, processes
and related applications used in the conduct of the businesses
of GMHC and its subsidiaries. The Disclosure Schedule contains
a list and summary description of all Marks, Patents and
Copyrights.
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(b) GMHC owns, has the right to use, sell, license, dispose
of, and to bring actions for the misappropriation of all of the
Intellectual Property Assets, material to the conduct of its business
without any conflict with or infringement of the rights of others, free
and clear of all liens, charges, encumbrances, or other restrictions of
any kind.
(c) The Disclosure Schedule contains a list of all material
agreements, licenses, permits and other instruments relating to the
Intellectual Property Assets material to the conduct of its business to
which GMHC or any of its subsidiaries is a party, together with a brief
description of the Intellectual Property Asset.
(d) To GMHC's knowledge, no Intellectual Property Asset
material to the conduct of business of GMHC and its subsidiaries is
infringed or has been challenged.
(e) There is no action, suit, proceeding, judgment, order, or
writ pending or to GMHC's knowledge, threatened against GMHC or any of
its subsidiaries contesting the validity, ownership, or right to use,
sell, license, dispose of, or to bring actions for the misappropriation
of the Intellectual Property Assets material to the conduct of their
business.
3.21 CAR COUNTS. GMHC has delivered to QL 3000 the car counts
broken down for each of GMHC's and its subsidiaries' stores (including
franchise stores) for 1997 and for each month through December 1998. Copies
of the car counts are contained on the Disclosure Schedule. The car counts,
as of their respective dates are accurate, correct and complete.
3.22 FRANCHISES. The Disclosure Schedule sets forth all franchises
GMHC and its subsidiaries have with franchisees. Except as set forth on the
Disclosure Schedule, all franchises are in good standing, neither GMHC nor
any of its subsidiaries is in default under any franchise and, to GMHC's
knowledge, no franchisees are in default under any franchise. Also included
in the Disclosure Schedule is the following information: (i) the beginning
date, ending date and franchise renewal options (either by franchisee or
franchisor) for each franchise, (ii) 1997 franchise fees collected from each
franchise, (iii) 1997 franchise fees outstanding for each franchisee, (iv)
1997 royalty fees collected from each franchisee, (v) 1997 royalty fees
outstanding for each franchisee and (vi) any reserve amount for uncollectible
franchise fees or royalty fees. GMHC shall provide to QL 3000 a file
containing correspondence from all persons with whom GMHC or any subsidiary
has discussed the prospect of becoming a franchisee within the past three
years.
3.23 YEAR 2000. Except as set forth on the Disclosure Schedule,
GMHC has analyzed and to GMHC's knowledge has identified both internally
developed and acquired software which is material to its operations or which
has been or is being provided or delivered to customers or franchisees and
utilizes data embedded codes that may
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experience operations problems when the Year 2000 is reached and, where
problems have arisen, has made, or has coordinated with customers,
franchisees, suppliers, financial institutions and others with which it has
business relationships that are material to GMHC's business, to make all
necessary modifications to the identified software to make such software Year
2000 compliant. Except as disclosed in a GMHC SEC Document or in the
Disclosure Schedule, to GMHC's knowledge GMHC and its subsidiaries have not
incurred, and do not expect to incur, significant operating expenses or been
required, or expect to be required, to invest heavily in computer systems
improvements to be Year 2000 compliant, and business operations have not been
disrupted and, to GMHC's knowledge, its customers and franchisees have not
experienced any material interruption of service as a result of making such
software Year 2000 compliant. The Disclosure Schedule identifies all
outstanding Year 2000 compliance problems known to GMHC relating to its
software (including, without limitation, software provided or delivered to
customers or franchisees), with a correct and materially complete statement
of the status of GMHC's efforts to correct such problems. "Year 2000
compliant" means, with respect to GMHC's information technology, the
information technology is designed to be used prior to, during and after the
calendar Year 2000 A.D., and the information technology used during each such
time period will accurately receive, provide and process date/time data
(including, without limitation, calculating, comparing and sequencing) from,
into and between the 20th and 21st centuries, including the years 1999 and
2000, and leap-year calculations and will not materially malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data, to the extent that other information technology, used in combination
with the information technology being acquired, properly exchanges date/time
data with it. "Information technology" means computer software, computer
firmware, computer hardware (whether general or specific purpose), and other
similar or related items of automated, computerized or software system(s)
that are used or relied on by GMHC and its subsidiaries and franchisees in
the conduct of their business.
3.24 GUARANTIES; POWERS OF ATTORNEY. Except as set forth in the
Disclosure Schedule, neither GMHC nor any of its subsidiaries is a guarantor
or otherwise liable for any liability or material obligation (including
without limitation any indebtedness) of any other Person. To GMHC's
knowledge, there are no outstanding powers of attorney executed on behalf of
GMHC.
3.25 BROKERS. No broker, investment banker, financial advisor, or
other Person, other than Green Manning & Bunch, LTD., the fees and expenses
of which will be paid by GMHC, is entitled to any broker's, finder's,
financial advisor's, or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of GMHC. GMHC has provided QL 3000 true and correct copies of
all agreements between GMHC and Green Manning & Bunch, LTD.
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3.26 DISCLOSURE. None of the representations and warranties made
by GMHC in this Agreement contains any untrue statement of a material fact or
omits a material fact necessary to make each statement contained therein not
misleading. To GMHC's best knowledge, neither GMHC nor any responsible
officer or director of GMHC has intentionally concealed any fact known by
such Person to have a Material Adverse Effect.
3.27 TRUE AT CLOSING. The representations, warranties, covenants
and agreements of GMHC set forth in this Article 3, and made to third parties
in connection with the transactions contemplated in this Agreement, are and
will be true both on the date of this Agreement and on and as of the Closing,
except for representations, warranties, covenants and agreements made as of a
specific date, which shall be true as of such specific date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF QL 3000
QL 3000 represents and warrants to GMHC as follows:
4.1 CORPORATE EXISTENCE AND AUTHORITY. QL 3000 is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida. QL 3000 has the full corporate power and authority to enter
into this Agreement and carry out its terms. QL 3000 has taken all corporate
action necessary to authorize the execution, delivery, and performance of
this Agreement. This Agreement has been duly and validly executed and
delivered by QL 3000 and is binding upon and enforceable against QL 3000 in
accordance with its terms.
4.2 NO ADVERSE CONSEQUENCES. Neither the execution and delivery
of this Agreement by QL 3000 nor the consummation of the transactions
contemplated hereby will:
(a) violate or conflict with any provision of the charter or
bylaws of QL 3000;
(b) violate any law, judgment, order, injunction, decree,
rule, regulation, or ruling of any Governmental Entity applicable to QL
3000, except as such would not individually or in the aggregate prevent
QL 3000 from performing its obligations under this Agreement and
consummating the transactions contemplated hereby; or
(c) require any notices to or consent of any third party,
including without limitation any Governmental Entity, except where the
failure to obtain such consents, approvals or authorizations would not
prevent or delay
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consummation of the Offer or the Merger or otherwise prevent QL 3000
from performing its obligations under this Agreement.
4.3 LEGAL PROCEEDINGS. There is neither pending nor, to the best
knowledge of QL 3000, threatened by or against QL 3000 any legal action,
claim, arbitration, investigation, or administrative proceeding before any
Governmental Entity that could enjoin or restrict the right or ability of QL
3000 to perform its obligations under this Agreement and, to the best
knowledge of QL 3000, there is no basis for any such claim, litigation,
proceeding, or investigation.
4.4 PROXY STATEMENT. The information supplied by QL 3000 for
inclusion in the Proxy Statement to be sent to the stockholders of GMHC in
connection with the Stockholders' Meeting will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of GMHC or, at the time of the Stockholders' Meeting, contain
any statement which, at such time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact,
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not false or misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meeting which shall have become
false or misleading; PROVIDED, HOWEVER, that QL 3000 makes no representation
or warranty with respect to information supplied by GMHC for inclusion in any
of the foregoing documents.
ARTICLE 5
COVENANTS
5.1 CONTINUATION OF BUSINESS. From and after the execution date
of this Agreement until Closing, GMHC covenants and agrees to use its best
efforts to and shall cause its subsidiaries to: (i) keep the business and
organization of GMHC and its subsidiaries intact until the Closing; and (ii)
carry on the business of GMHC and its subsidiaries in its usual and ordinary
course of business and in a manner consistent with past practice until
Closing. Without limiting the generality of the foregoing, except as
expressly provided to the contrary in this Agreement or with the prior
written consent of QL 3000, until the Closing, GMHC covenants and agrees that:
(a) GMHC and its subsidiaries will not declare, pay, or set
aside for payment any dividend or other distribution of money or
property in respect of its capital stock;
(b) GMHC and its subsidiaries will not issue any shares of its
capital stock (except upon the valid exercise of currently outstanding
options under the Stock Option Plans, or currently outstanding
warrants), or issue or sell any
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securities convertible into, or exchangeable for, options or warrants
to purchase, or rights to subscribe to, any shares of its capital
stock or subdivide or in any way reclassify any shares of its capital
stock, or repurchase, reacquire, cancel, or redeem any such shares;
(c) GMHC and its subsidiaries will use their best efforts to
ensure that (i) the assets, property and rights now owned by GMHC and
its subsidiaries will be used, preserved, and maintained, as far as
practicable, in the ordinary course of business, to the same extent and
in the same condition as said assets, property, and rights are on the
date of this Agreement, and no unusual or novel methods of manufacture,
purchase, sale, management, or operation of said properties or business
or accumulation, disposition, or valuation of inventory will be made or
instituted; (ii) GMHC will not encumber any of its material assets or
make any material commitments relating to such assets, property, or
business, except in the ordinary course of its business. GMHC will use
its commercially reasonable best efforts to ensure that GMHC and its
subsidiaries will pay all debts when due in the usual course of
business;
(d) GMHC will use its best efforts to ensure that it and its
subsidiaries will comply in all material respects with all statutes,
laws, ordinances, rules, and regulations applicable to it in the
ordinary course of business;
(e) GMHC will use its best efforts to ensure that it and its
subsidiaries will keep or cause to be kept the Policies (or substantial
equivalents) in such amounts duly in force until the Closing Date and
will give QL 3000 notice of any material change in the Policies;
(f) GMHC or its subsidiaries will not incur additional debt
(including without limitation obligations under leases for real or
personal property whether or not required to be capitalized under
generally accepted accounting principles), incur or increase any
obligation or liability (fixed, contingent, or other, including without
limitation liabilities as a guarantor or otherwise with respect to
obligations of others) except in the ordinary and usual course of its
business and consistent with past practices, forgive or release any
material debt or claim, give any waiver of any right of material value,
or voluntarily suffer any extraordinary loss;
(g) GMHC or its subsidiaries will not make any payment to
discharge or satisfy any lien or encumbrance or pay any obligation or
liability (fixed or contingent) other than (i) current liabilities
(including the current portion of any long-term liabilities) included
in the financial statements contained in the GMHC SEC Documents and
(ii) current liabilities incurred or maturing in the ordinary course of
business since the date of the current balance sheet most recently
filed as part of a GMHC SEC Document or (iii) payments under its
revolving credit facility with Citibank N.A. made in the ordinary
course of business and consistent
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with past practices; provided, however, that notwithstanding anything
in this Agreement to the contrary, GMHC may pay any legal, accounting
or investment banking fees relating to this Agreement and the
transactions contemplated hereby;
(h) GMHC or its subsidiaries will not acquire any assets other
than assets acquired in the ordinary and usual course of its business
and consistent with past practices;
(i) GMHC or its subsidiaries will not purchase or otherwise
acquire, or agree to purchase or otherwise acquire, any debt or equity
securities of any Person other than equity securities issued by a money
market fund registered as an investment company under the Investment
Company Act of 1940;
(j) GMHC or its subsidiaries will not enter into any
transaction or contract or make any commitment to do the same, except
in the ordinary and usual course of business and not requiring the
payment in any case of an amount in excess of $10,000 annually and will
promptly advise QL 3000 in writing of any written proposal or formal
negotiations or discussions relating to any such transaction, contract
or commitment;
(k) GMHC or its subsidiaries will not increase the wages,
salaries, compensation, pension, or other benefits payable, or to
become payable by them, to any of their officers, employees, or agents,
including without limitation any bonus payments or severance or
termination pay, other than increases in wages and salaries required by
employment arrangements existing on the execution date of this
Agreement or otherwise in the ordinary and usual course of its
business;
(l) GMHC or its subsidiaries will not implement or agree to
any implementation of, or amendment or supplement to, any employee
profit sharing, stock option, stock purchase, pension, bonus,
commission, incentive, retirement, medical reimbursement, life
insurance, deferred compensation, severance pay, or any other employee
benefit plan or arrangement;
(m) GMHC or its subsidiaries will not change its accounting
methods, policies or practices and will maintain its books and records
in accordance with Generally Accepted Accounting Principles;
(n) When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any
Contract to which GMHC or its subsidiaries is a party or by which
either is bound, GMHC will use its best efforts to obtain such consent
on terms and conditions not materially less favorable than those in
effect on the execution date of this Agreement;
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(o) GMHC and its subsidiaries will pay and discharge all
taxes, assessments, governmental charges, and levies imposed upon it,
its income or profits, or upon any property belonging to it, in all
cases before the date on which penalties attach thereto; and
(p) GMHC and its subsidiaries will not amend their respective
Articles of Incorporation or Bylaws.
5.2 NO SOLICITATION. Until such time, if any, as this Agreement is
terminated pursuant to Article 7, neither GMHC nor any of its subsidiaries
will, directly or indirectly, through an officer, director, agent or
otherwise, (i) solicit or initiate, directly or indirectly, or encourage
submission of inquiries, proposals, or offers from any potential purchaser
(other than QL 3000) relating to the disposition of all or any assets of GMHC
or any of its subsidiaries (other than sales of inventory in the ordinary
course of business and collection of accounts and notes receivable), or the
sale of any securities of GMHC or any of its subsidiaries or any merger,
consolidation, business combination, or similar transaction involving GMHC or
any of its subsidiaries (or any other transaction, such as option or
management agreements, that could have a similar economic result) or (ii)
participate in any discussion or negotiations regarding, or furnish any
person any information with respect to, the disposition of the assets or any
securities of GMHC or any of its subsidiaries or any part thereof or any
merger, consolidation, business combination, or similar transaction involving
GMHC or any of its subsidiaries (or any other transaction, such as option or
management agreements, that could result in a similar economic result);
provided, however, that in connection with any proposal relating to any of
the foregoing, GMHC may, to the extent required by fiduciary obligations as
advised by counsel, participate in any discussions or negotiations regarding,
and may furnish to any other person information with respect to, any of the
foregoing. GMHC shall immediately advise QL 3000 of, and communicate the
terms of, any such inquiry or proposal GMHC may receive.
