U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
---------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-22132
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BUCKHEAD AMERICA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
DELAWARE 58-2023732
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
4243 DUNWOODY CLUB DRIVE, SUITE 200, ATLANTA, GEORGIA 30350
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(770) 393-2662
- --------------------------------------------------------------------------------
(Issuer's telephone number)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: April 30, 1997
Common stock, par value $.01 - 1,771,127 shares outstanding
-----------------------------------------------------------
Transitional Small Business Disclosure Format (Check one):
Yes No X
--- ---
1
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PART I - FINANCIAL INFORMATION
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
March 31, 1997 and 1996
(Unaudited)
2
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 1997
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents, including
restricted cash of $284,637 $ 1,878,401
Short-term investments 2,649,005
Current portions of notes receivable 731,143
Other current assets 666,317
------------
Total current assets 5,924,866
Noncurrent portions of notes receivable 398,703
Property and equipment, at cost, net of
accumulated depreciation 19,084,452
Other assets 2,103,557
------------
Total assets $ 27,511,578
============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 751,394
Current portions of notes payable 330,271
------------
Total current liabilities 1,081,665
Noncurrent portions of notes payable 12,019,991
------------
Total liabilities 13,101,656
------------
Minority interest in partnership 666,674
Shareholders' equity:
Common stock; par value $.01; 3,000,000
shares authorized; 1,817,977 shares issued
and 1,771,127 shares outstanding 18,180
Additional paid-in capital 6,288,574
Retained earnings 7,826,315
Treasury stock (46,850 shares) (389,821)
------------
Total shareholders' equity 13,743,248
------------
Total liabilities and shareholders' equity $ 27,511,578
============
See accompanying notes to condensed consolidated financial statements.
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BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three Months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
Revenues:
Hotel revenues $2,288,172 2,880,764
Interest income:
Notes receivable 19,555 88,570
Investments 543,024 121,456
---------- ----------
Total interest income 562,579 210,026
---------- ----------
Other income 954,677 356,461
---------- ----------
Total revenues 3,805,428 3,447,251
---------- ----------
Expenses:
Hotel operations 1,632,260 1,890,179
Depreciation and amortization 190,300 237,100
Other operating and administrative 611,578 434,853
Interest 257,048 382,014
---------- ----------
Total operating, administrative,
and interest expenses 2,691,186 2,944,146
---------- ----------
Income before income taxes 1,114,242 503,105
Provision for income taxes -- --
---------- ----------
Net income $1,114,242 503,105
========== ==========
Net income per common and common
equivalent share $ .61 .28
===== ===
Weighted average number of common
and common equivalent shares used
to calculate net income per share 1,821,994 1,803,212
========== ==========
See accompanying notes to condensed consolidated financial statements.
4
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BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
Cash flows from operating activities:
Net income $ 1,114,242 503,105
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 190,300 237,100
Gain on note sale (800,000) --
Other, net (214,387) (225,742)
----------- -----------
Net cash provided by
operating activities 290,155 514,463
----------- -----------
Cash flows from investing activities:
Note receivable principal receipts 852,660 1,844,645
Originations of notes receivable (250,000) --
Hotel assets acquired -- (2,965,000)
Capital expenditures (513,855) (279,448)
Other, net (233,532) (37,504)
----------- -----------
Net cash used by
investing activities (144,727) (1,437,307)
----------- -----------
Cash flows from financing activities:
Repayments of notes payable (68,697) (1,781,050)
Additional borrowings -- 2,330,000
----------- -----------
Net cash provided (used) by
financing activities (68,697) 548,950
----------- -----------
Net increase (decrease) in cash and
cash equivalents 76,731 (373,894)
Cash and cash equivalents at beginning
of period 1,801,670 3,172,661
----------- -----------
Cash and cash equivalents at end of period $ 1,878,401 2,798,767
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
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BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1997 and 1996
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial
statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for
interim periods are not necessarily indicative of the results that
may be expected for a full year or any other interim period. For
further information, see the consolidated financial statements
included in the Company's Form 10-KSB for the year ended December
31, 1996.
(2) Subsequent Event
----------------
On May 8, 1997, the Company completed its acquisition of Lodgekeeper
Group Inc. of Prospect, Ohio ("Lodgekeeper"). The purchase price
totaled approximately $6.5 million consisting primarily of cash of
$825,000, approximately 106,000 shares of common stock of the
Company, and the assumption of approximately $4.8 million of debt.
Lodgekeeper operates 18 hotels under long-term leases, holds
management contracts on five Country Hearth Inn hotels and owns one
independent hotel, among other assets. The acquisition will be
accounted for using the purchase method and Lodgekeeper's results of
operations will be included in the Company's subsequent financial
statements from the acquisition date.
6
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Item 2. Management's Discussion and Analysis.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION.
- -------------------------------------------------------
1996
- ----
The most significant event affecting the Company's financial condition during
the first quarter of 1996 was the acquisition of an 82-room hotel in Atlanta for
approximately $3 million. The acquisition was funded by $600,000 cash, issuance
of a $230,000 interest free short-term note, and a seller provided $2.1 million
(9.5%) first mortgage.
During 1996 and 1997, the Company spent approximately $800,000 in renovations
and refurbishments in converting the Atlanta hotel to a Country Hearth Inn.
Approximately half of these costs were financed through lease agreements.
Other first quarter 1996 events included the collection of $1.1 million on a
first mortgage note receivable which had been pledged to Trilon International.
These funds reduced the Company's net obligation to Trilon to approximately $1.5
million. The Trilon obligation was fully satisfied in the fourth quarter of
1996.
The Company also collected in full on a $730,000 short-term note related to the
development, conversion, and sale of a hotel property in Lake Park, Georgia. The
Company recognized a $130,000 first quarter profit as a result of converting
this property to a Country Hearth Inn.
The Company reduced its Orlando IRB obligation $400,000 using funds generated by
operations of the Orlando Country Hearth Inn. Such obligation was refinanced in
November 1996.
1997
- ----
The Company completed the renovations of the Atlanta, Georgia Country Hearth Inn
in January 1997. The Atlanta hotel was acquired in March 1996 (see above). The
Company completed the renovations of the Dalton, Georgia Country Hearth Inn in
February 1997 and also completed certain enhancements to the Orlando, Florida
Country Hearth Inn which were required under its debt obligation. Capital
expenditures on these three hotels during the first quarter of 1997 aggregated
approximately $500,000 and were funded from available cash and restricted funds.
The Company received $800,000 cash from the sale of a mortgage note in February
1997. The Company also received approximately $1.6 million cash from its
investment in IRB's which were called in February 1997. The majority of these
funds were reinvested in short-term government securities.
In March 1997, the Company announced that it had entered into two separate
agreements for the acquisition of hotels, hotel management contracts, and a
hotel management business. One agreement provides for the purchase of eight
Hatfield Inns located in Kentucky and Missouri (the "Hatfield Agreement"). The
Hatfield Agreement, if consummated, would require the assumption of
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approximately $7 million in debt and the issuance of $3 million of 10%
cumulative preferred convertible stock of the Company. The Company intends to
convert the properties to Country Hearth Inns; conversion costs are not expected
to be significant. The operations of the hotels are expected to service the debt
and the preferred stock requirements. The Hatfield Agreement is subject to
significant due diligence and other contingencies. The authorization to issue
preferred shares of the Company is subject to shareholder approval. Management
of the Company provides no assurances that the transaction will be completed or
that, if completed, the final terms will be the same as described above.
The second agreement was for the acquisition of Lodgekeeper Group Inc.
("Lodgekeeper"), a closely held concern that manages 24 hotels in Ohio, Indiana,
and Michigan. Lodgekeeper operates 18 hotels under long-term leases, holds
management contracts on five Country Hearth Inns, and owns one independent
hotel, among other assets. The transaction was completed in May 1997 (see note 2
to the accompanying condensed consolidated financial statements).
In February 1997, the Company completed the sale of its investment in Days Inns
Mortgage Trust ("DIMT"). The Company collected $100,000 from the sale; the gain
for financial reporting purposes had been recognized in 1996. The Company had
significant tax purpose net operating loss carryforwards associated with its
investment in DIMT. The Company had not recognized the benefits from these tax
purpose carryforwards since they were offset by tax purpose gains which would be
realized upon the dissolution of DIMT (i.e. these were timing differences
between financial and tax reporting). The Company continues to have unrecognized
net deferred tax assets of approximately $4 million which will be realized if
and to the extent the Company sustains continued profitable operations.
RESULTS OF OPERATIONS
- ---------------------
First Quarter of 1997 vs. First Quarter of 1996
- -----------------------------------------------
Hotel revenues and operating profits before interest and depreciation in the
first quarter of 1997 were reduced as a result of the fourth quarter 1996 sale
of the Company's Miami hotel. The Miami hotel contributed approximately $160,000
of net income to the Company's 1996 first quarter, but lost approximately
$80,000 during the remainder of 1996.
Excluding the impact of the Miami hotel, hotel revenues and operating profits
before interest and depreciation increased during the first quarter of 1997. The
revenue increase was primarily attributable to the acquisitions of the Atlanta
and Dalton hotels. Operating profits from the Orlando and Daytona Florida hotels
were comparable to 1996, and were comparatively negligible from the Atlanta and
Dalton hotels which just completed renovations. Operating profits from the
Company's Texas hotels tripled in the first quarter of 1997 vs. 1996 as they
completed their first full year as Country Hearth Inns.
Note receivable interest income continued to decline as a result of decreases in
the note receivable portfolio. As previously stated, management intends to shift
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financial resources to other assets, such as the hotel acquisitions previously
discussed. The first quarter of 1997 included investment income of approximately
$450,000 as a result of the IRB's which were called. As previously stated, these
funds have been reinvested.
Other income in 1996 included the $130,000 gain from the sale of the Lake Park
hotel and approximately $110,000 of income from changes in estimates of allowed
amounts of "Old Buckhead" claims. Further gains from these sources are not
expected. Other income in 1997 included the $800,000 note sale gain previously
discussed. Other income also included Country Hearth Inn franchise fees of
approximately $108,000 and $92,000 in the first quarters of 1997 and 1996,
respectively.
Depreciation and interest expense in 1997 were reduced as a result of the
previously discussed Miami hotel sale. Interest expense on each individual debt
obligation generally decreased as the principal balances were reduced. Interest
expense associated with the Orlando hotel increased as a result of the increased
principal balance resulting from its November 1996 refinancing. Proceeds from
the refinancing were used to pay off the Trilon obligation. Trilon interest
expense in the first quarter of 1996 amounted to $68,000. Interest expense in
future periods will increase as a result of the openings of the Atlanta and
Dalton hotels. Most of the Company's debt obligations are fixed rate, thus the
Company is not susceptible to a large amount of rate risk.
Other operating and administrative expenses increased approximately $175,000 in
the first quarter 1997 vs. 1996. These increases result primarily from personnel
additions associated with Country Hearth Inn franchising activities and
increased sales and marketing efforts. The Company has continued to invest
portions of its other income into the expansion of the Country Hearth Inn hotel
chain. Management expects to recover such investments from future franchising
income.
