-------------------------
ASSET PURCHASE AGREEMENT
-------------------------
DATED AS OF FEBRUARY 20, 1997
AMONG
SWIFT TRANSPORTATION CO., INC.
AND
DIRECT TRANSIT, INC.
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
ASSET PURCHASE AGREEMENT
------------------------
THIS AGREEMENT, made this 20th day of February, 1997, by and among
Direct Transit, Inc., an Iowa corporation ("Seller"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the
sole shareholder of Seller ("▇▇▇▇▇▇▇▇"), and Swift Transportation Co., Inc., an
Arizona corporation ( "Swift" or "Purchaser");
BACKGROUND
A. Seller is engaged, among other areas, in business as a motor carrier
(the "Seller's Business" or the "Business") and desires to sell to Purchaser
certain assets of Seller's business and to continue its corporate existence for
other legitimate purposes following the sale. ▇▇▇▇▇▇▇▇ is the sole owner, of
record and beneficially, of all of Seller's issued and outstanding capital stock
and will benefit from a sale of the Business to Purchaser.
B. Purchaser, together with its subsidiaries and operating affiliates
(collectively "Purchaser") is engaged, in substantial part, in business as a
motor carrier and transportation logistics provider (the "Purchaser's Business")
and desires to purchase certain assets of Seller's Business.
C. Seller is currently operating as a debtor-in-possession under the
protection of a proceeding filed under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code"), Case No. 96-52691XS (the "Bankruptcy
Case") in the United States Bankruptcy Court for the Northern District of Iowa
(the "Bankruptcy Court").
D. Seller intends to file an Amended Plan of Reorganization (the
"Amended Plan") which would, if confirmed by the Bankruptcy Court, allow the
Purchaser to purchase from Seller the Assets (as hereinafter defined).
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Agreement to Sell. At the Closing (as defined in Article II) and
except as otherwise specifically provided in Section 1.3.2 hereof, and in
reliance on the representations, warranties and covenants of Purchaser contained
herein, Seller shall sell, convey, assign, transfer and deliver to Purchaser or
its nominee, upon and subject to the terms and conditions of this Agreement, all
right, title and interest of Seller in and to the Assets (as defined below),
free and clear of all mortgages, liens, pledges, security interests, charges,
claims, restrictions and encumbrances of any nature whatsoever, whether in rem
or in personam, pursuant to ss.ss.363, 1123(b)(4), 1129 and 1141(c) of the
Bankruptcy Code.
1.2 Agreement to Purchase. Upon and subject to the terms and conditions
of this Agreement and in reliance on the representations, warranties and
covenants of Seller and
▇▇▇▇▇▇▇▇ contained herein, Purchaser shall, at Closing, purchase the Assets from
Seller in exchange for the Purchase Price (defined in Section 1.4 hereof).
1.3 Description of Assets; Excluded Assets.
---------------------------------------
1.3.1 Assets to Be Acquired.
(a) The machinery, equipment, tools, vehicles,
furniture, furnishings, leasehold improvements, goods, and other tangible
personal property of Seller, including, but not limited to, those items which
are listed on Seller's September 30, 1996 Balance Sheet attached hereto as
Exhibit A (the "September 30 Balance Sheet") under the category of "Equipment"
and as listed on the September 30 Balance Sheet as Revenue Equipment, Shop and
Garage Equipment, Furniture, and Office Equipment, with an aggregate book value,
as reflected on the September 30 Balance Sheet in the amount of One Million Four
Hundred Sixty-Six Thousand Five Hundred Ninety-One Dollars ($1,466,591), some of
which, but not all of which, items of Equipment are set forth on Schedule
1.3.1(a) attached hereto;
(b) All parts, fuel, tires and oil and other like
items comprising the inventories of Seller, as well as all office supplies,
including, but not limited to, all items of inventories and supplies set forth
on the September 30 Balance Sheet under the category of Inventory, which
Inventory has a book value reflected on the September 30 Balance Sheet of Three
Hundred Two Thousand One Hundred Sixteen Dollars ($302,116). The Inventory and
supplies to be acquired by Purchaser are located in Seller's terminals in North
Sioux City, South Dakota, Moosic, Pennsylvania and Portage, Indiana.
(c) All computer equipment, computer software
(including documentation and related object and source codes) of Seller,
including, but not limited to, those items listed on Schedule 1.3.1 (c) hereto;
(d) All methods, formulations, data bases, trade
secrets, know-how, and other intellectual property used in the Seller's
Business;
(e) All Seller's rights under any trademark, service
▇▇▇▇, trade name or copyright, whether registered or unregistered, and any
applications therefor, including the name "Direct Transit," all telephone
numbers and telecopier numbers, as well as all other intangible assets;
(f) All Seller's rights under any written or oral
contract, agreement, warranty, maintenance agreement, lease, plan, instrument,
advertising, listing, registration, license, operating authority, certificate of
occupancy, permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization;
(g) All rights under express or implied warranties
relating to the Assets;
(h) The driver, customer and supplier lists shown on
the attached Schedule 1.3.1 (h) updated, as appropriate, at the Closing; and
-2-
(i) All Insurance Proceeds (as defined in Section
4.3.1 of the Rolling Stock Acquisition Agreement) for Rolling Stock belonging to
Equipment Lessors who elect the application of Section 4.3 of the Rolling Stock
Acquisition Agreement.
1.3.2 Excluded Assets. Notwithstanding the foregoing, the
Assets shall not include any of the following (collectively, the "Excluded
Assets"):
(a) The corporate seals, certificates of
incorporation, minute books, stock books, tax returns, books of account or other
records having to do solely with the corporate organization of Seller;
(b) The rights which accrue or will accrue to Seller
under this Agreement;
(c) Cash or cash equivalents, accounts receivable for
services or goods provided by Seller prior to the Closing Date and accounts
receivable from Seller's employees, insurance refunds, miscellaneous
receivables, and note receivables;
(d) All life insurance policies owned by Seller on
the life of ▇▇▇▇▇▇▇▇;
(e) The assets, properties or rights set forth on
Schedule 1.3.2 (e) hereto; and
(f) All causes of action of Seller, including all
actions arising after the commencement of the Bankruptcy Case under Chapter 5 of
the Bankruptcy Code.
1.4 Purchase Price, Payment, Allocation, Liabilities.
-------------------------------------------------
1.4.1 Purchase Price. Assuming the accuracy of the warranties
and representations in Article III, and subject to any adjustments under Section
1.4.3 hereof, the purchase price to be paid for the Assets (the "Purchase
Price") shall be equal to Three Million Dollars ($3,000,000) and shall be
allocated among the Assets as set forth below:
ALLOCATION OF PURCHASE PRICE
--------------------------------------------|-----------------------------------
o Equipment (machinery, | $1,466,591
equipment, tools, vehicles, furniture, |
furnishings, leasehold improvements, goods |
and other tangible personal property) as |
described in Section 1.3.1 (a) |
--------------------------------------------|-----------------------------------
o Supplies and inventories | $302,116
described in Section 1.3.1 (b) |
--------------------------------------------|-----------------------------------
-3-
--------------------------------------------|-----------------------------------
o Computer equipment, | $331,293
software and other technology assets |
described in Section 1.3.1 (c) |
--------------------------------------------|-----------------------------------
o Trade names, copyright and | $200,000
other intangible assets described in Section|
1.3.1 (e) |
--------------------------------------------|-----------------------------------
o Book of Business' including | $700,000
driver, customer and supplier lists, |
operating rights, technologies, and other |
intellectual property as described in |
Sections 1.3.1 (f), (g) and (h) |
--------------------------------------------|-----------------------------------
o Non-Competition Agreement | $100,000
with Seller |
--------------------------------------------|-----------------------------------
| Total: $3,000,000
============================================|===================================
Seller and Purchaser each hereby covenant and agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the terms of this Section 1.4.1.
1.4.2 Payments; No Assumption of Liabilities.
(a) On the Closing Date, Purchaser shall pay to the
Escrow Agent under an Escrow Agreement substantially in the form attached hereto
as Exhibit B (the "Escrow Agreement"), on account of the Purchase Price, the
amount of Three Million Dollars ($3,000,000) (the "Escrowed Amount"). The Escrow
Agreement shall provide that of the Escrowed Amount, One Million Dollars
($1,000,000) (the "$1 Million Hold Back") shall be held for six months following
the Closing Date (the "Six Month Period") as security for any adjustments to the
Purchase Price to be made pursuant to Section 1.4.3 below as well as any setoffs
made pursuant to Section 6.3 below. After the expiration of the Six Month
Period, the balance of the $1 Million Hold Back shall be released to Seller. The
Escrow Agreement shall further provide that the full Escrowed Amount less the $1
Million Hold Back shall be released to Seller upon entry of a final,
non-appealable Plan Confirmation Order in a form reasonably satisfactory to
Purchaser pursuant to Section 7.10 below which adequately addresses Purchaser's
concerns as to successor liability claims relating to the operation of Seller's
Business prior to the Closing Date, including, but not limited to, tort claims,
contract claims, tax liabilities and environmental liabilities ("Successor
Liability Claims"). In the event that a final, nonappealable Plan Confirmation
Order is not entered as provided above, the Escrowed Amount shall continue to be
held in escrow for the Six Month Period until the parties have agreed (or if no
agreement is forthcoming, the Court has decided) upon a sufficient reserve from
the Escrowed Amount in order to satisfy, discharge or contest Successor
Liability Claims asserted prior to the expiration of the Six Month Period.
-4-
(b) At the Closing, in consideration of ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ (collectively the "Petersons")
entering into a restrictive covenant agreement with Seller in the form attached
hereto as Exhibit C (the "▇▇▇▇▇▇▇▇ Agreement"), described in Section 5.1.14
below, Seller shall pay to the Petersons (or their assignees) the sum of One
Million Forty-Five Thousand Dollars ($1,045,000), hereinafter referred to as the
"Covenant Payment." In addition to the ▇▇▇▇▇▇▇▇ Agreement, Seller shall execute
a Noncompetition Agreement between Purchaser and Seller in the form attached
hereto as Exhibit D (the "Seller Noncompete Agreement").
1.4.3 Adjustment to Purchase Price. The $1,000,000 Hold Back
shall be held in escrow during the Six Month Period in order to ensure that all
of the Assets are transferred to Purchaser, that such Assets are in operable
condition, and that all representations, warranties, covenants and agreements of
Seller have been satisfied and/or are true and correct in all material respects.
In the event that any of the Assets are not conveyed to Purchaser or are
conveyed to Purchaser in an inoperable condition, or if Purchaser has suffered
damages as a result of the material breach or inaccuracy of the representations,
warranties, covenants and agreements of Seller contained in this Agreement or
any exhibit or schedule thereto, then the Purchaser shall so notify Seller of
any such missing assets, defects or damages, in writing, prior to the expiration
of the Six Month Period. Unless disputed by Seller, the Purchase Price shall be
reduced by the book value (as reflected on the September 30 Balance Sheet and
any supplemental schedules thereto, without taking into consideration any
accumulated depreciation) of any Asset not so conveyed or in an inoperable
condition as of the Closing and/or the amount of damages suffered by Purchaser
arising from the breach or inaccuracy of the representations, warranties,
covenants and agreements of Seller. The Escrow Agreement shall provide that in
the event of a reduction in the Purchase Price under this Section 1.4.3, the
Escrow Agent shall release to the Purchaser from the $1 Million Hold Back an
amount equal to the reduction in the Purchase Price. Notwithstanding the above,
prior to any adjustment, the book value of the Equipment and Inventory actually
transferred to Purchaser at Closing must vary by at least 10% from the book
value of such Equipment and Inventory as reflected on the September 30 Balance
Sheet (without regard to accumulated depreciation), and any adjustment to the
Purchase Price shall only be made to the extent such variance exceeds 10% of
such book value.
1.4.4 No Assumption of Liabilities. Except with respect to the
acquisition of certain tractors and trailers (the "Rolling Stock") to be
acquired from certain of Seller's equipment lessors (the "Equipment Lessors") as
discussed in greater detail in Section 1.5 below, Purchaser shall not assume or
be responsible for any other Liability of Seller or ▇▇▇▇▇▇▇▇, whether accrued
before or after the Closing Date. For purposes of this Agreement, the term
"Liability" or "Liabilities" shall include, without limitation, any direct or
indirect indebtedness, guarantee, endorsement, claim, loss, damage, deficiency,
cost, expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, ▇▇▇▇▇▇ or inchoate, liquidated or unliquidated, secured
or unsecured, matured or unmatured, absolute or contingent, whether arising
under contract, tort, or by statute. Without limiting the breadth and generality
of the foregoing, Purchaser shall not assume or incur any Liability in respect
to any of the following:
-5-
(a) Liabilities to any of Seller's or ▇▇▇▇▇▇▇▇'▇
creditors for deficiencies following the sale, return or other disposition of
any assets, including, but not limited to, the Rolling Stock, which are subject
to their respective security interests;
(b) Any product liability, cargo liability, vehicle
accident, premises liability, or similar claim for injury to person or property,
regardless of when made or asserted, which arises out of or is based upon any
express or implied representation, warranty, agreement or guarantee made by
Seller, or alleged to have been made by Seller, or which is imposed or asserted
to be imposed by operation of law, and any claim seeking recovery for
consequential damage, lost revenue or income;
(c) Any foreign, federal, state or local Tax (as
defined in Section 3.1.10 below): (i) payable with respect to the business,
assets, properties or operations of Seller or ▇▇▇▇▇▇▇▇ or any member of any
affiliated group of which either is a member, or (ii) incident to or arising as
a consequence of the negotiation or consummation by Seller or ▇▇▇▇▇▇▇▇, or any
member of any affiliated group of which either is a member, of this Agreement
and the transactions contemplated hereby;
(d) Any Liability arising prior to or as a result of
the Closing to any employees, agents or independent contractors of Seller,
whether or not employed by Purchaser after the Closing, or under any benefit
arrangement with respect thereto;
(e) Any Liability of Seller or ▇▇▇▇▇▇▇▇ arising or
incurred in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby including, fees and expenses
of counsel, accountants and other experts.