5.3 ACCESS. For the period up to and including the Closing Date,
GMHC will provide, and cause each GMHC subsidiary to provide, to QL 3000 and
its authorized agents reasonable access to all of their physical assets,
facilities, financial information, production records, contracts and other
corporate records and documents as QL 3000 deems reasonably necessary,
provided that such activities do not unreasonably interfere with or hinder
the business or operation of GMHC. QL 3000 will have reasonable access during
normal working hours to all GMHC and GMHC subsidiary premises, properties,
and facilities and will be allowed to meet with their management personnel,
employees, and any outside consultants, including without limitation auditors
and accountants, investment and other bankers, tax and financial advisors,
and environmental consultants. In addition, GMHC will exercise its best
efforts to make available to QL 3000 any items, agreements and materials as
may be reasonably requested by QL 3000 or its lender in connection with QL
3000's financing of the Merger and refinancing of GMHC's debt, including but
not limited to copies of all leases, estoppel letters and consents of
landlords,
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franchisees and other parties, subordination and attornment agreements,
supply agreements, non-disturbance agreements and franchise agreements.
5.4 OTHER GOVERNMENT CONSENTS. Promptly following the execution of
this Agreement, the parties will proceed to prepare and file with the
appropriate Governmental Entities any requests for approval or waiver, if
any, that are required from Governmental Entities in connection with the
transactions contemplated by this Agreement, and the parties will diligently
and expeditiously prosecute and cooperate fully in the prosecution of such
requests for approval or waiver and all proceedings necessary to secure such
approvals and waivers.
5.5 BEST EFFORTS; NO INCONSISTENT ACTION. Subject to the terms and
conditions hereof, and to the fiduciary duties of the GMHC Board under
applicable law as advised by counsel, each party will use its best efforts to
effect the transactions contemplated by this Agreement and to fulfill the
conditions to the obligations of the opposing parties set forth in Article 6
of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the
consummation of the transactions contemplated by this Agreement without legal
authority or basis, except that nothing in this Section 5.5 will limit the
rights of the parties under Article 6 of this Agreement.
5.6 CHANGED CIRCUMSTANCES. Each of GMHC and QL 3000 will notify the
other party promptly of any fact or occurrence between the date of this
Agreement and the Closing Date of which it becomes aware which makes any of
its representations contained in this Agreement untrue or causes any breach
of its obligations under this Agreement.
5.7 FEES AND EXPENSES. All fees and expenses incurred in connection
with the Merger, this Agreement, and the transactions contemplated by this
Agreement will be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
5.8 PRESS RELEASES. No press releases or other public announcements
or disclosure of information to any third party concerning the transactions
contemplated by this Agreement may be made by either party without the prior
written consent of the other party, which consent will not be unreasonably
withheld; PROVIDED, HOWEVER, that nothing in this provision will prevent a
party from making such releases or announcements as are necessary for a party
to satisfy its legal obligations or the requirements of applicable law, but
in any such case the affected party will promptly notify the other party.
5.9 INDEMNIFICATION.
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(a) From and after the Effective Time, QL 3000 shall, and
shall cause the Surviving Corporation to indemnify, defend and hold harmless
the present and former officers, directors, employees and agents of GMHC and
its subsidiaries (the "Indemnified Parties") against all losses, claims,
damages, expense or liabilities arising out of or related to actions or
omissions or alleged actions or omissions occurring at or prior to the
Effective Time (i) to the full extent permitted by Utah law or, if the
protection afforded thereby to an Indemnified Party are greater, and (ii) to
the same extent and on the same terms and conditions (including with respect
to the advancement of expenses) provided for in GMHC's Articles of
Incorporation and By-Laws and agreements in effect at the date hereof (to the
extent consistent with applicable law), which provisions shall survive the
Merger and continue in full force and effect after the Effective Time.
Without limiting the foregoing, (i) QL 3000 shall, and shall cause the
Surviving Corporation to, periodically advance expenses (including attorney's
fees) as incurred by an Indemnified Party with respect to the foregoing to
the full extent permitted under applicable law, and (ii) any determination
required to be made with respect to whether an Indemnified Party shall be
entitled to indemnification shall, if requested by such Indemnified Party, be
made by independent legal counsel selected by the Surviving Corporation and
reasonably satisfactory to such Indemnified Party.
(b) This Section 5.9 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit GMHC, the Indemnified
Parties and the Surviving Corporation, shall be binding on all successors and
assigns of QL 3000 and the Surviving Corporation and shall be enforceable by
the Indemnified Parties.
5.10 FINANCING. QL 3000 shall use its best efforts to cause CSFC
Retail Energy Finance or another lender to issue a bona fide commitment
letter in an amount not less than $11,000,000 within 60 days from the date of
execution of this Agreement. On or prior to the Closing Date, QL 3000 shall
use its best efforts to cause CSFC Retail Energy Finance or another lender
and Exxon Company or another supplier or equity or debt investor to advance
an amount not less than $11,000,000 and $1,500,000, respectively, for the
purpose of completing the Merger. On or prior to the Closing Date, QL 3000 or
an affiliated company shall use its best efforts to sell and issue not less
than $4,000,000 of equity securities of such company, for the purpose of
completing the Merger.
ARTICLE 6
CONDITIONS TO THE PARTIES' OBLIGATIONS
The obligations of each party to consummate the Merger are subject
to the conditions set forth in Sections 6.1 - 6.6, any of which may be waived
by QL 3000 and GMHC. The obligations of QL 3000 are subject to Sections 6.7,
6.8 and 6.9.
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6.1 GOVERNMENTAL AUTHORIZATIONS. Each of the parties will have
obtained all authorizations, consents, and approvals of all governmental
agencies and authorities required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement, in a form
satisfactory to each of QL 3000 and GMHC in its reasonable discretion.
6.2 GMHC STOCKHOLDER APPROVAL. If necessary to approve the Merger
under applicable law, this Agreement and the Merger shall have been duly
adopted and approved, at a duly called and held Stockholders' Meeting (or by
action in writing, if appropriate), acting in accordance with applicable law
and the Articles of Incorporation and Bylaws of GMHC, by the requisite vote
of the holders of the Shares, the Preferred Shares and any other capital
shares of GMHC ("Stockholder Approval").
6.3 NO PROHIBITIONS. There has not been promulgated or issued a
law, statute, rule, regulation, decree, order, injunction or ruling by any
Governmental Entity that remains in effect and prohibits, restrains, enjoins
or restricts the consummation of the Merger.
6.4 NO PROCEEDINGS. No action, suit or other proceeding is pending
against any party to this Agreement to prohibit, restrain, enjoin, restrict
or otherwise prevent the consummation of the transactions contemplated by
this Agreement.
6.5 REPRESENTATIONS AND WARRANTIES. With respect to the obligations
of each party's representations and warranties to the other party, the
representations and warranties shall be true and correct as of the date of
this Agreement and as of the Effective Date.
6.6 FAIRNESS OPINIONS. A fairness opinion relating to the Merger
shall have been issued by Green Manning & Bunch and shall not have been
withdrawn or materially modified.
6.7 OTHER CONSENTS. GMHC shall have obtained and provided to QL
3000 and/or its lender all authorizations, agreements, consents and approvals
of third parties, required to be obtained to permit the consummation of the
transactions contemplated by this Agreement, under any contract, lease,
instrument or other document to which GMHC or any of its subsidiaries is a
party or by which GMHC or any of its subsidiaries is bound or in connection
with QL 3000's financing of the Merger or refinancing of GMHC's debt except
such authorizations, agreements, consents and approvals, the failure of which
to obtain would not have a Material Adverse Effect.
6.8 DISSENTING STOCKHOLDERS. As of the Effective Date, the total
number of Dissenting Shares shall be less than 20% of the total outstanding
Shares.
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6.9 COMPLETION OF FINANCINGS. QL 3000 shall have completed debt
financings with CSFC Retail Energy Finance or another lender in an amount not
less than $11,000,000 and Exxon Company or another supplier or equity or debt
investor in an amount not less than $1,500,000 and equity financing of not
less than $4,000,000.
ARTICLE 7
TERMINATION
7.1 TERMINATION BY QL 3000 AND/OR GMHC. This Agreement may be
terminated without further liability at any time before the Closing Date:
7.1.1 MUTUAL CONSENT. By mutual consent of QL 3000 and GMHC; or
7.1.2 INJUNCTION OR RESTRAINT. By either QL 3000 or GMHC, if
any Governmental Entity has promulgated or issued a law, statute, rule,
regulation, decree, order, injunction, or ruling or taken any other action
prohibiting, restraining, enjoining, restricting or otherwise prohibiting the
Offer or the Merger, that has become final and nonappealable.
7.2 TERMINATION BY QL 3000. QL 3000, if not then in default, may
terminate this Agreement at any time before the Closing Date upon written
notice to GMHC of the occurrence of a breach by GMHC of one or more of its
representations or warranties or a default in the observance or performance
of one or more of its covenants or agreements under this Agreement, which
breach or default is not cured within ten (10) days after GMHC has notice
thereof, except for breaches and defaults which, individually or in the
aggregate, would not have a Combined Material Adverse Effect or materially
impair the ability of the parties to consummate the transactions contemplated
by the Agreement.
7.3 TERMINATION BY GMHC.
7.3.1 GMHC, if not then in default, may terminate this
Agreement at any time before the Closing Date upon written notice to QL 3000
of the occurrence of a breach by QL 3000 of one or more of its
representations or warranties or a default in the observance or performance
of one or more of its covenants or agreements under this Agreement, which
default is not cured within ten (10) days after QL 3000 has notice thereof,
except for defaults which, individually or in the aggregate, would not
materially impair the ability of the parties to consummate the transactions
contemplated by this Agreement.
7.3.2 GMHC may terminate this Agreement at any time before the
Closing Date upon written notice to QL 3000 if (i) the Effective Time has not
occurred
32
<PAGE>
within 120 days after the execution of this Agreement; or (ii) QL 3000 has
not received and provided GMHC with a copy of a bona fide commitment letter
from CSFC Retain Energy Finance or another lender with respect to the
financing of the Merger Consideration within 60 days after the execution of
this Agreement; or (iii) CSFC Retail Energy Finance or such other lender
withdraws its commitment letter after such commitment letter has been issued
and no other commitment letter has been issued.
7.3.3 GMHC may terminate this Agreement at any time before the
Closing Date upon written notice to QL 3000 if prior to the Closing Date, any
person has made a bona fide proposal relating to an acquisition transaction
relating to GMHC or the Shares, or has commenced a tender or exchange offer
for the Shares and the Board of Directors of GMHC determines in good faith
(i) after consultation with its financial advisors, that such transaction
constitutes a better offer than terms of Merger contemplated hereby and (ii)
after consultation with legal counsel, that failure to approve such proposal
and terminate this Agreement could reasonably be expected to result in a
breach of fiduciary duties of the Board of Directors of GMHC; PROVIDED,
HOWEVER, that notwithstanding anything in this Agreement to the contrary, the
termination of this Agreement by GMHC pursuant to this Section 7.3.3 shall
not be deemed to violate any other obligations of GMHC under this Agreement.
7.4 PROCEDURE; EFFECT OF TERMINATION. If either QL 3000 or GMHC
elects to terminate this Agreement pursuant to this Article 7, the
terminating party will promptly give written notice thereof to the other
party. In the event of termination pursuant to this Article 7, the parties
will be released from all liabilities and obligations under this Agreement,
other than the obligations under Section 5.8 and except that nothing herein
shall relieve any party from liability for damages to the extent arising from
a breach of this Agreement before termination.
ARTICLE 8
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, and covenants in this Agreement will not survive
the Effective Time, and shall terminate at the Effective Time or upon
termination of this Agreement pursuant to Section 7.1. This Section 8.1 will
not limit any covenant or agreement of the parties that by its terms provides
for performance after the Effective Time or such termination.
8.2 FURTHER ACTION. GMHC and QL 3000 will execute any documents and
take any additional action reasonably required to fully implement this
Agreement.
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<PAGE>
8.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding among GMHC and QL 3000 regarding the subject matter hereof
and thereof and supersedes and replaces all prior or contemporaneous
negotiations, representations, or agreements, written or oral.
8.4 ASSIGNMENT. This Agreement may not be assigned by either party
by operation of law or otherwise without the prior written consent of the
other party, except that QL 3000 may assign all or any of its rights and
obligations to any wholly owned subsidiary or other affiliate of QL 3000;
PROVIDED, HOWEVER, that no such assignment shall relieve the assigning party
of its obligations hereunder if the assignee does not perform the
obligations. An Affiliate of a person shall include any other person
controlling, controlled by or under other common control with such person.
8.5 BINDING EFFECT; NO THIRD PARTY BENEFIT. This Agreement will
inure to the benefit of and be binding upon each of the parties and their
respective successors and assigns, subject to the restrictions on assignment
contained in Section 8.4. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give to any Person other than
the parties to this Agreement any rights or remedies under or by reason of
this Agreement or any transaction contemplated by it.
8.6 WAIVER. Failure of any party at any time to require
performance of any provision of this Agreement will not limit such party's
right to enforce such provision, nor will any waiver of any breach of any
provision of this Agreement constitute a waiver of any succeeding breach of
such provision or a waiver of such provision itself. Any waiver of any
provision of this Agreement will be effective only if set forth in writing
and signed by the party to be bound.
8.7 GOVERNING LAW. This Agreement will be governed and construed
in accordance with the laws of the State of Florida.
8.8 SEVERABILITY. If any term or provision of this Agreement or
the application thereof to any Person or circumstance is to any extent held
to be invalid or unenforceable, the remainder of this Agreement and the
application of such term or provision to Persons or circumstances other than
those as to which it is held invalid or unenforceable will not be affected
thereby, and each term or provision of this Agreement will be valid and
enforceable to the fullest extent permitted by law.
8.9 TIME OF ESSENCE. GMHC and QL 3000 hereby acknowledge and agree
that time is strictly of the essence with respect to each and every term,
condition, obligation, and provision of this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which taken together
will constitute one and the same instrument, binding on the parties. If this
Agreement is executed in
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<PAGE>
counterparts, each party will transmit by facsimile a copy of the signed
counterpart upon execution and will cause an executed original counterpart to
be transmitted by courier service to the other parties.
8.11 AMENDMENTS. This Agreement may not be modified or amended
except by the written agreement of GMHC and QL 3000. This Agreement may not
be terminated other than pursuant to Article 7 except by the written
agreement of GMHC and QL 3000. A party may waive one or more of its rights
under this Agreement only in a written instrument signed by the party.
8.12 AUTHORITY. The person executing this Agreement on behalf of
each party warrants that she/he has the authority to execute this Agreement
and to so bind that party as provided in this Agreement.
8.13 NOTICES. All notices or other communications required or
permitted under this Agreement must be in writing and must be personally
delivered, sent by registered or certified mail, postage prepaid, return
receipt requested, or sent by facsimile. Any notice, if mailed, will be
deemed given when received; any notice, if transmitted by facsimile, will be
deemed given when transmitted and electronically confirmed. Notices will be
given to the following Persons:
To QL 3000: QL 3000, Inc.
9551 Baymeadows Road
Jacksonville, Florida 32256
Attention: David Plyler
Telephone: (904) 730-2660
Facsimile No.: (904) 733-6619
With a copy to: Smith Hulsey & Busey
1800 First Union Bank Tower
225 Water Street
Jacksonville, Florida 32202
Attention: John R. Smith, Jr., Esq.