The Company's financial condition and results of operations in future
periods will be significantly impacted by the Lodgekeeper acquisition and the
Hatfield acquisition, if completed. The Company expects to report historical and
pro forma financial information relating to its acquisitions, as required, in
subsequent filings with the Commission.
9
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit Description
------- -----------
2.1* Stock Purchase Agreement dated as of March 7, 1997 amoug the
Registrant, The Lodge Keeper Group, Inc. ("LodgeKeeper") and
the Stockholders of LodgeKeeper.
2.2* Agreement of Merger dated as of March 11, 1997 among the
Registrant, BLM-RH, Inc., Hatfield Inns, LLC, Guy Hatfield
Dorothy Hatfield, and Hatfield Inns Advisors, LLC
(Incorporated herein by reference to Appendix B of the
Registrant's Preliminary Proxy Statement filed with the
Securities and Exchange Commission on April 25, 1997.)
3(i) Articles of Incorporation (Previously filed as Exhibit 3(i)
to the Registrant's Registration Statement on Form 10-SB
which became effective on November 22, 1993 and incorporated
herein by reference.)
3(i)(a) Certificate of Amendment of Certificate of Incorporation
(Previously filed as Exhibit 3(i)(a) to the Registrant's
December 31, 1994 Form 10-KSB and incorporated herein by
reference.)
3(ii) By-Laws - Amended and Restated as of June 27, 1994
(Previously filed as Exhibit 3(ii) to the Registrant's
December 31, 1994 Form 10-KSB and incorporated herein by
reference.)
27 Financial Data Schedule
- --------------
* In accordance with Item 601(b)(2) of Regulation S-K, the schedules have
been omitted and the Company undertakes to furnish supplementally a copy of any
omitted schedule to the commission upon request.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the
quarter for which this report is filed.
10
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Buckhead America Corporation
- ----------------------------
(Registrant)
Date: May 14, 1997 /s/ Douglas C. Collins
-------------- -------------------------------------------
Douglas C. Collins
President and Chief Executive Officer
Date: May 14, 1997 /s/ Robert B. Lee
-------------- -------------------------------------------
Robert B. Lee
Senior Vice President and
Chief Financial and Accounting Officer
11
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 7th day of March, 1997, by and among BUCKHEAD AMERICA
CORPORATION, a Delaware corporation ("Purchaser"), and shareholders set forth on
Exhibit 8.1, (hereinafter collectively referred to as "Seller").
WITNESSETH:
WHEREAS, Seller owns all of the issued and outstanding capital stock
("Stock") of The Lodge Keeper Group, Inc., an Ohio corporation, ("Company");
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Agreement to Purchase and Sell Stock. Subject to the terms
and conditions of this Agreement, each individual Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase from Seller, on the Closing Date,
all of the Stock which said Seller owns, free and clear of all security
interests, pledges, liens, encumbrances, charges, or restrictions on the
ownership, use, voting, transfer, receipt of dividends or other attributes of
ownership.
SECTION 1.2 Purchase Price for Stock.
(a) Payment. The purchase price for the Stock will be paid to
Seller by Purchaser as follows: (i) Nine Hundred Seventy-Five Thousand and
No/100 Dollars ($975,000.00) by cashier's checks, wire transfer or other good,
immediately available U.S. funds (the "Cash"); and (ii) Seller shall receive
Nine Hundred Seventy-Five Thousand and No/100 Dollars ($975,000.00) worth of
unregistered shares (the "Shares") of Purchaser's common stock, such Shares to
be represented by Seller's customary certificate for similar shares.
The number of Shares shall be determined by dividing $975,000.00 by the
"value" of the Shares. The "value" of the Shares shall be deemed to be the
greater of Purchaser's (i) per share "book value" or (ii) per share "market
value."
<PAGE>
As used herein, the term "book value" shall mean the net book value of
Purchaser as reflected on Purchaser's Form 10-Q or Form 10-KB filed with the
United States Securities Exchange Commission closest in time prior to Closing.
As used herein, the term "market value" shall mean the average selling
price of Purchaser's common stock on the NASDAQ national market system for the
period beginning ten (10) "business days" prior to Closing and terminating ten
(10) "business days" (as defined in Section 10.6 below) after Closing.
If (x) Purchaser's per share "market value" is less than $6.00 per
share, and (y) Purchaser's per share "book value" is greater than Purchaser's
per share "market value", then in calculating the "value" of the Shares,
Purchaser's per share "book value" shall be reduced by an amount equal to the
difference between $6.00 and Purchaser's per share "market value.
The Shares shall be registered under applicable federal and state
securities laws pursuant to that certain Registration Rights Agreement by and
between Seller and Purchaser, to be executed and delivered at Closing, the form
of which shall be mutually agreed upon by Seller and Purchaser.
(b) Adjustments to Purchase Price. The Purchase Price will be
reduced by an amount equal to the diminution in net worth of the Company as a
result of the transfer of the assets as set forth in Section 4.16 and said
reduction shall be taken 50/50 from the Shares and the Cash.
(c) Delivery of Cash and Stock. Purchaser shall deliver the
Cash and Stock to each Seller in the amounts set forth on Exhibit 1.2(c),
attached hereto and incorporated herein by this reference. The Cash shall be
delivered at Closing and the Shares shall be delivered twenty days after the
closing.
SECTION 1.3 Closing. The closing of the transactions contemplated in
this Agreement (the "Closing") shall take place at the offices of Arnall, Golden
& Gregory in Atlanta, Georgia on May 1, 1997 or such other date or place as
shall be mutually acceptable to the parties (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to the Purchaser to enter into this Agreement, each
Seller hereby jointly and severally represents and warrants to Purchaser (each
of which representation and warranty is material to and relied upon by
Purchaser) as follows:
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SECTION 2.1 Disclosure Schedule. Seller shall cause the Company to
deliver to Purchaser no later than fifteen (15) business days after the
execution of this Agreement by all parties hereto a schedule (the "Disclosure
Schedule") containing certain information regarding the Company and the
Subsidiaries (defined below) as indicated at various places in this Agreement.
The Disclosure Schedule shall be deemed for all purposes of this Agreement to
constitute an integral part of this Agreement and the representations and
warranties of Seller, contained herein.
SECTION 2.2 Incorporation and Qualification of the Company. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Ohio and has all corporate power and authority,
together with all material governmental licenses, authorizations, consents and
approvals, required to own, operate or lease the properties and assets now
owned, operated or leased by the Company and to carry on its business. The
Company is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties,
owned, operated or leased or the nature of its activities makes such
qualification necessary and where the failure to qualify would have a Material
Adverse Effect (defined below) upon the Company. All jurisdictions in which the
Company is qualified as a foreign corporation are set forth in Section 2.2 of
the Disclosure Schedule.
For purposes of this Agreement, "Material Adverse Effect" means a
material adverse effect on the condition (financial or otherwise), business,
assets, results of operations or prospects of the Company taken as a whole.
SECTION 2.3 Capital Stock of the Company. The authorized capital stock of the
Company consists of 10,000 shares and all of the issued and outstanding shares
of capital stock of the Company consists of 1,088.33 shares of Common Stock, no
par value per share. Each outstanding share of the Stock has been duly
authorized and validly issued, and is fully paid and non-assessable. Seller now
has, and will have on the Closing Date, good, valid and marketable title to the
Stock free and clear of any Stock Encumbrances (defined below). There are
outstanding (i) no shares of capital stock or other voting securities of the
Company except as set forth in this Section 2.3, (ii) no securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, (iii) no options (including employee stock options),
warrants or right of conversion or other rights, agreements, arrangements or
commitments obligating, or which may obligate, the Company to sell or issue any
additional shares of the Company's capital stock, (iv) no obligation of the
Company to issue any voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company and (v) no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company (the items in clauses (i), (ii), (iii),
(iv) and (v) being referred to collectively as the "Company Securities").* There
are no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any of the Company Securities. Upon Closing, Seller shall transfer to
Purchaser all right, title and interest in and
* except as otherwise set forth on Scheduls 2.3 of the Disclosure Schedule
-3-
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to the Stock free and clear of any Stock Encumbrances. As used in this
Agreement, "Stock Encumbrances" shall mean any security interest, pledge, lien,
charge, adverse claim of ownership or use, or any restriction on ownership, use,
voting, transfer or receipt of dividends, or any encumbrance of any kind.
SECTION 2.4 Subsidiaries and Other Business Entities.
(a) Section 2.4 of the Disclosure Schedule is a true, correct
and complete list of all corporations, limited liability companies,
partnerships, joint ventures or other business entities (collectively, the
"Subsidiaries") in which the Company owns, of record or beneficially, any direct
or indirect equity interest or any right, (contingent or otherwise) to acquire
the same.
(b) Section 2.4 of the Disclosure Schedule lists the name,
jurisdiction, date of incorporation, authorized stock and stock ownership of
each Subsidiary.
(c) Each Subsidiary (i) is a corporation duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, (ii) has all corporate power and authority,
together with all material governmental licenses, authorizations, consents and
approvals, required to own, operate or lease the properties and assets now
owned, operated or leased by such Subsidiary and to carry on its business in all
respects as currently conducted by such Subsidiary and (iii) is duly qualified
as a foreign corporation to do business and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary and where the
failure to qualify would have a Material Adverse Effect upon the Company or its
Subsidiaries.
(d) The Company or a Subsidiary owns all of the issued and
outstanding shares of capital stock of each Subsidiary and such shares are fully
paid and nonassessable. There are outstanding (i) no shares of capital stock or
other voting securities of any Subsidiary except as set forth in this Section
2.4(d), (ii) no securities of any Subsidiary convertible into or exchangeable
for shares of capital stock or voting securities of such Subsidiary, (iii) no
options (including employee stock options), warrants or rights of conversion or
any other rights, agreements, arrangements or commitments relating to any
subsidiary obligating a Subsidiary to issue additional shares of capital stock,
(iv) no obligation of any Subsidiary to issue any voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of such Subsidiary and (v) no equity equivalents, interests in the
ownership or earnings, or other similar rights of or with respect to any
Subsidiary (the items in clauses (i), (ii), (iii), (iv) and (v) being referred
to collectively as the "Subsidiary Securities") except as otherwise set forth on
Section 2.4(d)(v) of the Disclosure Schedule. There are no outstanding
obligations of any Subsidiary to repurchase, redeem or otherwise acquire any
Subsidiary Securities.
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SECTION 2.5 Authority of Seller; Enforceability. This Agreement has
been duly authorized, executed and delivered by the Seller, and this Agreement
(and the obligations of the Seller set forth herein) constitute the legal, valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, subject to the effect, if any, of bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and the effect, if any, of general principles of
equity.