1.4.5 Successor Liability. Since Purchaser will not assume or
take responsibility for any successor Liability of Seller or ▇▇▇▇▇▇▇▇, the
Amended Plan, as confirmed by the Bankruptcy Court, must make provisions for
tort claims, whether known or unknown, arising prior to the Closing.
1.5 Acquisition of Rolling Stock from Equipment Lessors. Purchaser
shall acquire the Rolling Stock from Equipment Lessors which Rolling Stock
Seller is currently leasing under certain agreements denominated as operating
leases (the "Operating Leases"). Purchaser shall acquire the Rolling Stock from
the Equipment Lessors either by entering into new lease agreements with the
Equipment Lessors and/or through the purchase of such Rolling Stock directly
from such Equipment Lessors pursuant to that certain Rolling Stock Acquisition
Agreement attached hereto as Exhibit E.
1.6 Real Estate. With respect to the Moosic, Pennsylvania terminal, the
North Sioux City, South Dakota terminal and the Portage, Indiana terminal,
Purchaser, subject to its inspection of each terminal, obtaining certain
representations, warranties and indemnifications with respect to each such
property, as well as its approval of the results of a Phase I and/or Phase II
Environmental Site Assessment for each such property, agrees to lease such
terminals on the following terms and conditions:
-6-
1.6.1 Moosic, Pennsylvania Terminal. Purchaser will lease this
terminal from Seller for an initial term of sixty (60) days, and month-to-month
thereafter. Such lease may be terminated by either party at any time, but either
party shall give the other not less than sixty (60) days written notice prior to
terminating such lease.
1.6.2 North Sioux City, South Dakota Terminal. Purchaser will
lease this terminal from Seller for an initial term of ninety (90) days, and
month-to-month thereafter. Such lease may be terminated by either party at any
time, but either party shall give the other not less than thirty (30) days
written notice prior to terminating such lease.
1.6.3 Portage, Indiana Terminal. Purchaser will lease this
terminal from Seller for an initial term of nine (9) months, and month-to-month
thereafter. After the initial term, such lease may be terminated by either party
at any time, but either party shall give the other not less than sixty (60) days
written notice prior to terminating such lease.
1.6.4 Monthly Rent. Monthly rental payments for each terminal
shall be based upon its respective fair market rental value. If the parties are
unable to mutually agree upon such fair market rental value, such value shall be
determined by a mutually agreed upon independent appraisal. Purchaser shall be
obligated to pay for its own utilities and shall carry adequate worker's
compensation and liability insurance, as well as casualty insurance for its own
personal property, but not covering the improvements on the terminals, (which
insurance shall be provided by Seller), and Purchaser shall be responsible for
janitorial services for the interior of the leased terminals with Seller to be
responsible for all other maintenance and repairs with respect to any of the
leased terminals. Purchaser shall not be obligated to reimburse Seller for any
property taxes attributable to such leased terminals.
1.6.5 Form Lease. The terms and conditions of each lease shall
be substantially similar to Exhibit F attached hereto.
1.6.6 Leasehold Rights. Purchaser's leasehold rights for each
such leased terminal shall include all structures, improvements and fixtures,
rights of way, uses, licenses, easements, hereditaments, tenements and
appurtenances. At the termination of each such lease, Purchaser shall be
permitted to remove all personal property attached to or located in any such
terminal which are part of the Assets purchased under this Agreement.
1.6.7 Environmental Conditions. Purchaser shall not be liable
with respect to any environmental condition on any of the terminals existing as
of the Closing which is considered to be a violation of any environmental law
(an "Environmental Condition"), whether violative of any federal, state or local
law, regulation, rule or ordinance, in the broadest sense of the word. Seller
shall indemnify, defend and hold Purchaser harmless from any loss, claim,
damages or expenses incurred by Purchaser as a result of any such Environmental
Condition existing prior to the Closing and Purchaser shall indemnify, defend
and hold Seller harmless from any Environmental Condition caused by any act or
omission of Purchaser, its officers, employees, agents or contracts subsequent
to the Closing.
ARTICLE II
CLOSING
-------
-7-
The closing (the "Closing") of the sale and purchase of the Assets
shall take place at ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, Chicago, Illinois at 10:00 a.m.,
local time, on the date which is not more than 5 business days after the
conditions set forth in Article V have been satisfied or waived by the party
whose obligations are subject to such condition or on such other date as may be
mutually agreed upon in writing by Purchaser and Seller. The date of the Closing
is sometimes herein referred to as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of the Seller. The Seller and
▇▇▇▇▇▇▇▇, jointly and severally, hereby represent and warrant to Purchaser that,
except as set forth on the Disclosure Schedule attached hereto (the "Disclosure
Schedule"), which Disclosure Schedule shall specifically identify the relevant
subsection hereof to which it relates and shall be deemed to be representations
and warranties as if made hereunder:
3.1.1 Corporate Existence and Organization. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; and Seller is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the conduct of the Business by it requires it to be so qualified; as
evidenced by certificates of good standing issued by each such jurisdiction and
included as part of the Disclosure Schedule. ▇▇▇▇▇▇▇▇ is the sole owner and
holder of all issued and outstanding common voting stock of Seller and is
entitled to exercise all voting rights. There are no proxies, voting trust
agreements, pledges or other restrictions affecting those voting rights. There
are no agreements affecting Seller's corporate governance other than the
Articles of Incorporation and By-Laws included as a part of the Disclosure
Schedules. There are issued and outstanding no bonds, debentures, warrants,
options, multiple classes of stock or any other instrument convertible to any
class of stock.
3.1.2 Corporate Power; Authorization; Enforceable Obligations.
Subject to the provisions of the Bankruptcy Code, the Bankruptcy Case and the
jurisdiction of the Bankruptcy Court, Seller has the corporate power, authority
and legal right to execute, deliver and perform this Agreement. Subject to the
provisions of the Bankruptcy Code, and the required confirmation of the
Bankruptcy Court of this Agreement and the underlying transactions contemplated
thereby, the execution, delivery and performance of this Agreement by ▇▇▇▇▇▇▇▇
and Seller have been duly authorized by all necessary corporate and shareholder
action. This Agreement has been, and the other agreements, documents and
instruments required to be delivered by Seller in accordance with the provisions
hereof (the "Seller's Documents") will be, duly executed and delivered on behalf
of Seller by duly authorized officers of Seller; and this Agreement constitutes,
and the Seller's Documents when executed and delivered (and when approved by the
Bankruptcy Court) will constitute, the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.
3.1.3 Safety Rating. Seller has now and since the commencement
of its operations, maintained a "Satisfactory" safety rating as promulgated by
the Department of Transportation ("DOT") and is not aware of any issues,
deficiencies or violations which would change such rating. Seller is not aware
of any notice of any intended, pending, or proposed
-8-
audit of its operations by the DOT or any other governmental entity having
jurisdiction over the operations of Seller.
3.1.4 No Interest in Other Entities. Except for interests in
the entities described in the Disclosure Schedule in response to this Section
(such entities are hereinafter referred to as the "Subsidiaries"), no shares of
any corporation or any ownership or other investment interest, either of record,
beneficially or equitably, in any association, partnership, joint venture or
other legal entity are included in the Assets, other than shares of capital
stock representing immaterial, non-controlling interests in publicly-traded
companies obtained by Seller in the ordinary course of the Business.
3.1.5 Validity of Contemplated Transactions, Etc. Subject to
the provisions of the Bankruptcy Code, the Bankruptcy Case and the jurisdiction
of the Bankruptcy Court, the execution, delivery and performance of this
Agreement by ▇▇▇▇▇▇▇▇ and Seller does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under, (a) any existing law, ordinance, or
governmental rule or regulation to which Seller or ▇▇▇▇▇▇▇▇ is subject, (b) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Seller or ▇▇▇▇▇▇▇▇, (c) the charter documents of Seller or any securities issued
by Seller, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization (defined in Section 3.1.15), or other instrument,
document or understanding, oral or written, to which Seller or ▇▇▇▇▇▇▇▇ is a
party, by which Seller or ▇▇▇▇▇▇▇▇ may have rights or by which any of the Assets
may be bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of Seller or ▇▇▇▇▇▇▇▇ thereunder. Except as aforesaid or provided in
15 U.S.C. ss.18a, no Authorization, approval or consent of, and no registration
or filing with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery or performance of this
Agreement by Seller or ▇▇▇▇▇▇▇▇.
3.1.6 No Third Party Options. There are no existing
agreements, options, commitments or rights with, of or to any person to acquire
any of Seller's assets, properties or right included in the Assets or any
interest therein or ▇▇▇▇▇▇▇▇'▇ ownership interest in Seller.
3.1.7 Financial Statements. Seller has delivered to Purchaser
true and complete copies of (a) the balance sheets of Seller at December 31,
1993, 1994, and 1995 and the related statements of income, cash flow and changes
in shareholders equity for the fiscal years then ended, certified by Seller's
Auditors (the "Audited Statements"); (b) the September 30 Balance Sheet; and (c)
the unaudited balance sheet of Seller as of December 31, 1996 and related
statements of income and cash flow for the periods then ended (the "Interim
Statements") and, together with the Audited Statements, the "Financial
Statements"), all of which have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved. The Financial Statements, including the related notes, fairly present
the financial position, assets and liabilities (whether accrued, absolute,
contingent or otherwise) of Seller at the dates indicated and such statements of
income, cash flow and changes in shareholders equity fairly present the results
of operations, cash flow and changes in shareholders equity of Seller for the
periods indicated. The Interim Statements contain all adjustments, which are
solely of a normal recurring nature, necessary to present fairly the
-9-
financial position for the periods then ended. In addition to the foregoing,
Seller has delivered to Purchaser a Presentation to Creditors dated as of
January 24, 1997, prepared by the firm of Coopers & ▇▇▇▇▇▇▇ ("the Debt
Schedule") which provides a summary of all outstanding or potential Liabilities
of the Seller as of July 31, 1996. The Debt Schedule fairly and accurately
reflects all Liabilities of the Seller as of such time and there are no
Liabilities of Seller except as shown on the Debt Schedule.
3.1.8 Accounts Receivable. The accounts receivable shown in
the Financial Statements do not include any amounts attributable to goods yet to
be delivered or services yet to be performed.
3.1.9 Inventory. All inventory of Seller used in the conduct
of the Business, including without limitation raw materials, work-in-process and
finished goods, reflected on the Financial Statement or acquired since the date
thereof was acquired and has been maintained in the ordinary course of the
Business; is of good and merchantable quality; consists substantially of a
quality, quantity and condition usable in the ordinary course of the Business;
is valued at reasonable amounts based on the ordinary course of business of
Seller during the past six months; and is not subject to any write-down or
write-off.
3.1.10 Tax and Other Returns and Reports. All federal, state,
local and foreign tax returns, reports, statements and other similar filings
required to be filed by Seller (the "Tax Returns") with respect to any federal,
state, local or foreign taxes, assessments, interest, penalties, deficiencies,
fees and other governmental charges or impositions, (including, without
limitation, all income tax, unemployment compensation, social security, payroll,
sales and use, excise, privilege, property, ad valorem, franchise, license,
school, fuel and any other tax or similar governmental charge or imposition
under laws of the United States or any state or municipal or political
subdivision thereof or any foreign country or political subdivision thereof)
(the "Taxes") have been filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of Seller for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, or heretofore or
hereafter claimed to be due by any taxing authority from Seller, have been
properly accrued or paid and no Taxes are currently delinquent. The accruals for
Taxes contained in the Financial Statements are adequate to cover the tax
liabilities of Seller with respect to the Business as of that date and include
adequate provision for all deferred taxes, and nothing has occurred subsequent
to that date to make any of such accruals inadequate. Seller has not received
any notice of assessment or proposed assessment in connection with any Tax
Returns and there are not pending tax examinations or audits of or tax claims
asserted against Seller or any of its assets or properties. Seller has not
extended, or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes. There are no
tax liens (other than any lien for current taxes not yet due and payable) on any
of the assets or properties of Seller. Seller has no knowledge of any basis for
any additional assessment of any Taxes. Seller has made all deposits required by
law to be made with respect to employees' withholding and other employment
taxes, including without limitation the portion of such deposits relating to
taxes imposed upon Seller.