Telephone: (904) 359-7700
Facsimile No.: (904) 359-7712
To GMHC: Grease Monkey Holding Corporation
633 17th Street, Suite 400
Denver, Colorado 80202
Attention: James Wallace
Telephone: (303) 295-0565
Facsimile No.: (303) 295-0565
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With a copy to: Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17th Street, 16th Floor
Denver, Colorado 80202
Attention: Douglas R. Wright, Esq.
Telephone: (303) 575-7571
Facsimile No.: (303) 825-6525
ARTICLE 9
DEFINITIONS
The following terms are defined in this Agreement in the sections
identified below:
<TABLE>
<CAPTION>
TERM Definition Section
<S> <C>
Affiliate 8.4
Agreement Preamble
Certificate of Merger 1.4
Certificates 2.2.2
Closing and Closing Date 1.8
Code 3.14.1
Combined Material Adverse Effect Introduction to Article 3
Contamination 3.13.1
Contracts 3.8
Copyrights 3.20
Disclosure Schedule Introduction to Article 3
Dissenting Stockholders 2.1.5
Dissenting Shares 2.1.5
Effective Date 1.4
Effective Time 1.4
Environmental Law 3.13.1
ERISA 3.16
ERISA Plans 3.16
GMHC Preamble
GMHC Board Recitals
GMHC Returns 3.14.1
GMHC SEC Document 3.5
Governmental Entity 3.2
Hazardous Substance 3.13.1
Information Technology 3.23
Intellectual Property Assets 3.20
IRS 3.16
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
TERM Definition Section
<S> <C>
Leased Properties 3.10
Leases 3.10
Licenses 3.12
Marks 3.20
Material Adverse Change Introduction to Article 3
Material Adverse Effect Introduction to Article 3
Material Properties 3.9
Material Properties and Assets 3.9
Merger Recitals
Merger Consideration 2.1.1
NOL 3.14.3
Patents 3.20
Paying Agent 2.2.1
Person 2.2.4
Policies 3.19
Preferred Shares 3.3
Proxy Statement 1.2.2
QL 3000 Preamble
Securities Act 3.5
Share, Shares 3.3
Stock Option Plans 2.3
Stockholder Approval 6.2
Stockholders' Meeting 1.2.2
Surviving Corporation 1.5
Taxes 3.14.4
URBCA Recitals
Year 2000 Compliant 3.23
</TABLE>
IN WITNESS WHEREOF, the parties have executed this Agreement,
effective the day and year first written above.
QL 3000, INC. GREASE MONKEY HOLDING
CORPORATION
By /S/ DAVID PLYLER By /S/ JAMES B. WALLACE
-------------------------- ----------------------------
Name: DAVID PLYLER Name: JAMES B. WALLACE
--------------------- ------------------------
Title: PRESIDENT AND Title: CHAIRMAN OF THE BOARD
CHIEF OPERATING OFFICER -----------------------
--------------------
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
AMONG
GREASE MONKEY HOLDING CORPORATION
AND
QL 3000, INC.
MARCH __, 1999
TABLE OF CONTENTS
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 ACTIONS BY GMHC; STOCKHOLDERS MEETING;
PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.4 EFFECT OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 ARTICLES OF INCORPORATION AND BYLAWS . . . . . . . . . . . . . . .3
1.6 DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . .3
1.7 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.1 EFFECT OF MERGER ON GMHC.. . . . . . . . . . . . . . . . . . . . .4
2.1.1 Merger Consideration. . . . . . . . . . . . . . . . . . . .4
2.1.2 Withholding Tax . . . . . . . . . . . . . . . . . . . . . .4
2.1.3 Shares of Dissenting Stockholders . . . . . . . . . . . . .4
2.1.4 Liquidation and Dissolution of GMHC . . . . . . . . . . . .5
2.2 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . .5
2.2.1 Paying Agent. . . . . . . . . . . . . . . . . . . . . . . .5
2.2.2 Exchange Procedure. . . . . . . . . . . . . . . . . . . . .6
2.2.3 No Further Ownership Rights in GMHC Common Stock. . . . . .6
2.2.4 No Liability. . . . . . . . . . . . . . . . . . . . . . . .6
2.2.5 Lost, Stolen, or Destroyed Certificates . . . . . . . . . .7
2.3 GMHC STOCK OPTIONS AND WARRANTS. . . . . . . . . . . . . . . . . .7
2.4 RELEASE OF GMHC STOCKHOLDER OBLIGATIONS. . . . . . . . . . . . . .7
ARTICLE 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
REPRESENTATIONS AND WARRANTIES OF GMHC. . . . . . . . . . . . . . . . . . . . .8
3.1 CORPORATE EXISTENCE AND AUTHORITY. . . . . . . . . . . . . . . . .8
3.2 NO ADVERSE CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . .9
3.3 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 SUBSIDIARIES AND JOINT VENTURES. . . . . . . . . . . . . . . . . 10
3.5 SEC REPORTS AND FINANCIAL STATEMENTS . . . . . . . . . . . . . . 10
3.6 INFORMATION SUPPLIED . . . . . . . . . . . . . . . . . . . . . . 11
3.7 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 CONTRACTS AND ARRANGEMENTS . . . . . . . . . . . . . . . . . . . 11
3.9 REAL PROPERTY; MATERIAL ASSETS . . . . . . . . . . . . . . . . . 12
3.10 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.11 STATUS OF CONTRACTS AND LEASES . . . . . . . . . . . . . . . . . 13
3.12 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . 14
3.13 ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . 15
3.13.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 15
3.13.2 Compliance . . . . . . . . . . . . . . . . . . . . . . . 15
3.13.3 Hazardous Substances . . . . . . . . . . . . . . . . . . 15
3.13.4 Storage Tanks. . . . . . . . . . . . . . . . . . . . . . 16
3.13.5 Environmental Records. . . . . . . . . . . . . . . . . . 16
3.14 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14.1 Returns. . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14.2 Taxes Paid or Reserved . . . . . . . . . . . . . . . . . 17
3.14.3 Loss Carryforwards; Investment Tax Credit
Carryforwards. . . . . . . . . . . . . . . . . . . . . . 17
3.14.4 Definition . . . . . . . . . . . . . . . . . . . . . . . 17
3.14.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 17
3.14.6 Tax Sharing Agreements . . . . . . . . . . . . . . . . . 17
3.15 EMPLOYEES AND LABOR RELATIONS MATTERS. . . . . . . . . . . . . . 17
3.16 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . 20
3.18 UNDISCLOSED LIABILITIES. . . . . . . . . . . . . . . . . . . . . 21
3.19 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.20 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . 22
3.21 CAR COUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 FRANCHISES . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.24 GUARANTIES; POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . 24
3.25 BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.26 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.27 TRUE AT CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
REPRESENTATIONS AND WARRANTIES OF QL 3000 . . . . . . . . . . . . . . . . . . 25
4.1 CORPORATE EXISTENCE AND AUTHORITY. . . . . . . . . . . . . . . . 25
4.2 NO ADVERSE CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . 25
4.3 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 CONTINUATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . 26
5.2 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 OTHER GOVERNMENT CONSENTS. . . . . . . . . . . . . . . . . . . . 29
5.5 BEST EFFORTS; NO INCONSISTENT ACTION . . . . . . . . . . . . . . 30
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.6 CHANGED CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . 30
5.7 FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 PRESS RELEASES . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.9 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10 FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CONDITIONS TO THE PARTIES' OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 31
6.1 GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . . . . . . . . . 31
6.2 GMHC STOCKHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . 31
6.3 NO PROHIBITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 32
6.4 NO PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 32
6.6 FAIRNESS OPINIONS. . . . . . . . . . . . . . . . . . . . . . . . 32
6.7 OTHER CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.8 DISSENTING STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . 32
6.9 COMPLETION OF FINANCINGS . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 TERMINATION BY QL 3000 AND/OR GMHC . . . . . . . . . . . . . . . 33
7.1.1 Mutual Consent. . . . . . . . . . . . . . . . . . . . . . 33
7.1.2 Injunction or Restraint . . . . . . . . . . . . . . . . . 33
7.2 TERMINATION BY QL 3000 . . . . . . . . . . . . . . . . . . . . . 33
7.3 TERMINATION BY GMHC. . . . . . . . . . . . . . . . . . . . . . . 33
7.4 PROCEDURE; EFFECT OF TERMINATION . . . . . . . . . . . . . . . . 34
ARTICLE 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . 34
8.2 FURTHER ACTION . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.5 BINDING EFFECT; NO THIRD PARTY BENEFIT . . . . . . . . . . . . . 35
8.6 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.7 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.9 TIME OF ESSENCE. . . . . . . . . . . . . . . . . . . . . . . . . 35
8.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.11 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.12 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.13 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of March ___, 1999 (the
"Agreement") is among QL 3000, INC., a Florida corporation ("QL 3000"), and
GREASE MONKEY HOLDING CORPORATION, a Utah corporation ("GMHC").
RECITALS
A. The Boards of Directors of GMHC (the "GMHC Board") and QL 3000
have determined that it is advisable and in the best interests of their
respective corporations and stockholders that Grease Monkey International,
Inc. ("GMI") and GM Properties, Inc. ("GMP"), wholly owned subsidiaries of
GMHC merge with and into QL 3000 or a wholly owned subsidiary or other
affiliate of QL 3000 ("Newco") pursuant to the terms and conditions of this
Agreement (such merger, as described in more detail in Article 2 below, the
"Merger"). The transactions described in this Agreement are subject to the
approvals of the shareholders of GMHC and the satisfaction of certain other
conditions described in this Agreement.
B. Jerry D. Armstrong, James B. Wallace, Ray O. Brownlie, J. H.
Bander, Charles H. Steinbrueck, Cortlandt S. Dietler, George F. Woods, Wayne
H. Patterson and Jim Baldwin, each a stockholder of GMHC, have agreed to (i)
vote all of their respective shares of GMHC capital stock (common and
preferred) in favor of the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained in this Agreement,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. Subject to and in accordance with the terms and
conditions of this Agreement, at the Effective Time GMI and GMP will be
merged with and into Newco in accordance with applicable law. Newco shall be
the surviving entity, resulting from the merger and its equity interests
shall remain outstanding as the sole equity interests of the surviving entity.
1.2 ACTIONS BY GMHC; STOCKHOLDERS MEETING; PROXY STATEMENT.
1.2.1 GMHC hereby approves of and consents to the Merger and
represents and warrants that the GMHC Board, at a meeting duly called and
held on March 5, 1999 unanimously has (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are fair to and
in the best interests of
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GMHC's stockholders, (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, and (iii) resolved to recommend
that the stockholders of GMHC, if required by applicable law, approve the
transactions contemplated hereby. GMHC has been advised by each of its
directors that each such person has agreed, subject to the terms and
conditions of this Agreement, to take all action necessary or advisable in
support of the Merger, to vote all Shares owned by such person in favor of
the Merger and to sell to QL 3000 all such Shares.
1.2.2 If required by applicable law in order to consummate the
Merger, GMHC will, in accordance with applicable law and GMHC's Articles of
Incorporation and Bylaws, call and hold a special meeting of its stockholders
(the "Stockholders' Meeting") as soon as practicable for the purpose of
approving the Merger. Subject to the terms and conditions of this Agreement,
the GMHC Board will recommend to its stockholders that the Merger be
approved, and, subject to the terms and conditions of this Agreement, GMHC
will use its best efforts to solicit from its stockholders proxies in favor
of the approval of the Merger, and will take all other action necessary or
advisable to secure the requisite vote or consent of stockholders.
1.2.3 GMHC will prepare and file a preliminary proxy statement to
solicit Stockholder Approval (the "Proxy Statement") with the SEC and will
use its best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement, as finalized, to be mailed to GMHC's
stockholders as promptly as practicable after responding to all such comments
to the satisfaction of the staff; provided, however, that GMHC shall not be
required to prepare and file such proxy statement until a bona fide
commitment letter from one or more lenders with respect to the Merger
Consideration has been issued to QL 3000 and delivered to GMHC. QL 3000 will
provide to GMHC in writing all information regarding QL 3000 necessary for
the preparation of the Proxy Statement. GMHC will notify QL 3000 promptly of
the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply QL 3000 with copies of all
correspondence between GMHC or any of its representatives, on the one hand,
and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time before the Stockholders' Meeting
there occurs any event that should be set forth in an amendment or supplement
to the Proxy Statement, GMHC will promptly prepare and mail to its
stockholders such an amendment or supplement. GMHC will not mail any Proxy
Statement, or any amendment or supplement thereto, to which QL 3000
reasonably objects. The Proxy Statement will include the GMHC Board's
recommendation that GMHC's stockholders grant proxies to approve the Merger;
provided, however, that such recommendation may be withdrawn, modified, or
amended if and to the extent the GMHC Board determines, in good faith after
consultation with outside legal counsel, that a failure to do so would be
contrary to its fiduciary obligations.
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1.2.4 Prior to the Merger, GMHC shall (i) contribute all of the
issued and outstanding capital stock of Grease Monkey de Mexico SA de CV
("GMM") to GMI, (ii) if necessary for the Merger, cause GMI and GMP to be
reincorporated under Florida law as Florida corporations and (iii) cause GMI
and GMP to adopt articles of merger in form and substance acceptable to QL
3000.
1.3 EFFECTIVE TIME. As soon as practicable after satisfaction or
waiver of all of the conditions to the Merger set forth in Article 6 of this
Agreement, a Certificate of Merger prepared in accordance with applicable law
(the "Certificate of Merger") will be executed and filed with the Secretaries
of State of the appropriate states. The Merger will be effective on the
later of the date and at the time (the "Effective Time") when the Certificate
of Merger has been accepted for filing by such Secretaries of State. The day
during which the Effective Time occurs is referred to herein as the
"Effective Date."
1.4 EFFECT OF MERGER. At the Effective Time, GMI and GMP will be
merged with and into Newco in the manner and with the effect provided by
applicable law, the issued and outstanding capital stock of GMI and GMP shall
be cancelled, the separate corporate existence of GMI and GMP will cease and
thereupon GMI, GMP and Newco will be a single entity and will continue to be
governed by the laws of the State of Florida.
1.5 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws or other constituent documents of Newco as in effect
at the Effective Time will be the constituent documents of the surviving
entity.
1.6 DIRECTORS AND OFFICERS. The directors, officers or managers of
Newco at the Effective Time will be the directors, officers or managers of
the surviving entity.
1.7 CLOSING. Unless this Agreement has been terminated and the
transactions contemplated by it have been abandoned pursuant to Article 7,
the closing of the Merger (the "Closing") will take place at the offices of
Otten, Johnson, Robinson, Neff & Ragonetti at 10:00 a.m. on the date five
business days after the date on which the last of the conditions set forth in
Article 6 hereof (other than conditions that by their terms are to occur at
"Closing") will have been fulfilled or waived or on such other date as QL
3000 and GMHC may agree (the "Closing Date").