SECTION 2.6 No Conflicts; Consents. Section 2.6 of the Disclosure
Schedule sets forth all of the consents, approvals, authorizations, filings,
notifications and other actions necessary to consummate all of the transactions
described herein. Assuming all consents, approvals, authorizations and other
actions described in Section 2.6 of the Disclosure Schedule have been obtained
and all filings and notifications listed in Section 2.6 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by Seller does not and will not:
(a) violate or conflict with the certificate of incorporation,
bylaws or other organizational documents of the Company;
(b) conflict with or violate any law, rule or regulation of,
or any order, writ, judgment, injunction, decree, stipulation, determination or
award entered by or with, any foreign federal, state or local governmental
authority, body, agency official, regulatory or administrative agency, body or
official, or governmental commission, court, tribunal, body, agency official or
arbitral body (singularly and collectively, the "Governmental Authority")
applicable to Seller or the Company or the business of the Company;
(c) conflict with, result in any breach of, constitute a
material default (or constitute an event which with the giving of notice or
lapse of time, or both, would become or result in a conflict, breach or default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of Contract (defined in Section 2.16 below), Lease (defined in
Section 2.15 below), agreement or obligation to which the Company or the Seller
is subject or bound, or result in the creation of any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or use or any encumbrance of
any kind (collectively, the "Encumbrance") on the stock or Company's assets.
SECTION 2.7 Corporate Records of the Company. The stock records and
minute book of the Company heretofore furnished to Purchaser by the Company
correctly show the total number of shares of its capital stock issued and
outstanding and all corporate action taken by the directors and shareholders of
the Company (including actions taken by consent without a meeting), and contain
true, correct and complete copies or originals of the certification of
incorporation and bylaws and all amendments thereto.
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SECTION 2.8 Financial Statements. Section 2.8 of the Disclosure
Schedule is true, correct and complete consolidated financial statements for the
fiscal years 1994, 1995, and 1996 and for the month ending December 31, 1996
(the "Financial Statements"), including a consolidated balance sheet (the
"Balance Sheet") as of December 31, 1996 (the "Balance Sheet Date") and
consolidated statements of income and retained earnings and cash flows for the
years then ended, together with the notes thereto for the Company. All of the
Financial Statements and the Balance Sheet (including any related notes and
schedules) have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the prior years of the Company and
present fairly the financial condition of the Company as of the respective dates
thereof and the results of its operations for the periods then ended.
All of the books and records of the Company have been
maintained in accordance with good business practice and are in all material
respects in accordance with all laws, regulations and other requirements
applicable to its business and operations.
SECTION 2.9 Absence of Certain Changes, Events and Conditions.
(a) Except as set forth on Section 2.9(a) of the Disclosure
Schedule, since the Balance Sheet Date, there has not been any material adverse
change in the condition (financial or otherwise) of the business or the
liabilities, assets, operations, results of operations, prospects or conditions
(financial or other) of the Company or its Subsidiaries.
(b) Except as set forth on Section 2.9(b) of the Disclosure
Schedule, since the Balance Sheet Date, the Company and the Subsidiaries have
operated their respective businesses in the ordinary course consistent with past
practice and the Company and the Subsidiaries have not (other than in the
ordinary course of business):
(i) permitted or allowed any of its assets to be
mortgaged, pledged or subjected to any Encumbrance;
(ii) written down, or failed to write down (in
accordance with generally accepted accounting principles, consistently
applied), or written up the value of any of its inventory or assets;
(iii) amended, terminated, cancelled or compromised
any claims or waived any other rights, or sold, transferred or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible
property);
(iv) disposed of or permitted to lapse any patent,
trademark, assumed name, service mark, trade name or copyright
application, registration or license to its business, or under which
the or the Subsidiaries has any right or license, or disclosed to
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any person any trade secret or process of its business, or under which
the Company or the Subsidiaries has any right or license;
(v) granted any general increase in the compensation
of the employees of the Company and the Subsidiaries (including,
without limitation, any such increase pursuant to any Plan, as defined
in Section 2.17), or established or increased or promised to increase
any benefits under any such Plan;
(vi) made any material changes in the customary
methods of operation of its business, including practices and policies
relating to leasing, purchasing, marketing or selling;
(vii) declared, made, set aside or paid any dividends
or other distributions (whether in cash, securities or other property)
to its stockholders with respect to the Stock, or redeemed any of its
capital stock;
(viii) incurred or assumed any indebtedness for
borrowed money or guaranteed any such indebtedness;
(ix) issued or sold any of its stock, notes, bonds or
other securities (including treasury shares), or any option, warrant or
other rights to purchase the same;
(x) sustained any damage, destruction or other
casualty loss (whether or not covered by insurance) affecting the
business or assets of the Company or the Subsidiaries which damage is
in excess of $5,000.00;
(xi) entered into any transaction, commitment,
contract or agreement relating to its assets or business (including the
acquisition or disposition of any assets) or the relinquishment of any
contract or other right;
(xii) (A) granted any severance or termination pay to
any director, officer or employee of the Company or the Subsidiaries,
(B) entered into any employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company, (C) increased benefits
payable under any existing severance or termination pay policies or
employment agreements or (D) increased compensation, bonus or other
benefits payable to directors, officers or employees of the Company;
(xiii) granted any option to purchase, or other right
to acquire, capital stock or any security or other instrument
convertible into capital stock of any class of the Company or the
Subsidiaries to any Person (defined below);
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(xiv) changed any method of accounting or accounting
practice (including in each case tax accounting), except for any such
change required by reason of a concurrent change in accordance with
generally accepted accounting principles and notice of which has been
given in writing to Purchaser;
(xv) entered into, extended, amended or terminated,
any contract, agreement, lease, franchise, permit or license or any
material term of any outstanding security of the Company or the
Subsidiaries;
(xvi) made any amendment to its certificate of
incorporation or bylaws;
(xvii) had any labor dispute or pending labor
negotiation, or any event that is expected to cause or to give rise to
any such labor dispute or negotiation, or any activity or proceeding by
a labor union or representative thereof to organize any employees of
the Company or the Subsidiaries, or any lockout, strike, slowdown, work
stoppage or threat thereof by or with respect to such employees;
(xviii) made any loan, advance or capital
contributions to or investment in any Person; and
(xix) agreed, whether in writing or otherwise, to
take any of the actions specified in this Section 2.9(b).
As used in this Agreement, "Person" means an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
SECTION 2.10 Accounts Receivable. All accounts receivable existing on
the Closing Date will be valid obligations of the respective makers thereof and
not subject to any offset or counterclaim.
SECTION 2.11 Tangible Personal Property. Section 2.11 of the Disclosure
Schedule lists the machinery, equipment, tools, parts, supplies, furniture,
fixtures, personalty, and other tangible personal property (the "Tangible
Personal Property") used in the Company's or the Subsidiaries's respective
businesses. The Tangible Personal Property is in good operating condition and
repair, normal wear and tear excepted. Except as set forth in Section 2.11 of
the Disclosure Schedule, the Company and the Subsidiaries have good and
indefeasible title to and own the Tangible Personal Property free and clear of
all Encumbrances or similar rights of third parties. The Tangible Personal
Property of the Company and the Subsidiaries is being maintained at normal and
customary levels adequate for the conduct of the business of the Company and the
Subsidiaries as currently conducted and includes all Tangible Personal
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Property and assets applicable to or used in connection with the business of the
Company and the Subsidiaries.
SECTION 2.12 Inventory. *the Company does not currently, and will not
as of the Closing Date, own any inventory.
SECTION 2.13 Intellectual Property. (a) Section 2.13 of the Disclosure
Schedule lists any trademark, service mark, registration thereof or application
for registration therefor, (domestic and foreign) trade name, invention, patent,
patent application, trade secret, know-how, copyright, copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual property (including without limitation any such right in computer
software) owned by the Company or the Subsidiaries or used in the conduct of the
Company's or the Subsidiaries respective businesses (collectively, the
"Intellectual Property"). Other than as set forth on Section 2.13 of the
Disclosure Schedule, the Company is the sole owner of all such Intellectual
Property and has the sole and exclusive right to use same. The consummation of
the transactions contemplated hereby will not alter or impair the Company's or
the Subsidiaries' rights to own and use the Intellectual Property. The
Intellectual Property is sufficient for the conduct of the business of the
Company and the Subsidiaries as currently conducted.
SECTION 2.14 Real Property. Section 2.14 of the Disclosure Schedule
sets forth all of the real property in which the Company or any Subsidiary has
any interest except for the interests described in Section 2.15 of the
Disclosure Schedule (the "Real Property"). Section 2.14 also sets forth all of
the monetary and non-monetary encumbrances, restrictions, and obligations
encumbering said Real Property and true, correct and complete copies of same
have been made available to Purchaser prior to the date hereof.
SECTION 2.15 Leases.
(a) Other than the Real Property, neither the Company nor any
Subsidiary holds any interest in real property (including, but not limited to,
any interest as a fee owner or any interest as lessor, lessee, sublessor,
sublessee, assignor, assignee or guarantor or other surety) except as described
in Section 2.15(a) of the Disclosure Schedule (the "Leases"), and such Schedule
specifies the name of the lessor, sublessor, lessee or sublessee thereunder, the
lease term and the basic annual rental and other items paid or payable with
respect thereto.
(b) The Leases are valid, binding and enforceable obligations
of the parties thereto, except that the enforceability of the leases and
subleases may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance). Seller's interests in
the Leases are unencumbered and free and clear of all liens and claims of any
kind. There is no development affecting any such
* Except as disclosed on Section 2.12 of the Disclosure Schedule
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properties pending which might curtail in any material respect the present or
future use of such property for the purpose for which it is currently used by
the Company or any Subsidiary. Neither the Company nor, to the best knowledge of
any Seller, any other party to any such Lease has breached any material
provision of, or is in default in any material respect under, the terms of such
Lease nor does there exist any event which with notice or the lapse of time or
both would constitute a breach or cause a default in any respect under the terms
of any such Lease. Except as disclosed in Section 2.15(b) of the Disclosure
Schedule, the transactions contemplated by this Agreement do not require the
consent of any party to any of the Leases, and will not result in the
termination of, any of the Leases.
(c) The copies of the Leases heretofore made available by the
Company to Purchaser are true, correct and complete copies of such Leases. Said
Leases have not been modified or amended since the commencement of the terms
specified in the respective Leases, except as disclosed in the copies made
available to Purchaser.
SECTION 2.16 Contracts.
(a) Section 2.16 of the Disclosure Schedule is a true, correct
and complete list of all contracts, agreements and obligations (collectively,
"Contracts") to which the Company or any Subsidiary is a party (other than the
Leases).
(b) The Company has delivered to Purchaser true, correct and
complete copies of each of the Contracts. Neither the Company, nor any
Subsidiary, is in default under, or in breach of, any of the terms or conditions
of the Contracts; (i) no condition exists or has occurred which, with the giving
of notice or the lapse of time, or both, would constitute a default or breach by
the Company of any of the terms or conditions of the Contracts; (ii) to Seller's
knowledge, no counterparty to the Contracts is in default or breach thereunder;
(iii) all of the Contracts are valid, binding, in full force and effect and
enforceable in accordance with their terms, except that the enforceability of
such Contracts and agreements may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights generally and (B) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance); and (iv) neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance with the terms and provisions
hereof, will require the consent of any person pursuant to, or will result in
the termination or impairment of, any such Contract.
SECTION 2.17 Employment Benefit Matters.