-10-
3.1.11 Books of Account. The books, records and accounts of
Seller maintained with respect to the Business accurately and fairly reflect, in
reasonable detail, the Assets and Liabilities of Seller. Seller has not engaged
in any transaction with respect to the Business, maintained any bank account for
the Business or used any of the funds of Seller in the conduct of the Business
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business.
3.1.12 Existing Condition. Since the date of the Interim
Statements, and unless specifically authorized by the Bankruptcy Court, Seller
has not:
(a) incurred any Liabilities, other than Liabilities
incurred in the ordinary course of business (other than Debtor-in-Possession
financing), consistent with past practice, or discharged or satisfied any lien
or encumbrance, or paid any Liabilities, other than in the ordinary course of
business consistent with past practice, or failed to pay or discharge when due
any Liabilities of which the failure to pay or discharge has caused or will
cause any material damage or risk of material loss to it or any of its assets or
properties (except for the failure to make any payments or discharge any
Liabilities specifically authorized by the Bankruptcy Court), and Seller has
made all adequate protection payments to its creditors required by the
Bankruptcy Court;
(b) sold, encumbered, assigned or transferred any
assets or properties which would have been included in the Assets if the Closing
had been held on the date of the September 30 Balance Sheet or on any date since
then, except for the sale, use or consumption of inventory in the ordinary
course of business consistent with past practice;
(c) created, incurred, assumed or guaranteed any
indebtedness for money borrowed, or mortgaged, pledged or subjected any of the
Assets to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever, except for
Debtor-in-Possession financing and any Liens specifically permitted under this
Agreement ("Permitted Liens");
(d) made or suffered any amendment or termination of
any material agreement, contract, commitment, lease or plan to which it is a
party or by which it is bound, or canceled, modified or waived any substantial
debts or claims held by it or waived any rights of substantial value, whether or
not in the ordinary course of business (other than Debtor-in- Possession
financing);
(e) declared, set aside or paid any dividend or made
or agreed to make any other distribution or payment in respect of its capital
shares or redeemed, purchased or otherwise acquired or agreed to redeem,
purchase or acquire any of its capital shares;
(f) suffered any damage, destruction or loss, whether
or not covered by insurance, (i) materially and adversely affecting its
business, operations, assets, properties or prospects or (ii) of any item or
items carried on its books of account individually or in the aggregate at more
than One Hundred Thousand Dollars ($100,000), or suffered any repeated,
recurring or prolonged shortage, cessation or interruption of supplies or
utility or other services required to conduct its business and operations;
-11-
(g) suffered any material adverse change in its
business, operations, assets, properties, prospects or condition (financial or
otherwise);
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital
expenditures or capital additions or betterments exceeding in the aggregate
Fifty Thousand Dollars ($50,000) except such as may be involved in ordinary
repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of,
or made any advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of its employees or made any increase in, or any
addition to, other benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed
by it or the methods of applying such principles; or
(l) entered into any transaction other than in the
ordinary course of business consistent with past practice.
3.1.13 Title to Properties. Seller has good, valid and
marketable title to all of its properties and assets, real, personal and mixed,
which would be included in the Assets if the Closing took place on the date
hereof, which it purports to own, including without limitation all Assets to be
acquired under this Agreement and as reflected in the September 30 Balance Sheet
(except for inventory sold, used or consumed since the date thereof in the
ordinary course of business consistent with past practice) free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
other encumbrances and defects of title of any nature whatsoever, except for
Permitted Liens.
3.1.14 Condition of Tangible Assets. All buildings,
structures, facilities, equipment, machinery, vehicles and other material items
of tangible property and assets which would be included in the Assets if the
Closing took place on the date hereof are in Seller's possession and control,
are in good operating condition and repair, subject to normal wear and
maintenance, are usable in the regular and ordinary course of Seller and
Purchaser's business and conform to all applicable laws, ordinances, codes,
rules, regulations, authorizations, warranties and maintenance schedules
relating to their construction, manufacture, modification, use and operation.
Attached as Schedule 3.1.14 is the Seller's most recent Age, Condition and
Location report for the Seller's leased and owned equipment, dated as of
February 14, 1997 ("the Report"). Seller represents and warrants that the Report
is accurate in all material respects and that the Report only reflects equipment
that is owned or leased by Seller and which will be included in the Assets.
Seller agrees to update such Report as of the Closing Date. No person other than
Seller owns any equipment or other tangible assets or properties situated on any
of the real estate owned or leased by Seller or necessary to the operation of
the business of Seller, except for leased items disclosed in the Disclosure
Schedule and for items of immaterial value.
-12-
3.1.15 Compliance with Law; Authorizations. Seller has
complied with each, and is not in violation of any law, ordinance, or
governmental or regulatory rule or regulation, whether federal, state, local or
foreign, to which Seller's business, operations, assets or properties is subject
("Regulations"). Seller owns, holds, possesses or lawfully uses in the operation
of its business all operating authorities, franchises, licenses, permits,
easements, rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of the
assets owned or used by Seller in the conduct of the business of Seller, free
and clear of all liens, charges, restrictions and encumbrances and in compliance
with all Regulations. All such Authorizations are listed and described in the
Disclosure Schedule. Seller is not in default, nor has it received any notice of
any claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No shareholder, director, officer, employee or former employee of Seller
or any affiliates of Seller, or any other person, firm or corporation owns or
has any proprietary, financial or other interest (direct or indirect) in any
Authorization which Seller owns, possesses or uses in the operation of the
business of Seller as now or previously conducted.
3.1.16 Disputes. No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
best knowledge of Seller, threatened against Seller or which relates to the
Assets of Seller or the transactions contemplated by this Agreement, nor does
Seller know of any reasonably likely basis for any such litigation, arbitration,
investigation or proceeding, the result of which could adversely affect Seller,
its assets or the transactions contemplated hereby. Seller is not a party to or
subject to the provisions of any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority which may adversely affect Seller, its assets or the transactions
contemplated hereby. The Disclosure Schedule accurately reflects all claims for
accidents, cargo damage or loss, available insurance and reserves for each such
claim.
3.1.17 Insurance. The Assets and operations of Seller are
insured under various policies of general liability and other forms of
insurance, all of which are described in the Disclosure Schedule, which
discloses for each policy the risks insured against, coverage limits, deductible
amounts, all outstanding claims thereunder, and whether the terms of such policy
provide for retrospective premium adjustments. All such policies are in full
force and effect in accordance with their terms, no notice of cancellation has
been received, and there is no existing default or event which, with the giving
of notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which are adequate in relation to the business and
assets of Seller and all premiums to date have been paid in full. Seller has not
been refused any insurance, nor has its coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. The Disclosure Schedule also contains a
true and complete description of all outstanding bonds and other surety
arrangements issued or entered into in connection with the business, assets and
liabilities of Seller.
-13-
3.1.18 Contracts and Commitments.
(a) Seller is not a party to any of the following
written or oral agreements, contracts, commitments, instruments, options or
undertakings (the "Agreements" or an "Agreement") other than those terminable at
Seller's will without penalty, payment or impairment:
(1) Any agreement with any present or former
employee or consultant or for the employment of any person, including any
consultant, who is engaged in the conduct of the Business;
(2) Any agreement for the future purchase
of, or payment for, supplies or products, or for the performance of services by
a third party which supplies, products or services are used in the conduct of
the Business involving in any one case One Hundred Thousand Dollars ($100,000)
or more;
(3) Any agreement to sell or supply products
("Goods Contracts") or to perform services ("Services Contracts") in connection
with the Business involving in any one case One Hundred Thousand Dollars
($100,000) or more;
(4) Any distribution, dealer, representative
or sales agency Agreement, relating to the Business;
(5) Any lease under which Seller is either
lessor or lessee relating to the Assets or any property at which the Assets are
located;
(6) Any note, debenture, bond, equipment
trust agreement, letter of credit agreement, loan agreement or other Agreement
for the borrowing or lending of money relating to the Business or agreement or
arrangement for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person relating to the Business;
(7) Any agreement for any charitable or
political contribution relating to the Business;
(8) Any agreement for any capital
expenditure or leasehold improvement in excess of Twenty-Five Thousand Dollars
($25,000) relating to the Assets;
(9) Any agreement limiting or restraining
Seller, the Business or any successor thereto from engaging or competing in any
manner or in any business, nor, to Seller's knowledge, is any employee of Seller
engaged in the conduct of the Business subject to any such agreement, contract
or commitment;
(10) Any license, franchise, distributorship
or other Agreement which relates in whole or in part to any software, patent,
trademark, trade name, service ▇▇▇▇ or copyright or to any ideas, technical
assistance or other know-how of or used by Seller in the conduct of the
Business; or
-14-
(11) Any agreement relating to the Business
not otherwise listed on the Disclosure Schedule and continuing over a period of
more than six months from the date hereof or exceeding One Hundred Thousand
Dollars ($100,000) in value.
(b) Each of the Agreements listed in the Disclosure
Schedule in response to this Section, or not required to be listed therein
because of the amount thereof, and to which Purchaser is to acquire rights or
obligations hereunder, is valid and enforceable in accordance with its terms.
Seller is, and to Seller's knowledge all other parties thereto are, in
compliance with the provisions thereof; Seller is not, and to Seller's
knowledge, no other party thereto is, in default in the performance, observance
or fulfillment of any material obligation, covenant or condition contained
therein; and no event has occurred which with or without the giving of notice or
lapse of time, or both, would constitute a default thereunder. No such
Agreement, in the reasonable opinion of Seller, contains any contractual
requirement with which there is a reasonable likelihood Seller or any other
party thereto will be unable to comply. No such Agreement requires the consent
of any party to its assignment in connection with the transactions contemplated
hereby.
(c) Each Goods Contract and each Service Contract is
in one of the forms attached to the Disclosure Schedule with only such changes
thereto as are necessary to reflect applicable fees, products, and time periods
and such other changes therein as do not materially affect the rights or
obligations of Seller thereunder.
(d) The Disclosure Schedule accurately discloses with
respect to each Services Contract disclosed therein, the customer name; the form
from which such contract has been derived; whether or not the contract amount is
fixed or may be varied based on services performed; if the contract amount is
fixed, the contract amount, or, if the contract amount is not fixed, a good
faith, reasonable estimate of the contract amount and the estimated contract
amount most recently communicated to the customer; a good faith, reasonable
estimate of the work completed and total costs incurred to the date hereof
thereunder; the total ▇▇▇▇▇▇▇▇ as of the date hereof under such contract; the
estimated completion dates therefor; whether or not Seller has any reason to
believe that its profit margin with respect to such contract might be less than
it has customarily achieved in the past for similar contracts; and whether such
contract requires the furnishing of goods or services by persons other than the
employees of Seller.
3.1.19 Additional Information. The Disclosure Schedule
contains accurate lists and summary descriptions of the following:
(a) all inventory, equipment and furniture and
fixtures of Seller included in the Assets as of the date of the September 30
Balance Sheet, specifying such items as are owned and such as are leased and,
with respect to the owned property, specifying its aggregate cost or original
value and the net book value as of the date of the September 30 Balance Sheet
and, with respect to the leased property as to which Seller is a lessee,
specifying the identity of the lessor, the rental rate and the unexpired term of
the lease;
(b) all real property and interests in real property
owned, leased or otherwise held by Seller in the conduct of the Business or upon
which the Assets are located as of the date of the September 30 Balance Sheet,
specifying which are owned and which are leased
-15-
and, (i) with respect to the owned property, specifying its cost or original
value and the net book value as of the date of the September 30 Balance Sheet
and reconciling the aggregate value of the assets in such category to the amount
of such category on the September 30 Balance Sheet Balance Sheet, and (ii) with
respect to the leased property, specifying the identity of the lessor, the
rental rate and the unexpired term of the lease;
(c) the names and titles of and current annual base
salary or hourly rates for all employees of Seller engaged in the conduct of the
Business, together with a statement of the full amount and nature of any other
remuneration, whether in cash or kind, paid to each such person during the past
or current fiscal year or payable to each such person in the future and the
bonuses accrued for, the vacation and severance benefits to which, each such
person is entitled; and
(d) all names under which Seller has conducted any
business or which it has otherwise used during the last five years.
3.1.20 Labor Matters. Seller is not a party to any collective
bargaining agreement, no such agreement determines the terms and conditions of
employment of any employee of Seller, no collective bargaining agent has been
certified as a representative of any of the employees of Seller, and no
representation campaign or election is now in progress with respect to any of
the employees of Seller. Seller is not and will not be at Closing, obligated for
any notice, action, fine, penalty or damages under and is not in violation of 29
U.S.C. ss. 2101- 2109 (the "WARN Act") or any applicable state law counterparts.