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ARTICLE 2
MERGER CONSIDERATION
2.1 EFFECT OF MERGER ON GMHC.
2.1.1 MERGER CONSIDERATION. As of the Effective Time (or at a
later time within three business days of a request by GMHC), in consideration
of the Merger, QL 3000 or Newco shall pay or cause to be paid to GMHC an
amount equal to:
(a) $1.00 (the "Liquidation Distribution") for each Share issued
and outstanding immediately prior to the Effective Time (other than Shares
held in the treasury of GMHC, shares held by any direct or indirect
subsidiary of GMHC or Dissenting Shares);
(b) $100.00 per share for GMHC's Series C Preferred Stock, the
liquidation preference, plus an amount equal to any unpaid cumulative
dividends (whether or not declared), if any, without interest, to the
Effective Date;
(c) the appraisal value of all Dissenting Shares determined in
accordance with Section 2.1.3 of this Agreement; and
(d) the amount required to satisfy all GMHC liabilities and other
claims of creditors pursuant to the plan of liquidation adopted by GMHC
pursuant to Section 2.1.4 of this Agreement and to assure that the
shareholders of GMHC receive the same after tax net consideration as if QL
3000 was merged with and into GMHC.
The aggregate amount of such payments shall constitute the "Merger
Consideration."
2.1.2 WITHHOLDING TAX. The right of any stockholder to receive
any portion of the Merger Consideration will be subject to and reduced by the
amount of any required tax withholding obligation.
2.1.3 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding
anything in this Agreement to the contrary, if any shareholder of GMHC who
has not voted his or her Shares in favor of or consented to the Merger and
who is entitled to dissent from the Merger and require appraisal for his or
her Shares under applicable law (a "Dissenting Stockholder") and complies
with all the provisions thereof concerning the right of holders of Shares to
dissent from the Merger and require appraisal of his or her Shares
("Dissenting Shares") then such Dissenting Shares will represent only the
right to receive such consideration as may be determined to be due to such
Dissenting Stockholder pursuant to applicable law. If, after the Effective
Time, such Dissenting Stockholder (if
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any) withdraws his or her demand for appraisal or fails to perfect or
otherwise loses his or her right of appraisal, in any case pursuant to
applicable law, each of his or her Shares will be deemed to be outstanding
and entitled to the Liquidation Distribution upon the same terms as other
Shares. GMHC will give QL 3000 (i) prompt notice of any demands for
appraisal of Shares received by GMHC and (ii) the opportunity to participate
in and direct all negotiations and proceedings with respect to any such
demands. GMHC will not, without the prior written consent of QL 3000, make
any payment with respect to, or settle, offer to settle, or otherwise
negotiate, any such demands except as required by applicable law.
2.1.4 LIQUIDATION AND DISSOLUTION OF GMHC. Following the Merger,
GMHC shall be liquidated and dissolved on the following terms:
(a) GMHC shall adopt a plan of liquidation providing for the
satisfaction of (i) all liabilities and other claims of creditors, (ii) the
redemption of GMHC's Series C Preferred Stock and (iii) the termination of
all outstanding options and warrants;
(b) as of the Effective Time, all of the Shares will no longer be
outstanding and will automatically be canceled and retired and will cease
to exist, and each holder of a certificate representing any such Shares
(other than Shares held in the treasury of GMHC, Shares held by any direct
or indirect subsidiary of GMHC and Dissenting Shares) will cease to have
any rights with respect thereto, except the right to receive the
Liquidation Distribution, without interest, in accordance with Section 2.2
of this Agreement; and
(c) GMHC shall file or cause to be filed, Articles of Dissolution
or other required documentation in accordance with applicable law to
liquidate and dissolve GMHC.
2.2 EXCHANGE OF CERTIFICATES.
2.2.1 PAYING AGENT. Before the Effective Time, QL 3000 and GMHC
will designate a mutually acceptable bank or trust company to act as paying
agent in the liquidation of GMHC (the "Paying Agent"). From time to time on,
before or after the Effective Time, QL 3000 will make available, or cause
Newco to make available, to the Paying Agent funds in amounts and at the
times necessary for the payment of the Liquidation Distribution for each
share entitled to payment under Section 2.2.1 upon surrender of certificates
representing such Shares, it being understood that any and all interest
earned on funds made available to the Paying Agent pursuant to this Agreement
will be turned over to QL 3000.
2.2.2 EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Paying Agent will mail to each holder of record
of a certificate or
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certificates that immediately before the Effective Time represented Shares
(the "Certificates"), (i) a notice (advising the holders that the Merger has
become effective) and a letter of transmittal in customary and appropriate
form (which will specify that delivery will be effected, and risk of loss and
title to the Certificates will pass, only upon proper delivery of the
Certificates to the Paying Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Liquidation
Distribution. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by QL 3000,
together with such letter of transmittal, properly completed and duly
executed, and such other customary documents as may reasonably be required by
the Paying Agent, the holder of such Certificate will be entitled to receive
in exchange therefor the Liquidation Distribution, and the Certificate so
surrendered will be canceled. In the event of a transfer of ownership of
Shares that is not registered in the transfer records of GMHC, payment may be
made to a Person (as defined in Section 2.2.4 below) other than the Person in
whose name the Certificate so surrendered is registered, if such Certificate
is properly endorsed or otherwise is in proper form for transfer and the
Person requesting such payment pays any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of such
Certificate or establishes to the satisfaction of Newco that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2.2, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Liquidation Distribution, without interest. No interest will be paid or will
accrue on the cash payable upon the surrender of any Certificate.
2.2.3 NO FURTHER OWNERSHIP RIGHTS IN GMHC COMMON STOCK. All cash
paid upon the surrender of Certificates in accordance with the terms hereof
will be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Certificates. At
the Effective Time, the stock transfer books of GMHC will be closed, and
there will be no further registration of transfers. If, after the Effective
Time, Certificates are presented to Newco or the Paying Agent for any reason,
they will be canceled as provided in Section 2.1.4 and exchanged as provided
in Section 2.2.2.
2.2.4 NO LIABILITY. None of QL 3000, GMHC, Newco or the Paying
Agent will be liable to any Person in respect of any cash or security
delivered to a public official pursuant to any applicable abandoned property,
escheat, or similar law. As used in this Agreement, the term "Person" means
any individual, corporation, general partnership, limited partnership,
limited liability company, joint venture, trust, cooperative or other
association, Governmental Entity (as defined in Section 3.2(b) below), or any
other organization.
2.2.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. In the event that
any Certificate has 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, GMHC will issue in exchange for such lost, stolen, or
destroyed Certificate, the Liquidation Distribution
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deliverable in respect thereof as determined in accordance with this
Agreement; PROVIDED, HOWEVER, that GMHC may, in its sole discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed Certificate to indemnify GMHC or to give GMHC a bond in
such sum as it may reasonably direct as indemnity against any claim that may
be made against GMHC with respect to the certificate alleged to have been
lost, stolen, or destroyed.
2.3 GMHC STOCK OPTIONS AND WARRANTS. GMHC shall use its best efforts
to enter into an agreement with each holder of stock options, vested and
unvested, outstanding under GMHC's 1986 Incentive Stock Option Plan, 1993
Incentive Stock Option Plan, 1993 Amendment to 1993 Incentive Stock Option
Plan, 1994 Stock Incentive Plan and Amendment to 1994 Stock Incentive Plan
(the "Stock Option Plans") and all outstanding warrants to purchase GMHC
common stock, which agreement provides that, immediately after the Effective
Date, each option or warrant that is then outstanding, whether or not then
exercisable or vested, shall be canceled by GMHC, and each holder of a
canceled option or warrant shall be entitled to receive from GMHC as of the
Effective Time, in consideration for the cancellation of such option or
warrant, an amount in cash equal to the product of (i) the number of Shares
previously subject to such option or warrant, and (ii) the excess, if any, of
the Liquidation Distribution over the exercise price per Share previously
subject to such option or warrant, reduced by any applicable withholding. In
any event as of the Effective Time all such Stock Option Plans, options
issued pursuant thereto and outstanding warrants shall be cancelled and of no
further effect.
2.4 RELEASE OF GMHC STOCKHOLDER OBLIGATIONS. On or before the
Effective Date, QL 3000 shall cause to be released or cancelled the GMHC
stockholder guarantees and letters of credit described in Schedule 2.4
attached hereto.
2.5 PAYMENT OF FEES. On the Effective Date, QL 3000 shall cause all
outstanding and unpaid legal, accounting and investment banking fees incurred
by GMHC in connection with the Merger to be paid in full by QL 3000 or Newco.
The total legal, accounting and investment banking fees incurred by GMHC in
connection with the merger subsequent to September 30, 1998 shall not exceed
$__________.
2.6 REPAYMENT OF ADVANCES. On the Effective Date, QL 3000 shall cause
Newco to repay all amounts advanced to GMHC by Brownlie Wallace Armstrong &
Bander Exploration and its affiliates described in Schedule 2.6 attached
hereto.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GMHC
In this Agreement, the term "Material Adverse Effect" used in connection
with a party means any event, change or effect that is materially adverse to
the condition (financial or otherwise), properties, assets, liabilities,
businesses, operations or results of operations of such party in excess of
$100,000. "Combined Material Adverse Effect" means any individual or
combination of events, changes or effects that are materially adverse to the
condition (financial or otherwise), properties, assets, liabilities,
businesses, operations or results of operations of such party in excess of
$250,000. "Material Adverse Change" means any change that has resulted, will
result or is likely to result in a Material Adverse Effect. The term
"Disclosure Schedule" means the document delivered by GMHC to QL 3000 on the
date hereof that sets forth certain exceptions to the representations and
warranties contained in this Agreement under captions referencing each and
every Section to which such exceptions apply (whether or not referred to in a
particular representation or warranty), provided that information
appropriately and expressly disclosed or qualified with respect to one
representation or warranty in the Disclosure Schedule shall be deemed to have
been disclosed or qualified with respect to any other applicable
representation or warranty to the extent that the disclosure contains a clear
statement of the relevant fact or facts so as to provide reasonable notice of
the applicability of the disclosure to the unreferenced representation or
warranty.
GMHC hereby represents and warrants to QL 3000 as follows:
3.1 CORPORATE EXISTENCE AND AUTHORITY. GMHC is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Utah and has the requisite corporate power and authority to own, operate
and lease its properties and assets and to carry on its business as it is now
being conducted. GMHC is duly qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of business or the
ownership or lease of property requires or makes it desirable for GMHC to be
so qualified except where the failure to be so qualified would not have a
Material Adverse Effect. GMHC has the full corporate power and authority to
enter into this Agreement and carry out its terms, subject to the conditions
set forth in the Agreement. The Board of Directors of GMHC has, by
resolutions duly adopted, authorized and approved the Merger, which
resolutions have not been rescinded or otherwise modified and remain in full
force and effect. Except for the approval of its stockholders, GMHC has
taken all corporate action necessary to authorize the execution, delivery,
and performance of this Agreement. This Agreement has been duly and validly
executed and delivered by GMHC and is binding upon and enforceable against
GMHC in accordance with its terms, and the Articles of Merger, when executed
and delivered by GMHC, will constitute the valid and binding obligation of
GMHC. GMHC has heretofore delivered to QL 3000 correct and complete copies
of its Articles of Incorporation and Bylaws as in effect on the date of this
Agreement.
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3.2 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of
this Agreement by GMHC nor the consummation of the transactions contemplated
by this Agreement will:
(a) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of GMHC or any of its subsidiaries;
(b) violate any law, judgment, order, injunction, decree, rule,
regulation, or ruling of any court, legislature, administrative agency or
commission or other governmental or other regulatory authority or agency (a
"Governmental Entity") applicable to GMHC or any of its subsidiaries,
except as such would not have a Material Adverse Effect, individually or in
the aggregate;
(c) either alone, or with the giving of notice or the passage of
time or both, conflict with, constitute grounds for termination or
acceleration of, result in the breach of the terms, conditions, or
provisions of, result in the loss of any benefit to GMHC or any of its
subsidiaries, or constitute a default under any agreement, instrument,
license, or permit to which GMHC or any of its subsidiaries is a party or
by which GMHC or any of its subsidiaries is bound, or result in the
creation or imposition of any lien, charge or encumbrance on any of the
assets of GMHC or any of its subsidiaries except as such would not have a
Material Adverse Effect, individually or in the aggregate; or
(d) require any notices to or consent of any third party,
including without limitation any Governmental Entity.
3.3 CAPITALIZATION. GMHC has authorized capital stock consisting of
(i) 20,000,000 shares of GMHC Common Stock, par value $.03 per Share (each a
"Share," collectively the "Shares"), of which 4,647,880 Shares were
outstanding on March 1, 1999 and no Shares are in treasury and (ii) 200,000
shares of GMHC Preferred Stock, no par value per share, of which 20,896
shares of Series C Convertible Preferred Stock, no par value per share and
liquidation value $100.00 plus accrued unpaid dividends per share, were
outstanding on March 1, 1999 (the "Preferred Shares") and no shares are in
treasury. Options to purchase 854,266 Shares were outstanding on March 1,
1999 under grants made pursuant to the Stock Option Plans. Warrants to
purchase 400,000 Shares were outstanding on March 1, 1999. All of the
outstanding shares of capital stock of GMHC have been duly authorized and are
validly issued, fully paid, and nonassessable, and no shares were issued in
violation of preemptive or similar rights of any stockholder or in violation
of any applicable securities laws. Except as set forth above, there are no
shares of capital stock of GMHC authorized, issued, or outstanding, and,
except as set forth above, there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities, or other
agreements or commitments of GMHC of any character relating to the issued or
unissued capital stock or other securities of GMHC.
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There are no outstanding obligations of GMHC to repurchase, redeem, or
otherwise acquire any of the Shares.
3.4 SUBSIDIARIES AND JOINT VENTURES. Except as disclosed on the
Disclosure Schedule, GMHC has no subsidiaries and owns no stock or other
interest in any other corporation or in any partnership or limited liability
company, or other venture or entity. Each subsidiary of GMHC is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or formation and is duly qualified to do
business as a foreign corporation in each jurisdiction in which the conduct
of business or the ownership or lease of property requires or makes it
desirable for such subsidiary to be so qualified except where the failure to
be so qualified would not have a Material Adverse Effect. All of the
outstanding shares of capital stock of each subsidiary are validly issued,
fully paid and nonassessable and owned by GMHC free and clear of all liens,
claims or encumbrances. There are no options, calls or commitments of any
character relating to the issued or unissued capital stock of any subsidiary.
3.5 SEC REPORTS AND FINANCIAL STATEMENTS. GMHC has filed with the
SEC, and has made available to QL 3000 true and complete copies of, all
forms, reports, schedules, statements, and other documents required to be
filed by it since December 31, 1997 under the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act") (each of such forms, reports,
schedules, statements, and other documents, to the extent filed and publicly
available before the date of this Agreement, other than preliminary filings,
is referred to as a "GMHC SEC Document"). Each GMHC SEC Document, at the
time filed, (a) 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 (b) 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. The financial statements of GMHC and its subsidiaries
included in the GMHC SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC) and fairly present (subject, in the case of the unaudited statements, to
normal, recurring audit adjustments) the consolidated financial position of
GMHC and its subsidiaries as of and at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
3.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by GMHC specifically for inclusion or incorporation by reference in
the Proxy Statement will at the time the Proxy Statement is first mailed to
GMHC's stockholders or at the time of the 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
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to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation or warranty is
made by GMHC with respect to statements made or incorporated by reference
therein based on information supplied by QL 3000 in writing specifically for
inclusion or incorporation by reference therein.