(a) For purposes of this Section 2.17 only, the term "Company" shall
include the Company and all of its Subsidiaries. Section 2.17 of the Disclosure
Schedule sets forth a list of each "employee benefit plan" (as defined by
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and any other bonus, profit sharing, pension,
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compensation, deferred compensation, stock option, stock purchase, fringe
benefit, severance, post-retirement, scholarship, disability, sick leave,
vacation, individual employment, commission, bonus, payroll practice, retention,
or other plan, agreement, policy, trust fund or arrangement (each such plan,
agreement, policy, trust fund or arrangement is referred to herein as an
"Employee Benefit Plan", and collectively, the "Employee Benefit Plans") that is
currently in effect, was maintained since December 31, 1975 or which has been
approved before the date hereof but is not yet effective, for the benefit of (i)
directors or employees of the Company or any other persons performing services
for the Company, (ii) former directors or employees of the Company or any other
persons formerly performing services for the Company, or (iii) beneficiaries of
anyone described in (i) or (ii) (collectively, "Company Employees") or with
respect to which the Company or any "ERISA Affiliate" (hereby defined to include
any trade or business, whether or not incorporated, other than the Company,
which has employees who are or have been at any date of determination occurring
within the preceding six (6) years, treated pursuant to Section 4001(a)(14) of
ERISA and/or Section 414 of the Code as employees of a single employer which
includes the Company) has or has had any obligation on behalf of any Company
Employee. Except as disclosed on Section 2.17 of the Disclosure Schedule, there
are no other benefits to which any Company Employee is entitled or for which the
Company has any obligation.
(b) Seller has delivered to Purchaser, with respect to each Employee
Benefit Plan, true and complete copies of (i) the documents embodying and
relating to the plan, including, without limitation, the current plan documents
and documents creating any trust maintained pursuant thereto, all amendments,
investment management agreements, administrative service contracts, group
annuity contracts, insurance contracts, collective bargaining agreements, the
most recent summary plan description with each summary of material modification,
if any, and employee handbooks, (ii) annual reports including but not limited to
Forms 5500, 990 and 1041 for the last three (3) years for the plan and any
related trust, (iii) actuarial valuation reports and financial statements for
the last three years, and (iv) each communication involving the plan or any
related trust to or from the Internal Revenue Service ("IRS"), Department of
Labor ("DOL"), Pension Benefit Guaranty Corporation ("PBGC") or any other
governmental authority including, without limitation, the most recent
determination letter received from the IRS pertaining to any Employee Benefit
Plan intended to qualify under Sections 401(a) or 501(c)(9) of the Code.
(c) The Company has no obligation to contribute to or provide benefits
pursuant to, and has no other liability of any kind with respect to, (i) a
"multiple employer welfare arrangement" (within the meaning of Section 3(40) of
ERISA), or (ii) a "plan maintained by more than one employer" (within the
meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Section 2.17 of the Disclosure
Schedule, the Company is not liable for, and neither the Company nor Purchaser
will be liable for, any contribution, tax, lien, penalty, cost, interest, claim,
loss, action, suit, damage, cost assessment
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or other similar type of liability or expense of any ERISA Affiliate (including
predecessors thereof) with regard to any Employee Benefit Plan maintained,
sponsored or contributed to by an ERISA Affiliate (if a like definition of
Employee Benefit Plan were applicable to the ERISA Affiliate in the same manner
as it applies to the Company), including, without limitation, withdrawal
liability arising under Title IV, Subtitle E, Part 1 of ERISA, liabilities to
the PBGC, or liabilities under Section 412 of the Code or Section 302(a)(2) of
ERISA.
(e) The Company, each ERISA Affiliate, each Employee Benefit Plan and
each Employee Benefit Plan "sponsor" or "administrator" (within the meaning of
Section 3(16) of ERISA) has complied in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA (such
statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA"). Section 2.17 of the Disclosure Schedule lists the name
of each Company Employee who has experienced a "Qualifying Event" (as defined in
COBRA) with respect to an Employee Benefit Plan who is eligible for
"Continuation Coverage" (as defined in COBRA) and whose maximum period for
Continuation Coverage required by COBRA has not expired. Included in such list
are the current address for each such individual, the date and type of each
Qualifying Event, whether the individual has already elected Continuation
Coverage and, for any individual who has not yet elected Continuation Coverage,
the date on which such individual was notified of his or her rights to elect
Continuation Coverage. Schedule 2.17 attached hereto also lists the name of each
Business Employee who is on a leave of absence (whether or not pursuant to the
Family and Medical Leave Act of 1993, as amended ("FAMLA") and is receiving or
entitled to receive health coverage under an Employee Benefit Plan, whether
pursuant to FAMLA, COBRA or otherwise.
(f) With respect to each Employee Benefit Plan and except as otherwise
set forth on Section 2.17 of the Disclosure Schedule:
(i) each Employee Benefit Plan which is described in
Section 3(2) of ERISA qualifies under Section 401(a) of the Code and
has received a determination letter from the IRS to the effect that the
Employee Benefit Plan is qualified under Section 401 of the Code and
that any trust maintained pursuant thereto is exempt from federal
income taxation under Section 501 of the Code, and nothing has occurred
or is expected to occur that caused or could cause the loss of such
qualification or exemption or the imposition of any penalty or tax
liability;
(ii) all payments required by the Employee Benefit
Plan, any collective bargaining agreement or by law (including all
contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date
hereof have been made;
(iii) there are no violations of or failures to
comply with ERISA and the Code with respect to the filing of applicable
reports, documents, and notices regarding
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the Employee Benefit Plan with the DOL, the IRS, the PBGC or any other
governmental authority, or any of the assets of the Employee Benefit
Plan or any related trust;
(iv) no claim, lawsuit, arbitration or other action
has been asserted or instituted or threatened in writing against the
Employee Benefit Plan, any trustee or fiduciaries thereof, the Company
or any ERISA Affiliate, any director, officer or employee thereof, or
any of the assets of the Employee Benefit Plan or any related trust;
(v) all amendments required to bring the Employee
Benefit Plan into conformity with applicable law, including, without
limitation, ERISA and the Code, have been timely adopted;
(vi) any bonding required with respect to the
Employee Benefit Plan in accordance with the applicable provisions of
ERISA has been obtained and is in full force and effect;
(vii) the Employee Benefit Plan complies with and has
been maintained and operated in accordance with its respective terms
and the terms and the provisions of applicable law, including, without
limitation, ERISA and the Code (including rules and regulations
thereunder);
(viii) no "prohibited transaction" (within the
meaning of Section 4975 of the Code and Section 406 of ERISA) has
occurred or is expected to occur with respect to the Employee Benefit
Plan (and the transactions contemplated by this Agreement will not
constitute or directly or indirectly result in such a "prohibited
transaction") which has subjected or could subject the Company, any
ERISA Affiliate or Purchaser or any officer, director or employee of
the Company, any ERISA Affiliate, Purchaser or the Employee Benefit
Plan trustee, administrator or other fiduciary, to a tax or penalty on
prohibited transactions imposed by either Section 502 of ERISA or
Section 4975 of the Code or any other liability with respect thereto;
(ix) the Employee Benefit Plan is not under audit or
investigation by the IRS or the DOL or any other governmental authority
and no such completed audit, if any, has resulted in the imposition of
any tax, interest or penalty;
(x) if the Employee Benefit Plan purports to provide
benefits which qualify for tax-favored treatment under Sections 79,
105, 106, 117, 120, 125, 127, 129 or 132 of the Code, the Employee
Benefit Plan satisfies the requirements of said Section(s);
(xi) the Employee Benefit Plan may be unilaterally
amended or terminated on no more than 90 days notice;
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(xii) if the Employee Benefit Plan purports to be a
voluntary employee beneficiary association ("VEBA"), a request for a
determination letter for the VEBA has been submitted to and approved by
the IRS that the VEBA is exempt from federal income tax under Section
501(c)(9) of the Code, and nothing has occurred or is expected to occur
that caused or could cause the loss of such qualification or exemption
or the imposition of any tax, interest or penalty with respect thereto;
(xiii) the Employee Benefit Plan has not been
terminated under circumstances which would result in liability to the
PBGC;
(xiv) no "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred; and
(xv) if the Employee Benefit Plan is subject to Title
IV of ERISA, no proceeding has been or is expected to be initiated to
terminate the plan.
(g) The Company is not subject to any liens, and excise or other taxes
under ERISA, the Code or other applicable law relating to any Employee Benefit
Plan; has not ceased operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA; has not withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA; and
has not ceased making contributions to any Employee Benefit Plan subject to
4064(a) of ERISA to which the Company or any ERISA Affiliate made contributions
at any time during the six (6) years prior to the date hereof.
(h) With respect to each Employee Benefit Plan that is subject to Part
3 of Title I of ERISA, Title IV of ERISA and/or Section 412 of the Code but is
not a "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA or Section
414(f) of the Code) (a "DB Plan"):
(i) the present value of all vested and unvested
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA)
determined (A) based on actuarial assumptions used for funding purposes
as set forth in the most recent actuarial report; (B) as required by
the PBGC if the DB Plan were terminated; and (C) as set forth in
Financial Accounting Standards Board SFAS No. 87 using the methodology
to calculate the DB Plan's accrued benefit obligation, do not exceed
the current fair market value of the assets of the DB Plan;
(ii) except as set forth on Section 2.17 of the
Disclosure Schedule, no amendments or other modifications to such DB
Plan or its actuarial assumptions have been adopted since the date of
such DB Plan's most recent actuarial report;
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(iii) no "accumulated funding deficiency" (as defined
in Section 302 of ERISA or Section 412 of the Code) has been incurred
with respect to the DB Plan, whether or not waived, and the DB Plan
complies with all funding requirements of the Code and ERISA; and
(iv) no excise or other taxes, interest or other
charges have been incurred or are due and owing with respect to the DB
Plan because of any failure to comply with the minimum funding
standards of ERISA and the Code.
(i) In the case of any Employee Benefit Plan that is a
Multiemployer Plan, the Company has no withdrawal liability under Part 1 of
Subtitle E of Title IV of ERISA as a result of either a "complete withdrawal"
(as defined in Section 4203 of ERISA) or a "partial withdrawal" (as defined in
Section 4205 of ERISA) by the Company from such Employee Benefit Plan occurring
on or prior to the date hereof.
(j) The consummation of the transactions contemplated by this
Agreement will not give rise to any liability for any employee benefits,
including, without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits due to any
Company Employee.
(k) No amounts payable under any Employee Benefit Plan will
fail to be deductible for federal income tax purposes by virtue of Section 280G
of the Code;
(l) Except as set forth on Section 2.17 of the Disclosure
Schedule, no Employee Benefit Plan in any way provides for any benefits of any
kind whatsoever (other than under COBRA, the Federal Social Security Act or any
Employee Benefit Plan qualified under Section 401(a) of the Code) to any Company
Employee who, at the time the benefit is to be provided, is a former director or
employee of, or other provider of services to, the Company or an ERISA Affiliate
(or a beneficiary of any such person), or any other Company Employee, nor have
any representations, agreements, covenants or commitments been made to provide
such benefits.
(m) Since December 31, 1996, through the date hereof, neither
the Company nor any ERISA Affiliate has, nor will it, (i) institute or agree to
institute any new employee benefit plan or practice, (ii) make or agree to make
any change in any Employee Benefit Plan, (iii) make or agree to make any
increase in the compensation payable or to become payable by the Company or any
ERISA Affiliate to any Company Employee, or (iv) except pursuant to this
Agreement and except for contributions required to provide benefits pursuant to
the provisions of the Employee Benefit Plans, pay or accrue or agree to pay or
accrue any bonus, percentage of compensation, or other like benefit to, or for
the credit of, any Company Employee.