If Purchaser determines that it is required to send a "WARN" notice or state law
notice to any of Seller's employees prior to Closing, Seller will provide to
Purchaser any information necessary or helpful in the sending of such notice,
will cooperate with Purchaser in providing such notice, and will coordinate
responses to inquiries and requests by such employees. Seller is in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours. There is no labor strike,
dispute, slow-down or work stoppage actually pending or, to the knowledge of the
Seller or ▇▇▇▇▇▇▇▇, threatened with respect to Seller's employees. Since date of
the Interim Statements, Seller has not made or agreed to any increase in the
amount, rate, terms or method of calculation of compensation to any existing or
former employee to Seller. Seller's Business is not subject to Executive Order
11246.
3.1.21 Employee Benefit Plan and Arrangements. The Disclosure
Schedule contains a complete list of all employee benefit plans, whether formal
or informal, whether or not set forth in writing, and whether covering one
person or more than one person, sponsored or maintained by the Seller. For the
purposes hereof, the term "employee benefit plan" includes all plans, funds,
programs, policies, arrangements, practices, customs and understandings
providing benefits of economic value to any employee, former employee, or
present or former beneficiary, dependent or assignee of any such employee or
former employee other than regular salary, wages or commissions paid
substantially concurrently with the performance of the services for which paid.
Without limitation, the term "employee benefit plan" includes all employee
welfare benefit plans within the meaning of section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), all employee
pension benefit plans within the meaning of section 3(2) of ERISA. Each plan
providing benefits which are funded through a policy of insurance is indicated
by the word "insured" placed by the listing of the plan in the
-16-
Disclosure Schedule. Except as set forth on the Disclosure Schedule, Seller has
not incurred or reasonably expects to incur prior to the Closing, any liability
under Title IV of ERISA arising in connection with the termination of, or
complete or partial withdrawal from, any plan covered or previously covered by
Title IV of ERISA that is likely to become, after the Closing, an obligation of
Purchaser. Except as disclosed on the Disclosure Schedule, no condition exists
that is likely to constitute grounds for termination by the PBGC of any employee
benefit plan subject to Title IV of ERISA that is maintained by Seller. Except
as set forth on the Disclosure Schedule, no "reportable event," within the
meaning of section 4043(c)(5), (6) or (10) of ERISA, has occurred in connection
with any employee benefit plan subject to Title IV of ERISA. None of Seller's
employee benefit plans is a "multi-employer plan" as defined in section 3(37) or
section 4001(a)(3) of ERISA.
3.1.22 Intellectual Property Matters. The Seller in the
conduct of the Business did not and does not utilize any patent, trademark,
trade name, service ▇▇▇▇, copyright, software, trade secret or how-know except
for those listed on the Disclosure Schedule (the "Intellectual Property"), all
of which are owned by the Seller free and clear of any liens, claims, charges or
encumbrances. The Seller does not infringe upon or unlawfully or wrongfully use
any patent, trademark, trade name, service ▇▇▇▇, copyright or trade secret owned
or claimed by another. The Seller is not in default under, and has not received
any notice of any claim of infringement or any other claim or proceeding
relating to any such patent, trademark, trade name, service ▇▇▇▇, copyright or
trade secret. No present or former employee of the Seller and no other person
owns or has any proprietary, financial or other interest, direct or indirect, in
whole or in part, in any patent, trademark, trade name, service ▇▇▇▇ or
copyright, or in any application therefor, or in any trade secret, which the
Seller owns, possesses or uses in its operations as now or heretofore conducted.
The Disclosure Schedule lists all confidentiality or nondisclosure agreements to
which the Seller or any of Seller's employees engaged in the Business is a party
which relates to the Business.
3.1.23 The Software.
(a) Performance. The computer software of Seller
included in the Intellectual Property (the "Software") performs in accordance
with the documentation and other written material used in connection with the
Software and is free of defects in programming and operation, is in
machine-readable form, contains all current revisions of such software, and
includes all computer programs, materials, tapes, know-how, object and source
codes, other written materials, know-how and processes related to the Software.
Seller has delivered to the Purchaser complete and correct copies of all user
and technical documentation related to the Software.
(b) Enhancements, New Products. Neither Seller nor,
to the best knowledge of Seller, any employee or agent thereof has developed or
assisted in the enhancement of the Software except for enhancements included in
the Software as delivered to Purchaser pursuant hereto or the development of any
program or product based on the Software or any part thereof.
(c) Development. No employee or Seller is, or is now
expected to be, in default under any term of any employment contract, agreement
or arrangement relating to the
-17-
Software or noncompetition arrangement, or any other Contract or any restrictive
covenant relating to the Software or its development or exploitation. The
Software was developed entirely by the employees of Seller during the time they
were employees only of Seller and such Software does not include any inventions
of the employees made prior to the time such employees became employees of
Seller nor any intellectual property of any previous employer of such employee.
(d) Title. All right, title and interest in and to
the Software is owned by Seller, free and clear of all liens, claims, charges or
encumbrances, are fully transferable to the Purchaser, and no party other than
Seller has any interest in the Software, including without limitation, any
security interest, license, contingent interest or otherwise. Seller's
development, use, sale or exploitation of the Software does not violate any
rights of any other person or entity and Seller has not received any
communication alleging such a violation. Seller does not have any obligation to
compensate any Person for the development, use, sale or exploitation of the
Software nor has Seller granted to any other person or entity any license,
option or other rights to develop, use, sell or exploit in any manner the
Software, whether requiring the payment of royalties or not.
(e) Protection of Proprietary Nature of Software.
Seller has kept secret and has not disclosed the source code for the Software to
any person or entity other than certain employees of Seller who are subject to
the terms of a binding confidentiality agreement with respect thereto. Seller
has taken all appropriate measures to protect the confidential and proprietary
nature of the Software, including without limitation the use of confidentiality
agreements with all of its employees having access to the Software source and
object code. There have been no patents applied for and no copyrights registered
for any part of the Software. There are no trademark rights of any person or
entity in the name given to the Software or by which it is known.
(f) Delivery of All Copies. All copies of the
Software embodied in physical form are being delivered to the Purchaser at or
prior to the Closing.
3.1.24 Environmental Matters.
(a) Seller has obtained all permits, licenses and
other authorizations which are required in connection with the conduct of the
Business (including all of its owned or leased real estate, the "Seller Real
Property") or any other assets owned or leased by the Seller under Regulations
relating to pollution or protection of the environment, including Regulations
relating to emissions, storage, discharges, existence, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, groundwater, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
(b) Seller is in full compliance in the conduct of
the Business (including the Seller Real Property and all assets owned or leased
by the Seller) with all terms and conditions of the required permits, licenses
and authorizations, and is also in full compliance
-18-
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder.
(c) Seller is not aware of, nor has Seller nor any of
its subsidiaries received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent compliance or continued compliance with
those laws or any regulations, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder, or
which may give rise to any common law or legal liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture, existence, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the environment of any
pollutant, contaminant, chemical, or industrial, toxic or hazardous substance of
waste.
(d) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or threatened against Seller in
connection with the conduct of the Business (including the Seller Real Property
and all assets owned or leased by the Seller) relating in any way to those laws
or any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, or which
requires any investigation or response activities.
3.1.25 Seller Real Property.
(a) Seller Real Property. All Seller Real Property
(including, without limitation, all interests in and rights to real property)
and improvements located thereon which are owned or leased by Seller and used in
connection with the Business is listed on the Disclosure Schedule in response to
this Section.
(b) Owned Real Property. Except as listed on the
Disclosure Schedule in response to this Section, with respect to the Seller Real
Property that is owned by Seller ("Owned Real Property"), title to such Owned
Real Property is, and at Closing shall be, good and marketable, fee simple
absolute, free and clear of all Liens, adverse claims and other matters
affecting Seller's title to or possession of such Owned Real Property,
including, but not limited to, all encroachments, boundary disputes, covenants,
restrictions, easements, rights of way, mortgages, security interests, leases,
mechanics and materialmen liens, encumbrances and title objections, excepting
only such easements, restrictions and covenants presently of record which will
not, in Purchaser's sole judgment, interfere with or impair Purchaser's proposed
lease and intended use of the Owned Real Property.
(c) Leased Real Property. With respect to any Seller
Real Property that is leased by Seller (a "Lease"), each Lease is, and at
Closing shall be, in full force and effect, is evidenced and governed solely by
writings furnished to Purchaser as a part of the Disclosure Schedule, has not
been assigned, modified, supplemented or amended except as listed on the
Disclosure Schedule, and neither Seller nor the landlord or sublandlord under
any Lease
-19-
is in default under any of the Leases, and no circumstances or state of facts
presently exists which, with the giving of notice or passage of time, or both,
would permit the landlord or sublandlord under any Lease to terminate any Lease.
(d) Pollution and Hazardous Substances. Seller has
not used, discharged, released, disposed of or allowed to exist on, under or
about any of its assets, including the Seller Real Property, any radioactive
materials, asbestos, organic compounds known as polychlorinated biphenyls or
chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials, including
without limitation any substances defined as or included within the definition
of "hazardous substances", "hazardous wastes", "hazardous materials", or "toxic
substances" under any and all Regulations, except for goods and materials
transported as cargo in the ordinary course of Seller's Business and in
compliance with all Regulations. Seller has kept and maintained its assets,
including the Seller Real Property, and the waters or any waste on, under or
discharged from its assets, including the Seller Real Property, in compliance
with, and has not caused or permitted its assets, including the Seller Real
Property, to be in violation of any regulations now or previously in effect
related to environmental conditions, air, water and land pollution or the
storage or disposition of hazardous or toxic materials on, under or about its
assets, including the Seller Real Property.
(e) Utility Services. The water, electric, gas and
sewer utility services and the septic tank and storm drainage facilities
currently available to the Seller Real Property are adequate for the present use
of the Seller Real Property by Seller in conducting the Business, are not being
appropriated by Seller but rather are being supplied to Seller by utility
companies or municipalities pursuant to valid and enforceable contracts, and
there is no condition which will result in the termination of the present access
from the Seller Real Property to such utility services and other facilities.
(f) Access. Seller has obtained all Authorizations
and rights-of-way, including proof-of-dedication, which are necessary to ensure
vehicular and pedestrian ingress and egress to and from the Seller Real
Property. There are no restrictions on entrance to or exit from the Seller Real
Property to adjacent public streets and no conditions which will result in the
termination of the present access from the Seller Real Property to existing
highways and roads.
(g) Assessments or Hazards. Seller has received no
notices, oral or written, (i) from any governmental body, that the assessed
value of the Seller Real Property has been determined to be greater than that
upon which county, township or school tax was paid for the current tax year
applicable to each such tax, or (ii) from any insurance carrier of Seller of
fire hazards with respect to the Seller Real Property.
(h) Eminent Domain. Seller has received no notices,
oral or written, and has no reason to believe, that any governmental body having
the power of eminent domain over the Seller Real Property has commenced or
intends to exercise the power of eminent domain or a similar power with respect
to all or any part of the Seller Real Property.
-20-
(i) No Violations. The Seller Real Property and its
present uses comply with all Regulations of all governmental bodies having
jurisdiction over the Seller Real Property. Seller has received no notices, oral
or written, from any governmental body, and has no reason to believe, that the
Seller Real Property or any improvements erected or situated thereon, or the
uses conducted thereon or therein, violate any Regulations of any governmental
body having jurisdiction over the Seller Real Property.
(j) Improvements. The improvements located on the
Seller Real Property are in good condition and are structurally sound, and all
mechanical and other systems located therein are in good operating condition,
subject to normal wear, and no condition exists requiring material repairs,
alterations or corrections.
(k) Public Improvements. No work for municipal
improvements has been commenced on or in connection with the Seller Real
Property or any street adjacent thereto. No assessment for public improvements
has been made against the Seller Real Property which remains unpaid. No notice
from any county, township or other governmental body has been served upon the
Seller Real Property or received by Seller requiring or calling attention to the
need for any work, repair, construction, alteration or installation on or in
connection with the Seller Real Property which has not been complied with.
(l) Executory Contracts. Set forth on the Disclosure
Schedule is a description of all Executory Contracts with respect to the Seller
Real Property.
3.1.26 Availability of Documents. Seller has made available to
Purchaser or will make available to Purchaser prior to Closing, copies of all
documents, including without limitation all agreements, contracts, commitments,
insurance policies, leases, plans, instruments, undertakings, authorizations,
permits, licenses, patents, trademarks, trade names, service marks, copyrights
and applications therefor listed in the Disclosure Schedule hereto or referred
to herein or any other documents reasonably requested by Purchaser in its due
diligence. Such copies are true and complete and include all amendments,
supplements and modifications thereto or waivers currently in effect thereunder.
3.1.27 Restrictions. Except for orders entered in the
Bankruptcy Court, and except for this Agreement, Seller is not a party to any
indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree or award which materially adversely affects or
materially restricts or, so far as Seller can now reasonably foresee, may in the
future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Seller after consummation of the transactions contemplated hereby.