3.7 LEGAL PROCEEDINGS. Except as disclosed in a GMHC SEC Document or
in the Disclosure Schedule, there is neither pending nor to GMHC's knowledge
threatened by or against GMHC or any of its subsidiaries any legal action,
claim, arbitration, investigation, or administrative proceeding before any
Governmental Entity that could (i) have a Material Adverse Effect on the
parties or the financial condition, assets, liabilities, business or results
of operations of GMHC following the Closing; or (ii) enjoin or restrict the
right or ability of GMHC to perform its obligations under this Agreement; and
(iii) to the best knowledge of GMHC, there is no basis for any such claim,
litigation, proceeding, or investigation; and (iv) there is not in existence
any judgment, injunction, order or decree requiring GMHC to take any action
of any kind, or to which GMHC is subject or by which it or its assets are
bound or affected.
3.8 CONTRACTS AND ARRANGEMENTS. The Disclosure Schedule contains a
complete and accurate list of all agreements of the following types,
organized by type of agreement, to which GMHC or any of its subsidiaries is a
party or by which GMHC or any of its subsidiaries is bound or otherwise
affected and which are material to GMHC or any of its subsidiaries (the
"Contracts"):
(a) any mortgage, note, or other instrument or agreement relating
to the borrowing of money or the incurrence of indebtedness by GMHC or any
of its subsidiaries or any guaranty of any obligation for the borrowing of
money;
(b) contracts, agreements, purchase orders, or acknowledgment
forms for the purchase, sale, lease or other disposition of GMHC's or any
of its subsidiaries' equipment, products, materials, or capital assets, or
for the performance of services which exceed $5,000 individually or on an
annual commitment basis;
(c) contracts or agreements for the joint performance of work or
services and all other joint venture agreements;
(d) contracts or agreements with agents, brokers, consignees,
sales representatives, or distributors relating to the sale of GMHC's
products or services;
(e) contracts or agreements relating to the employment or
compensation of GMHC's or any of its subsidiaries' officers, directors, or
employees, including without limitation any collective bargaining
agreements, and agreements with
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former officers, directors or employees which remain in effect, other than
disclosed in the Disclosure Schedule in response to Section 3.16;
(f) franchise agreements; and
(g) any other contract, instrument, agreement, or obligation not
described in any other section of this Agreement to which GMHC or any of
its subsidiaries is a party or by which it or any such subsidiary is bound
and which contains unfulfilled obligations of GMHC or any of its
subsidiaries in excess of $5,000.
3.9 REAL PROPERTY; MATERIAL ASSETS. The Disclosure Schedule contains
a list of (i) all real property owned by GMHC or any of its subsidiaries (the
"Material Properties") and (ii) all other assets owned by GMHC or any of its
subsidiaries having an original cost of more than $2,500 (together, the
"Material Properties and Assets"). Except as set forth in the Disclosure
Schedule, GMHC or a subsidiary of GMHC has good and marketable title to all
of its respective Material Properties and Assets subject to no encumbrance,
lien, charge, or other restriction (including, without limitation, any
restriction on transfer) of any kind or character and there is no condition,
restriction, or reservation affecting the title to or utility of any of the
Material Properties and Assets, other than (i) such imperfections or
irregularities of title, encumbrances, claims, liens, charges or other
conditions, restrictions or reservations set forth on the Disclosure
Schedule, (ii) statutory liens securing payments (including taxes) not yet
due and (iii) such other minor imperfections or irregularities of title,
encumbrances, claims, liens, charges or other conditions, restrictions or
reservations as do not materially affect the use and value of the properties
or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties. All facilities located on the
Material Properties set forth on the Disclosure Schedule are in satisfactory
condition and are suitable for the purpose for which they are being used,
subject in each case to ordinary wear and tear and to ordinary repair,
maintenance and periodic replacement.
All of the buildings and improvements upon such Material
Properties comply with all applicable size, height, setback and other zoning
restrictions and regulations. Neither GMHC nor any subsidiary has been
denied any special exception, variance or other zoning permit or approval
required for the construction, operation and maintenance thereof by GMHC or a
subsidiary. There presently is located within such Material Properties an
adequate number of automobile parking spaces to satisfy the requirements of
all applicable zoning ordinances and regulations as modified by duly issued
zoning variances. To the best knowledge of GMHC, there is not existing, or
presently contemplated or proposed, (i) any condemnation or similar action,
or rezoning action or proceeding, with respect to any portion of such
Material Properties or (ii) any moratorium upon or similar impediment to land
development or building construction or hook-up to or usage of water or sewer
or other utility services that could affect the use
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or development thereof. Such Material Properties are zoned
commercial/industrial in a manner sufficient to enable QL 3000 to continue to
conduct the businesses as presently conducted by GMHC and its subsidiaries.
Sewer or septic services and water services are available now and, to GMHC's
knowledge, will be available after Closing to enable QL 3000 to conduct the
businesses presently conducted by GMHC and its subsidiaries. Adequate
access, ingress and egress are available now and, to GMHC's knowledge, will
be provided to such Material Properties.
3.10 LEASES. The Disclosure Schedule contains a list of all material
leases for the lease of any real or personal property with terms in excess of
one year to which GMHC or any of its subsidiaries is a party (the "Leases"
and the real property covered by a Lease the "Leased Properties"). Except as
described in the Disclosure Schedule, GMHC or any subsidiary enjoys
undisturbed possession to each leasehold interest it holds under the Leases.
All of the buildings and improvements upon the Leased Properties
comply with all applicable size, height, setback and other zoning
restrictions and regulations. Neither GMHC nor any subsidiary has been
denied any special exception, variance or other zoning permit or approval
required for the construction, operation and maintenance thereof by GMHC or a
subsidiary. There presently is located upon the Leased Properties an
adequate number of automobile parking spaces to satisfy the requirements of
all applicable zoning ordinances and regulations as modified by duly issued
zoning variances. To the best knowledge of GMHC, there is not existing, or
presently contemplated or proposed, (i) any condemnation or similar action,
or rezoning action or proceeding, with respect to any portion of the Leased
Properties or (ii) any moratorium upon or similar impediment to land
development or building construction or hook-up to or usage of water or sewer
or other utility services that could affect the use or development thereof.
The Leased Properties are zoned commercial/industrial in a manner sufficient
to enable QL 3000 to continue to conduct the businesses as presently
conducted by GMHC and its subsidiaries. Sewer or septic services and water
services are available now and, to GMHC's knowledge, will be available after
Closing to enable QL 3000 to conduct the businesses presently conducted by
GMHC and its subsidiaries. Adequate access, ingress and egress are available
now and, to GMHC's knowledge, will be provided to the Leased Properties.
3.11 STATUS OF CONTRACTS AND LEASES.
(a) Each of the Contracts and Leases is valid, binding, and
enforceable by GMHC or its subsidiaries in accordance with its terms and is
in full force and effect, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the rights of creditors and
except as enforceability may be limited by principles of equity governing
specific performance, injunctive relief or other equitable remedies. There
is no existing default or violation by GMHC or its
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subsidiaries under any Contract or Lease and no event has occurred which
(whether with or without notice, lapse of time, or both) would constitute
a default of GMHC or its subsidiaries under any Contract or Lease, except
for such defaults as would not have a Material Adverse Effect.
(b) To the best knowledge of GMHC, neither GMHC nor any of its
subsidiaries is aware of any default by any other party to any Contract or
Lease or of any event which (whether with or without notice, lapse of
time, or both) would constitute a default by any other party with respect
to obligations of that party under any Contract or Lease, except for such
defaults set forth on the Disclosure Schedule.
(c) Except as set forth on the Disclosure Schedule, neither GMHC
nor its subsidiaries is a party to, or is bound by, any Contract that:
(i) will result in any material loss to it upon the
performance thereof, including any material liability for penalties
or damages, whether liquidated, direct, indirect, incidental or
consequential, or
(ii) is not terminable by GMHC with 90 days or fewer notice
and which termination will not cause a Material Adverse Effect.
3.12 COMPLIANCE WITH LAWS. Except for those whose absence, either
individually or in the aggregate, would not have a Material Adverse Effect,
and, with the passage of time will not have a Material Adverse Effect, GMHC
and its subsidiaries possess all governmental and other licenses,
certificates, consents, permits, and other authorizations of Governmental
Entities (collectively, the "Licenses") legally required to carry on its
business as now conducted. No material violation exists in respect of, and
no proceeding is pending or threatened to revoke or limit, any such License.
Except as disclosed in the GMHC SEC Documents or the Disclosure Schedule, the
businesses of GMHC and its subsidiaries are not being conducted in violation
of any laws, rules, regulations, ordinances, codes, judgments, orders, writs,
or decrees applicable to its business where such violation would have a
Material Adverse Effect. Except as set forth on the Disclosure Schedule or
disclosed in the GMHC SEC Documents, there have been no violations of such
laws, rules, regulations, ordinances, codes, judgments, orders, writs, and
decrees since December 31, 1993 where such violation, either individually or
in the aggregate, would have a Material Adverse Effect.
3.13 ENVIRONMENTAL MATTERS.
3.13.1 DEFINITIONS. As used in this Agreement, "Environmental
Law" means any federal, state, or local statute, regulation, or ordinance
pertaining to the protection of human health or the environment and any
applicable orders, judgments, decrees, permits, licenses, or other
authorizations or mandates under such laws.
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"Hazardous Substance" means any hazardous, toxic, radioactive, or infectious
substance, material, or waste as defined, listed, or regulated under any
Environmental Law, and includes without limitation petroleum oil and its
fractions. "Contamination" means the existence (actual or reasonably
suspected) in the environment of a Hazardous Substance, if the existence or
suspected existence of such Hazardous Substance requires any investigatory,
remedial, removal, or other response action under any Environmental Law, if
such response action legally could be required by any Governmental Entity
under prevailing Environmental Laws.
3.13.2 COMPLIANCE. Except as disclosed on the Disclosure
Schedule, the businesses and the assets of GMHC and it subsidiaries are in
material compliance with all Environmental Laws and those entities have all
permits required under Environmental Laws in connection with the
construction, ownership or operation of those assets and the businesses.
GMHC is not aware of and has not received notice of any past, present or
anticipated future events, conditions, activities, investigation, studies,
plans or proposals that (a) would interfere with or prevent compliance by
GMHC with any Environmental Law, or (b) may give rise to any common law or
other liability, or otherwise form the basis of a claim, action, suit,
proceeding, hearing or investigation, involving GMHC and related in any way
to Hazardous Substances or Environmental Laws.
3.13.3 HAZARDOUS SUBSTANCES. Except as disclosed on the
Disclosure Schedule, no Hazardous Substance has been disposed of, spilled,
leaked or otherwise released on, in, under or from, or otherwise come to be
located in the soil or water (including surface and ground water) on or
under, any real property owned, leased or occupied by GMHC or its
subsidiaries now or in the past. Except as disclosed on the Disclosure
Schedule, none of the assets of GMHC or its subsidiaries have incorporated
into them any asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls (in electrical equipment or otherwise), lead-based paint or any
other Hazardous Substance which is prohibited, restricted or regulated when
present in buildings, structures, fixtures or equipment. Except as disclosed
on the Disclosure Schedule, all wastes generated in connection with the
businesses of GMHC or its subsidiaries are and have been transported to and
disposed of at an authorized waste disposal facility in compliance with all
Environmental Laws. Except as disclosed on the Disclosure Schedule, GMHC is
not liable under any Environmental Law for investigation, remedial, removal
or other response costs, natural resources damages or other damages or for
any other claims (including administrative orders) arising out of the release
or threatened release of, or exposure to, any Hazardous Substance and no
basis exists for any such liability. GMHC has not entered any contract
pursuant to which it has assumed the liability of any other person or entity,
or agreed to indemnify any other person or entity for any liability, under
any Environmental Law or arising out of the release or threatened release of,
or exposure to, any Hazardous Substance.
3.13.4 STORAGE TANKS. Except as disclosed on the Disclosure
Schedule, there are no underground or other storage tanks on any real
property owned, leased or
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occupied by GMHC or its subsidiaries now or in the past (whether or not
regulated and whether or not out of service, closed or decommissioned). To
the extent GMHC has or has had underground or other storage tanks, it has
complied with all federal, state and local laws, and rules applicable thereto
(including financial responsibility and required upgrades).
3.13.5 ENVIRONMENTAL RECORDS. Except as disclosed on the
Disclosure Schedule, GMHC has disclosed and made available to QL 3000 true,
complete and correct copies of any reports, studies, analysis, tests,
monitoring, correspondence with any Governmental Entity or other documents in
the possession of or initiated by GMHC or otherwise known to GMHC, pertaining
to Hazardous Substances, the existence of Contamination, compliance with
Environmental Laws, or any other environmental concern relating to the assets
or the businesses of GMHC or its subsidiaries.
3.14 TAX MATTERS.
3.14.1 RETURNS. GMHC has filed on a timely basis all federal,
state, foreign, and other returns, reports, forms, declarations, and
information returns required to be filed by it with respect to Taxes (as
defined below) that relate to the business, results of operations, financial
condition, properties, or assets of GMHC and its subsidiaries (collectively,
the "GMHC Returns"), all GMHC Returns filed are complete and accurate, and
GMHC has paid on a timely basis all Taxes. Except as disclosed on the
Disclosure Schedule, GMHC is not part of, nor has it been part of, an
affiliated group of corporations that files or has the privilege of filing
consolidated tax returns pursuant to Section 1501 of the Internal Revenue
Code of 1986, as amended (the "Code") or any similar provisions of state,
local, or foreign law, and GMHC is not a party to, nor has been a party to,
any tax-sharing or tax-allocation agreement. Except as set forth on the
Disclosure Schedule, GMHC has not received any notice of audit and neither
GMHC nor any director, officer or employee responsible for tax matters of
GMHC has knowledge of any intention of any authority to assess additional
Taxes against GMHC or of any dispute with any authority with respect to such
Taxes. There are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for such Taxes for any period.
GMHC has provided QL 3000 with complete and accurate copies of GMHC Returns
for each of GMHC's fiscal years 1993 through 1997 and the Forms 1139 related
to any loss or credit carryback claim for those years.
3.14.2 TAXES PAID OR RESERVED. The reserves for taxes reflected
in the current balance sheet most recently filed as part of a GMHC SEC
Document are adequate for payment of Taxes in respect of periods ending on
the date thereof. All reserves for Taxes have been determined in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved and with prior periods. All Taxes that GMHC has been
required to collect or withhold have been collected or withheld and, to the
extent required, have been paid to the proper taxing authority.