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(n) Any contribution, insurance premium, excise tax, interest
charge or other liability or charge imposed or required with respect to any
Employee Benefit Plan which is attributable to any period or any portion of any
period prior to the Closing shall be reflected as a liability on the Company's
Balance Sheet as of the Closing, including, without limitation (i) any portion
of the matching contribution required with respect to the Company's 401(k) Plan
for the plan year ending after the Closing which is attributable to elective
contributions made by participants in such plan prior to the Closing and
assuming that all participants are employed by the Company as of the end of such
plan year, and (ii) an amount equal to a pro rata portion of the quarterly
contribution requirement with respect to any DB Plan for the quarter beginning
immediately prior to the Closing, based on the number of days that will have
elapsed from such date through the Closing.
SECTION 2.18 Labor Matters. Except as set forth on Section 2.18 of the
Disclosure Schedule, neither the Company, nor any of its Subsidiaries, is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any of its Subsidiaries; (a)
there are no unfair labor practice complaints (or any basis therefor pending
against the Company or any of its Subsidiaries before the National Labor
Relations Board or any other Governmental Authority; (b) to Seller's best
knowledge, there have been no efforts by any union, or local thereof, to seek to
represent, at any location where they do not currently represent such employees,
and employees of the Company or any of its Subsidiaries; and (c) there have been
no strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company or any of its Subsidiaries; and (d)
without having made any investigation or inquiry, Seller has no knowledge that
any party with whom the Company or any of its Subsidiaries has entered a
Contract is involved in or threatened with or affected by any labor dispute or
other proceeding or order.
SECTION 2.19 Taxes.
(a) The following terms shall have the following meanings:
"Net Unrealized Built-in Loss" means any "net unrealized
built-in loss" as that term is defined in Section 382(h)(3)(A) of the Code.
"Post-Closing Tax Period" means any Tax period ending after
the Closing Date, excluding the portion, if any, of such Tax period up to and
including the Closing Date.
"Pre-Closing Tax Period" means any Tax period ending on or
before the Closing Date. Additionally, if a Tax period ending after the Closing
Date contains any days which fall prior to or on the Closing Date, any portion
of the Tax period up to and including the Closing Date shall also be included in
the Pre-Closing Tax Period.
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"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding on amounts paid to or by the Company or any Subsidiary,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition of
any such tax (domestic or foreign), (ii) any liability of the Company or any
Subsidiary for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any period and (iii) any liability of the Company or any Subsidiary
for the payment of any amounts of the type described in (i) as a result of any
express or implied obligation to indemnify or pay the Tax obligations of any
other person.
"Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute of the Company or any Subsidiary which could reduce
Taxes (including without limitation deductions and credits related to
alternative minimum Taxes, and Net Unrealized Built-in Losses existing prior to
the Closing Date).
(b) Except as set forth in Section 2.19(b) of the Disclosure
Schedule, (i) all Tax returns, statements, reports and forms (including
estimated tax returns and reports and information returns and reports) required
to be filed on or before the Closing Date with any Taxing Authority with respect
to any Pre-Closing Tax Period by or on behalf of the Company, or any Subsidiary
or Seller (collectively, the "Returns"), have been, or will be, filed when due
in accordance with all applicable laws, except that any such return, statement,
report or form that has been extended until after the Closing Date in accordance
with applicable law will be completed and a copy provided to Purchaser no later
than ten (10) days prior to the Closing Date; (ii) as of the time of filing, the
Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Company and any Subsidiary, and
any other information required to be shown therein; (iii) the Company and its
Subsidiaries have timely paid or withheld all Taxes shown as due and payable on
the Returns that have been filed; (iv) the charges, accruals and reserves for
Taxes with respect to the Company and its Subsidiaries for any Pre-Closing Tax
Period (including any Pre-Closing Tax Period for which no Return has yet been
filed) reflected or to be reflected on the books of the Company or any
Subsidiary (excluding any provision for deferred income taxes) are adequate to
cover such Taxes; (v) all federal, state, local and foreign tax returns filed
with respect to Taxable years of the Company and any Subsidiary through the
Taxable year fiscal year 1992 have been examined and closed or are returns with
respect to which the applicable period for assessment under applicable law,
after giving effect to extensions or waivers, has expired; (vi) neither the
Company nor any Subsidiary is delinquent in the payment of any Tax or requested
any extension of time within
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which to file or send any Return, which Return has not since been filed or sent;
(vii) neither the Company nor any Subsidiary has granted any extension or waiver
of the limitation period applicable to any Returns, which period (after giving
effect to such extension or waiver) has not yet expired; (viii) there is no
claim, audit, action, suit, proceeding, or investigation now pending or
threatened against or with respect to the Company or any Subsidiary in respect
of any Tax; (ix) there are no requests for rulings or determinations in respect
of any Tax pending between the Company or any Subsidiary and any Taxing
Authority; (x) neither the Company nor any Subsidiary has any interest in real
property in any jurisdiction in which a Tax is imposed on the transfer of an
interest in real property; (xi) none of the property owned or used by the
Company or any Subsidiary is subject to a tax benefit transfer lease executed in
accordance with Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended by the Economic Recovery Tax Act of 1981; (xii) none of the property
owned or used by the Company or any Subsidiary is subject to a lease, other than
a "true" lease for federal income tax purposes; (xiii) none of the property
owned by the Company or any Subsidiary is "tax-exempt use property" within the
meaning of Section 168(h) of the Code; (xiv) neither the Company or any
Subsidiary nor any other Person on behalf of the Company any Subsidiary has
entered into or will enter into any agreement or consent pursuant to Section
341(f) of the Code; (xv) there are no liens for Taxes upon the assets or capital
stock of the Company any Subsidiary except liens for current Taxes not yet due;
(xvi) Seller is not subject to withholding under (A) Sections 1441, 1442, 1445
nor under any other section of the Code with respect to any transaction
contemplated hereby or (B) the laws, rules, regulations or administration
procedures of a Government Taxing Authority; (xvii) neither the Company nor any
Subsidiary will be required to include any adjustment in taxable income for any
Post-Closing Tax Period under Section 481(c) of the Code as a result of a change
in method of accounting for a Pre-Closing Tax Period effective prior to the
Closing Date or pursuant to the provisions of any agreement entered into with
any Taxing Authority on or before the Closing Date with regard to the Tax
liability of the Company for any Pre-Closing Tax Period; (xviii) neither the
Company nor any Subsidiary has been a member of an affiliated group other than
one of which the Company any Subsidiary was the parent, or filed or been
included in a combined, consolidated or unitary Return other than one filed by
the Company any Subsidiary; (xix) neither the Company nor any Subsidiary is
currently under any contractual obligation to pay the Tax obligations of any
other Person, or to pay the Tax obligations with respect to transactions
relating to any other Person, or to indemnify any other Person with respect to
any Tax; and (xx) all information set forth in the Interim Audited Statements of
the Company and the Subsidiaries relating to Tax matters is, and shall be, true,
complete and accurate; (xxi) any changes in the method of accounting used by the
Company any Subsidiary for any Tax items made during the Pre-Closing Tax Period
have been approved by the Internal Revenue Service in accordance with Section
446(e) of the Code; (xxii) neither the Company nor any Subsidiary will have a
Net Unrealized Built-in Loss.
(c) Section 2.19(c) of the Disclosure Schedule sets forth a
list of states, territories and jurisdictions (whether foreign or domestic) to
which any Tax is properly payable by the Company any Subsidiary.
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(d) Without the prior written consent of Purchaser, neither
the Company nor any Subsidiary shall make or change any election, change an
annual tax accounting period, adopt or change any tax accounting method, file
any amended Return, enter into any closing agreement, settle any Tax claim or
assessment, surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment, take any other action or omit to take any action, if any such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action or omission may have the effect of increasing the Tax liability
or reducing any Tax Asset of the Company any Subsidiary, Purchaser or any
affiliate of Purchaser.
(e) Prior to the date hereof, Seller has caused the Company
and its Subsidiaries to deliver to Purchaser copies of the federal income tax
returns filed by the Company and its Subsidiaries for all Tax periods for which
the applicable statute of limitations has not expired.
SECTION 2.20 Litigation. Except as set forth in Section 2.20 of the
Disclosure Schedule, there are no pending (or the best knowledge of Seller,
threatened), claims, disputes, actions, suits, arbitrations, inquiries, audit,
proceedings or investigations (or any basis therefor) by or against the Company,
any Subsidiary, or any of their respective assets, properties, officers, or
directors.
SECTION 2.21 Licenses. The Company and the Subsidiaries are now, and at
the Closing will be, the holder of all licenses, authorizations, permits and
certificates (the "Licenses") required by any Governmental Authority to conduct
their respective businesses, and all of the Licenses are now, and at the Closing
will be, in full force and effect.
SECTION 2.22 Compliance with Laws. The Company has received no written
notice that (and to the best of Seller's knowledge, Seller is unaware that) the
Company, or any Subsidiary, is in violation of, or has violated, any applicable
Federal, state, local, foreign or other law, regulation or order or any other
requirement of any governmental, regulatory or administrative agency or
authority or court or other tribunal relating to it; and the Company has
received no written notice that the Company or any Subsidiary is now charged
with, and to the best knowledge of Seller, or is now under investigation with
respect to, any possible violation of any applicable law, regulation, order or
requirement relating to any of the foregoing in connection with the business of
the Company, or any Subsidiary, and the Company and the Subsidiaries have filed
all reports required to be filed with any governmental, regulatory or
administrative agency or authority on or before the date hereof.
SECTION 2.23 Insurance. Section 2.23 of the Disclosure Schedule
contains a list and description of all policies of insurance and fidelity bonds
relating to the assets of the Company , the Subsidiaries, or the business or
employees of the Company, or any Subsidiary (except for any such policies
maintained to provide benefits to employees under a benefit plan
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or arrangement described in Section 2.23 hereof), together with the annual
premiums payable with respect therefor, presently maintained by the Company and
the Subsidiaries, all of which are, and will be maintained through the Closing
Date, in full force and effect. All premiums thereon have been paid, and neither
the Company, nor any Subsidiary, has received any notice of cancellation with
respect thereto. There are no claims pending under any of said policies or bonds
or disputes with underwriters. The Company and the Subsidiaries have used their
respective best efforts to estimate and calculate incurred, but not reported,
claims relating to such policies and bonds, and any potential liabilities in
respect thereof have been recorded on the Interim Audited Statements and will be
recorded in the Collected Interim Information. The methods used to derive the
amount of any such liabilities to be recorded in the Collected Interim
Information shall be consistent with past practices of the Company and the
Subsidiaries. There are no pending or threatened terminations of, or premium
increases with respect to, any of such policies and bonds and the Company and
the Subsidiaries are in compliance with all conditions contained therein. Seller
has no reason to believe that the insurance carried by the Company and the
Subsidiaries is not, or since the date of its inception, has not been adequate
with respect to risks normally insured against by comparable companies similarly
situated. The Company and the Subsidiaries have delivered true, complete and
correct copies of all insurance policies insuring the Company and the
Subsidiaries.