3.1.28 Conditions Affecting Seller. There is no fact,
development or threatened development with respect to the markets, products,
services, clients, customers, facilities, computer software, data bases,
personnel, vendors, suppliers, operations, Assets or prospects of the Business
which are known to Seller which would materially adversely affect the business,
operations or prospects of Seller considered as a whole, other than such
conditions as
-21-
may affect as a whole the economy generally. Seller does not have any reason to
believe that any loss of any employee, agent, customer or supplier or other
advantageous arrangement will result because of the consummation of the
transactions contemplated hereby.
3.1.29 Completeness of Disclosure. No representation or
warranty by Seller in this Agreement nor any certificate, schedule, statement,
document or instrument furnished or to be furnished to Purchaser pursuant
hereto, or in connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make any statement herein or therein not misleading.
3.1.30 Operating Authority. Seller has proper interstate and
intrastate authority to operate its business as its business is presently being
conducted and operated, and copies of such intrastate authorities are attached
here to as Schedule 3.1.30. There are no actions pending or threatened with any
regulatory body concerning Seller's operating authorities nor does Seller have
knowledge of any basis for such action.
3.1.31 Transfer of Permits. Seller agrees to cooperate with
Purchaser in connection with Purchaser's application for the transfer, renewal
or issuance of any permits, licenses, approvals or other authorizations, or to
satisfy any regulatory requirements involving the transfer of the Assets into
Purchaser's name, provided, however, that the parties acknowledge that the
Purchaser is not acquiring any rights to prepaid license or permit fees.
3.1.32 Customers. The Disclosure Schedule contains the names
of each customer of Seller that ordered products, goods or services from Seller
(the "Seller Products and Services") with an aggregate value of One Hundred
Thousand Dollars ($100,000) or more during the eleven (11) month period ending
November 30, 1996 (the "Measuring Period"). Except as disclosed on the
Disclosure Schedule, as of the date hereof to the actual knowledge of the
executive officers of Seller, Seller has not received any notice from any such
customer that it has (i) ceased or is planning to cease using the Seller
Products and Services or (ii) within the past ninety (90) days, substantially
reduced, or will substantially reduce, the amount of the Seller Products and
Services to be purchased in the future. Purchaser's obligation to close the
transaction contemplated under this Agreement shall be specifically conditioned
upon, among other things, Seller's retention of its customer base pending the
Closing as set forth in Section 5.1.13 below.
3.2 Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller as follows:
3.2.1 Corporate Existence. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona.
3.2.2 Corporate Power and Authorization. Purchaser has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by
Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by duly
-22-
authorized officers of Purchaser and constitutes the legal, valid and binding
obligation of Purchaser enforceable against Purchaser in accordance with its
terms.
3.2.3 Validity of Contemplated Transactions, Etc. The
execution, delivery and performance of this Agreement by Purchaser does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or (other than approval of the Bankruptcy Court) require the
consent of any other person under, (a) any existing law, ordinance, or
governmental rule or regulation to which Purchaser is subject, (b) any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
Purchaser, (c) the charter documents of Purchaser or any securities issued by
Purchaser, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, authorization, or other instrument, document or understanding, oral
or written, to which Purchaser is a party or by which Purchaser may have rights
or give any party with right thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of Purchaser
thereunder. Except as aforesaid or provided in 15 U.S.C. ss.18a, no
authorization, approval or consent of, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery or performance of this Agreement by Purchaser.
Purchaser represents to Seller that it has obtained the approval of its board of
directors as well as the approval of the board of directors of Purchaser's
parent corporation, subject to the fulfillment of the terms and conditions of
this Agreement.
3.3 Survival of Representations and Warranties. All representations and
warranties made by the parties in this Agreement or in any certificate,
schedule, statement, document or instrument furnished hereunder or in connection
with negotiation, execution and performance of this Agreement shall survive the
Closing. Notwithstanding any investigation, due diligence or audit conducted
before or after the Closing Date or the decision of any party to complete the
Closing, each party shall be entitled to rely upon the representations and
warranties set forth herein and therein.
ARTICLE IV
AGREEMENTS PENDING CLOSING
--------------------------
4.1 Agreements of Seller and ▇▇▇▇▇▇▇▇ Pending the Closing. Seller and
▇▇▇▇▇▇▇▇ each covenant and agree that, pending the Closing and except as
otherwise agreed to in writing by Purchaser:
4.1.1 Conduct of Business. The Business shall be conducted
solely in the ordinary course consistent with past practice. Neither Seller nor
▇▇▇▇▇▇▇▇ shall engage in any activity or other business competitive with or
detrimental to the Business. Seller shall use its best efforts to conduct its
business in such a manner that on the Closing Date the representations and
warranties of Seller and ▇▇▇▇▇▇▇▇ contained in this Agreement shall be true, as
though such representations and warranties were made on and as of such date.
Neither Seller nor ▇▇▇▇▇▇▇▇ shall provide any confidential information
concerning the Business or its properties or assets to any third party, other
than in the ordinary course of business.
-23-
4.1.2 Maintenance of Physical Assets. Seller shall continue to
maintain and service the physical assets used in the conduct of the Business in
the same manner as has been its consistent past practice.
4.1.3 Employees and Business Relations. Seller shall use its
best efforts to keep available the services of the present employees and agents
of the Business and to maintain the relations and goodwill with the suppliers,
customers, distributors and any others having business relations with the
Business. Seller shall not change the amount or method of compensation for any
employees.
4.1.4 Maintenance of Insurance. Seller shall notify Purchaser
of any changes in the terms of the insurance policies and binders referred to on
Schedule 4.1.4 hereto.
4.1.5 Maintenance of Authorizations. Seller shall use its best
efforts to maintain in full force and effect all Authorizations currently in
effect and used in the conduct of the Business.
4.1.6 Compliance with Laws, Etc. Seller shall comply with all
laws, ordinances, rules, regulations and orders applicable to the Business, or
Seller's operations, assets or properties in respect thereof, the noncompliance
with which might materially affect the Business or the Assets.
4.1.7 Updated Schedules. Seller and ▇▇▇▇▇▇▇▇ shall promptly
disclose to Purchaser any information contained in its representations and
warranties or the Schedules which, because of an event occurring after the date
hereof, is incomplete or is no longer correct as of all times after the date
hereof until the Closing Date; provided, however, that none of such disclosures
shall be deemed to modify, amend or supplement the representations and
warranties of Seller, and ▇▇▇▇▇▇▇▇, or the schedules hereto for the purposes of
Article V hereof, unless Purchaser shall have consented thereto in writing.
4.1.8 Cooperative Efforts. Seller and ▇▇▇▇▇▇▇▇ shall cooperate
with Purchaser and execute all necessary instruments and documents to effect the
Closing. Seller shall pay for all filing, assignment and transfer fees and other
charges up to $20,000, and Purchaser and Seller shall evenly divide all amounts
described in this Section 4.1.8 in excess of $20,000. Seller and ▇▇▇▇▇▇▇▇ shall
use their best efforts to cause all of the conditions to the obligations of
Purchaser and Seller under this Agreement to be satisfied on or prior to the
Closing Date.
4.1.9 Sale of Assets. Seller shall not, directly or
indirectly, sell or encumber all or any part of the Assets.
4.1.10 Access. Seller shall give to Purchaser's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Assets and the Rolling Stock and shall permit them to consult with the officers,
employees, accountants, counsel and agents of Seller for the purpose of making
such investigation of the Assets and the Rolling Stock, including without
limitation Seller's financial
-24-
statements, as Purchaser shall desire to make, provided that such investigation
shall not unreasonably interfere with Seller's business operations. Furthermore,
Seller shall furnish to Purchaser all such documents and copies of documents and
records and information with respect to the affairs of the Business and copies
of any working papers relating thereto as Purchaser shall from time to time
reasonably request and shall permit Purchaser and its agents to make such
physical inventories and inspections of the Assets and the Rolling Stock as
Purchaser may request from time to time.
4.1.11 Press Releases. Except as required by applicable law,
neither Seller nor ▇▇▇▇▇▇▇▇ shall give notice to third parties or otherwise make
any public statement or releases concerning this Agreement or the transactions
contemplated hereby except for such written information as shall have been
approved in writing as to form and content by Purchaser, which approval shall
not be unreasonably withheld.
4.1.12 Environmental Investigations. Seller acknowledges that
Purchaser may, at its expense, undertake or cause to be undertaken one or more
environmental investigations, including Phase I and/or Phase II investigations,
of each parcel of Seller Real Property. Seller shall provide or cause to be
provided all access, information and documents reasonably required for such
investigations, including, but not limited to, any prior environmental
assessment for any Seller Real Property.
4.1.13 HSR Act Notice and Filing. Unless waived by Purchaser,
as soon as practicable (but no later than 15 business days) after execution of
this Agreement, Seller, with Purchaser's cooperation, will file, or cause to be
filed with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice pursuant to 15 U.S.C. ss. ▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), and
any and all state, federal or foreign regulatory bodies or agencies, the
notification and documentary material required in connection with this
transaction. Thereafter Seller shall, with Purchaser's cooperation, promptly
file any additional information requested as soon as practicable after receipt
of a request for additional information under the HSR Act or any other
regulatory filing. Seller shall, with Purchaser's cooperation, use reasonable
efforts to obtain early termination of the applicable waiting period under the
HSR Act. Seller shall coordinate and cooperate with Purchaser in exchanging such
information and providing such reasonable assistance as may be requested in
connection with such filings. Seller and Purchaser shall each pay one-half (1/2)
of the filing fees (not to include any legal fees incurred in the preparation or
filing of the materials) required under the HSR Act or in connection with any
other state, federal or foreign regulatory filing.
4.1.14 Corporate Matters. Seller shall not amend its Articles
of Incorporation or By-Laws; make any tax election or change the tax status of
the corporation; merge with any other person or entity; acquire substantially
all the assets of any other entity; convert to any other form of organization;
or issue any new stock (except to ▇▇▇▇▇▇▇▇). ▇▇▇▇▇▇▇▇ shall not transfer, pledge
or otherwise alienate or encumber his ownership interest in Seller; pledge,
transfer or suffer any restrictions in his voting rights; or exercise his voting
rights in any manner, restricting, delaying or impairing, or inconsistent with,
the timely and full performance of Seller or ▇▇▇▇▇▇▇▇'▇ covenants, warranties,
agreements or obligations hereunder.
-25-
4.1.15 Termination Fee. If, at any time after the execution of
this Agreement and prior to the Closing, Seller shall:
(i) fail to consummate this transaction on or before
May 1, 1997 (the "Drop Dead Date") for any reason, other than as a result of
Purchaser's material breach of its agreements, warranties and/or representations
made herein, then Seller shall pay Purchaser One Hundred Thousand Dollars
($100,000) on the next business day following the Drop Dead Date;
(ii) reject this Agreement under ss.365 of the
Bankruptcy Code, then Seller shall pay to Purchaser One Hundred Thousand Dollars
($100,000) on the next business day following the date of rejection or deemed
rejection; or
(iii) accept an offer (other than from Purchaser) for
the sale of all of the Assets or ▇▇▇▇▇▇▇▇ shall accept an offer for the sale or
any of his stock in Seller, then Seller shall pay to Purchaser One Million
Dollars ($1,000,000) at the time another offer is consummated.
In addition, Seller shall reimburse Purchaser for all of its actual
transaction-related expenses, including, without limitation, its legal,
accounting and other consulting fees, up to the amount of Two Hundred Fifty
Thousand Dollars ($250,000) (collectively, the "Administrative Fees"). Purchaser
shall provide the Seller with a reasonable accounting of the Administrative
Fees.
4.1.16 Amended Plan of Reorganization. As soon as possible
after the execution of this Agreement, but in no event later than two (2)
business days prior to the Closing Date, Seller shall have filed the Amended
Plan with the Bankruptcy Court, in form and content satisfactory to Purchaser,
which Amended Plan shall be consistent with the terms of this Agreement. Seller
represents and warrants that it shall use its reasonable best efforts to obtain
confirmation of the Amended Plan in the form filed or in a form as modified with
the agreement of Purchaser.
4.1.17 Participation in Bidding Process. In the event Seller
solicits any additional bids for the Assets (whether voluntarily or at the
direction of the Bankruptcy Court), Seller agrees to notify Purchaser of its
intention to do so and agrees that Purchaser shall be allowed to participate in
such bid process. Furthermore, the parties agree, in order for Seller or
Purchaser to accept any bid other than Purchaser's bid (a "Third Party Bid"),
such Third Party Bid must (i) cover all Assets to be acquired by Purchaser
hereunder, and (ii) exceed the Purchase Price together with the present value of
the aggregate amount of consideration to be paid by Purchaser for the purchase
or lease of the Rolling Stock of the Equipment Lessors pursuant to the Rolling
Stock Acquisition Agreement by at least ten percent (10%). Notwithstanding
anything contained herein to the contrary, nothing shall preclude Seller from
selling any of its assets not acquired by Purchaser pursuant to this Agreement
to any third party (a "Permitted Third Party Sale"), provided, however, that no
Assets acquired by Purchaser pursuant to the terms of this Agreement, including,
but not limited to, any customer lists, contract rights or any intangible
assets, may be conveyed to such third party as part of any Permitted Third Party
Sale, and any such sale may not conflict with the terms of, or Seller's
obligations under, this Agreement.