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3.14.3 LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT CARRYFORWARDS.
The Disclosure Schedule contains a complete and accurate list of net
operating loss ("NOL") carryforwards and investment tax credit carryforwards
available to GMHC or one or more of its subsidiaries for federal income tax
purposes that originated in taxable years 1988 through 1997.
3.14.4 DEFINITION. As used in this Agreement, the term "Taxes"
means all federal, state, local, or foreign taxes, charges, fees, levies, or
other assessments, including without limitation all net income, gross income,
gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated
severance, stamp, occupation, property, or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest and any penalties
(including penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax.
3.14.5 MISCELLANEOUS. GMHC has not filed a consent under IRC
Section 341(f) concerning collapsible corporations. GMHC has not made any
payments, is not obligated to make any payments, nor is a party to any
agreement that in certain circumstances could obligate it to make any
payments that will not be deductible under IRC Section 280G. GMHC has not
been a United States real property holding corporation within the meaning of
IRC Section 897(c)(2) during the applicable period specified in IRC Section
897(c)(1)(A)(ii). GMHC has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
of federal income tax within the meaning of IRC Section 6662. GMHC shall
deliver to QL 3000 all necessary certificates and documents confirming that
no withholding under IRC Section 1445 is required in connection with payment
of the purchase price.
3.14.6 TAX SHARING AGREEMENTS. GMHC is not a party to any Tax
allocation or sharing agreement.
3.15 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on the
Disclosure Schedule or as provided in this Agreement:
(a) No GMHC key employee or executive has communicated to GMHC
any plans to terminate employment with GMHC.
(b) GMHC and its subsidiaries have complied in all material
respects with all labor and employment laws, including provisions thereof
relating to wages, hours, equal opportunity, discrimination, collective
bargaining, and the payment of social security and other taxes, except
where the failure to comply would not have a Material Adverse Effect;
(c) There is no unfair labor practice charge, complaint,
representation, petition, or other action against GMHC or any of its
subsidiaries pending or to
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GMHC's best knowledge threatened before the National Labor Relations Board
or any other Governmental Entity and neither GMHC nor any of its
subsidiaries is subject to any order to bargain by the National Labor
Relations Board;
(d) There is no labor strike, request for representation,
slowdown, or work stoppage actually occurring, pending, or to GMHC's best
knowledge threatened against GMHC or any of its subsidiaries;
(e) To GMHC's knowledge, no questions concerning representation
have been raised or are threatened with respect to employees of GMHC or any
of its subsidiaries;
(f) No grievance that might have a Material Adverse Effect on
GMHC or any of its subsidiaries and no arbitration proceeding arising out
of or under any collective bargaining agreement is pending and to GMHC's
best knowledge no basis exists for any such grievance or arbitration
proceeding; and
(g) To GMHC's knowledge, no employee of GMHC or any of its
subsidiaries is subject to any noncompetition, nondisclosure,
confidentiality, employment, consulting, or similar agreements with Persons
other than GMHC or its subsidiaries relating to the present business
activities of GMHC.
(h) All employees of GMHC and its subsidiaries are at-will
employees, and GMHC is not a party or otherwise subject to any collective
bargaining or other agreement governing the wages, hours or terms of
employment of its employees. GMHC has no written severance pay plan,
policy, practice or agreement with any of its employees, except as
described in the Disclosure Schedule.
(i) GMHC has not experienced any primary work stoppage or other
organized work stoppage involving its employees in the past five years.
(j) There are no pending claims, and to GMHC's best knowledge, no
threatened claims by or on behalf of any of the employees of GMHC or any of
its subsidiaries under any federal, state or local labor or employment laws
or regulations.
3.16 EMPLOYEE BENEFITS. The Disclosure Schedule lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission,
incentive, life insurance, health and disability insurance, hospitalization,
and all other employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees, insurance companies or
others relating to any such employee benefit plans or arrangements)
established, maintained, or contributed to by GMHC that are currently in
effect or that have been terminated within the past twelve months, and
complete and
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accurate copies of all those plans or arrangements have been provided to QL
3000. The employee pension and employee welfare benefit plans (within the
meaning of Sections 3(1) and 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) established and maintained by GMHC that
are subject to ERISA are listed separately as ERISA Plans on the Disclosure
Schedule (the "ERISA Plans"). The ERISA Plans comply in all material respects
with the applicable requirements of ERISA and any other applicable laws and
regulations. With respect to ERISA Plans intended to qualify under Section
401(a) of the Code, GMHC has received from the Internal Revenue Service
("IRS") a favorable determination for each of the ERISA Plans that each of
the ERISA Plans is qualified. There has been no event subsequent to that
determination of which GMHC has received notice from IRS or has otherwise
become aware that has adversely affected the tax qualified status of any of
the ERISA Plans or the exemption of the related trusts. As to any such ERISA
Plan that has been terminated, any legally-required notices to employees and
to the Pension Benefit Guaranty Corporation (if applicable) have been
provided as required, all other legally-required actions have been taken to
accomplish the termination, and a favorable IRS determination letter has been
requested with respect to such termination. In response to any such request
for a determination letter on plan termination, a favorable letter has been
received from the IRS or, if the requested favorable letter has not yet been
received, there has been no event or absence of a necessary action that would
prevent the issuance of a favorable determination letter on the termination
in due course. No accumulated funding deficiency as defined in Section
302(a)(2) of ERISA or Section 412(a) of the Code exists, with respect to any
of the ERISA Plans. Neither GMHC nor a controlled group of corporations of
which GMHC is a member have any actual or potential withdrawal liability, as
defined in Section 4201 and related provisions of ERISA. To the knowledge of
GMHC, none of the ERISA Plans, their related trusts or any trustee,
investment manager or administrator thereof has engaged in a nonexempt
prohibited transaction, as such term is defined in Section 406 of ERISA and
Section 4975 of the Code. There are not and have not been any excess
deferrals or excess contributions as defined in Code Sections 401(k)(8)(B)
and 402(g)(2)(a) under any ERISA Plan that have not been corrected. Each
ERISA Plan is, and to the knowledge of GMHC has been, operated and
administered in all material respects in conformance with the requirements of
all applicable laws and regulations, whether or not the ERISA Plan documents
have been amended to reflect such requirements. Except as set forth in the
Disclosure Schedule, GMHC has no obligation of any kind (whether under the
terms of the ERISA Plans or under any understanding with employees) to make
payments under, or to pay contributions to, any plan, agreement, or other
arrangement for deferred compensation of employees, whether or not tax
qualified, including, without limitation, a single employer tax qualified
plan, a tax qualified plan of a controlled group of corporations, a
multi-employer pension plan, a nonqualified deferred compensation plan or an
individual employment or compensation agreement, or any commitment to provide
medical benefits to retirees.
3.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Disclosure Schedule, since September 30, 1998, there has not been:
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(a) Any event, occurrence, development, or state of circumstances
or facts which could reasonably be expected to result in (i) a Material
Adverse Effect on the business, results of operations, financial position,
assets, or properties of GMHC or its subsidiaries or (ii) any transaction,
contract or commitment except in the ordinary and usual course of business
and not requiring the payment in any case of an amount in excess of
$10,000.00 annually;
(b) Any damage, destruction, or casualty loss, whether insured
against or not, to the assets or properties of GMHC or its subsidiaries
that would result in a Material Adverse Effect;
(c) Except as permitted by Section 5.1(k), any increase in the
rate or terms of compensation payable or to become payable by GMHC to its
directors, officers, or key employees; any increase in the rate or terms of
any bonus, insurance, pension, or other employee benefit plan, payment, or
arrangement made to, for or with any such directors, officers, or key
employees; any special bonus or remuneration paid; or any written
employment, severance or change of control contract executed or amended;
(d) Any amendment to GMHC's Articles of Incorporation or Bylaws
or any entry into any material agreement, commitment, or transaction
(including, without limitation, any borrowing, capital expenditure or
capital financing or any amendment, modification, or termination of any
existing agreement, commitment, or transaction) by GMHC, except agreements,
commitments, or transactions in the ordinary course of business and
consistent with past practices or as expressly contemplated in this
Agreement;
(e) Any direct or indirect declaration, setting aside, or payment
of any dividend or other distribution (whether in cash, stock, property, or
any combination thereof) in respect of the common stock of GMHC, or any
direct or indirect repurchase, redemption, or other acquisition by GMHC of
any shares of its stock or any option, warrant or other agreement relating
thereto;
(f) Any issuance or sale of any stock of GMHC (other than
issuances pursuant to the exercise of options or warrants outstanding on
September 30, 1998) or any issuance or granting of any option, warrant, or
right to purchase any stock of GMHC or any commitment to do any of the
foregoing;
(g) Any conduct of business that is outside the ordinary course
of business or not substantially in the manner that GMHC or its
subsidiaries have previously conducted their business (including any change
in their accounting method, principles or practices);
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(h) Any material purchase or other acquisition of property by
GMHC or its subsidiaries; any sale, lease, or other disposition of property
by GMHC or its subsidiaries; or any expenditure by GMHC or its
subsidiaries, except in the ordinary course of business;
(i) Any incurrence of any noncontract liability which, either
singularly or in the aggregate is material to the business, results of
operations, financial condition, or prospects of GMHC or its subsidiaries;
or
(j) Any encumbrance or consent to encumbrance of any material
property or assets of GMHC or its subsidiaries except in the ordinary
course of business and except for the types of encumbrances listed in
Section 3.9.
3.18 UNDISCLOSED LIABILITIES. Except for liabilities or obligations
described in the GMHC SEC Documents or the Disclosure Schedule, or
liabilities or obligations that would not in the aggregate have a Combined
Material Adverse Effect, neither GMHC or any of its subsidiaries nor any of
the property of GMHC or any of its subsidiaries is subject to any material
liability or obligation of any kind, whether accrued, absolute, contingent,
known, unknown or otherwise, whether or not such liabilities or obligations
would have been required to be contained or disclosed in a GMHC SEC Document
or any financial statement of GMHC and its subsidiaries. Without limiting
the generality of the foregoing, GMHC and its subsidiaries have no liability
(and to GMHC's knowledge there is no basis for any present or future charge,
complaint, action, suit, proceeding, hearing, investigation, claim or demand
against GMHC or any of its subsidiaries giving rise to any liability) arising
out of any injury to persons or property as a result of the ownership,
possession or use of any product manufactured, sold, leased or delivered or
service provided by GMHC or any of its subsidiaries.
3.19 INSURANCE. GMHC and its subsidiaries are now maintaining with
financially responsible insurance companies, the policies of insurance (the
"Policies") on their products, tangible assets and business as are listed in
the Disclosure Schedule, and all such Policies are currently in full force
and effect. There are no disputes with insurers under the Policies, and all
premiums due and payable thereto have been paid. To GMHC's knowledge, (i)
there are no pending or threatened cancellations or nonrenewals with respect
to any of the Policies, and GMHC or its subsidiaries, as the case may be, is
in compliance with all material conditions contained in the Policies, and
(ii) there are no pending or threatened claims against GMHC or any of its
subsidiaries related to product liability.
3.20 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" means collectively:
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(i) all registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all patents and patent applications (collectively,
"Patents");
(iii) all copyrights in both published works and unpublished
works that are material to GMHC's businesses (collectively,
"Copyrights");
(iv) all trade secrets; and
(v) all trade names, technology, know-how, processes and
related applications used in the conduct of the businesses of GMHC
and its subsidiaries. The Disclosure Schedule contains a list and
summary description of all Marks, Patents and Copyrights.
(b) GMHC owns, has the right to use, sell, license, dispose of,
and to bring actions for the misappropriation of all of the Intellectual
Property Assets, material to the conduct of its business without any
conflict with or infringement of the rights of others, free and clear of
all liens, charges, encumbrances, or other restrictions of any kind.
(c) The Disclosure Schedule contains a list of all material
agreements, licenses, permits and other instruments relating to the
Intellectual Property Assets material to the conduct of its business to
which GMHC or any of its subsidiaries is a party, together with a brief
description of the Intellectual Property Asset.
(d) To GMHC's knowledge, no Intellectual Property Asset material
to the conduct of business of GMHC and its subsidiaries is infringed or has
been challenged.
(e) There is no action, suit, proceeding, judgment, order, or
writ pending or to GMHC's knowledge, threatened against GMHC or any of its
subsidiaries contesting the validity, ownership, or right to use, sell,
license, dispose of, or to bring actions for the misappropriation of the
Intellectual Property Assets material to the conduct of their business.
3.21 CAR COUNTS. GMHC has delivered to QL 3000 the car counts broken
down for each of GMHC's and its subsidiaries' stores (including franchise
stores) for 1997 and for each month through December 1998. Copies of the car
counts are contained on the Disclosure Schedule. The car counts, as of their
respective dates are accurate, correct and complete.
3.22 FRANCHISES. The Disclosure Schedule sets forth all franchises
GMHC and its subsidiaries have with franchisees. Except as set forth on the
Disclosure Schedule,
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all franchises are in good standing, neither GMHC nor any of its subsidiaries
is in default under any franchise and, to GMHC's knowledge, no franchisees
are in default under any franchise. Also included in the Disclosure Schedule
is the following information: (i) the beginning date, ending date and
franchise renewal options (either by franchisee or franchisor) for each
franchise, (ii) 1997 franchise fees collected from each franchise, (iii) 1997
franchise fees outstanding for each franchisee, (iv) 1997 royalty fees
collected from each franchisee, (v) 1997 royalty fees outstanding for each
franchisee and (vi) any reserve amount for uncollectible franchise fees or
royalty fees. GMHC shall provide to QL 3000 a file containing correspondence
from all persons with whom GMHC or any subsidiary has discussed the prospect
of becoming a franchisee within the past three years.
3.23 YEAR 2000. Except as set forth on the Disclosure Schedule, GMHC
has analyzed and to GMHC's knowledge has identified both internally developed
and acquired software which is material to its operations or which has been
or is being provided or delivered to customers or franchisees and utilizes
data embedded codes that may experience operations problems when the Year
2000 is reached and, where problems have arisen, has made, or has coordinated
with customers, franchisees, suppliers, financial institutions and others
with which it has business relationships that are material to GMHC's
business, to make all necessary modifications to the identified software to
make such software Year 2000 compliant. Except as disclosed in a GMHC SEC
Document or in the Disclosure Schedule, to GMHC's knowledge GMHC and its
subsidiaries have not incurred, and do not expect to incur, significant
operating expenses or been required, or expect to be required, to invest
heavily in computer systems improvements to be Year 2000 compliant, and
business operations have not been disrupted and, to GMHC's knowledge, its
customers and franchisees have not experienced any material interruption of
service as a result of making such software Year 2000 compliant. The
Disclosure Schedule identifies all outstanding Year 2000 compliance problems
known to GMHC relating to its software (including, without limitation,
software provided or delivered to customers or franchisees), with a correct
and materially complete statement of the status of GMHC's efforts to correct
such problems. "Year 2000 compliant" means, with respect to GMHC's
information technology, the information technology is designed to be used
prior to, during and after the calendar Year 2000 A.D., and the information
technology used during each such time period will accurately receive, provide
and process date/time data (including, without limitation, calculating,
comparing and sequencing) from, into and between the 20th and 21st centuries,
including the years 1999 and 2000, and leap-year calculations and will not
materially malfunction, cease to function, or provide invalid or incorrect
results as a result of date/time data, to the extent that other information
technology, used in combination with the information technology being
acquired, properly exchanges date/time data with it. "Information
technology" means computer software, computer firmware, computer hardware
(whether general or specific purpose), and other similar or related items of
automated, computerized or software system(s) that are used or relied on by
GMHC and its subsidiaries and franchisees in the conduct of their business.