SECTION 2.24 Bank Accounts. Section 2.24 of the Disclosure Schedule
lists all of the (a) names of each bank, savings and loan, or other financial
institution in which the Company the Subsidiaries has an account, including cash
contribution accounts, and the account numbers and names of all persons
authorized to draw thereon or have access thereto, (b) locations of all
lockboxes and safe deposit boxes of the Company and the Subsidiaries and the
names of all persons authorized to draw thereon or have access thereto.
SECTION 2.25 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated under this Agreement.
SECTION 2.26 Governmental Authorization. The execution, delivery and
performance by the Seller of this Agreement requires no action by or in respect
of, or filing with, any governmental body agency, official or authority.
SECTION 2.27 Amounts Owing. On or prior to the Closing Date, the
Company and the Subsidiaries will have collected any amounts loaned, or advanced
to, or receivable from its directors, officers, Seller or consultants.
SECTION 2.28 Employees. Listed in Section 2.28 of the Disclosure
Schedule are all of the Company's and the Subsidiaries' directors, officers,
employees and any and all compensation, pension or benefit arrangements, whether
written or oral, between the Company, and the Subsidiaries and said directors,
officers and employees.
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SECTION 2.29 No Undisclosed Liabilities. There are no liabilities of
the Company, or any Subsidiary, required to be recorded of disclosed under
generally accepted accounting principles, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in any such liability, other than liabilities under this Agreement or reflected
in any schedule or document delivered in connection with this Agreement.
SECTION 2.30 Certain Interests. Except as set forth in Section 2.30 of
the Disclosure Schedule, no officer, director, or shareholder of the Company,
any Subsidiary, nor any relative of any such officer, director or shareholder,
nor any enterprise, firm, partnership, association, corporation or trust of
which any such officer, director, shareholder or relative is an officer,
trustee, director, partner, employee, agent, stockholder, owner or beneficiary,
is a party to or has an interest with respect to any Contract or Lease which
relates to or affects the business of the Company, or any Subsidiary, or has any
interest in any property, real or personal, tangible or intangible, used in or
pertaining to the business of the Company, any Subsidiary. For purposes of this
Section 2.30, a relative of any person means any person who is related by
consanguinity, marriage or adoption to such first person as a second cousin or
closer relative or is a spouse of any such relative.
SECTION 2.31 Powers of Attorney. Neither the Company, any Subsidiary,
nor the Seller have any outstanding powers of attorney or comparable delegations
of authority in connection with the Company, or any Subsidiary, or their
respective business or assets.
SECTION 2.32 Other Information. No document or item referred to in any
schedule (including, without limitation, the Disclosure Schedule) or exhibit
hereto contains, and no information set forth in any such schedule, exhibit,
document or item contains, any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements of the Company,
any Subsidiary, and/or Seller contained therein not misleading.
SECTION 2.33 Environmental Compliance. Except as disclosed in Section
2.33 of the Disclosure Schedule to Seller's knowledge (and the Company has
received no written notice which indicates otherwise):
(a) No notice, notification, demand, request for information,
citation, summons, complaint or order has been issued or filed, no penalty has
been assessed and no investigation or review is pending, or to the best
knowledge of Seller, threatened by any governmental or other entity, (i) with
respect to any alleged violation of any law, ordinance, rule, regulation or
order of any governmental entity in connection with the conduct of the business
of the Company, or any Subsidiary, and relating to a Hazardous Substance (as
hereinafter defined) or (ii) with respect to any alleged failure to have any
permit, certificate, license, approval, registration or authorization required
in connection with the conduct of the business of the Company, any Subsidiary,
relating to a Hazardous Substance of (iii) with respect
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to any generation, treatment, storage, recycling, transportation, disposal or
release (including a release as defined in 42 USC 9601) ("Hazardous Release") of
any toxic or otherwise hazardous substance, including petroleum, its
derivatives, by-products and other hydrocarbons, as defined in or regulated
under applicable Federal, state or local environmental statutes, ordinances,
rules, regulations or orders ("Hazardous Substance") used in connection with the
business or assets of the Company, or any Subsidiary.
(b)(i) Neither the Company, nor any Subsidiary, has handled
any Hazardous Substance, on any property now or previously owned or leased by
the Company, or any Subsidiary (the "Properties"); (ii) no polychlorinated
biphenyls ("PCBs") or urea formaldehyde was or has become present at any of the
Properties as a result of any activity which is or was, directly or indirectly,
within the control of the Company, or any Subsidiary, and no PCBs or urea
formaldehyde is or has been present at any of the Properties that Seller knows
of or of which they could reasonably be expected to know; (iii) no friable
asbestos was or has become present at any of the Properties as a result of any
activity which is or was, directly or indirectly, within the control of the
Company, or any Subsidiary and no friable asbestos is or has been present at any
such property that Seller knows of or of which it could reasonably be expected
to know; (iv) no underground storage tank ("UST"), which has or had been used to
store or has or had contained a Hazardous Substance, was or has become present
at any of the Properties as a result of any activity which is or was, directly
or indirectly, within the control of the Company, any Subsidiary, and there is
no such UST currently in use or abandoned, at any of the Properties that Seller
knows of or of which it could reasonably be expected to know of; (v) there has
been no Hazardous Release of a Hazardous Substance at, on or under any of the
Properties that Seller knows of or of which they could reasonably be expected to
know; and (vi) no Hazardous Substance is present in a reportable or threshold
planning quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under any of the Properties as a
result of any activity which is or was, directly or indirectly, within the
control of the Company, or any Subsidiary and no such Hazardous Substance in
such quantity was or has become present at any of the Properties that Seller
knows of or of which they could reasonably be expected to know of.
(c) Neither the Company, nor any Subsidiary, has transported
or arranged for the transportation (directly or indirectly) of any Hazardous
Substance to any location which is listed or proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Comprehensive
Environmental Response, Compensation and Liability Information System
("CERCLIS") or on any similar state list or, to the best knowledge of Seller,
which is the subject of any federal, state or local enforcement action or other
investigation which may lead to claims for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA.
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(d) No oral or written notification of a Hazardous Release of
a Hazardous Substance has been filed by or, on behalf of, the Company, or any
Subsidiary, and, to the best knowledge of Seller, none of the Properties is,
based on any act or omission directly or indirectly within the control of the
Company, or any Subsidiary, during the period of ownership or lease by the
Company, or any Subsidiary, listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS or on any similar
state list of sites requiring investigation or clean-up.
(e) There are no environmental Encumbrances on any asset owned
or leased by the Company, or any Subsidiary, no government actions have been
taken for, to the best knowledge of Seller is in process which could subject any
of such assets to such Encumbrances and no notice or restriction relating to the
presence of a Hazardous Substance is required to be placed in any deed to such
of said assets title to which would be conveyed by use of a deed.
(f) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of the Company, or any Subsidiary, in relation to any of the
Properties.
(g) Section 2.33(g) of the Disclosure Schedule is a true,
accurate and complete list of all environmental reports prepared for any of the
Properties (i) at the request of Seller, the Company, or any Subsidiary, or (ii)
to the best knowledge of Seller, at the request of any other person.
SECTION 2.34 No Options or Contracts. There are no outstanding options
to purchase the Stock, the Company, or any of its assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to Seller to enter into this Agreement, Purchaser
represents and warrants to Seller (which representations and warranties are
material to and relied upon by Seller) as follows:
SECTION 3.1 Incorporation and Authority of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser, and (assuming due authorization, execution
and delivery by Seller and the Company) constitutes a legal, valid and
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binding obligation of the Purchaser, enforceable against Purchaser in accordance
with its terms, subject to the effect, if any, of bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and the effect, if any, of general principles of equity.
SECTION 3.2 No Conflicts. The execution, delivery and performance of
this Agreement by Purchaser does not and will not (i) violate or conflict with
the certificate of incorporation or bylaws or other organizational documents of
Purchaser; (ii) conflict with or violate any law, rule or regulation of, or any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered by or with, any Governmental Authority applicable to Purchaser; or (iii)
conflict with, result in any breach of, constitute a default (or constitute an
event which with the giving of notice or lapse of time, or both, would become or
result in a conflict, breach or default) under, any agreement or obligation to
which Purchaser is a party or subject and which would affect Purchaser's ability
or authority to consummate the transactions contemplated hereby.
SECTION 3.3 Investment Purpose. Purchaser is acquiring the Stock solely
for the purpose of investment and not with a view to, or for offer of sale in
connection with, any distribution thereof. Purchaser acknowledges that the Stock
has not been registered.
SECTION 3.4 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transaction contemplated hereby based upon arrangements made by or on behalf of
the Purchaser.
SECTION 3.5 Issuance of Shares. When issued by Purchaser to each
Seller, the Shares will have been duly authorized, validly issued, and fully
paid and non-assessable
ARTICLE IV
ADDITIONAL COVENANTS
SECTION 4.1 Conduct of Business Prior to the Closing. From the date
hereof through the Closing Date, Seller hereby covenants and agrees that the
Company and the Subsidiaries shall conduct their respective businesses in the
ordinary course consistent with past practice and shall use their best efforts
to preserve intact their business organizations and relationships with third
parties and to keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing Date, the Company, the Subsidiaries, and Seller will
not without the prior written consent of Purchaser, such consent to be granted
or withheld in Purchaser's sole, absolute and unreviewable discretion, (i) issue
any shares of the stock, warrants, options, or stock equivalents or declare or
make any payment on account of the purchase, redemption, retirement or
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acquisition or any shares of the Company or any Subsidiary, (ii) declare any
dividends or make any distributions to Seller except a one-time distribution to
Seller of the Company's undistributed taxable income, (iii) take any action that
would have a Material Adverse Effect on the Company, or any Subsidiary, (iv)
incur any indebtedness from borrowed money, (v) subject the assets of the
Company, any Subsidiary, to any additional liens or encumbrances or mortgages,
(vi) adopt or propose any change in its articles of incorporation or bylaws of
the Company, any Subsidiary, (vii) merge or consolidate with any other Person,
acquire a material amount of assets of any other Person, (viii) sell, lease,
license or otherwise dispose of any assets or property of the Company, or any
Subsidiary which have been disclosed to Purchaser, (ix) enter into or renew
(whether by exercise of option or otherwise) or amend in any material respect
any Contract or any Lease without the prior written consent of Purchaser, (x)
take or agree or commit to take any action that would make any representation or
warranty of the Company, any Subsidiary, or Seller inaccurate in any respect at,
or as of any time prior to, the Closing Date or omit or agree or commit to omit
to take any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time; (xi) permit the Company, or
any Subsidiary, to agree or commit to do any of the foregoing.