-26-
4.1.18 ▇▇▇▇▇▇▇▇'▇ Covenants. As separate consideration for
Purchaser entering into this Definitive Agreement and other good and valuable
consideration, ▇▇▇▇▇▇▇▇ agrees that he will not, prior to the later of (i)
Purchaser's termination of its obligations under this Definitive Agreement or
(ii) May 1, 1997, agree to enter into any restrictive covenants similar to those
set forth in Section 5.1.14 below with any third party. Irrespective of any of
its other remedies for a breach of this Agreement by either Purchaser or
▇▇▇▇▇▇▇▇, Purchaser shall retain the right to obtain injunctive and other legal
relief against ▇▇▇▇▇▇▇▇ for the breach of this covenant.
4.1.19 WARN Notice. Seller will comply with all notice
requirements under 29 U.S.C. ss.ss.2101-2109 (the "WARN Act") and all applicable
state law counterparts and will cooperate with Purchaser in doing so.
4.2 Agreements of Purchaser Pending the Closing. Purchaser covenants
and agrees that, pending the Closing and except as otherwise agreed to in
writing by Seller:
4.2.1 Actions of Purchaser. Purchaser will not take any action
which would result in a breach of any of its representations and warranties
hereunder. Furthermore, Purchaser shall cooperate with Seller and use its best
efforts to cause all of the conditions to the obligations of Purchaser and
Seller under this Agreement to be satisfied on or prior to the Closing Date.
4.2.2 Press Releases. Except as required by applicable law,
Purchaser shall not give notice to third parties or otherwise make any public
statement or releases concerning this Agreement or the transactions contemplated
hereby except for such written information as shall have been approved in
writing as to form and content by Seller, which approval shall not be
unreasonably withheld.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
5.1 Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are, at Purchaser's discretion, subject to the
fulfillment or satisfaction, at the times indicated herein, of each of the
following conditions precedent:
5.1.1 Representations and Warranties True as of the Closing
Date. The representations and warranties of Seller contained in this Agreement
or in any schedule, certificate or document delivered by Seller to Purchaser
pursuant to the provisions hereof shall have been true on the date hereof and
shall be true on the Closing Date with the same effect as though such
representations and warranties were made as of such date.
5.1.2 Compliance with this Agreement. Seller and ▇▇▇▇▇▇▇▇
shall have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing.
-27-
5.1.3 Closing Certificate. Purchaser shall have received a
certificate from Seller dated the Closing Date, certifying in such detail as
Purchaser may reasonably request that the conditions specified in Sections 5.1.1
and 5.1.2 hereof have been fulfilled and certifying that Seller has obtained all
consents and approvals required with respect to the transaction contemplated
herein.
5.1.4 No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or injunction or final judgment
relating thereto, shall be threatened or be pending before any court or
governmental or regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
Seller shall be aware of no investigation that might result in any such suit,
action or proceeding shall be pending or threatened.
5.1.5 Consents, Approvals and Notices. To the extent required
by applicable law:
(a) To the extent that Seller's rights under any
agreement, contract, commitment, lease, Authorization or other Asset to be
assigned to Purchaser hereunder may not be assigned without the consent of
another person which has not yet been obtained, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful.
(b) All notices shall have been given and all
consents shall have been obtained as required by the terms of the contracts,
commitments, agreements or Authorizations.
(c) The holders of any indebtedness of Seller, the
lessors or lessees of any real or personal property or assets leased by Seller,
the parties (other than Purchaser) to any contract, commitment or agreement to
which Seller is a party or subject, any governmental or regulatory official,
body or authority or any other person which owns or has authority to grant any
Authorization and any governmental, judicial or regulatory official, body or
authority having jurisdiction over ▇▇▇▇▇▇▇▇, Seller or Purchaser to the extent
that their consent or approval is required or necessary under the pertinent
debt, lease, contract, commitment or agreement or other document or instrument
or under applicable orders, laws, rules or regulations, for the consummation of
the transactions contemplated hereby in the manner herein provided, shall have
granted such consent or approval.
(d) If any consent or approval shall not be obtained
or if any attempted assignment would be ineffective or would impair Purchaser's
rights under the Asset in question so that Purchaser would not in effect acquire
the benefit of all such rights, and Purchaser elects to close this transaction
without such consent, approval or assignment, Purchaser shall have the
discretion to require that Seller, to the maximum extent permitted by law,
cooperate with Purchaser and act after the Closing as Purchaser's agent in order
to obtain for it the benefits under such Asset.
5.1.6 Material Adverse Changes. The business, operations,
assets, properties or prospects of the Business shall not have been and shall
not be threatened to be materially adversely affected in any way as a result of
any event or occurrence.
-28-
5.1.7 Escrow Agreement. Any Official Committee appointed in
the Bankruptcy Case, Seller and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
5.1.8 Approval of Counsel; Corporate Matters. All instruments
and documents required to carry out this Agreement or incidental hereto shall
have been approved on the Closing Date by Lane & ▇▇▇▇▇▇▇, Ltd., counsel for
Purchaser, in the exercise of its reasonable judgment. ▇▇▇▇▇▇▇▇ and Seller shall
also have delivered to Purchaser such other documents, instruments,
certifications and further assurances as such counsel may reasonably require.
5.1.9 Approval by Bankruptcy Court. Prior to the Closing, the
Bankruptcy Court shall have, in a form satisfactory to Purchaser and its
counsel, approved this Agreement and all transactions contemplated hereunder,
including, but not limited to, the conveyance of the Assets as well as the
Rolling Stock to Purchaser, free and clear of all mortgages, liens, pledges,
successor liability, security interests (except for security interest created by
Purchaser in favor of the Equipment Lessors), charges, claims, restrictions and
encumbrances of any nature whatsoever pursuant to the applicable provisions of
the Bankruptcy Code (the "Sale Approval Order"). The Sale Approval Order with
respect to the sale shall, among other things, unless specifically waived in
writing by Purchaser:
(i) Make a finding that those matters which are the
subject of this Agreement, are "core" matters over which the Bankruptcy Court
has jurisdiction pursuant to 28 U.S.C. ss.ss.1334 and 157;
(ii) Make a finding that due and proper notice of the
transactions contemplated by this Agreement and ancillary agreements, including,
but not limited to, the Rolling Stock Acquisition Agreement, has been given to
creditors, shareholders, potential claimants, and other parties in interest;
(iii) Make a finding that the Purchase Price
constitutes fair value for the Assets;
(iv) Make a finding that the Assets are being
purchased by Purchaser in good faith and that the Purchase Price was not
controlled by an agreement among potential bidders and otherwise complies with
the requirements of 11 U.S.C. ss.363(m);
(v) Make a finding that "sound business reasons"
exist for Bankruptcy Court approval of this Agreement;
(vi) Approve the Agreement and provide that the
Assets are to be conveyed to Purchaser free and clear of any and all interest in
such Assets, including, but not limited to, tax liens, mortgages, liens,
security interests, encumbrances, claims (including third party claims of any
nature whatsoever, including, but not limited to, any claim which might
otherwise give rise to successor liability), restrictions and limitations;
(vii) Provide that Purchaser shall not be liable or
obligated for any liability (including successor liability), liens, interests,
damages, costs, expenses, claims or
-29-
demands arising from or relating to Seller's ownership or operation of the
Assets or Seller's conduct of the Business prior to the Closing Date or taxes
arising out of the sale of the Assets;
(viii) Approve the assignment of Insurance Proceeds
in favor of Purchaser pursuant to the provisions of Section 4.3.1 of the Rolling
Stock Acquisition Agreement;
(ix) Direct the Clerk of the Bankruptcy Court to
enter the Sale Approval Order on the docket and provide that there is no just
reason to delay entry of the Sale Approval Order;
(x) Authorize Seller's rejection of its leases of all
of its Rolling Stock or abandonment thereof to the appropriate secured creditor;
and
(xi) Specifically overrule objections, if any, to
confirmation of the sale; provided, however, that the Sale Approval Order shall
not have been stayed, materially modified, withdrawn or reversed as of the
Closing.
5.1.10 Drivers at Closing. Unless waived by Purchaser prior to
Closing, Purchaser shall have received reasonable assurances that 500 of
Seller's drivers have agreed to be employed by Purchaser subsequent to the
Closing.
5.1.11 HSR Approval Prior to Closing. Unless waived by
Purchaser prior to Closing, the waiting period shall have expired (whether
pursuant to early termination or passage of time) following the filing of forms
under the HSR Act, as required pursuant to Section 4.1.13 hereof.
5.1.12 Seller's Deliveries. The Seller shall have delivered to
the Purchaser at or prior to the Closing the following, all of which shall be in
a form reasonably satisfactory to the Purchaser and its counsel:
(a) Such bills of sale, deeds and assignments with
covenants of warranty, assignments, endorsements, and other good and sufficient
instruments and documents of conveyance and transfer, in form reasonably
satisfactory to Purchaser and its counsel, as shall be necessary and effective
to transfer and assign to, and vest in, Purchaser (i) good and valid title in
and to the Assets free and clear of all liens and encumbrances as provided
herein, (ii) good and valid leasehold interests in and to the Assets leased by
Seller as lessee, and (iii) Seller's rights under all agreements, warranties,
contracts, commitments, leases, plans, quotations, proposals, instruments and
other documents included in the Assets;
(b) Agreements, contracts, commitments, leases,
plans, bids, quotations, proposals, instruments, computer programs and software,
data bases whether in the form of computer tapes or otherwise, related object
and source codes, manuals and guidebooks, price books and price lists, customer
and subscriber lists, supplier lists, sales records, files, correspondences,
legal opinions, rulings issued by governmental entities, and other documents,
books, records, papers, files, office supplies and data belonging to Seller
which are part of the
-30-
Assets; and simultaneously with such delivery, all such steps will be taken as
may be required to put Purchaser in actual possession and operating control of
the Assets;
(c) The Escrow Agreement, duly executed by any
Official Committees appointed in the Bankruptcy Case, the Purchaser, and Seller;
(d) The Assignment, to the extent possible, of
Seller's telephone and telecopier numbers to Purchaser;
(e) All such documents as may be required to change
Seller's name to another name bearing no similarity to Direct Transit, including
but not limited to a name change amendment with the Secretary of State of Iowa
and an appropriate name change notice for each state where Seller is qualified
to do business;
(f) Evidence satisfactory to Purchaser that, as of
the Closing Date, all tax liabilities pertaining to the Assets which might
otherwise inure to the detriment of Purchaser (including, but not limited to,
federal highway use tax, excise taxes, sales, use and transaction privilege
taxes, etc.) have been paid through the Closing; and
(g) The Seller Non-Compete, duly executed by Seller.
5.1.13 Retention of Certain Customers. Seller shall have
derived average monthly revenues of at least $2,794,962, in the aggregate, from
the customers set forth on Schedule 5.1.13 for the period January 1, 1997 to
Closing.
5.1.14 Petersons' Delivery of Restrictive Covenant Agreements.
The Petersons shall have delivered to Purchaser, in a form satisfactory to
Purchaser, a restrictive covenant agreement, in the form of Exhibit C attached
hereto (the "▇▇▇▇▇▇▇▇ Agreement") which shall provide:
(i) that neither ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
shall compete with Purchaser in the trucking industry, directly or indirectly,
either individually or as a partner, member, shareholder, director, officer,
employee, consultant, agent, or independent contractor of any third party;
(ii) that neither ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ nor ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall, directly or indirectly, solicit (a) any
employee of Seller for the purpose of extending an offer of employment to that
employee; or (b) any current or past customer of Seller for the purpose of
seeking transportation business from such customer, individually or as a
partner, member, shareholder, director, officer, employee, consultant, agent or
independent contractor of any third party;
(iii) that the above restrictive covenants shall
extend for a period of eight (8) years (the "Covenant Term");
(iv) that Purchaser shall be entitled to obtain
injunctive and other legal relief against the Petersons, or any one of them, for
breaching the restrictive covenants;
-31-
(v) that Purchaser shall notify ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇▇▇ at least quarterly during the Covenant Term of any customer's
previously serviced by Seller which Purchaser no longer services and upon
receipt of such notice, the restrictive covenants contained in this Section
5.1.14 solely with respect to those customers set forth in said notice shall no
longer apply; and
(vi) that it is not an executory contract which may
be rejected by a debtor in bankruptcy nor shall the Petersons, or any of them,
seek discharge of the personal obligations under the ▇▇▇▇▇▇▇▇ Agreement. The
parties shall agree upon the assignment of some of the personal guaranties given
by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to Purchaser, which personal guaranties
shall continue to be enforceable against ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in
the event that any of the restrictive covenants contained in the ▇▇▇▇▇▇▇▇
Agreement are breached. Purchaser must be reasonably satisfied that ▇▇▇▇▇▇▇▇'▇
obligations not to compete under the ▇▇▇▇▇▇▇▇ Agreement are not dischargeable in
bankruptcy, do not constitute an executory contract and therefore rejectable in
bankruptcy, and that Purchaser would be entitled to a relief from the automatic
stay provision in bankruptcy in order to obtain preliminary, temporary and
permanent injunctive relief against the Petersons.