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3.24 GUARANTIES; POWERS OF ATTORNEY. Except as set forth in the
Disclosure Schedule, neither GMHC nor any of its subsidiaries is a guarantor
or otherwise liable for any liability or material obligation (including
without limitation any indebtedness) of any other Person. To GMHC's
knowledge, there are no outstanding powers of attorney executed on behalf of
GMHC.
3.25 BROKERS. No broker, investment banker, financial advisor, or
other Person, other than Green Manning & Bunch, LTD., the fees and expenses
of which will be paid by GMHC, is entitled to any broker's, finder's,
financial advisor's, or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of GMHC. GMHC has provided QL 3000 true and correct copies
of all agreements between GMHC and Green Manning & Bunch, LTD.
3.26 DISCLOSURE. None of the representations and warranties made by
GMHC in this Agreement contains any untrue statement of a material fact or
omits a material fact necessary to make each statement contained therein not
misleading. To GMHC's best knowledge, neither GMHC nor any responsible
officer or director of GMHC has intentionally concealed any fact known by
such Person to have a Material Adverse Effect.
3.27 TRUE AT CLOSING. The representations, warranties, covenants and
agreements of GMHC set forth in this Article 3, and made to third parties in
connection with the transactions contemplated in this Agreement, are and will
be true both on the date of this Agreement and on and as of the Closing,
except for representations, warranties, covenants and agreements made as of a
specific date, which shall be true as of such specific date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF QL 3000
QL 3000 represents and warrants to GMHC as follows:
4.1 CORPORATE EXISTENCE AND AUTHORITY. QL 3000 is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Florida. QL 3000 has the full corporate power and authority to enter into
this Agreement and carry out its terms. QL 3000 has taken all corporate
action necessary to authorize the execution, delivery, and performance of
this Agreement. This Agreement has been duly and validly executed and
delivered by QL 3000 and is binding upon and enforceable against QL 3000 in
accordance with its terms.
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4.2 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of
this Agreement by QL 3000 nor the consummation of the transactions
contemplated hereby will:
(a) violate or conflict with any provision of the charter or
bylaws of QL 3000;
(b) violate any law, judgment, order, injunction, decree, rule,
regulation, or ruling of any Governmental Entity applicable to QL 3000,
except as such would not individually or in the aggregate prevent QL 3000
from performing its obligations under this Agreement and consummating the
transactions contemplated hereby; or
(c) require any notices to or consent of any third party,
including without limitation any Governmental Entity, except where the
failure to obtain such consents, approvals or authorizations would not
prevent or delay consummation of the Offer or the Merger or otherwise
prevent QL 3000 from performing its obligations under this Agreement.
4.3 LEGAL PROCEEDINGS. There is neither pending nor, to the best
knowledge of QL 3000, threatened by or against QL 3000 any legal action,
claim, arbitration, investigation, or administrative proceeding before any
Governmental Entity that could enjoin or restrict the right or ability of QL
3000 to perform its obligations under this Agreement and, to the best
knowledge of QL 3000, there is no basis for any such claim, litigation,
proceeding, or investigation.
4.4 PROXY STATEMENT. The information supplied by QL 3000 for
inclusion in the Proxy Statement to be sent to the stockholders of GMHC in
connection with the Stockholders' Meeting will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of GMHC or, at the time of the Stockholders' Meeting, contain
any statement which, at such time and in light of the circumstances under
which it is made, is false or misleading with respect to any material fact,
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not false or misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meeting which shall have become
false or misleading; PROVIDED, HOWEVER, that QL 3000 makes no representation
or warranty with respect to information supplied by GMHC for inclusion in any
of the foregoing documents.
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ARTICLE 5
COVENANTS
5.1 CONTINUATION OF BUSINESS. From and after the execution date of
this Agreement until Closing, GMHC covenants and agrees to use its best
efforts to and shall cause its subsidiaries to: (i) keep the business and
organization of GMHC and its subsidiaries intact until the Closing; and (ii)
carry on the business of GMHC and its subsidiaries in its usual and ordinary
course of business and in a manner consistent with past practice until
Closing. Without limiting the generality of the foregoing, except as
expressly provided to the contrary in this Agreement or with the prior
written consent of QL 3000, until the Closing, GMHC covenants and agrees that:
(a) GMHC and its subsidiaries will not declare, pay, or set aside
for payment any dividend or other distribution of money or property in
respect of its capital stock;
(b) GMHC and its subsidiaries will not issue any shares of its
capital stock (except upon the valid exercise of currently outstanding
options under the Stock Option Plans, or currently outstanding warrants),
or issue or sell any securities convertible into, or exchangeable for,
options or warrants to purchase, or rights to subscribe to, any shares of
its capital stock or subdivide or in any way reclassify any shares of its
capital stock, or repurchase, reacquire, cancel, or redeem any such shares;
(c) GMHC and its subsidiaries will use their best efforts to
ensure that (i) the assets, property and rights now owned by GMHC and its
subsidiaries will be used, preserved, and maintained, as far as
practicable, in the ordinary course of business, to the same extent and in
the same condition as said assets, property, and rights are on the date of
this Agreement, and no unusual or novel methods of manufacture, purchase,
sale, management, or operation of said properties or business or
accumulation, disposition, or valuation of inventory will be made or
instituted; (ii) GMHC will not encumber any of its material assets or make
any material commitments relating to such assets, property, or business,
except in the ordinary course of its business. GMHC will use its
commercially reasonable best efforts to ensure that GMHC and its
subsidiaries will pay all debts when due in the usual course of business;
(d) GMHC will use its best efforts to ensure that it and its
subsidiaries will comply in all material respects with all statutes, laws,
ordinances, rules, and regulations applicable to it in the ordinary course
of business;
(e) GMHC will use its best efforts to ensure that it and its
subsidiaries will keep or cause to be kept the Policies (or substantial
equivalents) in such
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amounts duly in force until the Closing Date and will
give QL 3000 notice of any material change in the Policies;
(f) GMHC or its subsidiaries will not incur additional debt
(including without limitation obligations under leases for real or personal
property whether or not required to be capitalized under generally accepted
accounting principles), incur or increase any obligation or liability
(fixed, contingent, or other, including without limitation liabilities as a
guarantor or otherwise with respect to obligations of others) except in
the ordinary and usual course of its business and consistent with past
practices, forgive or release any material debt or claim, give any waiver
of any right of material value, or voluntarily suffer any extraordinary
loss;
(g) GMHC or its subsidiaries will not make any payment to
discharge or satisfy any lien or encumbrance or pay any obligation or
liability (fixed or contingent) other than (i) current liabilities
(including the current portion of any long-term liabilities) included in
the financial statements contained in the GMHC SEC Documents and (ii)
current liabilities incurred or maturing in the ordinary course of business
since the date of the current balance sheet most recently filed as part of
a GMHC SEC Document or (iii) payments under its revolving credit facility
with Citibank N.A. made in the ordinary course of business and consistent
with past practices; provided, however, that notwithstanding anything in
this Agreement to the contrary, GMHC may pay any legal, accounting or
investment banking fees relating to this Agreement and the transactions
contemplated hereby;
(h) GMHC or its subsidiaries will not acquire any assets other
than assets acquired in the ordinary and usual course of its business and
consistent with past practices;
(i) GMHC or its subsidiaries will not purchase or otherwise
acquire, or agree to purchase or otherwise acquire, any debt or equity
securities of any Person other than equity securities issued by a money
market fund registered as an investment company under the Investment
Company Act of 1940;
(j) GMHC or its subsidiaries will not enter into any transaction
or contract or make any commitment to do the same, except in the ordinary
and usual course of business and not requiring the payment in any case of
an amount in excess of $10,000 annually and will promptly advise QL 3000 in
writing of any written proposal or formal negotiations or discussions
relating to any such transaction, contract or commitment;
(k) GMHC or its subsidiaries will not increase the wages,
salaries, compensation, pension, or other benefits payable, or to become
payable by them, to any of their officers, employees, or agents, including
without limitation any bonus payments or severance or termination pay,
other than increases in wages and
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salaries required by employment arrangements existing on the execution
date of this Agreement or otherwise in the ordinary and usual course of its
business;
(l) GMHC or its subsidiaries will not implement or agree to any
implementation of, or amendment or supplement to, any employee profit
sharing, stock option, stock purchase, pension, bonus, commission,
incentive, retirement, medical reimbursement, life insurance, deferred
compensation, severance pay, or any other employee benefit plan or
arrangement;
(m) GMHC or its subsidiaries will not change its accounting
methods, policies or practices and will maintain its books and records in
accordance with Generally Accepted Accounting Principles;
(n) When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any Contract
to which GMHC or its subsidiaries is a party or by which either is bound,
GMHC will use its best efforts to obtain such consent on terms and
conditions not materially less favorable than those in effect on the
execution date of this Agreement;
(o) GMHC and its subsidiaries will pay and discharge all taxes,
assessments, governmental charges, and levies imposed upon it, its income
or profits, or upon any property belonging to it, in all cases before the
date on which penalties attach thereto; and
(p) GMHC and its subsidiaries will not amend their respective
Articles of Incorporation or Bylaws.
5.2 NO SOLICITATION. Until such time, if any, as this Agreement is
terminated pursuant to Article 7, neither GMHC nor any of its subsidiaries
will, directly or indirectly, through an officer, director, agent or
otherwise, (i) solicit or initiate, directly or indirectly, or encourage
submission of inquiries, proposals, or offers from any potential purchaser
(other than QL 3000) relating to the disposition of all or any assets of GMHC
or any of its subsidiaries (other than sales of inventory in the ordinary
course of business and collection of accounts and notes receivable), or the
sale of any securities of GMHC or any of its subsidiaries or any merger,
consolidation, business combination, or similar transaction involving GMHC or
any of its subsidiaries (or any other transaction, such as option or
management agreements, that could have a similar economic result) or (ii)
participate in any discussion or negotiations regarding, or furnish any
person any information with respect to, the disposition of the assets or any
securities of GMHC or any of its subsidiaries or any part thereof or any
merger, consolidation, business combination, or similar transaction involving
GMHC or any of its subsidiaries (or any other transaction, such as option or
management agreements, that could result in a similar economic result);
provided, however, that in connection with any proposal relating to any
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of the foregoing, GMHC may, to the extent required by fiduciary obligations
as advised by counsel, participate in any discussions or negotiations
regarding, and may furnish to any other person information with respect to,
any of the foregoing. GMHC shall immediately advise QL 3000 of, and
communicate the terms of, any such inquiry or proposal GMHC may receive.
5.3 ACCESS. For the period up to and including the Closing Date, GMHC
will provide, and cause each GMHC subsidiary to provide, to QL 3000 and its
authorized agents reasonable access to all of their physical assets,
facilities, financial information, production records, contracts and other
corporate records and documents as QL 3000 deems reasonably necessary,
provided that such activities do not unreasonably interfere with or hinder
the business or operation of GMHC. QL 3000 will have reasonable access
during normal working hours to all GMHC and GMHC subsidiary premises,
properties, and facilities and will be allowed to meet with their management
personnel, employees, and any outside consultants, including without
limitation auditors and accountants, investment and other bankers, tax and
financial advisors, and environmental consultants. In addition, GMHC will
exercise its best efforts to make available to QL 3000 any items, agreements
and materials as may be reasonably requested by QL 3000 or its lender in
connection with QL 3000's financing of the Merger and refinancing of GMHC's
debt, including but not limited to copies of all leases, estoppel letters and
consents of landlords, franchisees and other parties, subordination and
attornment agreements, supply agreements, non-disturbance agreements and
franchise agreements.
5.4 OTHER GOVERNMENT CONSENTS. Promptly following the execution of
this Agreement, the parties will proceed to prepare and file with the
appropriate Governmental Entities any requests for approval or waiver, if
any, that are required from Governmental Entities in connection with the
transactions contemplated by this Agreement, and the parties will diligently
and expeditiously prosecute and cooperate fully in the prosecution of such
requests for approval or waiver and all proceedings necessary to secure such
approvals and waivers.
5.5 BEST EFFORTS; NO INCONSISTENT ACTION. Subject to the terms and
conditions hereof, and to the fiduciary duties of the GMHC Board under
applicable law as advised by counsel, each party will use its best efforts to
effect the transactions contemplated by this Agreement and to fulfill the
conditions to the obligations of the opposing parties set forth in Article 6
of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the
consummation of the transactions contemplated by this Agreement without legal
authority or basis, except that nothing in this Section 5.5 will limit the
rights of the parties under Article 6 of this Agreement.
5.6 CHANGED CIRCUMSTANCES. Each of GMHC and QL 3000 will notify the
other party promptly of any fact or occurrence between the date of this
Agreement and the Closing Date of which it becomes aware which makes any of
its
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representations contained in this Agreement untrue or causes any breach of
its obligations under this Agreement.
5.7 FEES AND EXPENSES. All fees and expenses incurred in connection
with the Merger, this Agreement, and the transactions contemplated by this
Agreement will be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
5.8 PRESS RELEASES. No press releases or other public announcements
or disclosure of information to any third party concerning the transactions
contemplated by this Agreement may be made by either party without the prior
written consent of the other party, which consent will not be unreasonably
withheld; PROVIDED, HOWEVER, that nothing in this provision will prevent a
party from making such releases or announcements as are necessary for a party
to satisfy its legal obligations or the requirements of applicable law, but
in any such case the affected party will promptly notify the other party.
5.9 INDEMNIFICATION.
(a) From and after the Effective Time, QL 3000 shall, and
shall cause Newco to indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of GMHC and its subsidiaries
(the "Indemnified Parties") against all losses, claims, damages, expense or
liabilities arising out of or related to actions or omissions or alleged
actions or omissions occurring at or prior to the Effective Time (i) to the
full extent permitted by Utah law or, if the protection afforded thereby to
an Indemnified Party are greater, and (ii) to the same extent and on the same
terms and conditions (including with respect to the advancement of expenses)
provided for in GMHC's Articles of Incorporation and By-Laws and agreements
in effect at the date hereof (to the extent consistent with applicable law),
which provisions shall survive the Merger and continue in full force and
effect after the Effective Time. Without limiting the foregoing, (i) QL 3000
shall, and shall cause Newco to, periodically advance expenses (including
attorney's fees) as incurred by an Indemnified Party with respect to the
foregoing to the full extent permitted under applicable law, and (ii) any
determination required to be made with respect to whether an Indemnified
Party shall be entitled to indemnification shall, if requested by such
Indemnified Party, be made by independent legal counsel selected by Newco and
reasonably satisfactory to such Indemnified Party.