SECTION 4.2 Access to Information. Subject to the terms of that certain
Confidentiality Agreement, dated February 6, 1997, by and between the Company
and Purchaser, from the date hereof through the Closing Date, Seller agrees to
(a) permit Purchaser, and its employees and representatives reasonable access to
any and all of the office and properties records of the Company, or any
Subsidiary (including work papers of auditors in respect of the Financial
Statements and the Interim Statements, and work papers relating to the period
commencing on January 1, 1997 and ending on the Closing Date) for the purpose of
Purchaser conducting a complete and thorough investigation, analysis and review
of the Company, and any Subsidiary, (b) furnish to Purchaser, its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information relating to the Company, or any
Subsidiary as such Persons may reasonably request and (c) instruct the
employees, counsel and financial and other advisors of the Company, and any
Subsidiary, to cooperate with Purchaser in its investigation of the Company, and
any Subsidiary; provided, however, that no investigation pursuant to this
Section shall limit or otherwise affect any representation or warranty given by
Seller hereunder. In the event that Purchaser, in its sole discretion,
determines that the Company is, for any reason whatsoever, unsatisfactory,
Purchaser shall have until end of business on the forty-fifth (45) day after the
delivery of the Disclosure Schedule to notify Seller in writing that Purchaser
has elected to terminate this Agreement in which event neither party shall have
any further liability to the other.
SECTION 4.3 Confidentiality. Prior to the Closing Date, no party to
this Agreement shall disclose the existence of, or the terms of this Agreement,
or any document executed in connection with the transactions contemplated
herein, except upon the mutual agreement of the parties hereto.
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SECTION 4.4 COBRA Compliance. Within fifteen (15) days of the execution
of this Agreement, Seller will cause the Company to provide Purchaser with three
(3) years of claims history for purpose of calculating the projected COBRA
liability. Such projected liability shall be offset against the Purchase Price
at the Closing. Following the Closing, Purchaser will comply with all applicable
requirements of Section 4980B of the Code and Section 601 et. seq.
of ERISA.
SECTION 4.5 Unaudited Monthly Statements. For each full fiscal month
commencing with January 1, 1997 until the Closing Date, the Company will prepare
and deliver to Purchaser, as promptly as practicable after the end of such
fiscal month, a consolidated, unaudited balance sheet and unaudited statements
of income and retained earnings for the Company, and the Subsidiaries (the
"Unaudited Monthly Statements", and together with the Interim Audited
Statements, the "Collected Interim Information"). The Collected Interim
Information will be prepared in conformity with generally accepted accounting
principles as have been consistently applied previously by the Company and the
Subsidiaries. Seller will also deliver a 1996 calendar year financial statement
and balance sheet which will be based on (i) audited financial information for
the period from January 1 to June 30, 1996 and, (ii) unaudited financial
information for the period from July 1, 1996 to December 31, 1996.
SECTION 4.6 Inconsistent Activities. From the date hereof until the
termination hereof, neither the Company, any Subsidiary, nor any of their
officers, directors, employees or agents will, directly or indirectly, (a) take
any action to entertain, accept, solicit, initiate or encourage any Acquisition
Proposal (defined below) or (b) engage in negotiations with, disclose any
non-public information relating to the Company, or any Subsidiary, or afford
access to the properties, books or records of the Company, or any Subsidiary to,
or enter into any agreement or option with respect to the acquisition of the
Company, or any Subsidiary, with, any Person that may be considering making, or
has made, an Acquisition Proposal. Seller and the Company will promptly notify
Purchaser after receipt of any Acquisition Proposal or any indication that any
Person is considering making an any Acquisition Proposal or any request for
non-public information relating to the Company, or any Subsidiary, or for access
to the properties, books or records of the Company, or any Subsidiary, by any
Person that may be considering making, or has made, an Acquisition Proposal and
will keep Purchaser fully informed of the status and details of any such
Acquisition Proposal, indication or request. For purposes of this Agreement,
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving the Company, or
any Subsidiary, or the acquisition of any equity interest in, or a substantial
portion of the assets of, the Company, or any Subsidiary, other than the
transactions contemplated by this Agreement.
SECTION 4.7 Consents and Estoppels. Prior to Closing, and as a
condition to Purchaser's obligation to close this transaction, Seller will
obtain, at Seller's sole cost and expense, (i) all consents from third parties
necessary or advisable in the reasonable determination of Purchaser in order to
permit the consummation of the transactions contemplated in this
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Agreement without impairing the validity or effectiveness of any Lease or
Contract to which the Company is a party, (ii) an executed landlord estoppel
("Landlord Estoppel") from each party who is a Landlord under a Lease, and an
executed tenant estoppel ("Tenant Estoppel") from each party who is a tenant
under a Lease, and (iii) an estoppel ("Contract Estoppel") from any counterparty
to any party to any Contract, the forms of said Landlord Estoppel, Tenant
Estoppel, and Contract Estoppel being attached hereto as Exhibit 4.7(i), Exhibit
4.7(ii) and Exhibit 4.7(iii), respectively.
SECTION 4.8 Amounts Owing. The Company shall, prior to the Closing
Date, collect or provide for the collection of all amounts loaned or advanced by
it to, or otherwise receivable by it from, its directors, its officers, Seller
or any other employee or consultant.
SECTION 4.9 Governmental Filings. Seller, the Company and the
Subsidiaries will cooperate in preparing and, if necessary, executing all
documents and governmental filings necessary to the transactions contemplated
hereby, including filings required under the Hart- Scott-Rodino Act.
SECTION 4.10 INTENTIONALLY DELETED
SECTION 4.11 Notices of Certain Events. The Company and Seller shall
promptly notify Purchaser of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of their knowledge, threatened against, relating to or
involving or otherwise affecting the Company which, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Section 2.20 or which relate to the consummation of the transactions
contemplated by this Agreement; and
(d) any fact or circumstance of which the Company or Seller
has knowledge which would make any representation or warranty untrue or
inaccurate in any material respect as of the Closing Date.
SECTION 4.12 Physical Inspection. Purchaser may cause, in its sole
discretion and expense, its chosen agents or employees ("Inspectors") to
conduct, at reasonable times and upon reasonable advance notice to the Company,
a physical and environmental audit of the properties
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which are subject to the Leases. Purchaser agrees to deliver to the Company, as
soon as practicable after the issuance thereof, a copy of any written reports
prepared by said Inspectors.
SECTION 4.13 Delivery of Information. Seller shall immediately deliver,
or cause the Company to immediately deliver, copies of the following information
in the Seller's or the Company's actual possession about the Properties to
Purchaser:
(a) Copies of all physical and environmental reports or
inspections obtained by, prepared for or by, or in the possession of Seller or
the Company;
(b) Copies of all governmental approvals obtained by Seller or
the Company in connection with its acquisition, ownership and/or development of
the Property (including, without limitation, a Certificate of Occupancy for the
building constructed on the Property);
(c) Copies of all surveys and accompanying surveyor's
certificates;
(d) Copies of all title certificates, title commitments and
title insurance policies, and copies of all encumbrances and other matters
scheduled or shown as exceptions to title or requirements thereon;
(e) A copy of any declaration, easement, agreement or
restrictive covenant that does or may affect the use of the Properties.
SECTION 4.14 Certain Taxes Arising in Connection with this Agreement.
All transfer, documentary, sales, use, stamp, registration, value added and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne and paid by Seller when due.
SECTION 4.15 INTENTIONALLY DELETED
SECTION 4.16 Transfer of Certain Assets. Prior to the Closing Date and
as a condition to Purchaser's obligation, Seller shall have caused the Company
(i) to transfer all of the Company's right title and interest in and to (a)
Concepts in Lodging, L.L.C., which is currently estimated to have a net book
value of $300,000.00 and (b) LKG Construction Co. Ltd., (ii) to obtain the
release of the Company from any liability, whether direct or contingent, related
to said companies, and (iii) the dissolution of Roasters Coffee Concepts, Ltd.
-28-
<PAGE>
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to Obligations to Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing (or on such other date as
may be agreed by the parties), of each of the following conditions (any one or
more of which may be waived by Seller in his sole discretion).
(a) Representations and Warranties; Covenants Performed;
Officer's Certificate. The representations and warranties of Purchaser contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if made as of the Closing Date,
and all the covenants contained in this Agreement to be complied with by
Purchaser on or before the Closing Date shall have been complied with in all
material respects and Seller shall have received a certificate to such effect
signed by a duly authorized officer of Purchaser.
(b) Legal Opinion. Seller shall have received from counsel to
the Purchaser a legal opinion, addressed to Seller and dated the Closing Date in
form and substance reasonably acceptable to Seller and Purchaser.
(c) Cash Payments. Seller shall have received the Cash and the
Shares
(d) Certified Organizational Documents and Resolutions. Seller
shall have received a certificate duly executed and delivered by Secretary of
Purchaser certifying as true, correct, complete and unrevoked (a) the articles
of incorporation and by-laws of Purchaser, (b) the resolutions of the board of
directors of Purchaser approving the execution and delivery of this Agreement
and the consummation of the transactions described herein, and (c) the
incumbency of the officers executing this Agreement and document delivered at
Closing.
(e) Good Standing Certificates. Seller shall have received
Certificates of Good Standing issued by the Secretaries of State for the States
in which Purchaser is organized.
(f) Registration Rights Agreement. Seller shall have received
the Registration Rights Agreement duly executed and delivered by Purchaser.
(g) Employment Agreements. Purchaser shall have duly executed
and delivered Employment Agreements for Ronald L. Devine, James M. Devine,
Lonnie Lane, David L. Wright, Frances L. Bean, Jr., and Edward W. Hutchman in
form and substance acceptable to Purchaser and said parties.
-29-
<PAGE>
SECTION 5.2 Conditions to Obligations of Purchaser. The obligations of
the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing (or on such
other date as may be agreed by the parties), of each of the following conditions
(any one or more of which may be waived by Purchaser in its sole discretion):
(a) Representations and Warranties; Covenants Performed;
Seller's Certificate. The representations and warranties of Seller and the
Company contained in this Agreement shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made as of
the Closing Date, and all the covenants contained in this Agreement to be
complied with by Seller and the Company on or before the Closing Date shall have
been complied with in all material respects, and Purchaser shall have received a
certificate to such effect from Seller and from a duly authorized officer of the
Company, respectively.
(b) Certified Organizational Documents and Resolutions.
Purchaser shall have received a certificate duly executed and delivered by a
corporate secretary of the Company certifying as true, correct, complete and
unrevoked (x) the articles of incorporation and by-laws of the Company, (y) the
resolutions of the shareholders and board of directors of the Company approving
the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, and (z) the incumbency of officers executing
this Agreement and any documents at Closing.
(c) Legal Opinion. Purchaser shall have received from counsel
to Seller and the Company a legal opinion, addressed to the Purchaser and dated
the Closing Date in form and substance reasonably acceptable to Seller and
Purchaser.
(d) Consents Obtained; Continued Operation; Certificate.
Purchaser shall have received all written consents to the transaction
contemplated herein from, and there shall have been given any required notices
of the transaction contemplated herein to, the appropriate party to, or issuer
of, each Contract Lease, permit, license and other document or instrument
specified in any Exhibit or Schedule hereto as requiring such consent or notice,
without change in the financial terms thereof or, in the aggregate, any material
cost to the Company incurred in connection with obtaining such consents or
giving such notices. No court, arbitrator or governmental body, agency or
official shall have issued any order or adopted any statute, rule or regulation,
which, in the reasonable opinion of Purchaser, would materially restrain the
operation by Purchaser of the business of the Company after the Closing Date. A
certificate signed by the Seller, that the condition of the first sentence of
this Section 5.2(c) has been satisfied.