5.1.15 Purchaser's Acquisition of Rolling Stock. Purchaser, to
its sole satisfaction, has received assurances that sufficient numbers of
Equipment Lessors have executed the Rolling Stock Acquisition Agreement so that
Purchaser will acquire, by sale or lease, not less than 600 tractors and 1,200
trailers at the Closing.
5.1.16 Assignments of ▇▇▇▇▇▇▇▇ Guaranty Claims. Purchaser
shall have received an assignment of a satisfactory number of the rights, claims
or causes of action from ▇▇▇▇▇▇▇▇ which are described in Section 5.3.2 below.
5.2 Conditions Precedent to the Obligations of Seller. All obligations
of Seller under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
5.2.1 Representations and Warranties True as of the Closing
Date. The representations and warranties of Purchaser contained in this
Agreement or in any list, certificate or document delivered by Purchaser to
Seller pursuant to the provisions hereof shall be true on the Closing Date with
the same effect as though such representations and warranties were made as of
such date.
5.2.2 Compliance with this Agreement. Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing.
5.2.3 No Threatened or Pending Litigation. On the Closing
Date, no suit, action, or other proceeding, or injunction or final judgment
relating thereto, shall be threatened or be pending before any court or
governmental or regulatory official, body or authority in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
this Agreement or the consummation of the transactions contemplated hereby, and
no
-32-
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
5.2.4 Escrow Agreement. Any Official Committees appointed in
the Bankruptcy Case, the Purchaser and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
5.2.5 Approval of Counsel; Corporate Matters. All instruments
and documents required to carry out this Agreement or incidental hereto shall
have been approved on the Closing Date by counsel for Seller in the exercise of
their reasonable judgment. Purchaser shall also have delivered to Seller such
other documents, instruments, certifications and further assurances as such
counsel for Seller may reasonably require.
5.2.6 Seller Non-Compete. Purchaser shall have executed and
delivered to Seller the Seller Non-Compete.
5.3 Conditions Precedent to the Obligations of ▇▇▇▇▇▇▇▇. All
obligations of ▇▇▇▇▇▇▇▇ under this Agreement are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following conditions
precedent:
5.3.1 Seller's Payment of Taxes. The Bankruptcy Court shall
have entered a final and non-appealable order authorizing the Seller to pay any
Taxes incurred by ▇▇▇▇▇▇▇▇ solely as a result of his ownership of shares of the
Seller not to exceed the amount set forth in the Debt Schedule.
5.3.2 Receipt of Releases or Assignments from Equipment
Lessors. ▇▇▇▇▇▇▇▇ shall have received releases or assignments of any and all
rights, claims and causes of action, conditioned only on the consummation of the
transactions contemplated hereby and without any other condition, from at least
15 Equipment Lessors holding claims against ▇▇▇▇▇▇▇▇ in the aggregate principal
amount of $27,850,000.
5.3.3 Receipt of Release from Seller. The Bankruptcy Court
shall have entered a final and non-appealable order authorizing the Seller, as
debtor and as debtor-in-possession in the Bankruptcy Case, on behalf of its
estate, to release ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇
from any and all rights, claims and causes of action, arising under the
Bankruptcy Code or any other applicable law, which the Seller or its bankruptcy
estate has or may have against them.
5.3.4 ▇▇▇▇▇▇▇▇ Agreement. The Purchaser shall have delivered
to ▇▇▇▇▇▇▇▇ the ▇▇▇▇▇▇▇▇ Agreement, in a form satisfactory to ▇▇▇▇▇▇▇▇,
substantially similar to Exhibit C hereto.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 General Indemnification Obligation of Seller and ▇▇▇▇▇▇▇▇. From and
after the Closing, Seller and ▇▇▇▇▇▇▇▇, jointly and severally, each will
reimburse, indemnify and hold
-33-
harmless Purchaser and its successors and assigns (a "Purchaser Party") against
and in respect of:
(a) any and all damages, losses, deficiencies, liabilities,
costs and expenses (including, without limitation, reasonable legal fees and
expenses) incurred or suffered by any Purchaser Party that result from, relate
to or arise out of:
(i) any and all Liabilities and obligations of Seller
of any nature whatsoever, except for those liabilities and obligations of
Seller;
(ii) any and all actions, suits, claims, or legal,
administrative arbitration, governmental or other proceedings or investigations
against any Purchaser Party that: (1) relate to Seller or the Business, in which
the principal event giving rise thereto occurred prior to the Closing Date; or
(2) result from or arise out of any action or inaction of Seller or ▇▇▇▇▇▇▇▇ or
any director, officer, employee, agent, representative or subcontractor of
Seller; or
(iii) any misrepresentations, breach of warranty or
nonfulfillment of any agreement or covenant on the part of Seller or ▇▇▇▇▇▇▇▇
under this Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to Purchaser
pursuant hereto or in connection with the negotiation, execution or performance
of this Agreement; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 6.1.
6.2 Defense of Claims. If Purchaser seeks indemnity (the "Indemnitee")
pursuant to this Article VI, it shall give notice to all indemnifying parties
(the "Indemnitor"), briefly describing the claim and providing a good faith
estimate of the amount of the claim if it is successful. Within 10 days of the
date notice is given, the Indemnitor shall notify Indemnitee in writing that the
Indemnitor acknowledges its liability for defense and indemnity; the Indemnitor
denies all liability for indemnity or defense; or the Indemnitor denies
liability for indemnity but is willing to provide a defense to the Indemnitee.
Defense of the claim shall be provided by counsel selected by the Indemnitee, in
the exercise of reasonable discretion, unless the Indemnitor acknowledges full
liability for indemnity and defense and provides to the Indemnitee reasonable
evidence that the Indemnitor has the financial wherewithal to pay for both
indemnity and defense, If the Indemnitor acknowledges its liability for defense
and indemnity and provides reasonable evidence that the Indemnitor has the
financial wherewithal to pay for both indemnity and defense, any such claim
shall not be settled without the consent of the Indemnitor, which shall not be
unreasonably withheld.
6.3 Set-Off. Until such time that the $1 Million Hold Back is released
to Seller, the Indemnitee shall be entitled to be reimbursed from the $1 Million
Hold Back for the amount of any claim (third party or otherwise) for which
Indemnitor is responsible in the event that such claim is not paid in full by
Indemnitor within ten days after the later of (a) the amount thereof is
submitted to the Indemnitor by Indemnitee, or (b) if the claim is disputed in
good faith, the
-34-
Indemnitor shall have exhausted all avenues of appeal. After the release of the
$1 Million Hold Back to Seller, the Indemnitee shall have the right of set-off
against any amounts owed by it to Seller under this Agreement or any exhibit,
instrument, document or agreement contemplated hereunder.
6.4 Compliance with Bulk Sales Laws. Purchaser and Seller acknowledge
that Seller's principal business is not the sale of inventory from stock, and
hereby waive compliance by Purchaser and Seller with the bulk sales law and any
other similar laws in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement. Seller shall indemnify Purchaser from, and hold
it harmless against, any liabilities, damages, costs and expenses resulting from
or arising out of (i) the parties' failure to comply with any of such laws in
respect of the transactions contemplated by this Agreement, or (ii) any action
brought or levy made as a result thereof.
6.5 Other Rights and Remedies Not Affected. The indemnification rights
of the Indemnitee under this Article VI are independent of and in addition to
such rights and remedies as the parties may have at law or in equity or
otherwise for any misrepresentation, breach of warranty or failure to fulfill
any agreement or covenant hereunder on the part of any party hereto, including
without limitation the right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE VII
POST-CLOSING MATTERS
--------------------
7.1 Employee Benefits. The Amended Plan shall provide for disposition
to each employee of the Business concerning all benefits (including the
arrangements, plans and programs set forth in Schedule 7.1) which have been
accrued on behalf of that employee (or is attributable to expenses properly
incurred by that employee) as of the Closing Date, and Purchaser shall assume no
liability therefor. No portion of the assets of any plan, fund, program or
arrangement, written or unwritten, heretofore sponsored or maintained by Seller
(and no amount attributed to any such plan, fund, program or arrangement) shall
be transferred to Purchaser; and Purchaser shall not be required to continue any
such plan, fund, program or arrangement after the Closing Date. The amounts
payable on account of all benefit arrangements (other than as specified in the
following subsections) shall be determined with reference to the date of the
event by reason of which such amounts become payable, without regard to
conditions subsequent, and Purchaser shall not be liable for any claim for
insurance, reimbursement or other benefits payable by reason of any event which
occurs prior to the Closing Date. All employees of Seller who may be employed by
Purchaser on or after the Closing Date shall be new employees of Purchaser and
any prior employment by Seller of such employees shall not affect entitlement
to, or the amount of, salary or other cash compensation, current or deferred,
which Purchaser may make available to its employees. Seller shall take adequate
steps after the Closing to terminate its 401(k) plan and apply to the IRS for a
determination letter in connection therewith.
7.2 Employees. As of the Closing Date, Purchaser may offer employment
to, and Seller shall use its best efforts to assist Purchaser in employing as
new employees of Purchaser, those employees that Purchaser wants to employ after
the Closing Date.
-35-
7.3 Maintenance of Books and Records. Seller and ▇▇▇▇▇▇▇▇ shall
preserve all records possessed or to be possessed by such party relating to any
of the Assets, Liabilities or of the Business until the earlier of (i) the tenth
anniversary of the Closing Date or (ii) 90 days after notice to Purchaser that
Seller or ▇▇▇▇▇▇▇▇ intend to destroy the records, in which case Purchaser shall
have 30 days to elect to receive the records and Seller and ▇▇▇▇▇▇▇▇ will
deliver the records as requested by Purchaser. After the Closing Date, where
there is a legitimate purpose, Seller and ▇▇▇▇▇▇▇▇ shall provide the Purchaser
with access, upon prior reasonable written request specifying the need therefor,
during regular business hours, to (i) the officers and employees of Seller and
▇▇▇▇▇▇▇▇ and (ii) the books of account and records of Seller and ▇▇▇▇▇▇▇▇, and
the Purchaser and its representatives shall have the right to make copies of
such books and records; provided, however, that the foregoing right of access
shall not be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of Seller or ▇▇▇▇▇▇▇▇; and further, provided,
that, as to so much of such information as constitutes trade secrets or
confidential business information of Seller or ▇▇▇▇▇▇▇▇ (and not part of the
Assets), the Purchaser and its officers, directors and representatives will use
due care to not disclose such information except (i) as required by law, (ii)
with the prior written consent of Seller or ▇▇▇▇▇▇▇▇, which consent shall not be
unreasonably withheld, or (iii) where such information becomes available to the
public generally, or becomes generally known to competitors of Seller or
▇▇▇▇▇▇▇▇, through sources other than Purchaser, its affiliates or its officers,
directors or representatives. Such records may nevertheless be destroyed by
Seller or ▇▇▇▇▇▇▇▇ if such party sends to the Purchaser written notice of its
intent to destroy records, specifying with particularity the contents of the
records to be destroyed. Such records may then be destroyed after the 30th day
after such notice is given unless Purchaser objects to the destruction in which
case the party seeking to destroy the records shall deliver such records to
Purchaser.
7.4 Payments Received. Seller and Purchaser each agree that after the
Closing they will hold and will promptly transfer and deliver to the other, from
time to time as and when received by them, any cash, checks with appropriate
endorsements (using their best efforts not to convert such checks into cash), or
other property that they may receive on or after the Closing which properly
belongs to the other party, including without limitation any insurance proceeds,
and will account to the other for all such receipts. From and after the Closing,
Purchaser shall have the right and authority to endorse, without recourse, the
name of Seller on any check or any other evidences of indebtedness received by
Purchaser on account the Assets transferred to Purchaser hereunder.
7.5 Use of Name. From and after the Closing Date, Seller will sign such
consents and take such other action as Purchaser shall reasonably request in
order to permit Purchaser to use the name "Direct Transit" and variants thereof.
From and after the Closing Date, Seller will not use directly or indirectly, the
name "Direct Transit" or any names similar thereto or variants thereof.
7.6 UCC Matters. From and after the Closing Date, Seller will promptly
refer all inquiries with respect to ownership of the Assets to Purchaser. In
addition, Seller will execute such documents and financing statements as
Purchaser may request from time to time to evidence transfer of the Assets to
Purchaser, including any necessary assignments of financing statements.
-36-
7.7 Further Assurances. Seller from time to time after the Closing, at
Purchaser's request, will execute, acknowledge and deliver to Purchaser such
other instruments and will take such other actions and execute and deliver such
other documents, certifications and further assurances as Purchaser may
reasonably require to vest more effectively in Purchaser, or to put Purchaser
more fully in possession of, any of the Assets. Each of the parties hereto will
cooperate with the other and execute and deliver to the other parties hereto
such other instruments and documents and take such other actions as may be
reasonably requested from time to time by any other party hereto as necessary to
carry out, evidence and confirm the intended purposes of this Agreement.