(b) This Section 5.9 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit GMHC, the Indemnified
Parties and Newco, shall be binding on all successors and assigns of QL 3000
and Newco and shall be enforceable by the Indemnified Parties.
5.10 FINANCING. QL 3000 shall use its best efforts to cause CSFC
Retail Energy Finance or another lender to issue a bona fide commitment
letter in an amount not
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less than $11,000,000 within 60 days from the date of execution of this
Agreement. On or prior to the Closing Date, QL 3000 shall use its best
efforts to cause CSFC Retail Energy Finance or another lender and Exxon
Company or another supplier or equity or debt investor to advance an amount
not less than $11,000,000 and $1,500,000, respectively, for the purpose of
completing the Merger. On or prior to the Closing Date, QL 3000 or an
affiliated company shall use its best efforts to sell and issue not less than
$4,000,000 of equity securities of such company, for the purpose of
completing the Merger.
ARTICLE 6
CONDITIONS TO THE PARTIES' OBLIGATIONS
The obligations of each party to consummate the Merger are subject to
the conditions set forth in Sections 6.1 - 6.6, any of which may be waived by
QL 3000 and GMHC. The obligations of QL 3000 are subject to Sections 6.7,
6.8 and 6.9.
6.1 GOVERNMENTAL AUTHORIZATIONS. Each of the parties will have
obtained all authorizations, consents, and approvals of all governmental
agencies and authorities required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement, in a form
satisfactory to each of QL 3000 and GMHC in its reasonable discretion.
6.2 GMHC STOCKHOLDER APPROVAL. If necessary to approve the Merger
under applicable law, this Agreement and the Merger shall have been duly
adopted and approved, at a duly called and held Stockholders' Meeting (or by
action in writing, if appropriate), acting in accordance with applicable law
and the Articles of Incorporation and Bylaws of GMHC, by the requisite vote
of the holders of the Shares, the Preferred Shares and any other capital
shares of GMHC ("Stockholder Approval").
6.3 NO PROHIBITIONS. There has not been promulgated or issued a law,
statute, rule, regulation, decree, order, injunction or ruling by any
Governmental Entity that remains in effect and prohibits, restrains, enjoins
or restricts the consummation of the Merger.
6.4 NO PROCEEDINGS. No action, suit or other proceeding is pending
against any party to this Agreement to prohibit, restrain, enjoin, restrict
or otherwise prevent the consummation of the transactions contemplated by
this Agreement.
6.5 REPRESENTATIONS AND WARRANTIES. With respect to the obligations
of each party's representations and warranties to the other party, the
representations and warranties shall be true and correct as of the date of
this Agreement and as of the Effective Date.
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6.6 FAIRNESS OPINIONS. A fairness opinion relating to the Merger
shall have been issued by Green Manning & Bunch and shall not have been
withdrawn or materially modified.
6.7 OTHER CONSENTS. GMHC shall have obtained and provided to QL 3000
and/or its lender all authorizations, agreements, consents and approvals of
third parties, required to be obtained to permit the consummation of the
transactions contemplated by this Agreement, under any contract, lease,
instrument or other document to which GMHC or any of its subsidiaries is a
party or by which GMHC or any of its subsidiaries is bound or in connection
with QL 3000's financing of the Merger or refinancing of GMHC's debt except
such authorizations, agreements, consents and approvals, the failure of which
to obtain would not have a Material Adverse Effect.
6.8 DISSENTING STOCKHOLDERS. As of the Effective Date, the total
number of Dissenting Shares shall be less than 20% of the total outstanding
Shares.
6.9 COMPLETION OF FINANCINGS. QL 3000 shall have completed debt
financings with CSFC Retail Energy Finance or another lender in an amount not
less than $11,000,000 and Exxon Company or another supplier or equity or debt
investor in an amount not less than $1,500,000 and equity financing of not
less than $4,000,000.
ARTICLE 7
TERMINATION
7.1 TERMINATION BY QL 3000 AND/OR GMHC. This Agreement may be
terminated without further liability at any time before the Closing Date:
7.1.1 MUTUAL CONSENT. By mutual consent of QL 3000 and GMHC; or
7.1.2 INJUNCTION OR RESTRAINT. By either QL 3000 or GMHC, if any
Governmental Entity has promulgated or issued a law, statute, rule,
regulation, decree, order, injunction, or ruling or taken any other action
prohibiting, restraining, enjoining, restricting or otherwise prohibiting the
Offer or the Merger, that has become final and nonappealable.
7.2 TERMINATION BY QL 3000. QL 3000, if not then in default, may
terminate this Agreement at any time before the Closing Date upon written
notice to GMHC of the occurrence of a breach by GMHC of one or more of its
representations or warranties or a default in the observance or performance
of one or more of its covenants or agreements under this Agreement, which
breach or default is not cured within ten (10) days after GMHC has notice
thereof, except for breaches and defaults which, individually or in the
aggregate, would not have a Combined Material Adverse Effect or materially
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impair the ability of the parties to consummate the transactions contemplated
by the Agreement.
7.3 TERMINATION BY GMHC.
7.3.1 GMHC, if not then in default, may terminate this Agreement
at any time before the Closing Date upon written notice to QL 3000 of the
occurrence of a breach by QL 3000 of one or more of its representations or
warranties or a default in the observance or performance of one or more of
its covenants or agreements under this Agreement, which default is not cured
within ten (10) days after QL 3000 has notice thereof, except for defaults
which, individually or in the aggregate, would not materially impair the
ability of the parties to consummate the transactions contemplated by this
Agreement.
7.3.2 GMHC may terminate this Agreement at any time before the
Closing Date upon written notice to QL 3000 if (i) the Effective Time has not
occurred within 120 days after the execution of this Agreement; or (ii) QL
3000 has not received and provided GMHC with a copy of a bona fide commitment
letter from CSFC Retain Energy Finance or another lender with respect to the
financing of the Merger Consideration within 60 days after the execution of
this Agreement; or (iii) CSFC Retail Energy Finance or such other lender
withdraws its commitment letter after such commitment letter has been issued
and no other commitment letter has been issued.
7.3.3 GMHC may terminate this Agreement at any time before the
Closing Date upon written notice to QL 3000 if prior to the Closing Date, any
person has made a bona fide proposal relating to an acquisition transaction
relating to GMHC or the Shares, or has commenced a tender or exchange offer
for the Shares and the Board of Directors of GMHC determines in good faith
(i) after consultation with its financial advisors, that such transaction
constitutes a better offer than terms of Merger contemplated hereby and (ii)
after consultation with legal counsel, that failure to approve such proposal
and terminate this Agreement could reasonably be expected to result in a
breach of fiduciary duties of the Board of Directors of GMHC; PROVIDED,
HOWEVER, that notwithstanding anything in this Agreement to the contrary, the
termination of this Agreement by GMHC pursuant to this Section 7.3.3 shall
not be deemed to violate any other obligations of GMHC under this Agreement.
7.4 PROCEDURE; EFFECT OF TERMINATION. If either QL 3000 or GMHC
elects to terminate this Agreement pursuant to this Article 7, the
terminating party will promptly give written notice thereof to the other
party. In the event of termination pursuant to this Article 7, the parties
will be released from all liabilities and obligations under this Agreement,
other than the obligations under Section 5.8 and except that nothing herein
shall relieve any party from liability for damages to the extent arising from
a breach of this Agreement before termination.
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ARTICLE 8
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties, and covenants in this Agreement will not survive
the Effective Time, and shall terminate at the Effective Time or upon
termination of this Agreement pursuant to Section 7.1. This Section 8.1 will
not limit any covenant or agreement of the parties that by its terms provides
for performance after the Effective Time or such termination.
8.2 FURTHER ACTION. GMHC and QL 3000 will execute any documents and
take any additional action reasonably required to fully implement this
Agreement.
8.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding among GMHC and QL 3000 regarding the subject matter hereof
and thereof and supersedes and replaces all prior or contemporaneous
negotiations, representations, or agreements, written or oral.
8.4 ASSIGNMENT. This Agreement may not be assigned by either party by
operation of law or otherwise without the prior written consent of the other
party, except that QL 3000 may assign all or any of its rights and
obligations to any wholly owned subsidiary or other affiliate of QL 3000;
PROVIDED, HOWEVER, that no such assignment shall relieve the assigning party
of its obligations hereunder if the assignee does not perform the
obligations. An Affiliate of a person shall include any other person
controlling, controlled by or under other common control with such person.
8.5 BINDING EFFECT; NO THIRD PARTY BENEFIT. This Agreement will inure
to the benefit of and be binding upon each of the parties and their
respective successors and assigns, subject to the restrictions on assignment
contained in Section 8.4. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give to any Person other than
the parties to this Agreement any rights or remedies under or by reason of
this Agreement or any transaction contemplated by it.
8.6 WAIVER. Failure of any party at any time to require performance
of any provision of this Agreement will not limit such party's right to
enforce such provision, nor will any waiver of any breach of any provision of
this Agreement constitute a waiver of any succeeding breach of such provision
or a waiver of such provision itself. Any waiver of any provision of this
Agreement will be effective only if set forth in writing and signed by the
party to be bound.
8.7 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of Florida.
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8.8 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any Person or circumstance is to any extent held to be
invalid or unenforceable, the remainder of this Agreement and the application
of such term or provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable will not be affected thereby, and
each term or provision of this Agreement will be valid and enforceable to the
fullest extent permitted by law.
8.9 TIME OF ESSENCE. GMHC and QL 3000 hereby acknowledge and agree
that time is strictly of the essence with respect to each and every term,
condition, obligation, and provision of this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which taken together
will constitute one and the same instrument, binding on the parties. If this
Agreement is executed in counterparts, each party will transmit by facsimile
a copy of the signed counterpart upon execution and will cause an executed
original counterpart to be transmitted by courier service to the other
parties.
8.11 AMENDMENTS. This Agreement may not be modified or amended except
by the written agreement of GMHC and QL 3000. This Agreement may not be
terminated other than pursuant to Article 7 except by the written agreement
of GMHC and QL 3000. A party may waive one or more of its rights under this
Agreement only in a written instrument signed by the party.
8.12 AUTHORITY. The person executing this Agreement on behalf of each
party warrants that she/he has the authority to execute this Agreement and to
so bind that party as provided in this Agreement.
8.13 NOTICES. All notices or other communications required or
permitted under this Agreement must be in writing and must be personally
delivered, sent by registered or certified mail, postage prepaid, return
receipt requested, or sent by facsimile. Any notice, if mailed, will be
deemed given when received; any notice, if transmitted by facsimile, will be
deemed given when transmitted and electronically confirmed. Notices will be
given to the following Persons:
To QL 3000: QL 3000, Inc.
9551 Baymeadows Road
Jacksonville, Florida 32256
Attention: David Plyler
Telephone: (904) 730-2660
Facsimile No.: (904) 733-6619
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With a copy to: Smith Hulsey & Busey
1800 First Union Bank Tower
225 Water Street
Jacksonville, Florida 32202
Attention: John R. Smith, Jr., Esq.
Telephone: (904) 359-7700
Facsimile No.: (904) 359-7712
To GMHC: Grease Monkey Holding Corporation
633 17th Street, Suite 400
Denver, Colorado 80202
Attention: James Wallace
Telephone: (303) 295-0565
Facsimile No.: (303) 295-0565
With a copy to: Otten, Johnson, Robinson, Neff & Ragonetti, P.C.
950 17th Street, 16th Floor
Denver, Colorado 80202
Attention: Douglas R. Wright, Esq.
Telephone: (303) 575-7571
Facsimile No.: (303) 825-6525
ARTICLE 9
DEFINITIONS
The following terms are defined in this Agreement in the sections
identified below:
<TABLE>
<CAPTION>
TERM DEFINITION SECTION
<S> <C>
Affiliate 8.4
Agreement Preamble
Certificate of Merger 1.4
Certificates 2.2.2
Closing and Closing Date 1.8
Code 3.14.1
Combined Material Adverse
Effect Introduction to Article 3
Contamination 3.13.1
Contracts 3.8
Copyrights 3.20
Disclosure Schedule Introduction to Article 3
Dissenting Stockholders 2.1.5
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION SECTION
<S> <C>
Dissenting Shares 2.1.5
Effective Date 1.4
Effective Time 1.4
Environmental Law 3.13.1
ERISA 3.16
ERISA Plans 3.16
GMHC Preamble
GMHC Board Recitals
GMHC Returns 3.14.1
GMHC SEC Document 3.5
Governmental Entity 3.2
Hazardous Substance 3.13.1
Information Technology 3.23
Intellectual Property Assets 3.20
IRS 3.16
Leased Properties 3.10
Leases 3.10
Licenses 3.12
Marks 3.20
Material Adverse Change Introduction to Article 3
Material Adverse Effect Introduction to Article 3
Material Properties 3.9
Material Properties and Assets 3.9
Merger Recitals
Merger Consideration 2.1.1
NOL 3.14.3
Patents 3.20
Paying Agent 2.2.1
Person 2.2.4
Policies 3.19
Preferred Shares 3.3
Proxy Statement 1.2.2
QL 3000 Preamble
Securities Act 3.5
Share, Shares 3.3
Stock Option Plans 2.3
Stockholder Approval 6.2
Stockholders' Meeting 1.2.2
Newco 1.5
Taxes 3.14.4
URBCA Recitals
Year 2000 Compliant 3.23
</TABLE>
37
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, effective
the day and year first written above.
QL 3000, INC. GREASE MONKEY HOLDING
CORPORATION
By By
------------------------------ ------------------------------
Name: Name:
----------------------- -------------------------
Title: Title:
---------------------- ------------------------
38
<PAGE>
FOR IMMEDIATE RELEASE NEWS
March 26, 1999 OTC-GMHC
GREASE MONKEY HOLDING CORPORATION SIGNS MERGER AGREEMENT
DENVER, Colorado -- Grease Monkey Holding Corporation (OTC - GMHC), announced
today that it signed a definitive merger agreement to be acquired by QL 3000,
Inc., a privately held company based in Jacksonville, Florida. The merger
agreement provides that each shareholder of Grease Monkey will receive $1.00
for each share of Grease Monkey common stock. Holders of Grease Monkey
preferred stock will receive the stated value of their preferred stock plus
all accrued and unpaid dividends.
QL 3000 must complete debt and equity financing to fund the merger
consideration. Grease Monkey may terminate the Merger Agreement if QL 3000
has not received a commitment letter for the debt financing by May 25, 1999.
In addition, completion of the merger is subject to regulatory and
shareholder approvals and certain other conditions. There can be no assurance
that such financing or approvals will be obtained.
Grease Monkey Holding Corporation is a Denver-based company that owns,
operates, leases, manages, and franchises automotive fast service lubrication
and oil change centers under the trade name, "Grease Monkey."
Statements contained in this press release that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties, which would cause actual results to differ
materially from estimated results. Such risks and uncertainties are detailed
in Grease Monkey's filings with the Securities and Exchange Commission.
###
CONTACT:
James Wallace, Chairman
303/295-0565