(e) Stock Certificates. Seller shall have executed and
delivered to Purchaser free and clear of all Stock Encumbrances, a certificate
or certificates representing the Stock to be sold by Seller to Purchaser
hereunder, duly endorsed for transfer to Purchaser.
-30-
<PAGE>
(f) Landlord and Tenant Estoppels. Purchaser shall have
received all of the originals, properly executed Landlord Estoppels, Tenant
Estoppels, and Contract Estoppels, in form and content satisfactory to Purchaser
in its sole discretion.
(g) FIRPTA Certificate. Purchaser shall have received an
affidavit, executed in accordance with Code Section 1445 and the regulations
promulgated thereunder, certifying that the Company are not United States real
property holding corporations.
(h) Certificate of Good Standing. Purchaser shall have
received certificates of good standing from the Secretaries of State for the
State in which the Company is organized and from each state in which the Company
conducts its business.
(i) Board Approval. Purchaser's Board of Directors shall have
approved the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein. (j) Transfer of Ownership. Seller shall
have caused the transfers set forth in Section 4.16 above, and shall deliver
evidence of same to Purchaser.
(k) Disclosure Schedule. Purchaser shall have received the
Disclosure Schedule within the time period set forth in Section 2.1 and, same
shall be in form and substance acceptable to Seller in its sole discretion.
SECTION 5.3 Further Assurances. At any time on or after the Closing
Date, each party will execute and deliver any further assignments, conveyances
and other assurances, documents and instruments of transfer reasonably requested
by another party to consummate the transaction contemplated hereby.
ARTICLE VI
INDEMNIFICATION; LIABILITY
SECTION 6.1 Survival of Representations and Warranties. The
representations and warranties of Seller and the Company set forth in Article II
and Purchaser in Article III hereof shall survive the Closing through and expire
on the close of business of the twenty-four months after the Closing Date;
provided, however, the representations and warranties dealing with Tax matters
shall survive through the tenth day following the running of the applicable
statute of limitations after given effect to any extensions or waiver. If
written notice of a claim has been given prior to, but not after, the expiration
of the applicable representations and warranties by party in whose favor such
representations and warranties have been made to the party that made such
representations and warranties, then the relevant representations and warranties
shall survive as to such claim, until the claim has been finally resolved.
-31-
<PAGE>
SECTION 6.2 Indemnification by Seller. Except as otherwise limited by
this Article, Purchaser and its officers, directors, employees, agents,
successors and assigns shall be indemnified and held harmless by Seller, for any
and all liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable legal
costs and expenses) arising out of or resulting from (a) the breach of any
representation or warranty by Seller or the Company contained herein or in any
document delivered hereunder at the Closing; or (b) the breach of any covenant
or agreement contained herein to be performed by Seller or the Company;
provided, however, for purposes of this Section 6.2 only, Seller shall
specifically exclude James M. Devine, Robert C. Ludwig, Jr., David L. Wright,
Frances L. Bean, Jr., and Harry R. Uber.
SECTION 6.3 Indemnification by Purchaser. Except as otherwise limited
by this Article VI, Seller shall be indemnified and held harmless by Purchaser
for any and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable legal costs and expenses) arising out of or resulting from (a) the
breach of any representation or warranty by the Purchaser contained herein or in
any document delivered hereunder at the Closing; or (b) the breach of any
covenant or agreement by the Purchaser contained herein.
SECTION 6.4 General Indemnification Provisions. (a) The indemnified
party shall promptly notify the indemnifying party of any claim, demand, action
or proceeding for which indemnification is sought under Section 6.2 or 6.3 of
this Agreement and, if such claim, demand, action or proceeding is a third party
claim, demand, action or proceeding, the indemnifying party will have the right,
at its own expense, to assume the defense thereof using counsel reasonably
acceptable to the indemnified party, except in the case of a claim that relates
to Taxes, as to which Purchaser shall assume the defense, and Seller may, at
their sole expense, participate in such defense. The indemnified party shall
have the right to participate, at its own expense, with respect to any such
third party claim, demand, action or proceeding. In connection with any such
third party claim, demand, action or proceeding, the parties thereto shall
cooperate with each other and provide each other with access to relevant books
and records in their possession. No such third party claim, demand, action or
proceeding shall be settled without prior written consent of the indemnified
party, provided, however, that if a firm, written offer is made to settle any
such third party claim, demand, action or proceeding and the indemnifying party
proposes to accept such settlement and the indemnified party refuses to consent
to such settlement, then: (i) the indemnifying party shall pay such amount to
the indemnified party; (ii) the indemnifying party shall be excused from, and
the indemnified party shall be solely responsible for, all further defense of
such third party claim, demand, action or proceeding; and (iii) the maximum
liability of the indemnifying party relating to such third party claim, demand,
action, or proceeding shall be the amount of the proposed settlement if the
amount thereafter recovered from the indemnified party on such third party
claim, demand, action or proceeding is greater that the amount of the proposed
settlement.
-32-
<PAGE>
(b) Any payment made to or on behalf of any indemnified party
shall be increased to such amount as will, after taking into account all Taxes
imposed with respect to the accrual or receipt of such payment (as the same may
be increased pursuant this sentence), equal the amount of the payment otherwise
due without considering the taxes payable by such party as a result of the
accrual or receipt of such payment.
(c) Upon payment by an indemnified party to a third party of
an amount subject to indemnification, the indemnifying party shall discharge its
indemnification obligation by paying to the indemnified party an amount equal to
the amount paid by the indemnified party to the third party; provided, however,
Purchaser shall indemnify Ronald L. Devine for any guarantees executed by said
person guaranteeing an obligation of the Company.
(d) Any payment pursuant to this Article VI shall be made not
later than thirty (30) days after receipt by the indemnifying party of written
notice from the indemnified party stating that an indemnifiable amount has been
paid to a third party, and specifying the amount thereof and the amount of the
indemnity payment requested.
SECTION 6.5 Limits on Indemnification and Liability.
(a) The amounts for which the indemnifying party shall be
liable under of this agreement shall be net of (i) any insurance proceeds
received by the indemnified party and (ii) any tax benefits to the indemnified
party, arising from the facts giving rise to the liability or right of
indemnification.
(b) Purchaser shall not be entitled to assert any right under
this Agreement unless the aggregate amount of Purchaser's indemnified claims and
liability exceed $50,000.00, and then only to the extent the aggregate amount of
Purchaser's indemnified claims liabilities exceed such amount.
(c) Seller shall not be entitled to assert any right under
this Agreement unless the aggregate amount of the Seller's indemnified claims
and liability exceed $50,000.00, and then only to the extent the aggregate
amount of the Seller's indemnified claims and liabilities exceed such amount.
(d) Purchaser shall not be entitled to recover from any Seller
an amount in excess of the Purchase Price with respect to such Seller, except
that this limitation shall be inapplicable with respect to any liability of or
indemnified claims against any Seller who had actual knowledge of the matters
pertaining to the liability or indemnified claim and nonetheless misrepresented
the same in this Agreement or the documents delivered at the Closing.
-33-
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser;
(b) by either Seller or Purchaser if the Closing shall not
have occurred by June 15, 1997; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in the failure of, the Closing to occur on the
Closing Date and nothing contained herein shall relieve such party from
liability for breach of this Agreement.
(c) by Purchaser if there has been a material
misrepresentation or material breach of warranty or covenant on the part of the
Company or Seller, and by Seller if there has been a material misrepresentation
or material breach of warranty or covenant on the part of Purchaser;
(d) by Purchaser or the Company and Seller if it or they shall
reasonably determine that the transactions contemplated by this Agreement have
become inadvisable or impracticable by reason of the institution or threat by
state, local or Federal governmental authorities;
(e) by Purchaser if the business, assets, prospects, results
of operations or financial condition of the Company have been materially and
adversely affected since the Balance Sheet Date, by reason of changes or
developments in the operation of the business of the Company.
SECTION 7.2 Waiver. At any time prior to the Closing, either Seller or
the Purchaser may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto or (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
-34-
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Notices. All notices, request, demands or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given upon delivery in person or upon the expiration of
seven days after the date of positing, if mailed by registered or certified air
mail, postage prepaid, to the parties at the following addresses (or at such
other address for a party and shall be specified by a notice, provided that
notice of change of address shall be effective only upon receipt):
(a) if to Seller, then to the individuals listed on Exhibit
8.1(a)
with a copy to:
Roger T. Whitaker, Esq.
Luper, Sherriff & Niedenthal
50 West Broad Street
Suite 1200
Columbus, OH 43215
(b) if to Purchaser
Buckhead America Corporation
4243 Dunwoody Club Drive
Suite 200
Dunwoody, GA 30350
Attn: Mr. Douglas C. Collins
with a copy to:
James E. Dorsey, Esq.
1201 W. Peachtree Street
Suite 2800
Atlanta, GA 30309-3400
SECTION 8.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
-35-
<PAGE>
SECTION 8.3 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate n good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner so
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
SECTION 8.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes all prior agreements and undertakings
with respect to the subject matter hereof, except that the Confidentiality
Agreement between Purchaser and the Company shall remain in full force and
effect.
SECTION 8.5 Assignment. This Agreement shall not be assigned by Seller.
Purchaser shall have the unlimited right to assign any or all of the rights (but
not its obligations) under this Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the successors and permitted assigns of
Purchaser and Seller.
SECTION 8.6 No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
SECTION 8.7 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
SECTION 8.8 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO.
SECTION 8.10 INTENTIONALLY DELETED
SECTION 8.11 Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
-36-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal as of the date first written above.
PURCHASER
BUCKHEAD AMERICA CORPORATION
By:
Douglas C. Collins
President
SELLER
------------------------------
Ronald L. Devine
------------------------------
Edward W. Hutchman
------------------------------
James M. Devine
------------------------------
David L. Wright
------------------------------
Robert C. Ludwig, Jr., individually and
as Co-Trustee of the Robert C. Ludwig
Family Trust U/A Dated 12/26/96
[Signatures continued on following page.]
-37-
<PAGE>
------------------------------
Francis L. Bean, Jr.
------------------------------
Harry R. Uber
------------------------------
Paul L. Ludwig
------------------------------
Donald P. Ludwig, as Co-Trustee of
the Robert C. Ludwig Family Trust
U/A Dated 12/26/96
-38-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUCKHEAD AMERICA CORPORATION FOR THE THREE MONTHS ENDED
MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,878
<SECURITIES> 2,649
<RECEIVABLES> 1,281
<ALLOWANCES> 151
<INVENTORY> 0
<CURRENT-ASSETS> 5,925
<PP&E> 20,913
<DEPRECIATION> 1,829
<TOTAL-ASSETS> 27,512
<CURRENT-LIABILITIES> 1,082
<BONDS> 12,350
0
0
<COMMON> 18
<OTHER-SE> 13,725
<TOTAL-LIABILITY-AND-EQUITY> 27,512
<SALES> 2,288
<TOTAL-REVENUES> 3,805
<CGS> 1,632
<TOTAL-COSTS> 1,822
<OTHER-EXPENSES> 612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 257
<INCOME-PRETAX> 1,114
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,114
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