7.8 Computer Lease. Seller currently leases an IBM AS/100 mainframe
computer and attached peripherals (the "Computer") with an option to purchase.
If Seller chooses to purchase the Computer, then Seller may notify Purchaser
when and if it has no further use for the Computer, and Purchaser shall notify
Seller within 10 days thereafter as to whether it wishes to purchase the
Computer. If Purchaser chooses to purchase the Computer, the price shall be the
lesser of (a) $150,000 or (b) the price plus applicable taxes at which Seller
acquired the Computer, in each case less (x) the cost of the peripherals, if
any, which are included in the Purchase Price for the Assets, and (y) applicable
depreciation based upon a 60 month useful life after February 28, 1997,
calculated on a per diem basis. Amounts payable by Seller hereunder (if any)
shall be paid upon receipt and inspection of the Computer by Purchaser. For
example, if Seller were to acquire the Computer for $160,000, then Purchaser
would have the option to purchase the Computer from Seller for $150,000, less
depreciation from February 28, 1997 until the Computer is delivered to
Purchaser. If such delivery date were to be June 1, 1997 in this example, then
the actual price which Purchaser would pay to Seller would be $142,500 ($150,000
minus 5% depreciation).
7.9 In Transit Assets. Seller and Purchaser recognize that certain
Rolling Stock will have been dispatched by Seller and shall be "in transit" at
the time of the Closing. If the Rolling Stock has been dispatched to pick up a
load from a shipper and such load has been loaded onto the truck on or before
11:59 p.m. on the day immediately preceding the Closing Date, then such load
shall be considered a "Preclosing Load." All revenues derived from Preclosing
Loads shall belong to Seller. Any shipment which is loaded after 11:59 p.m. on
the day immediately preceding the Closing Date shall be considered a "Post
Closing Load" and all revenues derived from Post Closing Loads shall belong to
Purchaser.
7.9.1 Obligations with Respect to Pre and Post Closing Loads.
Seller shall bear the risk of loss with respect to Rolling Stock which is in
transit utilized to deliver any Preclosing Load until such load has been
delivered and the Rolling Stock is available for dispatch by Purchaser.
Purchaser shall bear the risk of loss with respect to Rolling Stock which is
used to deliver any Post Closing Load. Seller shall maintain full insurance
coverage (i.e., physical damage, property damage and liability insurance)
identical with its present coverage covering all Rolling Stock delivering
Preclosing Loads. All drivers delivering Preclosing Loads shall continue to be
considered employees of Seller until such loads have been delivered and any such
driver is available for dispatch by Purchaser (assuming that Purchaser has
offered that driver employment). Seller agrees to indemnify, defend and hold
Purchaser harmless from any type of claim or liability which may arise or be
asserted against Purchaser for injury, death, or property damage arising from
the delivery of any Preclosing Load. Purchaser agrees to
-37-
indemnify, defend, and hold Seller harmless from any type of claim or liability
which may arise or be asserted against Seller for injury, death or property
damage arising from the delivery of any Post Closing Load.
7.9.2 Expenses for Preclosing Loads. All costs and expenses
incurred in connection with delivering Preclosing Loads shall be the sole
obligation of Seller, including, but not limited to, fuel, salaries and per diem
payments to drivers, etc. Purchaser shall bear all such costs and expenses
incurred in connection with delivering Post Closing Loads. Seller further agrees
to pay Purchaser rent for any tractor or trailer which is in transit delivering
a Preclosing Load on the Closing Date at a daily of $40 per tractor and $10 per
trailer. Rent shall accrue as of the Closing Date and for each day or part of a
day thereafter through and including the day that the tractor or trailer
delivers the Preclosing Load.
7.9.3 Payments Due to Purchaser. All payments due to Purchaser
for rent of in transit Rolling Stock shall be paid within fifteen (15) days
after the amount due has been invoiced to Seller by Purchaser. All such amounts
as well as all financial obligations of Seller under this Section 7.9 shall be
secured by the Escrowed Amount.
7.10 Confirmation of Amended Plan. Seller shall use its reasonable best
efforts to obtain confirmation of the Amended Plan (as provided for in Section
4.1.16) and the Bankruptcy Court shall have entered an order, in form and
substance satisfactory to legal counsel for Purchaser, confirming the Amended
Plan (the "Plan Confirmation Order"), and the Plan Confirmation Order shall,
unless specifically waived in writing by Purchaser, make similar findings to
those set forth in Section 5.1.9 above and shall also:
(i) Make a finding that due and proper notice of confirmation
of the Amended Plan has been given to creditors, shareholders and other parties
in interest;
(ii) Make a finding that "sound business reasons" exist for
Bankruptcy Court approval of the Agreement as part of Seller's Amended Plan;
(iii) Find that all requirements of 11 U.S.C. ss.1129 have
been satisfied with respect to confirmation of the Amended Plan;
(iv) Direct the Clerk of the Bankruptcy Court to enter the
Plan Confirmation Order on the docket and provide that there is no just reason
to delay entry of the Plan Confirmation Order; and
(v) Specifically overrule objections, if any, to confirmation
of the Amended Plan.
Seller shall immediately notify Purchaser and Purchaser's counsel in the event
that the Plan Confirmation Order is stayed, materially modified, withdrawn or
reversed, and if a motion to alter or amend the Plan Confirmation Order or stay
the Plan Confirmation Order pending appeal has been filed prior to the lapse of
the period for filing a timely appeal or stay. Seller shall take all reasonable
actions to contest such appeal or stay.
-38-
7.11 Release of Escrowed Amount. The Escrowed Amount shall be held or
released as described in Section 1.4.2(a) above. All disputes relating to the
Escrowed Amount shall be determined by the Bankruptcy Court.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Termination.
8.1.1 Causes. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time on or before the Closing Date only as follows:
(a) by mutual consent of Seller and Purchaser;
(b) by Purchaser (i) at any time if the
representations and warranties of Seller or ▇▇▇▇▇▇▇▇ contained in Section 3.1
hereof were incorrect in any material respect when made or at any time
thereafter, including as of Closing, (ii) upon written notice to Seller given at
any time after May 1, 1997 (or such later date as shall have been specified in a
writing authorized on behalf of Seller and Purchaser) if all of the conditions
precedent set forth in Section 5.1 hereof have not been met; or (iii) if Seller
or ▇▇▇▇▇▇▇▇ breach any covenant or agreement which either of them make under
this Agreement or any other document contemplated by this Agreement; or
(c) by Purchaser upon the occurrence of any event
which would trigger Purchaser's right to receive the Termination Fee under
Section 4.1.15 hereof;
8.1.2 Effect of Termination. In the event of the termination
and abandonment hereof pursuant to the provisions of this Section 8.1, this
Agreement (except for Sections 4.1.15 and 8.4 which shall continue) shall become
void and have no effect, without any liability on the part of any of the parties
or their directors or officers or stockholders in respect of this Agreement,
unless the termination was the result of the representations and warranties of a
party being materially incorrect when made or the material breach by such party
of a covenant hereunder in which event the party whose representations and
warranties were incorrect or who breached such covenant shall be liable to the
other party for all costs and expenses of the other party in connection with the
preparation, negotiation, execution and performance of this Agreement.
8.2 Brokers' and Finders' Fees.
8.2.1 For Seller. Seller represents and warrants to Purchaser
that all negotiations relative to this Agreement have been carried on by it
directly without the intervention of any person, who may be entitled to any
brokerage or finder's fee or other commission in respect of this Agreement or
the consummation of the transactions contemplated hereby, and Seller agrees to
indemnify and hold harmless Purchaser against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by it as a
result of Seller's dealings, arrangements or agreements with any such person.
-39-
8.2.2 For Purchaser. Purchaser represents and warrants that
all negotiations relative to this Agreement have been carried on by it directly
without the intervention of any person who may be entitled to any brokerage or
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby, and Purchaser agrees to
indemnify and hold harmless Seller against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by it as a
result of Purchaser's dealings, arrangements or agreements with or any such
person.
8.3 Sales, Transfer and Documentary Taxes, Etc. Seller shall pay all
federal, state and local sales, documentary and other transfer taxes, if any,
due as a result of the purchase, sale or transfer of the Assets up to $20,000,
and Seller and Purchaser shall evenly divide any such taxes in excess of $20,000
and Seller shall indemnify, reimburse and hold harmless Purchaser in respect of
the liability for payment of or failure to pay any such taxes or the filing of
or failure to file any reports required in connection therewith.
8.4 Expenses. Except as otherwise provided in this Agreement and
hereunder, each party hereto shall pay its own expenses incidental to the
preparation of this Agreement, the carrying out of the provisions of this
Agreement and the consummation of the transactions contemplated hereby.
8.5 Contents of Agreement; Parties in Interest; Etc. This Agreement
sets forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
8.6 Assignment and Binding Effect. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other parties, except that prior to Closing, Purchaser may assign and
delegate any or all of its rights and obligations hereunder to one or more of
its subsidiaries, or other entity affiliated by common ownership with Purchaser
or one of its subsidiaries. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors and assigns of ▇▇▇▇▇▇▇▇, Seller and
Purchaser. Prior to execution by all parties, this Agreement shall not be
binding upon or enforceable by or against any party, by estoppel or otherwise.
In consideration of Seller's agreement to permit Swift to assign its obligations
hereunder, Swift agrees that, in the event of a breach of the obligations of its
assignee hereunder, Swift shall remain liable for any such breach.
8.7 Waiver. Any condition, term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party. Any such written waiver shall not imply
a waiver as to any other term, condition, circumstance or occasion nor estop any
party from enforcing any term, condition, right or remedy not expressly so
waived. Failure of a party to insist upon adherence to any term or condition of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon adherence to that term or condition
or any other term or condition of this Agreement.
-40-
8.8 Notices. Any notice or communication under this Agreement shall be
in writing and delivered (by hand, telecopier, telegraph, telex or courier) or
deposited in the United States mail (first class, registered or certified),
postage fully prepaid and addressed as stated below. Notice by United States
mail shall be deemed given on the third day after its deposit. Notice by
telecopier, telegraph or telex shall be deemed given on the day sent. Notice by
hand delivery or courier shall be deemed given on the first business day when
such delivery is first attempted. Either party may, from time to time, specify
as its address for purposes of this Agreement any other address upon the giving
of 10 days notice thereof to the other party in the manner required by this
paragraph. This paragraph shall not prevent the giving of written notice in any
other manner, but such notice shall be deemed effective only when and as of its
actual receipt at the proper address and by the proper addressee.
8.9 Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Arizona.
8.10 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article VI hereof, the other parties
certified to indemnity or defense, and their heirs, executors, administrators,
legal representatives, successors and assigns, and they shall not be construed
as conferring any rights on any other persons.
8.11 Headings, Gender and "Person." All section headings contained in
this Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
8.12 Schedules and Exhibits. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
8.13 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If, however, any condition precedent described in
Section 5.1 hereof is invalid or unenforceable, Purchaser shall nevertheless
have the option of terminating this Agreement under Section 8.1 hereof.
8.14 Jurisdiction. Except with respect to such matters as shall
properly remain within the jurisdiction of the Bankruptcy Court, Seller,
▇▇▇▇▇▇▇▇ and Purchaser consent to the jurisdiction and venue of the state and
federal courts located in Maricopa County, Arizona and/or the District of
Arizona with respect to any legal action, in tort or contract, arising directly
or indirectly from this Agreement or the relationship created hereby. This
provision shall not bar enforcement of a provisional, extraordinary, in-rem or
post-judgment remedy in
-41-
any court whose original jurisdiction is essential or exclusive as to that
remedy, despite the above consent to jurisdiction.
8.15 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
-42-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
SELLER PURCHASER
DIRECT TRANSIT, INC. SWIFT TRANSPORTATION CO., INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III
--------------------------------- ---------------------------------
Its: President Its: Executive Vice President
------------------------------- and CFO
-------------------------------
Address for Notices: Address for Notices:
▇/▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually
-43-
LIST OF EXHIBITS
----------------
Exhibit A September 30, 1996 Balance Sheet
Exhibit B Escrow Agreement
Exhibit C ▇▇▇▇▇▇▇▇ Agreement
Exhibit D Seller Non-Compete
Exhibit E Rolling Stock Acquisition Agreement
Exhibit F Form of Real Estate Lease
-44-
LIST OF SCHEDULES
-----------------
Schedule 1.3.1 (a) Machinery, equipment, tools, vehicles,
furniture, furnishings, leasehold improvements,
goods, and other tangible personal property of Seller
Schedule 1.3.1 (c) Computer software
Schedule 1.3.1 (h) Driver, customer and supplier lists
Schedule 1.3.2 (e) Assets, properties or rights - Excluded
Schedule 3.1.14 Age, Condition and Location
Schedule 3.1.30 Intrastate authorities
Schedule 4.1.4 Maintenance of Insurance
Schedule 5.1.13 Customer and revenue schedule
Schedule 7.1 Employee Benefits
-45-